re: #355 Obdicut

I don’t think taxing the rich and getting the rich to invest are diametrically opposed.

I know a lot of very wealthy people. I know absolutely zero of them who have ever not invested in something because, if it’s successful, they’ll have to pay taxes on it. I know some of them who didn’t invest in something because they felt the government wasn’t investing enough in it. That is currently part of the situation in the economy; a lot of investors are leery of investing since the government is shaky on investment right now.

Taxes certainly can be punitive, but we’re nowhere at all near that level. Tax differentials right now mostly affects people who are not investors in ‘real industries’, but only in the paper ones.

Lots of stuff in there.

First, I don’t think i made the proposition that people won’t invest because there someday may be some tax to pay. To the contrary, the only way to make tax policy effective is to have all the players on the hook and then incentivize activity that will let them off the hook a little.

Second, I would say people are shaky on investment based on certainty. Tax policy needs to be stable to be effective. Does that mean you never change it? No. But when you say you will be changing it, offer few specifics because it will be up to congress anyway, and when the populist rhetoric from the party in power is punitive, unfocused, but assures us that we are no where near the appropriate pain threshold, you have a very unstable situation that does not invite taking big risks with piles of capital. No one knows what the policy will be. And the assurance that it won’t be draconian but that some “free ride” is over is no comfort. A clear policy, even with some punitive measures, would be better than nothing being clear (though the outcome of the election may simply result in a stalmete which will add its own certainty).

We still have a tax system (thankfully) where the top few pay most of the bill. In 2008 the top 10% of the top 1% (that is the top on thousandth) reported 12 percent of the GDP on their returns and paid 20% of the federal tax bill. Think about it - that ain’t bad. Sure - there are idealists who think that such wealth should not exist, but to get 20% of the revenue out of 12% of the activity is pretty cool. And that was with all the Bush “give aways” to the rich in the tax code.

Does it seem that this group is getting away with something? Or should we be upset that they exist? We could construct a punitive system that would make us feel good, but they’d simply move their activity off shore in a better jurisdiction and then we’d be stuck paying all of the bill.

I think we should be trying to figure out how to create more economic activity in this country so that the government will see more revenues and there are more jobs so that the government is paying out less aid. It isn’t like this recession came about due to a natural disaster or famine - the world is configured largely as it was 5 years ago. What has us stuck right now is that the traditional engine of global growth (the US economy) is mired in uncertainty and it is chic to blame those activities that create wealth for not creating wealth evenly.