Re: G & J, in cahoots?

From: Dave Long (
Date: Wed Mar 21 2001 - 14:19:56 PST

> > Why do I find it strange when Mr. Bone and Ms. Schuman agree?

And although they doth protest, they are
still in agreement (on this point):

> When you're worrying about buying goods and services for yourself, your tax
> breaks are limited ... When you move it into business, there's all kinds
> of ways to grow your asset value without paying taxes ...


> ... it seems as though wealth is trickling UP and staying there, not
> trickling back down ...

both, at least to me, say that there is a
Matthew effect, and people who live on what
they have find it easier to accumulate than
people who live on what they have coming.

Usually, progressive taxation has been used
to rebalance this perceived imbalance.

Let's leave aside any discussion of how large
the overall tax burden may be. We might be
talking about only a 1% overall tax, yet still
question whether it should be applied in a
regressive, flat, or progressive manner*.

If the problem is that they who have, get,
and they who have not, have even that taken,
I don't see how progressive taxes encourage
the problem, and I certainly don't see how
regressive schemes (such as universal sales
tax) can ameliorate it.


* In a progressive tax scheme, the upper end of
the distribution is taxed at a greater rate
than the lower. A regressive scheme is the
opposite, and a flat tax doesn't differentiate
between taxpayers.

> It's too damned high: it's derivative income, and you've already paid tax on
> that income once before investing it.

It's no higher than regular income tax, and
usually very much less. Any money on which
one has already paid tax is counted in one's
tax basis, and so one is only taxed on any
gains beyond that.

> The point remains, though, that there *is* finite regress.

There need not be even finite regress. If one
looks at the tax basis when making the original
sale, it is trivial to sell an amount which will
not only cover current cash needs but also the
taxes incurred on the gain. I use a multiplier
of .6, but I'm lazy.

> > > the aggregate tax rate across the board once income's into six figures
> > > is about 2/3, so I'm going to put in *at least* double the effort to
> > > actually achieve a net gain of about 33%.

If TX has no income tax, how does one arrive
at a 66% aggregate tax rate? Here are figures
from CA, estimating upper bounds on taxes for
someone who has been foolish enough to take a
high income/short term gains:

agi state federal total percent
--- ----- ------- ----- -------
100 7.65 25.7 33.3 33
200 17 60 77 38
300 26.3 96.5 123 40
400 35.6 136 172 42
500 45 176 221 44

even up near a million, this'll be
going more like 46%, not 66%

(this seriously overestimates amount of tax
to be paid, but it's handy for quarterlies.
These are probably 99 or 00 figures, not 01)

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