Tax-related voting wierdness

Dave Long dl at silcom.com
Mon Oct 20 08:33:19 PDT 2003



> Executive abstract:  people have self-interests beyond the economic
> ones, even when considered as demographic sectors that are defined by
> the student in economic terms.

Agreed. [0]

Keep in mind that below I'm not arguing
that one should not vote against one's
pocketbook, I'm arguing that one should
not naively say "35% is higher than 10%"
without calculating the bottom line.

> The 10% Jehovah tax is on one's gross increase, I believe.

Which is why it seemed appropriate
to compare it with the income tax.

After I get through the pedantry[1],
maybe you all will appreciate why I
tried to hew to "apples to apples".

> You've neglected the payroll tax (15+% -- off the *first* not last
> wages), proppitty taxes personal and real, capital gains, inheritance
> [think family farmers], excise taxes and "fees" (whiskey, guns,
> smokes, telephones, gasoline, tickets to Nascar races,...), tariffs
> and the state and local versions of the above, and the sales tax,
> itself rising to tithe levels in some jurisdictions.  And God told
> men to use gold for money, not paper, so do include inflation as a
> hidden tax.

First, the minor points:

payroll tax:
    Applicable only to laborers,
    not landowners or capitalists,
    and, in theory, they'll get
    the equivalent benefits upon
    retirement.[2]

proppitty taxes:
    Deductible from federal income tax.

    Personal property is in the noise.
    (do I need a fancier bass boat to
    change my mind on this?), but real
    looks like it could add up: with a
    US median home price somewhat under
    $200k, and 2% on the high side for
    property taxes, that's <4k pa.  How
    much of the median mortgage is paid
    off, and how much do those interest
    deductions affect this figure?

capital gains:
    Is there a reason these wouldn't be
    already counted in the table?  When
    I do my taxes, the cap gains count
    as income (positive delta to basis),
    just assessed at a lower rate.

inheritance:
    Noise for most people.  (the 99%[3] of
    the population with assets under, what
    is the figure now, $1.3M, $2M, or $oo?)

    From the number of people trying to
    sell estate planning, it may also turn
    out to be noise for anyone who has the
    rather unusual foresight to bet on both
    (a) death and (b) taxes.

    Depending upon what laws we have when
    you kick the bucket (anyone seen the
    results on the elasticity of death?),
    don't forget that that basis step-up
    could pass on 6+ figures tax free.

excise taxes and "fees": noise [4]

tariffs: ???
    Good question. [5]

Now, for the major points:

If one believes that people who care about
their tax liability will act to reduce it,
then these are the opposite sides of the
same coin. [6]

sales tax:
    Hits those whose consumption is large
    relative to their wealth.  (one need
    not realize more gains than one has
    personal expenditures)

inflation:
    Hits those whose wealth is large
    relative to their consumption.
    (those with no savings already pay
    tomorrow's expenses with tomorrow's
    currency)

So, yeah, I didn't take any of these things
into account.  But for me, income tax is the
most significant line item, and in my Calif.
experience, one needs to pull down somewhere
around $150k adjusted (more than $100, less
than $200) to incur a 35% income tax burden.

In CA, that's either sales tax on $700k of
goods (not services), or 2% inflation on
$2.6M dollars.  I bet there are far more
people who incur that kind of liability
via income than via consumption or saving.[7]

-Dave

:: :: ::

> And God did not issue funny bonds.

A bond provides an income stream, but
not in perpetuity, only up until it is
called.  God provides man's daily bread,
but not in perpetuity, only up until
that "dust to dust" part.  Sounds a bit
like a funny bond to me.

>                                                             The 3%
> Allah tax is on net worth, with a subsistence deduction.

Interesting.  Could religious arguments
be why we now mostly have an income tax,
rather than property taxes?

:: :: ::

[0] Well, maybe we could reduce them
all to economic ones -- but only after
finding a far better proxy for utility
than one's bank account, and probably
after giving up continuity.

[1] Jehovah is willing to settle
up annually, but Uncle Sam wants it
done quarterly, with the exceptions
existing for farmers and fishermen.

[2] It is to laugh, slimy Terry

[3] Merrill's estimate of individuals
with a net worth over USD 1M in 2002
breaks down as follows:

  N     USD
----    ----
2.6M    8.8T  Europe
2.2M    7.4T  North America
1.8M    5.7T  Asia-Pacific
 .3M    3.6T  Latin America
 .3M    1.1T  Middle East

Maybe the dollar fall isn't so severe
against the loony, but against the euro
it's gone from 1/.85 to .85 over the
last year.  To me, that feels like the
situation in countries where most of
the politics is run by those who own
massive amounts of natural resources,
and who are then willing to ruin the
capital formation of their countrymen
in order to artificially boost exports.

If the goal is to make the few who are
already well off incredibly so, then it
seems to be a winning strategy:

USD/N
-----
 3.4M Europe
 3.4M North America
 3.2M Asia-Pacific
12.0M Latin America
 3.7M Middle East

Merrill Lynch/Cap Gemini Ernst & Young
World Wealth Report 2003

[4] OK, anyone here know how to start
a phone company?  It would be nice to
have one that provided real prepaid
service: where one puts some amount
in the account, and then forgets about
it until actually using it up.  I'm
pretty tired of making $30 phone calls,
but haven't found any prepaid plans
that aren't meant for people with far
more time than money.

[5] Even if the data turn out to say
that the economic cost of tariffs is
outweighed by the gastronomic cost of
tariffing out sugar in favor of corn
sweetener. :-)

[6] Californians can look at the new
vineyards along 101 as proof that at
least some people are trying to time
shift their income stream.

[7] Given the appropriate multipliers,
it should be possible to compare income
taxes to taxes on different derivatives
of an income stream.  Care to try?


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