Let's Talk: Increasing Taxes on the Wealthy

[Bernard]

A friend of mine brought up this topic since Democratic candidates Bernie Sanders and Elizabeth Warren are "wanting to put in place an extreme wealth tax". That being said, I haven't read their plans. I'll try to structure this based on how the conversation went back and forth. Bolded Quotes will be points my friend made and lines with no quotes will be the points I make in response just to make it easy to type. If you don't care for this conversation, you don't have to post. Feel free to call me out on points I made that are not true or are possibly misleading.

"In response to Warren and Sanders wanting to put in an extreme wealth tax, little do they know it keeps people employed...it starts at $32 million a year. $32 Million is nothing when you own a major business. It'll stall growth badly. Reganomics doesn't work because you don't spend when you cut taxes. You think increasing taxes is going to cause them to hire people smh."

Me: If anything rich people holding onto money stunts GDP growth I'd imagine. And it's not just rich people holding onto money that stunts GDP growth, it's when people in general don't spend money and just save it. It just so happens that rich people tend to save most because well, they have the luxury of not having to spend their entire paycheck to survive.

"People take risks if it's worth it. It allows massive companies to exist if they have a massive amount of capital stored in case they implode a bit. If you raise taxes the same way the rich accumulate wealth, they just won't hire the extra person. Or they in fact downsize since there is no incentive to grow. And technically not actually if the money is in the bank it is being used to give loans or its in a stock portfolio. The companies can leverage their stock. Also tech is a huge factor, investment into new tech stimulates major growth. But if it costs more to invest..."

Me: A study published by the Congressional Budget Office shows that tax cuts for the middle and lower class produces more jobs than tax cuts for the wealthy. Also in a 2018 study by the Institute for Policy Studies, looking at 92 publicly traded companies that paid less than the 35% corporate tax rate, it found that between 2008-2015, these corporations lost jobs while the overall economy increased jobs by 6%. Instead of paying taxes or hiring, these companies bought back their own stocks and increased CEO pay at a higher rate than the average for the companies listed on the S&P 500. In a 2014 New York University study, it compared companies in low-tax states to those in high-tax states. They found the tax rate didn't affect job creation unless tax cuts were offered during recessions. (I literally googled "does decreasing taxes for the rich create more jobs)

"The point is if tax cuts aren't going to get them to open their wallets, what are new taxes going to do. They will try to cut losses by hiring less, producing less, and generally lowering growth and prosperity overall. Large companies are able to take advantage of economies of scale. Taxing them more will also mean everything costs more too."

Me: I mean even if you increase costs, you will still maintain capacity until you have marginal losses. Earning less profit per item is better than not selling it at all.

"That's how it will work in the long run. They wont invest in new tech. They will be content and won't have much capital to use. If wealth isn't concentrated, it can't be used effectively. Capitalism is basically growth through people taking risks and trying to exploit opportunities. Why is inequality growing? If it was easier and possible to generate growth from the middle and lower classes, it wouldn't be growing. The big Amazons of the world would have to deal with so many competitors they would get dethroned. They are able to stay at the stop because they have the cash reserves to get there."

I didn't know what else to really say.

@Ferris Bueller @Dab

[[MPGH]Mayion]

In which case are we speaking here, capitalism or socialism?
In either case, owners will thrive to make more profit, that is true of purely profitable and social businesses. To improve, expand or innovative, you need capital, if i however impose higher taxes, and thus, leave you with higher costs, i will in a way cripple your progression. That affects even billionaires as they have achieved their wealth from saving up and working, assumingly, hard.

With that in mind, tax brackets already exist, don't they? If you are talking about even higher amount of taxes than that then you will face lots of problems.

First one: what will the government do with the money? Increase public sector minimum wages? Improve public services, and thus, improve standards of living? If we assume it is the former, increase of wages, wouldn't that force private sector businesses to increase their wages as well? This will lead to higher costs, which in the end, lead to slight inflation, in which the prices will equalize just the same way as before, meaning that you achieved nothing in the end.
Say a burger costs 1 pound to buy and your salary is 10. If the costs to produce the burger increases, due to higher wages, and it is 2 pounds now, you will not benefit from your increased wage, which for the sake of simplicity, is 20 pounds now. Both ratios are 1 in the end.

In economics we use a flow chart to simplify it, and whether it is on a micro or a macro scale, the concept of having a balanced equation is crucial.
There are quite a few more problems but i am not home right now.

[Bernard]

In which case are we speaking here, capitalism or socialism?
In either case, owners will thrive to make more profit, that is true of purely profitable and social businesses. To improve, expand or innovative, you need capital, if i however impose higher taxes, and thus, leave you with higher costs, i will in a way cripple your progression. That affects even billionaires as they have achieved their wealth from saving up and working, assumingly, hard.

With that in mind, tax brackets already exist, don't they? If you are talking about even higher amount of taxes than that then you will face lots of problems.

First one: what will the government do with the money? Increase public sector minimum wages? Improve public services, and thus, improve standards of living? If we assume it is the former, increase of wages, wouldn't that force private sector businesses to increase their wages as well? This will lead to higher costs, which in the end, lead to slight inflation, in which the prices will equalize just the same way as before, meaning that you achieved nothing in the end.
Say a burger costs 1 pound to buy and your salary is 10. If the costs to produce the burger increases, due to higher wages, and it is 2 pounds now, you will not benefit from your increased wage, which for the sake of simplicity, is 20 pounds now. Both ratios are 1 in the end.

In economics we use a flow chart to simplify it, and whether it is on a micro or a macro scale, the concept of having a balanced equation is crucial.
There are quite a few more problems but i am not home right now.

The case here is specifically the United States and whether or not the Unites States should tax the wealthy more or less and for what reasons. The reasons matter sure but they're a whole other issue. We're just going to assume the government will use the tax dollars for "the good of the people". Interpret that however you want.

- - - Updated - - -

In which case are we speaking here, capitalism or socialism?
In either case, owners will thrive to make more profit, that is true of purely profitable and social businesses. To improve, expand or innovative, you need capital, if i however impose higher taxes, and thus, leave you with higher costs, i will in a way cripple your progression. That affects even billionaires as they have achieved their wealth from saving up and working, assumingly, hard.

With that in mind, tax brackets already exist, don't they? If you are talking about even higher amount of taxes than that then you will face lots of problems.

First one: what will the government do with the money? Increase public sector minimum wages? Improve public services, and thus, improve standards of living? If we assume it is the former, increase of wages, wouldn't that force private sector businesses to increase their wages as well? This will lead to higher costs, which in the end, lead to slight inflation, in which the prices will equalize just the same way as before, meaning that you achieved nothing in the end.
Say a burger costs 1 pound to buy and your salary is 10. If the costs to produce the burger increases, due to higher wages, and it is 2 pounds now, you will not benefit from your increased wage, which for the sake of simplicity, is 20 pounds now. Both ratios are 1 in the end.

In economics we use a flow chart to simplify it, and whether it is on a micro or a macro scale, the concept of having a balanced equation is crucial.
There are quite a few more problems but i am not home right now.

The case here is specifically the United States and whether or not the Unites States should tax the wealthy more or less and for what reasons. The reasons matter sure but they're a whole other issue. We're just going to assume the government will use the tax dollars for "the good of the people". Interpret that however you want.

[[MPGH]Jov]

you mean tax the currently untaxed like the eccomerce companies and tech giants who outsource their accounting and banks to skirt around paying tax in the country they are based on? lol amazon is even building their own shipping company to truly just profit and never pay for anything 30% of stores have closed due to eccomerce and tons of mfkin jobs are getting cut, ppl blame the mexicans but in reality its the fuckin robots that u see in the factories

[Ferris Bueller]

Gonna respond in a hurry sorry i'm busy

You think increasing taxes is going to cause them to hire people smh.

The objective of enforcing strict taxes on the upper class isn't to increase employment. Employment isn't the issue in America, we have record low unemployment. The problem is wages and the standard of life. Who cares if you have a job if you can't make enough money to support yourself and your family? You tax the rich, and redistribute the money to those that need it, whether it's the public sector like education and transportation, and just things that are proven to improve the economy and lives of the average joe. Not austerity.

If anything rich people holding onto money stunts GDP growth I'd imagine.

Completely accurate. This is why trickle-down economics is a scam. It's a scam made to convince you that having a guy like jeff bezos is good because his money will somehow trickle down to you. What actually happens is that people like jeff bezos get their money, invest it off-shore, keep it in off-shore banks, spend it on luxury mansions etc..., or just hoard it. This is very well documented. The poor on the other do not exhibit wealth hoarding because they have no wealth to hoard. Most poor Americans spend their entire paycheck on just staying alive and then have to dip into debt to make up for the rest of their living costs. It's the death spiral of debt we have built for our poor Americans.

"People take risks if it's worth it. It allows massive companies to exist if they have a massive amount of capital stored in case they implode a bit. If you raise taxes the same way the rich accumulate wealth, they just won't hire the extra person. Or they in fact downsize since there is no incentive to grow. And technically not actually if the money is in the bank it is being used to give loans or its in a stock portfolio. The companies can leverage their stock. Also tech is a huge factor, investment into new tech stimulates major growth. But if it costs more to invest..."

What your friend is talking about here is austerity for the poor and tax-cuts for the rich. It is proven not to work for a) improving the country's economy b) improving the lives of people. What it actually does do though is improve the profit-margin of CEOs who can then spend that profit on media corps and lobbying to make people like your friend believe that them not paying taxes is somehow good for your friend. When you give the working class more respect in the form of pay, free-time, etc... They then have spending power. They can use that spending power to buy the shit these CEOs are selling and stimulate the economy just like you're gonna go on to explain:

A study published by the Congressional Budget Office shows that tax cuts for the middle and lower class produces more jobs than tax cuts for the wealthy.

Increasing the power of middle and lower class is good for the economy; the economy is built on them. They are your consumers and your workers.

The point is if tax cuts aren't going to get them to open their wallets, what are new taxes going to do.

Is your friend mentally-challenged? They don't open their wallets no matter what, this is why you force them to to open their wallet by imposing taxes and destroying tax loop-holes that lead to big corps paying nothing in taxes.

They will try to cut losses by hiring less, producing less, and generally lowering growth and prosperity overall.

Again don't let your friend use this point to fear-monger. It is not about the jobs, it's about the pay and the standard of living.

They wont invest in new tech

Then fuck them, let the government invest in new tech. Why is he acting like they're investing in new tech now? The top companies all have a, and i can not stress this enough, FUCKING TINY R&D budget. Waiting on the private sector to do something for the good of man-kind is fucking childish. They stumble upon new tech that would help man-kind, and for example, a big pharmaceutical company will pick up said tech, patent it, and then limit access to said new tech that is good for humanity behind a massive fucking pay-wall.

Capitalism is basically growth through people taking risks and trying to exploit

TRUUUUUUEEEEEEEEE

"That's how it will work in the long run. They wont invest in new tech. They will be content and won't have much capital to use. If wealth isn't concentrated, it can't be used effectively. Capitalism is basically growth through people taking risks and trying to exploit opportunities. Why is inequality growing? If it was easier and possible to generate growth from the middle and lower classes, it wouldn't be growing. The big Amazons of the world would have to deal with so many competitors they would get dethroned. They are able to stay at the stop because they have the cash reserves to get there."

Him saying it is necessary for wealth to be concentrated in the hands of a few to be used effectively is disgusting. But this is how capitalists unironically think. They don't care about the thousands dying of hunger, they don't care about the thousands of homeless, they just don't. Is your friend aware of the amount of foul-play is performed by these companies? Actually that's a topic for another day.

What I want to talk about though is him asking you this dumb question "Why is inequality growing? If it was easier and possible to generate growth from the middle and lower classes, it wouldn't be growing." Inequality is growing is because of the same exact policies he is advocating for. Tax-cuts for the rich, and austerity for the poor. This is how you grow inequality. If the rich are paying less every year and the poor are paying more, it is clear to see which direction the wealth is shifting. How can he in one breath say we should make the rich richer and the poor poorer, and then in the next ask "why is inequality growing surprised pikachu face?" His response would be, oh well the rich have to get richer to grow the economy. We have already debunked this though, tax-cuts for the rich harm the average American, distributing money on the working class helps the average American and the economy as a result.

I honestly think this boils down to that last paragraph but as an aside, your friend has a massive blind-spot. He believes in the invisible hand. He believes that the big corps number one priority is to do what they can to grow the economy and help the average Joe. The reality is quite the opposite. The big corps number one priority is profit. And the reality is, increasing the profits of a corp most of the time is directly opposed to a)improving the economy b)improving the lives of the worker. The 2008 market crash happened because banks were growing profits, banks were growing profits, etc... They did this while knowing that this will hurt the economy and that it will hurt millions. But at the end of the day they were doing what the system is designed for them to do: make profits.

damn i got carried away but my response still isn't perfect and there's a lot of information i left out, feel free to correct my logic or ask questions
PROFIT IS THEFT

[[MPGH]Dave84311]

Gonna respond in a hurry sorry i'm busy
damn i got carried away but my response still isn't perfect and there's a lot of information i left out, feel free to correct my logic or ask questions
PROFIT IS THEFT

more like capitalism is theft

fucking over your neighbor to advance

[Dab]

more like capitalism is theft

fucking over your neighbor to advance

me republican me cut taxes for the rich so they spend more.

hurdur let's subsidize the cost of multi billion dollar companies while passing regulations that make it nearly impossible for smaller businesses and manufacturers to compete.

[Gaydow]

me republican me cut taxes for the rich so they spend more.

hurdur let's subsidize the cost of multi billion dollar companies while passing regulations that make it nearly impossible for smaller businesses and manufacturers to compete.