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I think 1 & 2 might be the motivating problem for my whole worldview right now --- just the notion that the system is in fact rigged, but not for who we want to say it's rigged for, but rather for the college-educated middle/upper-middle class. We're all on board for for social justice (I certainly am too), but only to the extent that it doesn't impact the square footage we can get a mortgage on in a choice "public" school district.

This isn't an especially productive comment and I should probably delete it before I hit the reply button.

You'd think that, until you have a conversation with someone who does accounting for the ultra rich and discover that the mortgage interest deduction is a joke compared to the loopholes those people are able to take advantage of.

The key-word here is ultra-rich. See: https://www.irs.gov/pub/irs-soi/soi-a-ints-id1801.pdf. Average tax rate goes up with income up to the top 0.1% ($2.4 million+). It starts dropping at the top 0.01% ($11 million+). But at that point you're talking about just 5% of total income. Tax those people an extra 10 points more, and you get maybe another $50 billion. But if you taxed the top 50% an average rate of 21% (the same as the top 10%), you'd raise $500 billion more.

We love to complain about billionaires and hedge fund managers, but 80% of the income in this country accrues to a group of people that has entry-level college graduates at one end and top Google engineers at the other end.

To be a little more specific, the federal tax system relies on people who make very roughly around $200-$500K/year, because those making less have their numbers outweighed by their lack of income, and those making more have their income outweighed by their lack of numbers.

The thing about the WSJ graphic that everybody made fun of: https://franklycurious.com/wp/2013/01/16/pity-the-rich/

...is that whatever people in that income range are really like, and however little sympathy they deserve, they are the golden goose that provides the lion's share of revenue for the government, so politically, there always has to be a game of chicken when tax increases are discussed. That's where the money is, so how much can be taken without harm to the economy?

I would bet that expropriating billionaires would have surprisingly little effect, but most of the people who would like to do it think six figures is rich too.

You don't need to "expropriate" anyone, and I'd rather not experiment on the folks running the companies (Google, Microsoft, Apple, etc.) that make America the envy of the world.

Folks at the top 30% mark still benefit from income inequality. (That is to say, they earn a larger share of national income than their share of the population.) If you tax the entire top 30% an average of 25% you could increase revenues by double what Warren's proposed wealth tax would bring in. (And you wouldn't risk driving businesses and jobs to Canada.)

But folks (Sundar Pichai, Satya Nadella) running large companies are not usually billionaires. Bill Gates isn't running Microsoft any more, you know. And if he was, what difference does it make to anyone exactly how many billions in stock he has? The difference is the delta between the benefit of his charitable efforts and what anyone else would do with the money, and the parsimonious assumption is that it's about zero. Since, you know, he didn't get rich by solving the problems he's trying to solve now.

The difference is that soon as he gets successful, he reincorporates Microsoft in Vancouver BC. Or people like Musk, who continue to use their personal wealth to bankroll new companies, move to Toronto.

That's not the only single factor for them to consider though. I doubt Musk would move to Toronto, or that he would ultimately benefit from moving to Toronto in the long run were these taxes to go in effect. Of the sea of other things to consider, including the pool of candidates, the business culture, the social culture, the infrastructure already in place, types of grants available, the federal funding available (which can come with strings attached, like: "you gotta stay incorporated in the States"), etc. it makes sense for them to stay in America more than any other place. Not to mention, the safety that is here for these people and their children, the great schools, the best medical care, their ties, and so on.

I have no idea who benefits from corporations being incorporated in Delaware, but I (and the vast majority of Americans) don't live there and I don't care. The location of incorporation is not the headquarters or where the workers are.

This "Atlas will shrug" thing is trite posturing, not to say that there cannot be other drawbacks to populist revolutions.

From Matt Levine's column describing people threatening that Argentina will become "uninvestable" if it doesn't do what bondholders want:

"[Argentina] defaulted in 2001, imposed 70% haircuts in 2005 and 2010 restructurings, was in default on interest payments on the new restructured bonds from 2014 until 2016 due to legal disputes, finally cleaned up its act and returned to the international bond markets in 2016, and then in 2017 issued a hundred-year bond that international investors lined up to buy. Now those bonds trade at about 40 cents on the dollar, and international bond investors have the gall to be like “well if you default nine times we won’t lend to you a tenth time,” come on. They bought 100-year bonds one year after the last default ended! “There is a limit to what they will endure,” sure, but after two centuries of diligent searching Argentina hasn’t found it. "

It’s not an “Atlas Shrugged” point. What’s the difference between Bangladesh and America? It’s not that we have more people with bachelors degrees in psychology. It’s not that we’re smarter. Or nicer. It’s partly our civil society and lack of corruption, but a big part of it is access to capital. We have Silicon Valley. Bangladesh does not. My family left Bangladesh for the US 30 years ago because America offered more opportunities. What does that mean? It means there was capital available to do things and build things. Interestingly, some of the latest generation of my family aren’t leaving. Amazingly, over the last 20 years major increases in foreign direct investment have resulted in opportunities in Bangladesh. Not for John Galt. But for young programmers looking to join a tech startup: https://www.forbes.com/sites/theyec/2018/08/02/why-banglades....

Taxing away your capital is like selling your furniture for quick cash. You’re not skimming the fat, you’re cutting into muscle and bone.

As to Argentina, it had to offer a 7.9% interest rate to move those bonds in 2017. If we refinanced our national debt at those rates, we’d be paying $1.5 trillion a year on debt service, about what we spend on Medicare/Medicaid and defense out together.

If it was generally understood why America is different from Bangladesh, every country would be like the US.

It sounds like you're implying the secret is being nice to the big capitalists so they keep their capital in your country. But I don't think that's the way the world works, and it's precisely because most people think that's the way it works that most of the world cannot catch up.

Big companies in the US are largely owned by Vanguard and Blackrock and so on. They're already collectively owned by the people, despite all the talk about inequality. Prosperity depends on this system, not billionaires.

It's not that the US couldn't wreck things by acting like Argentina, but that people shouldn't pay attention to the super wealthy posturing. And the more they talk nonsense, the more they encourage radical actions, because true things can't be believed.

If Pichai is making $100m a year it won’t be long

> Everyone agrees that markets produce efficient prices so long as you account for externalities.

Clearly not everyone does. A big part of the heterodox economists even denies the existence of the notion of “efficient price” and rejects the concept of equilibrium.

What you call “everyone” is in fact the huge group of “Neoclassical synthesis” economists, which is super dominant nowadays, but it's not at all everyone.

>4) replace payroll and income taxes with consumption taxes

how can this be implemented in a fashion that's non-regressive? income taxes in most countries are progressive, and consumption taxes are regressive.

They can be progressive too: [1]

> A direct, personal consumption tax may take the form of an expenditure tax, that is, an income tax that deducts savings and investments, such as the Hall–Rabushka flat tax. A direct consumption tax may be called an expenditure tax, a cash-flow tax, or a consumed-income tax and can be flat or progressive...

> This form of tax applies to the difference between the income of an individual and the increase/decrease in his savings. Like the other consumption taxes, simple personal consumption taxes tend to be regressive with respect to income. However, because this tax applies on an individual basis, it can be made as progressive as a progressive personal income tax. Just as income tax rates increase with personal income, consumption tax rates increase with personal consumption. Economists from Milton Friedman to Edward Gramlich and Robert H. Frank have supported a progressive consumption tax.

[1] https://en.wikipedia.org/wiki/Consumption_tax

Progressiveness is a function of both taxes and benefits. A consumption tax scheme can be made more progressive by paying benefits in a more progressive manner.

For example, Exampleville institutes a consumption tax of 15%. Such a tax is regressive because consumption is usually a smaller proportion of a wealthy person's income than a poor person's income. To counteract this, Exampleville pays a monthly cash grant to all citizens and adjusts the payment level so that the cash grant is larger for the poor and smaller (or non-existent) for the wealthy.

See https://tax.purpleplans.org for an example of a real proposal that mimics this scheme.

Where is that money supposed to come from? To make this work people have to pay enough consumption tax so there is money for the payouts. Also, if you make these payments dependent on income level you pretty much have the problem of determining a taxable income which we have now.

Personally I think there is almost no way to make this work without being highly regressive.

I don't think it makes any sense to tax everything and give back the money in the same proportions.

However, if you just tried the experiment, then to the extent it redistributed resources, it would be taking more money from those who consumed more at a given level of income, and giving it to those who consumed less.

So it would probably reduce consumer activity, and I don't know if that would be good for the economy in the long run. I don't think it would be a null-op though. It doesn't seem like a logical or mathematical contradiction.

But this assumes that the revenue from the consumption tax will 1) be the same as for the income tax, and 2) hit wealthy people enough that the lower benefit payout will balance it.

I don't really see how these can be true given that, as you state, wealthy people spend a smaller portion (a lot smaller) of their income than do poor people.

To toss out some numbers, let's say the wealthy person makes $1M per year at a 35% effective income tax rate and the poor person makes $50K per year at an effective 10% income tax rate. Let's further suppose the wealthy person spends half their after-tax income, and the poor person spends all of it. Total tax revenue in this case would be $355K under the income scheme, but if we switch to a consumption tax, the tax revenue drops to $55,500. There's no amount of benefit allocation you can do to make up the difference. On top of that, the tax burden for the wealthy person (after offsetting for the benefit allocation) is still massively lower than under the income scheme, even if they get $0 in benefits. You'd have to raise the consumption tax ridiculously high (33% !) to get close, which will effectively discourage expenditures and encourage savings, pretty much destroying the US consumption-based economy.

I just can't see a realistic scenario where this setup isn't regressive or generally a bad idea. If you want to keep a progressive system but also eliminate income tax, we need to consider a wealth tax.

> You'd have to raise the consumption tax ridiculously high (33% !)

I don't think 33% is ridiculously high. VAT is 25% in Norway, Sweden, and Denmark, 27% in Hungary; and their economies are doing well.

Well, you may not think 33% is ridiculously high, but you just wrote that it is in the second sentence. You say that 33% is 1/3 higher than Sweden, which is proverbial as an example of a highly taxed locale.

Interestingly, the Nordics also have super-high income taxes. I wonder what the VAT there would have to be to abolish income taxes. 50%? 60%?

Just checked the Danish national budget. Danish VAT brought in (or was estimated to bring in) 212 billion DKK in 2018. In comparison, tax levied on personal income brought in 562 billion.

That's fair. However, the proposal in the parent comment's link (and other proposals like it) is asking for a 17.5% consumption tax, which would be an absurd gift for the wealthy. Even for not-wealthy people like me, it would be a huge boon, while the middle class would get hosed.

Won’t most of these cause more wealth inequality? I think economics should be focused on improving peoples‘ lives, not just increasing the GDP.

> NPR did a podcast a few years ago on six policies it’s ideologically diverse panel of economists all agreed on:

That panel consisted of five American economists (Luigi Zingales is perhaps an immigrant but working in an American university). Two of them appeared to be om the Democrat's side and three aligning with the Republican party. That is not very ideologically diverse.

You said: "Everyone agrees that markets produce efficient prices so long as you account for externalities.”

You lost me here, and revealed much about your thinking. Please explain how a “market” is anything other than steady state if all externalities are accounted for? Profit, by definition, means getting something for nothing. Without externalities, capitalism doesn’t exist.

I don't agree with your definition of profit.

Profit, I would say, is really the same thing as interest, i.e. return on capital, just with the connotation of being less predictable.

And interest, I would define not as something extra for doing nothing, but as a deferred payment for the labor that created the capital, which serves the important social purpose of rewarding people for deferring the consumption of the fruits of labor.

That's why people have not found a way of eliminating it, even though usury has been criticized for thousands of years.

Some other points:

1. Externalities can be positive. For example, the government builds roads, and doesn't account for the benefit to private industry on their books.

2. You're in a forum with a lot of software engineers; do you really believe that every new piece of software that brings $X in revenue necessarily costs society $X somehow? What mechanism causes this? Saying everything has externalities is far from saying they are always significant, or if significant, they are equal and opposite to the internalized value.

2. is actually a damning criticism of economics. There is nothing in economic theory that makes a calculation of broader costs vs benefits possible.

It simply doesn't exist, so it's not considered.

So economic theory is blatantly biased towards the accumulation of profit for shareholders, and blatantly biased against a realistic assessment of the social costs of those profits.

Simple example: AirBnB. Some people - mostly property owners - make money.

Other groups - people who need to rent property at a reasonable price - lose money.

You won't find the latter represented on the balance sheet. What looks like a potentially profitable operation actually turns out to have a huge social cost. Effectively it's moving money from a relatively unprivileged group to a relatively privileged group.

This is not a hypothetical example - it's a real problem in the area I'm living in, where the supply of long-term rental property has almost disappeared because owners can make more money from short-term tourist rentals.

Economics relies exclusively on these kinds of effects. There is no concept of "social profit" which is a guaranteed positive benefit for as many affected parties as possible.

And without that, economic theory becomes a vicious feedback loop that prioritises the redistribution of money over genuine value creation.

> There is nothing in economic theory that makes a calculation of broader costs vs benefits possible.

There are vast swathes of economic literature and theory dedicated to the study of external and social costs and how to best estimate and adjust for them. Claiming there is no concept of 'social profit' in economics is akin claiming there is no concept of testing in software development...

Right? They literally gave the Nobel Prize last year to someone who began the literature on calculating the social cost of carbon (Nordhaus). And that's just the beginning of a voluminous literature on the question.

I'm not an economist, but it seems to me that it necessarily contemplates ideas of profit that don't match accountants' - otherwise there would be nothing to it.

Also, I've noticed how actual economists speak of "economic profit". Whether you use the word "economic" or "social" or anything else, the modifier implies there is some deeper truth than whatever a given accountant writes down.

You can look at essentially everything that is illegal as a limitation on creating negative externalities, so saying that costs and benefits to society are not considered is as ridiculous to me as saying business is not regulated.

What people seem to disagree about is whether everything that is not illegal is permitted, or whether businesses should be expected to adhere to implicit codes of ethics and proper behavior without specific regulation.

It's not surprising that many people want a strict separation of responsibilities, but obviously governments are having an increasingly hard time keeping up, partly because of technology and partly because of politics.

I don't think that a society where people compete with each other and are restrained by laws is fundamentally new; that's been around for thousands of years. It's just that information technology is increasingly enabling the exploitation of discrepancies between actual laws and the common assumptions about what they do.

> Please explain how a “market” is anything other than steady state if all externalities are accounted for?

I took micro-economics in highschool, and when discussing how trade is overall beneficial, they trotted out the old example of two countries, each producing bicycles and bananas.

The purpose of the exercise is to show that if each country focuses on one item and specializes on it, everyone benefits.

I always found that example to be deeply disturbing. If given a choice, who would actually prefer to live the banana country rather than the bicycle country? Even in highschool this silly example demonstrated the absurdity of classical economics.

Economists were wrong about the $15 min wage.

According to this survey in 2015 (http://www.igmchicago.org/surveys/15-minimum-wage), economists do not have a clear opinion on a 15 dollar minimum wage. "Uncertain" is the most common answer on whether it would cause unemployment, and "Agree" and "Disagree" both get considerable support.

https://www.marketwatch.com/story/the-15-minimum-wage-was-su...

Supposed by who, though? As you can see from the survey there was nothing like consensus on the question. The link in that article is to the National Restaurant Association, who are a lobbying organization.

Many economists are divided on the issue largely on ideological grounds.