[JonFish85]

"Make more than a million dollars a year? 95% marginal tax rate."

Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Then you gotta start taxing the upper middle class -- what rate do you want to tax people making over $500k? $250k? $100k? Those are the ones that will pay for this program.

As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything, and it comes down to how much you want to tax the moderately successful person who is trying to pay for their 2 kids' college expenses while saving to have a retirement.

[toomuchtodo]

> Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m.

Do wealthy individuals in other countries with a heavier tax burden (Europe, Scandinavia to be specific) do this? Would be nice to see evidence of this behavior before outright dismissing raising taxes.

[caseysoftware]

Yes. Google "millionaires leaving X" and see what the autosuggestions are for X and choose one. While some are US states - NY, Maryland, etc - most are countries.

Here's the top couple using France: http://www.forbes.com/sites/chrisconover/2012/07/23/flight-o...

http://www.theguardian.com/world/2014/dec/31/france-drops-75...

[toomuchtodo]

https://en.wikipedia.org/wiki/Expatriation_tax

[JonFish85]

If the tax rate is 95%, a company would have to pay someone a $21 million dollar salary to pay that person $2m. I suspect that no company would do such a thing, as it's just throwing money away.

[bryanlarsen]

5% of a very large number is still a large number. Very few people are going to say "don't give me that extra $20 million because the government will take $19 million." $1 million is still a lot of money.

And of course, there are lots of deductions. You could give that $20 million to a charity and the government would get none of it. You wouldn't get any either, but you could certainly get a lot of indirect value out of giving away $20M.

[JonFish85]

What company is going to pay that? It's just silly. If you felt that a CEO/athlete/whatever was worth $30m a year, you'd have to pay that person $581 million dollars. They'd find some other way, that money wouldn't go to the government.

[toomuchtodo]

> They'd find some other way, that money wouldn't go to the government.

And so we keep closing loopholes.

[crdoconnor]

>As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything,

The point isn't to make them pay for everything. The point of taxing them is to mute the inflationary effect of letting them keep their money.

The primary noticeable effect of taxing the wealthy on the rest of us would be to make property more affordable once again.

[yummyfajitas]

This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods (servers, backhoes, research, etc). If we redistribute to people with a higher propensity to spend, then we are shifting wealth from investment to consumption. This will raise demand for consumer goods, hence raising prices, and causing inflation.

Note that an increase in the speculative value of real estate is NOT inflation - inflation incorporates the cost of housing (rent or owner-equivalent rent), not the speculative value of land. Similarly, it's not inflation if FB or MS goes up.

By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

[toomuchtodo]

> By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

In a recession, you want to stoke demand. Inflation isn't a worry, deflation is. You therefore give tax cuts to the people who are going to spend (ie not the wealthy).

"Overall, tax cuts for the bottom 90% tend to result in more output, employment, consumption, and investment growth than equivalently sized tax cuts for the top 10% over a business cycle frequency."

http://www.forbes.com/sites/taxanalysts/2015/04/24/tax-cuts-...

[yummyfajitas]

Yes, that's the point I'm making - I'm disagreeing with this: "The point of taxing them is to mute the inflationary effect of letting them keep their money."

But if crdoconnor disagrees and also is logically consistent, he should also disagree with you. Somehow I suspect he won't.

Also, your understanding of Keynesian economics is slightly confused; the goal is to cause inflation in order to reduce real wages.

[crdoconnor]

>But if crdoconnor disagrees and also is logically consistent, he should also disagree with you.

Uh, no. It's entirely logically consistent to agree with him.

[crdoconnor]

>This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods

Have you not noticed that these goods have experienced a considerable degree of price inflation over the last decade? Did houses get cheaper?

>Note that an increase in the speculative value of real estate is NOT inflation

Bullshit. If I'm spending more on rent or mortgage (which I will if property prices increase), I've experienced inflation just as much as if I'm spending more on milk, eggs and bread.

>By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy.

Depends on whose economy you are stimulating. If you just want to stimulate the price of property and stock prices, sure, tax cuts for the wealthy all round. If you want to stimulate employment for the middle classes, not so much.

If you want to stimulate general economic growth, tax cuts for the rich are awful because there is a very minimal multiplier effect. The money goes into real estate and the stock market and largely stays there.

The best way to do that is to offer a job guarantee like FDR did in the 30s or increasing the minimum wage. The spending multiplier on both of those is about 3-5.

>Do you favor such cuts during times of recession?

Clearly not.

[yummyfajitas]

Rent increases are inflation, house price increases are not. Similarly, burrito price increases are inflation but chipotle share price is not. Please, understand inflation and cpi before opining on it. Also google it - inflation has been very low over the past decade.

(In fact, its my belief that we've had deflation for a while, since I believe cpi is considerably overstated. The biggest driver of inflation is health care, which is not hedonically adjusted.)

According to you, money in the hands of the poor has a higher multiplier (I.e. causes more inflation) than money in the hands of the rich. How does that not contradict your previous post? In whose hands does money cause the most inflation, the poor or the rich?

Also, your ideas about stimulating different parts of the economy are pretty explicitly not Keynesian.

[SamReidHughes]

Speculative property price increases won't cause an increase to rent, that's a function of what prices the market will pay for housing at particular levels of quality. It might cause somebody who'd buy a home to decide to rent instead, but remember that somebody else is currently occupying that home (or better yet, renting it out). In areas with room for development, speculative price increases on housing will make it profitable to build more housing, which will lower rents (i.e. make them rise less quickly).

Note that property price increases are often associated with increases in rent, but they don't cause the increases -- rent increases is caused by influxes of population, decreases in the population's price sensitivity, etc. Property price increases are caused by the same thing, and speculative property price increases are caused by (among other things) expectations of that sort of thing.

The big difference between houses and milk is that houses are durable goods which don't completely depreciate.

[JonFish85]

"The point of taxing them is to mute the inflationary effect of letting them keep their money."

What? How is it inflationary to let "the wealthy" keep their money vs. artificially raising the wages of the minimum wage workers?

"The primary noticeable effect of taxing the wealthy on the rest of us would be to make property more affordable once again."

Also--what? Being that we're on Hacker News, the majority of people here are probably making $100k+ a year and are solidly in the top 10% of wage-earners in the country. We're the ones driving up housing prices on a macro scale across the country, not the few people that have hundreds of millions to spend.

[crdoconnor]

>What? How is it inflationary to let "the wealthy" keep their money

Because they spend it.

>We're the ones driving up housing prices on a macro scale across the country, not the few people that have hundreds of millions to spend.

Both are. The few people with hundreds of millions of dollars will buy large properties in central locations in multiple cities, shrinking the available housing stock for the rest of us.

[JonFish85]

"Because they spend it."

So does everyone, they just spend it differently. Bill Gates' money isn't sitting in a checking account, it's in stock certificates. High net-worth people don't put money under their mattresses, they spend it, albeit in different ways. I don't know how to compare consumer spending vs. investments, so I can't say if one is "better" than another, but that money isn't just sitting in bank accounts.

Available housing stock on the whole is just fine in the US. Sure, you and I probably can't afford to live on Park Avenue or overlooking Central Park, but that's because those properties attract worldwide money. We're not there yet. San Francisco's housing problems aren't as simple as "some people have money". Taking money away from people isn't going to solve this.

[crdoconnor]

>So does everyone, they just spend it differently.

Yes, and the wealthy spend more, so the effect of their spending is more inflationary.

>Bill Gates' money isn't sitting in a checking account, it's in stock certificates. High net-worth people don't put money under their mattresses, they spend it, albeit in different ways.

Quite. This is why the price of property is absurd and P/E for the stock market is so low. Unfortunately the middle and working classes get hit by this just as much as they get hit by rises in the price of milk or eggs.

>Available housing stock on the whole is just fine in the US. Sure, you and I probably can't afford to live on Park Avenue or overlooking Central Park, but that's because those properties attract worldwide money. We're not there yet. San Francisco's housing problems aren't as simple as "some people have money". Taking money away from people isn't going to solve this.

Oh yes it would. Hit the wealthy with huge taxes and they would end up selling those properties to pay off their tax bill. That would lead to a spiraling decrease in San Francisco and New York property prices as well as a stock market decline.