by Tyler Cowen
on October 16, 2013 at 12:46 pm
1. How to practice well.
2. How to spot good gelato from fifteen feet away.
3. Coorg dining and recipes.
4. Megan McArdle on the exchanges and how long they have to fix them.
5. A simple note on wealth taxes.
6. New post on GMM. And John Cochrane on Hansen and GMM.
You may wish to make the gelato link point to the actual post, not just the website:
Re #5 – Thatcher tried a variant of this–a ‘one time’ tax namely a poll tax–which I believe technically is unconstitutional in the USA–and the poor rioted, bringing in John Major. But I agree with the proposal for a ‘one time’ wealth tax on the rich, which, as the article says, will not distort incentives if it is deemed one time. Anyway, another study showed the super wealthy have inelastic demands for tax, meaning they enjoy working and will work just as hard even if you tax them more. So soak the rich, yes. Dearime, you with me?
It is just precious when people assume ridiculous things like “the rich are happy to pay more, and are stupid to boot, so they won’t find out what we’re doing, and have no political influence either, so they won’t be able to gum up the works and shift finances overseas”. The reason these taxes don’t distort incentives is that anyone with an incentive to distort has dodged them.
The gelato link is down!! Can someone find a mirror?? I need this information.
5. ‘Cuz the government has permitted the 1% to accumulate obscenely large balances of its bearer debt securities, a.k.a. Federal Reserve Notes.
Re: Wealth Tax
Perhaps taxation should be regressive, the greater to incentivize beneficial economic activity?
I should have said this earlier, but you both did an excellent job on the Nobelists.
Re: McArdle and ACA IT
I’ve wondered why the ACA designers didn’t populate their data base(s) with what the government already knows about uninsured people. Seems as if it would have saved a lot of time as potential customers tried to reenter their data and the government tried to check its validity.
Because then everyone and his dog has access to potentially very sensitive information.
re 5: There are two major problems with this proposal, not counting normative biases.
First, as a practical matter there is no such thing as a “one time” tax; essentially everyone with an IQ larger than a turnip will assume it will recur.
Second, all modern governmental debt problems are a result of unsustainable spending, not too little taxation. You can’t fix an unsustainable spending problem with more taxation, it will just prolong the problem, worsen the economy through disincentives creating deadweight loss, and thus making things worse in the long run.
Government transfer spending needs to be slashed, everything else is simply misleading people to not see the real problem.
A third problem is that just as the need to define “income” for purposes of the income tax has led to massive statutory and regulatory complexity (and entire industries of tax minimization), a similar mechanism would be needed to determine taxable net worth. Actually, it may be even greater (it would require a way to value every farm, house, business, work of art, piece of jewelery etc. etc.). Setting up such a mechanism would be so time-consuming and expensive, it’s hard to imagine it being worthwhile if the tax is one-off. And once it exists, it’s utterly unimagineable that it won’t be used again. The only other alternative would be to focus a wealth tax on certain types of easily-measurable and grabbable wealth (e.g. bank balances) in which case it would be hugely inefficient, damaging to the economy, and so easy to avoid that it probably wouldn’t yield much.
In any event, once the precedent of a wealth grab has been set, the genie can’t be put back in the bottle.
All in all, a truly feeble idea.
On top of having to put a value on non-monetary assets, there’s a liquidity problem. If the tax is applied to real estate, for example, there are going to be cases where people have all their net worth in the form of an inherited property. If they had to pay, say, 5% of that value, they would either have to borrow against the property to pay the tax or liquidate the whole thing. The externalities that come with a one time tax on potentially extremely valuable real assets make the whole scheme impractical.
Of course you could means test the tax to make sure people have liquid assets to cover their illiquid ones, but that’s an absolute nightmare for the IRS.
Do you calculate your wealth before or after the stock market crash caused by taxpayers liquidating positions to pay the tax?
Here’s the cached version of the gelato link: http://webcache.googleusercontent.com/search?q=cache:_P7kGWcGZrYJ:exurbe.com/%3Fp%3D2392+&cd=1&hl=en&ct=clnk&gl=us
A different take on practice, but not necessarily contradictory to #1:
I was going to post that too, but you beat me to it. It has been going around recently, and I second that it’s worth a look. Some other similarly interesting articles are available on the same site.
4. It’s more than just the IT. Now I wonder if the IT is just a fall guy.
It’s the death spiral, dearest. And I think the fundamental problem is this: you can’t funnel cash from people trying to insure themselves directly to the chronically ill. That’s not what insurance is supposed to be, for one thing. But if natural law doesn’t interest you, it may simply not work. People who want to insure themselves are dealing with the uncertainty of illness. They don’t want to sign up for a known loss.
Long story short, if the banana gelato is gray, it’s probably good, if it’s yellow, it probably isn’t.
What about cheese? Does this test work with cheese? The free government type? If it has a blue-gray tinge on it, is that good? Is that healthy marbling in a blue cheese, or some sort of deadly mold?
Not a lot of meat on a Corgi, is there?
What does it signal that MR switched to links that open new windows vs how it was before where links would take you away from the site?
What does it signal that MR’s link now open a new window rather than leaving the MR site altogether?
RE: wealth tax
If you are thinking about a US federal wealth tax, don’t forget that it would need to be apportioned among the states according to population, as a direct tax. That’s a constitutional requirement. Thus, the rate would vary from state to state, with higher rates necessary in states with lower per capita wealth. Think that is likely to emerge from Congress?
#2 Probably the most helpful thing you have posted 😉
I don’t understand the notion that the economy would have been hurt by the government shutdown because of the foregone federal payrolls. In that respect, the shutdown resembled a highly effective one-time wealth tax on federal employees, until they approved back pay.
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