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PaperclipPerfector  10d ago (text post)   33107 thread views

Culture War Roundup for the week of September 9, 2024

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Reducing taxes on blue collar work doesn't increase it's value, though it does reduce its price. The working of the market should result in wages falling as a result, though various distortions like minimum wage and required time-and-a-half may change that. Sans gaming, the undesirable consequence I'd be most sure of is that hiring fewer employees and working them longer would become even more popular than it already is, both among employees (the ones still working) and employers.

If this proposal were to pass (and I give it a big fat zero chance), gaming would of course be extreme. Give me a contract that guarantees me 41 hours a week and pays me almost all the money in the 41st hour please.

Both Harris's proposals and Trump's are absolutely terrible this time around. Tariffs are bad, tax-free tips are stupid, and this tax-free overtime idea would be be a horror show of distortion and revenue loss if passed, which it won't be. On the other side, Harris's increased tax proposals and unrealized gains tax are terrible and have a better chance of being passed. Price controls are even worse and perhaps like Nixon she could do them by executive order. So Harris is still worse but Trump is closing that gap.

The sorts of people who are paid hourly are, in aggregate, not good enough at math to accept the system being gamed for their benefit. A few CEO's and accountants figuring out how to game it is probably a minor effect, mostly on tax revenue.

No its probably huge because it would also affect payroll tax, which the company pays right upfront. Companies not figuring it out would be giving up a 6-12% margin on costs. Thats bankruptcy level uncompetitiveness in almost every industry.

The sort of people who are paid a salary, and the sort of people who pay salaries, are in aggregate good enough at math to game the system for their own benefit by switching to hourly pay.

gaming would of course be extreme. Give me a contract that guarantees me 41 hours a week and pays me almost all the money in the 41st hour please.

I don't think there would be any more gaming than on any other tax change of that sort. Claiming to not be paid for the first 40 hours is convoluted, and besides, lawmakers aren't total morons and usually close such simple holes in the laws they write.

Don't you have such tax exemptions for night work, sunday work, overtime work in the US? They are very common in Europe - Sarkozy passed one (winning campaign slogan: "work more to earn more"). So did Hitler, and it held up.

Economically, the argument’s pretty straightforward. Why favour the hard-worker over the smart-worker? You can’t really entice workers to be more productive, but you can entice them to work more. So this is better for GDP.

Politically, people think it’s fairer to be rewarded for conscentiousness than intelligence. You could sell it as industrial policy, onshoring. You need more people in factories doing dumb stuff for long hours if you want to compete with china.

Don't you have such tax exemptions for night work, sunday work, overtime work in the US?

No. The night exemption seems especially bizarre to me. Why should income earned at night be any less taxed than income earned during the day?

For my father's long-time job the differentials were 2x for Saturday work and 3x for Sunday or holiday work. In my previous federal government job (~30 years ago) there was a shift differential of 10% for second (16:00-00:00) or third (00:00-08:00) shifts. I worked second shift which was quite acceptable for a young single guy.

At one point post-war euros were struggling to encourage 2nd shift factory work. Maybe it's a holdover from that.

Edit: and not-post-war too, re. Hitler. I remember hearing a lot of German factories were running one shift even during the war. Admittedly probably half due to material shortages and supply chain problems, but they could have been doing some extra labour substitution.

Yeah, it does seem like this overtime suggestion is pretty stupid all around.

In regards to tariffs, why do you think they are bad? Yes, in theory, the United States should have a comparative advantage in something. But when we look at the staggering trade deficit, it seems like this isn't really true. We get goods from China, we give them money, they buy assets. China develops and the US falls further behind. Our "comparative advantage" is debt.

Free trade has destroyed the American blue collar worker and the Rust Belt. The idea that we can compensate for these losses via tax redistribution and job training has been proven false. When we look at the industrial policy of the last 30 years, do we really say "yes, more of this please"?

I'd be willing to accept less prosperity for more social stability and supply chain robustness.

We get goods from China, we give them money, they buy assets. China develops and the US falls further behind. Our "comparative advantage" is debt.

Maybe I'm economically naive, but I think the goods we get from them have utility, and make us better. All they get from the deal is dollars.

Chinese manufacturing is eating the world. Do we want to have a domestic steel industry? Because China makes 12x as much steel as the United States. How about cars? China makes 3x as many.

Rinse and repeat for almost every single manufactured thing. There lead only grows with each passing year.

At first, we built things in China because they were cheap. Now we build them in China because we lack the ability to do it domestically.

I'd say they also get factories and expertise.

We get goods from China, we give them money which they use to buy assets. China develops and the US falls further behind. Our "comparative advantage" is debt.

China's got a long way to go before the US could be "behind".

Free trade has destroyed the American blue collar worker and the Rust Belt.

Wage and price regulations, environmental regulations, and general wealth, have destroyed the Rust Belt. If factory workers elsewhere are making $15/day and yours are making $15/hr, and shipping is cheap, you can't compete at factory work. Blocking that off with tariffs makes everyone (possibly excepting the factory workers who would have lost their jobs) poorer.

The idea that we can compensate for these losses via tax redistribution and job training has been proven false. When we look at the industrial policy of the last 30 years, do we really say "yes, more of this please"?

You can't separate industrial policy from the rest of the economy. Would you rather have had the 1970s forever?

Blocking that off with tariffs makes everyone (possibly excepting the factory workers who would have lost their jobs) poorer.

But low Gini coefficients usually make places nicer to live in them. So it also should be included in the calculation. As an IT - my experience has shown me so far that optimizing for a single variable is rarely the wisest thing to do.

But low Gini coefficients usually make places nicer to live in them.

I don't believe that.

I think it's the other way around. High Gini index countries are all shitholes (or city states with distorted demographics), but low Gini index countries can be the best first world countries, regular second world countries or countries destroyed by a war.

Tyler Cowen really, really hates unrealized gains taxes

He isn't always right, but on this topic he imo makes a lot of good arguments.

In a nutshell, they require massive periodic selloffs of stocks to pay for, which will have tons of second order effects. That in addition to the fact that the government already pulls in enough tax money to piss down the drain/burn in a giant fire, it doesn't need more.

Why on earth would anyone believe that the way to attack a strategy that relies on a very specific step up basis policy was to invent an entirely new type of tax? This makes no sense at all. End the step up basis, I'm on board, why would you keep the strategy working and but then add another tax on top instead of actually fixing it?

Taxing unrealized gains is dumb regardless of what other actions are taken. One does not depend on the other.

If you are rich enough to use that strategy, you still are paying the full 40% on most of your estate. That more than makes up for not paying the lower capital gains tax.

Your interest rate will not be particularly favorable unless the bank is confident that even if the stock significantly devalues you will still pay them back.

There is a reason that this "strategy" is mostly just a speculative law review article and like 1 example. No one complaining about bie borrow die has ever demonstrated that its actually being used to any large extent.

I would love to learn more about this. Happy to read a link if you don't feel like explaining.

https://x.com/RyanHanley_Com/status/1826286357892784269

Tax loss harvesting isn't "avoiding" paying capital gains any more than deducting expenses "avoids" paying tax on profits.

If one of your stocks goes from $10 to $20 and the other from $20 to $10, you haven't actually made any gains for the governemt to tax

Little slips like this convince me the whole thing is an excuse for seizing all assets that aren't owned by blackrock or NGOs.

I keep saying it: somebody is going to have to pay for the black holes that are state budgets because interest on debt is reaching critical levels.

Since all the value is piling into investments to avoid inflation, now governments are trying to seize those investments. Property taxes and seizure of government backed pension schemes have both been floated already.

property taxes... have been floated already.

I have bad news for you...

I meant wealth taxes, my ESL ass keeps tripping over taxation jargon somehow.

somebody is going to have to pay for the black holes that are state budgets

State budgets, in the administration department, are generally themselves welfare schemes. People who benefit from that will never vote for a party that promises to put the brakes on that, which is why the Democrats are the interest party of those people. They have to be.

Will public employees' voting power to make sure they keep receiving those benefits outrank the voting power of the old (though young men are increasingly catching on) to not pay them? Well, stay tuned...

Usually, in cases like these, the two interest groups put their heads together to do something both stupid and evil, and this is called compromise.

This compromise is likely to be inflation.

If one of your stocks goes from $10 to $20 and the other from $20 to $10, you haven't actually made any gains for the governemt to tax

From the pro-tax perspective, if you make $10 on one stock you should be taxed on it; if you lose $10 on another stock, too bad so sad. Why would they give up the tax on the first stock just because you lost money on some unrelated stock?

Because we have an income tax; not a takings

It's already the rule that gains in certain categories can't be offset against losses in other categories. I have no doubt making it so each and every financial instrument one owned had to be treated separately is the kind of thing people who like taxes would put in place.

Yes capital losses can’t offset OI. But by and large we have a system where we look to net income.

If you wanted to target buy-borrow-die, you can just eliminate the step-up basis. Much simpler and less distortionary than unrealized gains taxes.

It would be more focused to target buy-borrow-die by expanding the definition of realization to include using the asset as collateral for a loan. Buy for $100, take out loan for $90 secured on asset, no tax liability. Notice that the asset is now more valuable. Convince lender that the increase in value is durable. Take out another $90 loan secured on the asset. Now you have realized $180 so a $80 gain becomes taxable, and you have money (the loan) to pay it without having to sell the asset.

And taxing unrealized gains has also been avoided since 1913.

It doesn’t follow that unrealized capital gains is good just because you can’t get your preferred option. But if the point is “it’s hard to remove the step up on death” presumably that’s easier compared to a whole new idea of “let’s tax unrealized gains.” The former is something that most people can grok. The latter is confiscatory.

Buy, borrow, die doesn't seem to actually be enough of a problem as to make unrealized gains taxes a reasonable alternative.

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