Well ya the poor guy might be able to hold on to his transportation with warranty and insurance but he also needs to house and clothe himself and his family as well as cover medical expenses etc.
The guy in the OP had $6000 left in cash and no mention of any of those other issues. The super rich guy might just as well have crippling medical conditions for him, his wife, his 20 kids, and his entire extended family (who he’s also supporting). We can make up any after the fact assessments, point is they’re all moot.
We don’t know what losing $40million will mean for the rich guy, and we don’t know if it will “hurt” more than $4000 for the poor guy. If the rich guy is smart enough to mitigate his losses good for him, that’s what it usually takes to get and stay rich.
But even after all that, the rich guy has to pay a lot for insurance (and risk mitigating actions) that will cut into his returns.
You’ve totally failed to address anything interesting. The yacht makers did pretty well under Clinton, as the impact of the tax increase was far outweighed by the boom. Yes, if you screw up the economy you hurt everyone, and I say that not doing everything to help the economy - including raising taxes on the rich - is screwing it up. IIRC, a lot of the increase in investment after the Clinton tax increase was Wall Street saying that the government had finally gotten its act together - something certainly not true today.
If the rich get that way by taking risks, isn’t that rather an argument in favor of taxing them heavily? If it all comes down to risk, then the one guy who took a risk and got lucky is ultimately just as deserving as the nine others who took an equivalent risk and failed. A fair distribution of wealth would take the success of the one and spread it out evenly among all ten, since they all took equal risks.
If you were rich, would you take the risk then, knowing that if you ‘got lucky’ you’d just end up getting taxed more? I know I wouldn’t be as willing to take risks if I knew I’d be taxed more heavily than is already the case if I happened to be successful.
Of course, it’s all in what you mean exactly by ‘taxing them heavily’…presumably that means you will tax them more than what they are currently being taxed. Depending on what you mean by that in practical terms it might mean you will make people more risk averse than the are even under normal situations. Take what’s happening right now. Though it’s not due to taxes, many ‘rich’ aren’t taking large risks right now because the risks to rewards don’t seem favorable to them. Result…the ‘rich’ aren’t investing as much, or expanding their businesses as much…and banks aren’t loaning as much. What that means in practical terms is that businesses are in a recession mind set…they aren’t hiring a bunch of people back, they aren’t expanding their business, new business opportunities aren’t being explored as much, loans for new businesses or expansions of businesses are tighter and less frequent…and so we have a high unemployment and sagging tax revenues. A vicious cycle.
Tax people more heavily for succeeding and, depending on where you set the bar you will get exactly the same result. It’s basic human psychology. ISTM that people on this board seem to forget that ‘the rich’ are still, you know, human…just like the rest of us. I might be willing to take great risks for great rewards…but not if, having ‘got lucky’ I’m going to have those rewards lessened substantially because I managed to succeed.
-XT
I only needed to read this far to know you were trying to dream up a highly artificial scenario. The yacht industry is notoriously flakey because it is prone to crash based on mere inchoate fears.
Face it, no amount of cooked up flakey anecdotal scenario construction is going to get over the fact that marginal rates on higher incomes have historically been higher without the cooling effect your theory predicts. Long term empirical historical data is going to trump your pet thought experiment any time. Get over it.
Yes but the great unspoken feature that characterises all scaremongering on this topic by the right is that the proposed setting of the bar is nowhere near what would be required to have the theoretical effect you mention.
Only a complete idiot would fail to understand that if you increase taxes to 100% on incomes over a certain level, essentially no one is going to bother to earn more than that level and a cooling effect will occur. Only a complete idiot would fail to understand that if you increase taxes by 0.00000001% on incomes over a certain level, essentially no one is going to bother taking that into account when considering whether to invest in a risky enterprise and there is going to be no cooling effect.
The only relevant question therefore is whether the percentage tax increase actually proposed is going to cause a signficant cooling effect. Given that actual proposed increases are at levels that historical empirical evidence shows will have little to no effect, anyone who talks about cooling effects without qualifying that none will occur at the levels proposed is spreading irrational fear, uncertainty and doubt probably because they have an ulterior motive, rather than participating in useful discussion.
When I got lucky during the bubble, and sold enough stock so that I went up to a higher bracket, and I was damn happy about it. You really think someone is going to be happy about getting an extra $90K but not getting an extra $88K?
And if we did tax them some more and used the money to jump start consumption, then they might take the next step of expanding to meet that consumption. How is letting them keep money that they are neither saving or investing helping again? I bet lots of people lost more money in the market last week than then they would pay in taxes - was that a good thing?
And, as you admit, this keep the taxes low policy hasn’t helped
Well, aren’t we all glad that no one is proposing to tax people heavily. I’m sorry you never had to suffer the high Clinton tax rate. I did, and I’d gladly suffer it again.
This isn’t 1993. You’ll notice that even without a tax increase the current level of risk outweighs the potential upside. This is known as a multivariable problem.
The Clinton tax increases were a sign that the government had things under control. It was a very strong message and when combined with a balanced budget it gave the economy a huge boost.
Right now the tax increases on the rich won’t put a dent in the deficit, so all they are is a promise that taxes will go up again next year, and the year after that, and the year after that. And for the record, an equivalent amount of spending decreases will send the same message. Neither is good for the economy right now.
[QUOTE=Voyager]
Well, aren’t we all glad that no one is proposing to tax people heavily. I’m sorry you never had to suffer the high Clinton tax rate. I did, and I’d gladly suffer it again.
[/QUOTE]
You are kidding, right? 
[QUOTE=Princhester]
Yes but the great unspoken feature that characterises all scaremongering on this topic by the right is that the proposed setting of the bar is nowhere near what would be required to have the theoretical effect you mention.
[/QUOTE]
I agree, but it’s a sliding scale, not a cliff that you can drive up to and then fall over. Again, I have no issue with setting taxes back to Clinton rates, or even closing many loopholes…or even making major corporations pay the same taxes that small businesses face. I DO think that this will have a negative effect on the economy, but it won’t be the end of the world, and if we couple it with major spending cuts I think we’d be ok. But all our problems aren’t going to be solved by simply soaking the rich…and that’s what the other side doesn’t seem to grasp. We are caught between dueling rhetoric here.
-XT
Cutting is stupid. it sounds good, but it has the burden of taking demand down with it. Demand is the factor that will save the economy. That is what will increase employment. We need to spend on infrastructure to increase employment.
Just cutting is a death spiral down to disaster. If we do that we are doomed.
It’s possible to lose more than you invested if you leverage your investment (of course it multiplies the gains, but here we’re talking about the downside). It’s also possible to lose more than you invested if you get sued. Think about the liability the average operator of a chemical plant is exposing himself to: you can be sued by an employee, people who live in the neighborhood, the EPA, a customer… Unless you take the position that all such lawsuits are justly decided and that a chemical plant can be operated profitably with zero risk of losing a lawsuit, the possibility of getting sued is yet another dimension of risk.
Let’s see, don’t we have some kind of financial product that handles that kind of risk? In-something … in-something… ah, yes, insurance! Liability insurance! So … still not a hell of a lot of risk, Hyperelastic.
Even if you can get it, insurance just shifts the risk onto the insurance company (another rich guy taking his chances). And often you can’t get it, particularly when it’s hard to predict the chance of a mishap or the damage that might be caused. Insurance for industrial mishaps is not like getting car insurance. For a truly novel activity there just aren’t enough data to know what the chances of an accident are.
To give you an example, you cannot buy enough commercial insurance to cover the potential losses from a worst-case nuclear power plant accident. You also cannot buy enough insurance to cover the loss of a major piece of space hardware like an ISS module. (This is one reason space missions for anything but comsats will not be truly commercial for the foreseeable future). There’s just a limit to the funds available to pay out a huge claim. In the nuclear case, the government made the interesting decision that even though private insurers wouldn’t/couldn’t cover a big accident, the industry had to go forward and a fund was set up where utilities have to agree to pay up to $111 million in the event of an accident anywhere no matter whose fault it is. An arrangement like that would never be initiated today.
Yeah, that was the original Obama proposal before he pulled down his pants and spread his buttcheeks. I’m starting to think he likes it.
There is also evidence that tax increases that go directly into reducing teh deficit has little to no negative impact on the economy.
There is a difference between risking your rent money and risking “capital” Sure capitalists take risks, they risk their capital, others risk their retirement or livelihood.
A lot of it is lack of demand.
This may have some effect on teh armgins but lack of demand and the resulting non-viability of any business model is proabbly a much much bigger factor.
First of all I think its its not small busniesses, its NEW businesses, GROWING businesses that hire not necessarily small businesses. There aer a lot of stagnant small businesses that will never hire another employee. Second of all, youa re taking an awful small population of businesses, applying a relatively small uncertainty ($3000/year) and extrapolating an awfully big effect.
First of all, you don’t depreciate inventory (they are thinking of changing LIFO accounting), second of all, there is ALWAYS legislative risk. There is ALWAYS regulatory risk and none of this stuff is stifling its mountain out of molehill hyperventilation while you ignore the lack of demand.
You seem to be saying that teh risks are unquantifiable right now because of something other than the recession itself? That simply bullshit.
How many industries had an average compensation of $5.85/hour?
As long as there are limits on liability, you can price out the risks. We do in fact have satellite insurance despite the lack of data. We do in fact have product liability risk despite knowing if there is another asbestos type liability out there. As long as you cap the risk, someone out there is willing to price it.
Anything larger than that cap is likely to have driven you out of business anways.
“Poverty … is a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilisation. It is the lot of man – it is the source of wealth, since without poverty there would be no labour, and without labour there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth”
—Patrick Colquhoun - Wikipedia