# How will the economy move forward (aka do the 1% need us)? **URL:** \ **Category:** Great Debates\ **Created:** [April 3, 2020, 6:54am UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937 "2020-04-03T06:54:36Z")\ **Posts on this page:** 6\ **Page:** 3
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [April 7, 2020, 7:45pm UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/41 "2020-04-07T19:45:12Z")
> [@puddleglum](#): > > For poor Americans healthcare is free, education is free, cell phones are free, and crime is down to levels not seen in 60 years. “Look how easy the poor have it! How could they possibly complain about anything?” Sorry, not buying it. Being poor really, really sucks, and having cell phones, shitty health care, shitty education, and a bit less crime than before doesn’t really make up for it. > [@](#): > > There is nothing nearly happening in today’s America, you can relax mobs are not going to try to kill you and take your stuff. I’m sure many of the French nobles thought exactly the same thing prior to the revolution! Maybe you’re right, but I’d rather make sure the poor have decent chances to have a better life (including access to good health care, good education, and good/safe places to live, with enough left over for emergencies) just in case (and also because I think it’s the morally right thing to do). Right now they don’t. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [April 7, 2020, 10:52pm UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/42 "2020-04-07T22:52:01Z")
> [@iiandyiiii](#): > > Sorry, not buying it. Being poor really, really sucks, and having cell phones, shitty health care, shitty education, and a bit less crime than before doesn’t really make up for it. You may not buy it, but people who remember life in this country thirty years ago remember twice as much likelihood of being a victim of violent crime (that’s not “a bit”). They remember the whole zero family contribution at good colleges thing not being invented yet. They remember survival rates for diseases being lower. And dial-up internet. Maybe people bought the Trumpist doom-and-gloom narrative in 2016. But whether or not you think people should feel satisfied today, they do. As of February. You keep bringing up France but have thus far failed to draw any actual parallels. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 8, 2020, 3:21am UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/43 "2020-04-08T03:21:16Z")
> [@puddleglum](#): > > Capital gains taxes have more elasticity because people can decide when to sell to realize a capital gain, but for the most part get paid for work on a regular basis. Thus they can time their selling to when it is most tax advantaged to do so , whereas they can’t time their work as easily. Oh. OK I thought you were talking about something else because elasticity has a specific meaning when it comes to economics and tax revenue. If you are saying that people can time their recognition of capital gains then i wold agree with you. I would also suggest that this cuts against your argument. Why does having control over timing of revenue mean that they should be taxed at a lower rate? > [@](#): > > Forum shopping is a deadweight loss. Capital has more deadweight loss than labor because if someone wants to take advantage of lower income taxes they have to move to the other country and become a citizen, whereas if they want to take advantage of lower capital taxes all they have to do is change where they make their investments. Having a corporate income tax much higher than other countries is what is the bad idea. What you seem to be saying is that we have to compete with other jurisdictions to attract capital? That’s not really true. If you want to escape capital gains taxes, you have to move to another country and change citizenship as well and you get hit with an exit tax on your way out. But yes there are tax planning opportunities that are available if countries engage in a race to the bottom. As for corporate tax, once again, our corporate taxes are not higher than most western countries. Our top marginal tax rate might be but the effective tax rate paid by our multinational corporations are nowhere near those rates. As i said before, corporate tax reform (for decades) has been about lowering the rate and broadening the base (i.e. getting rid of deductions so that more income is subjected to the lower rate). We lowered the rate but did not broaden the base. The biggest roadblock to this lower the rate/broaden the base approach was that no industry wanted to lose their carve-outs, they just wanted everyone else to lose theirs. > [@](#): > > The point is that the rich are paying more than the poor. Glad you agree. I’m not sure I ever contested that. The rich are not paying enough. The tax legislation over the last 40 years have by and large been very good to the rich. Very good to corporation. I don’t know how you can see it any other way. > [@](#): > > The debate is if an experienced restaurant manager opens a restaurant with two other people who have no experience in the managing a restaurant. They two partners agree that they will give money to open the business and the manager will run it. If they agree that each takes an equal share of the business profits, is the manager an employee or partner? That is what the debate is. Yes and the experienced manager is earning compensation, he is not earning a return on investment. There is no investment, it is much closer to a performance bonus than capital gains. Whereas the waittress may in fact be the beneficiary of a gift from a patron. I know you’ve seen the stories about someone leaving a waittress a $1000 tip on a $25 bill because they wanted to do something good that day or something. That meets all the common law definitions of a gift but the IRS regulation characterize that as compensation because she received it in the course of her employment. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 8, 2020, 3:25am UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/44 "2020-04-08T03:25:43Z")
> [@puddleglum](#): > > Everyone could be taxed more. If you count the refusal to increase taxes on a person as welfare, then the word ceases to mean anything. Welfare is money or services given by the government to help the poor. Corporate welfare is money given by the government to businesses. A special tax deduction is different than a refusal to increase taxes. The accelerated depreciation rules that allow businesses to deduct the value of equipment before their value has actually diminished is a form of corporate welfare. We do it in part to increase their desire to purchase equipment but there is no requirement that the equipment be purchased from an American company or put to use in an American factory. I can be bought from Germany and put to use in China and create a deduction on an American tax return. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [April 8, 2020, 3:45am UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/45 "2020-04-08T03:45:12Z")
> [@Ruken](#): > > You may not buy it, but people who remember life in this country thirty years ago remember twice as much likelihood of being a victim of violent crime (that’s not “a bit”). They remember the whole zero family contribution at good colleges thing not being invented yet. They remember survival rates for diseases being lower. > > And dial-up internet. > > Maybe people bought the Trumpist doom-and-gloom narrative in 2016. But whether or not you think people should feel satisfied today, they do. As of February. > > You keep bringing up France but have thus far failed to draw any actual parallels. Being poor still really sucks. It’s not like Asahi is crazy, he has a point he just makes too much of it IMHO. There is still PLENTY of incentive to avoid poverty. When we talk about economic justice, the target moves with the prosperity of the society. Economic justice in Somalia looks different than economic justice in America. And economic justice in 2020 America looks different than economic justice in 1970’s America. We have seen a de-linking of wages and productivity that had held fairly constant since the industrial revolution. I blame management consultants who started to link executive pay to stock price but it relegated employees in the esteem of the executives. Add this relegation to the de-unionization that was going on in our society and there was just no way for employees to fight back. This aligned the interests of shareholders and managers but it was a tragedy of the commons as low wages started to hollow out the American consumer base that all companies shared. ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [April 8, 2020, 6:09pm UTC](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937/46 "2020-04-08T18:09:07Z")
> [@Damuri\_Ajashi](#): > > Oh. OK I thought you were talking about something else because elasticity has a specific meaning when it comes to economics and tax revenue. > > If you are saying that people can time their recognition of capital gains then i wold agree with you. I would also suggest that this cuts against your argument. Why does having control over timing of revenue mean that they should be taxed at a lower rate? The best taxes are those that raise the money while distorting the economy the least. > [@](#): > > What you seem to be saying is that we have to compete with other jurisdictions to attract capital? That’s not really true. If you want to escape capital gains taxes, you have to move to another country and change citizenship as well and you get hit with an exit tax on your way out. But yes there are tax planning opportunities that are available if countries engage in a race to the bottom. > > As for corporate tax, once again, our corporate taxes are not higher than most western countries. Our top marginal tax rate might be but the effective tax rate paid by our multinational corporations are nowhere near those rates. As i said before, corporate tax reform (for decades) has been about lowering the rate and broadening the base (i.e. getting rid of deductions so that more income is subjected to the lower rate). We lowered the rate but did not broaden the base. The biggest roadblock to this lower the rate/broaden the base approach was that no industry wanted to lose their carve-outs, they just wanted everyone else to lose theirs. Our corporate rates used to be among the highest in the developed world, the effective rates were lower because corporations would employ legions of tax attorneys to minimize the tax. This activity was total deadweight loss. One of the largest sources of tax minimization is booking economic activity in a country with a lower corporate tax rate. That is the reason Ireland became so wealthy recently. Eliminating loopholes at the same time would have been better but a lower corporate tax is good for the economy regardless. > [@](#): > > I’m not sure I ever contested that. The rich are not paying enough. The tax legislation over the last 40 years have by and large been very good to the rich. Very good to corporation. I don’t know how you can see it any other way. I was responding to the poster above who said that the government is in thrall of the wealthy. Whether the rich are paying enough taxes is a matter of opinion what is a matter of fact is that the rich pay vastly more in taxes than the poor both in percentage of income and total amount. The poor also receive vastly larger monetary benefits from the government than the rich do. For most people it is obvious that the rich pay the most in taxes and receive the least from the government but not to everyone. > [@](#): > > Yes and the experienced manager is earning compensation, he is not earning a return on investment. There is no investment, it is much closer to a performance bonus than capital gains. > > Whereas the waittress may in fact be the beneficiary of a gift from a patron. I know you’ve seen the stories about someone leaving a waittress a $1000 tip on a $25 bill because they wanted to do something good that day or something. That meets all the common law definitions of a gift but the IRS regulation characterize that as compensation because she received it in the course of her employment. If the restaurant would not exist without the manager then it could be a form of investment income from sweat equity. If Micheal Richards or similar rich person wants to give $1,000 tip then most of it should be taxed as a gift instead of as wages, but customary tips should be taxed as income. [Previous page](https://boards.straightdope.com/t/how-will-the-economy-move-forward-aka-do-the-1-need-us/850937.md?page=2)