Rethinking Economic Incentives

Discussion in 'Politics, Religion, Social Issues' started by BigQid, Oct 31, 2010.

  1. BigQid macrumors regular

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    #1
    I’m not sure that everyone see these things as problems with our society, but I do. I believe in capitalism is the best way we have found to decide how to distribute resources, but I also think we have clearly missed the mark. As such I ask how could society fix them?
    1) How can we remove the personhood of corporations and instead view it as a collection of individuals? What would the resulting corporations look like?
    2) How can we reward businesses more for employing people than making profits?
    3) How should inheritance be handled?
    4) How can we prevent the pain of future great recessions?
    5) What is the logic in having a derivatives market that is larger than the actual market?


    1) In my view, someone at corporations should be responsible for each negative or risky thing that they do. Corporations should not be able to lobby because it increases the limits placed on individuals and amplifies the voice of some over others. Businesses should keep running the way that they run, but employees should not be protected from prosecution nor shareholders from losses if CLEAR wrong doing can be seen.
    2) I imagine that there could be a inverted graduated system in which executive pay is connected to employee income. The more employees you should be able to make, but the less of a percentage of the income.
    3) If it were up to me, I’d tax large inheritances heavily. While I don’t think its right to take 90% of what someone has, I also think no one needs more than $10-20 million dollars no matter who their parents were. If a person deserves more than that, they should have earned it themselves.
    4) Society should be structured in such a way that anyone who is looking can find a job. The great recession was not a lack of resources put deciding how to pay back people who made investments. The problem with this is we still have resources. Surely we can handle this better.
     
  2. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #2
    1) Any attempt to assign more liability to corporations will simply cripple the markets. Be prepared for slow economic growth if you do this (along with higher unemployment rates).

    2) Employment is a bi-product of high earnings as a company then attracts more investors and is able to expand. There may be high earnings in times of employment cut-backs, but the company is still employing thousands due to its size. Incentives for employing people is as backwards as backwards can get and the same reason we don't employ one person to dig a hole and another one to fill it.

    3) None of the governments business. Thats how it should be handled.

    4) Educate the populace to not sign off on things they can't afford.

    5) Money.
     
  3. Sydde macrumors 68020

    Sydde

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    #3
    Simple enough: The function of incorporation is to accomplish one specific difficult goal. Once the goal has been accomplished, the corporation is dissolved, investments are returned with profit or loss, any shared IP placed in public domain. Economies of scale can be acheived by co-ops just as easily as by large corporations, probably with less overhead.
    Tax incentives?
    Probably not preventable as such, but mitigation and minmization might be practical. Crashes seem to be caused most frequently by concentrated market sector growth. Some form of regulatory mechanism to choke off sector pooling in favor of broader capital distribution would probably help. Add to this a 1% tax on trades to reduce speculation.
    I believe it's justification is to spread out loads and losses across a larger base (like insurance).
     
  4. Desertrat macrumors newbie

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    #4
    Corporations are intended as ongoing enterprises. As government essays controls (regardless of purpose), lobbyists are necessary to attempt to point out unintended consequences which can easily be harmful. That's as true for Sierra Club as for Exxon.

    #2? It's called either bankruptcy or subsidized by gifts.

    Inheritance taxes are nothing but government theft, the impetus being the politics of envy.

    #4? They generally come about from egregious foolishness on the part of central banks, regarding interest rates. Couple that with governmental decisions and you have 1920s real estate and stock-market bubbles, dot-com bubbles and housing bubbles and now a treasury bond bubble that's building.

    Derivatives originated as a form of insurance against investment-bets going wrong. Unfortunately, they became marketable items in themselves. They're now a helluva menace. Early victims were Long Term Capital Management and then Barclay's.
     
  5. mcrain macrumors 68000

    mcrain

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    #5
    ^^ Total BS ^^

    Inheritance taxes are a preferential discount given to people on transfers of wealth at death. Inheritance taxes are actually a "giveaway" by the government, the impetus being the politics of greed.

    Taxes are imposed on income from whatever source derived. In other words, every dollar you receive is taxable, and considered income for income tax purposes. So, if you receive a dollar from work, interest, dividend, sale, gift or even inheritance, it is income.

    If you die with a $900,000 estate, that estate can be transferred to your child tax free. Your child then gets $900,000 without paying a penny in taxes. Your child's friend who actually worked to earn $60,000 pays more in taxes! Why is the $900,000 received by your child tax free while the $60,000 salary is taxable?

    Most common answer is because you earned the money, so you should be able to do with it as you please. Of course you can spend it, invest it, gift it, etc... When you do; EVERY time there is a transfer of money; there is a tax. Why is the transfer to a relative tax free or at a discounted rate?

    Even if you advocate for complete elimination of the estate tax, you can't claim estate taxes are theft when they are a preferential treatment of income. If you eliminated every section of the tax code dealing with estate taxes (as I advocate), then every beneficiary of an estate would claim any income they receive as ordinary income.

    (edit)

    One big part of the confusion is that the estate pays any taxes so it almost seems as though it is a tax on your money. In fact, it is a tax on the transfer of the money - namely the receipt by the heir. The estate pays the taxes because it is far simpler (less paperwork than issuing 1099s to many heirs, who then have to add to their annual tax returns). In addition, grieving family members don't have to worry about paying the taxes on mom or dad's death.
     
  6. iJohnHenry macrumors P6

    iJohnHenry

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    #6
    ^^ Total BS ^^

    So, it's keep the money moving, and thereby taxable, or lose it?

    Outstanding economics, that.
     
  7. NT1440 macrumors G4

    NT1440

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    #7
    Explain to me where the underlined came in? :confused:

    Mcrain is a lawyer who deals heavily with taxes if I remember correctly btw
     
  8. iJohnHenry macrumors P6

    iJohnHenry

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    #8
    :eek: Sorry, over-zealous there.

    I don't doubt that he does, and therefore has an interest in the status quo.

    For me, I can now see why some elderly people choose to distribute the bulk of their estate, just under the radar of the Feds for money transfers.

    They are no better than the House at some poker games, taking a percentage of every pot. Pretty soon there is no money left. ;)
     
  9. NT1440 macrumors G4

    NT1440

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    #9
    You call it an "interest" I call it an actual understanding of how the system works and why.
     
  10. Desertrat macrumors newbie

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    #10
    mcrain, nothing you said obviates my comment. I earned the money to create an estate for the benefit of my children and grandchildren. To think that somebody else has some sort of "right" to the fruits of my life's work is way over and above any rational idea about financing any reasonable government.

    Taxes on income and consumption at some reasonable level during one's lifetime is one thing, but imposing a death tax is nothing but theft, and I say again, driven by the politics of envy.

    Folks in love with this bloated government we've created have combined to become an insatiable appetite for money. This phony compassion for "the poor" has sold a bill of goods where a small percentage of the taxpayers are providing the majority of the support of the entire society. That's a horrible enough situation for the more productive folks during their lifetimes, but it's biblically evil to grab onto what they have left at death. Call it financial necrophilia...
     
  11. iJohnHenry macrumors P6

    iJohnHenry

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    #11
    Sorry, I left the word "vested" out.

    It should have read "I don't doubt that he does, and therefore has a vested interest in the status quo."
     
  12. NT1440 macrumors G4

    NT1440

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    #12
    I was already working under the assumption that was what you meant anyway. Yes, he's "part of the machine" but in doing so he actually understands why certain mechanisms are in place and how they are supposed to work.

    Yes some of these may be flawed and need reworking, but it's not even close to a simple cut and dry thing to do.
     
  13. Desertrat macrumors newbie

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    #13
    mcrain may well be a very knowledgeable tax lawyer. I hope he gets rich and creates a gigantic estate. But that's irrelevant to the issue. He comes across as one who feels that any and all taxes are justified, and that's our point of disagreement.

    I'm no lawyer, but I've been dealing with taxes since 1962. W2s, Sole Proprietor of small businesses, a piss-ant little corporation, all that stuff. Carrying paper on real property sales, etc. Four estates I've dealt with in my family. I have a fair understanding of how the system works.

    But that knowledge has zero, zip, nada to do with the issue of the death tax. That's a matter of philosophy of government.
     
  14. chrmjenkins macrumors 603

    chrmjenkins

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    #14
    Slow(er) economic growth is not necessarily a problem if it is steadier. The cyclical nature represents a higher expenditure of resources as workers must be constantly given severance packages and trained for new employment.

    Your second point is in direct contradiction with how the market works. It relies on these people to create bubbles and the in-the-know ones jump ship before the bubble pops. The market relies on the uniformed to make their money.
     
  15. Arran macrumors 68040

    Arran

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    #15
    I've never really understood why folks want to leave a ton of money to their kids. I'd rather mine work hard at school, college and beyond, and build their own lives. Most importantly, I want them to learn how to do it themselves and not be waiting for me to drop dead so the party can get started. :). I reckon that if I force them to learn, from experience, how wealth is created, then I've given the best insurance I can as a father.

    Growing up, I watched other (rich) people's kids fall prey to waiting for payday. Sadly, they wasted their best and most energetic years (career-wise) being not very ambitious because, well, they'd inherit it all in the end, so why bust a gut. I don't want my kids to even think that's an option.
     
  16. mcrain macrumors 68000

    mcrain

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    #16
    Your Philosophy - There should be no taxes on estates.

    Your description of the Estate tax - theft.

    I said your description is BS based on the fact that the estate tax is in fact a preferential treatment of transfers of money over what would otherwise happen without the estate tax.

    My philosophy - all income should be treated the same.

    We can disagree about the philosophy all day, but can we at least agree that the estate tax is not theft, but a preferential tax treatment of certain transfers. You want a more preferential treatment, and I want less.
     
  17. KingYaba macrumors 68040

    KingYaba

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    #17
    I see it as a sleazy form of double taxation. The money in the checking account was taxed at some point through income tax. That estate was taxed through property taxes, those items in the house were taxed through sales taxes, everything being passed down was taxed at some point. And now they're to be taxed again when they change hands? I find that infuriating. I disagree with the definition and I would work to change it. Receiving inheritance shouldn't be defined as income so I hope the new Congress will work to change that. But knowing them they'll just prolong the exemptions or preferential treatment of transfers like you defined. But I doubt Congress will do much. :(
     
  18. Macaddicttt macrumors 6502a

    Macaddicttt

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    #18
    Taxes always occur when money changes hands. I buy something, I pay sales tax. Wasn't my money already taxed when I got it as income and paid income tax?

    Singling out inheritance as a special instance of money changing hands so that it's not taxed is ridiculous.
     
  19. iJohnHenry macrumors P6

    iJohnHenry

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    #19
    So, here in Ontario, if a spouse transfers ownership of a car to his/her partner, Sales Tax must be paid on the value of the vehicle?

    No, it is not, nor is it when the transfer is between parent and child.

    Is there no end to this constant milking??
     
  20. Macaddicttt macrumors 6502a

    Macaddicttt

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    #20
    I'm not saying that every transfer is taxed or that it should be, but to call taxing this one particular transfer of wealth "theft" is ridiculous. If you don't think this one transfer of wealth should be taxed, fine, but let's give up the hyperbolic rhetoric, okay?
     
  21. iJohnHenry macrumors P6

    iJohnHenry

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    #21
    OK, uncle, but when does the buck ever stop, where?? ;)

    To continue in this thread any longer would require that I monitor some lectures at the London School of Economics, and I am unlikely do to that at this time of life. :)
     
  22. Eraserhead macrumors G4

    Eraserhead

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    #22
    Not taxing inheritance is just a tax break to the mega-rich. Its basically a tax on money that you don't really deserve to have as you haven't earned it.
     
  23. iJohnHenry macrumors P6

    iJohnHenry

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    #23
    Oh, really?? Is there a lower limit, under which this tax is not applicable??
     
  24. Macaddicttt macrumors 6502a

    Macaddicttt

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    #24
    Currently only inheritances over $1 million are taxed in the US.
     
  25. KingYaba macrumors 68040

    KingYaba

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    #25
    Ah, the politics of envy. That must be what 'rat was talkin' about.


    Apparently not. :(
     

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