$24 billion a week in interest payments:
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Problem is, taxes MUST go up. But people won’t vote for that. They vote for tax CUTS, which drives us further into a hole.
And before someone starts harping on “just spend less”, we can’t. Not unless you want to end Medicare and Social Security (which, combined, are the lion’s share of the budget). Cutting PBS wasn’t even a rounding error in the budget, for example. Taxes must go up, possibly to pre-Reagan levels. Even the Reagan/Bush era taxes would be an improvement.
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Agreed. We learned with that ill-conceived DOGE program that “fraud and waste” is actually a very small problem (outside the Pentagon) and has zero ability to dent the debt problem. Elon actually made things worse. (surprise!)
Taxes must go up. The last 40 years were a mistake.
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It’s not just the “cut cut cut” mentality, it’s also the switcheroo part: where the working stiff (who spends the money) gets another $20 a week while the millionaire gets $100,000 which goes into a savings account or an overpriced IPO.
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It is a tough problem. You could simplify the tax code so the highest earners pay more into taxes instead of evading them, but many argue that it would cause less entrepreneurial growth and innovation.
Yeah, we could do that… like we used to do.
But, fewer people would start a business? Nah. Fewer people start businesses because their health insurance is tied to their jobs. And consumers are too strapped for cash to support their business.
We are so hypnotized in this country. All the money’s going to the top and somehow we can’t do anything about it. Dat’s SOCIALISM!
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That’s the argument, but I don’t believe it. When Steve Jobs and Bill Gates founded their companies, the top marginal rate was 70%. How come they went ahead anyway?
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Since this is the Macro board, anecdotes are illustrative, but data is important:
Yes. Relative to the total size of the economy, **there were more business startups in the 1970s than there are today**. In the late 1970s, Americans founded about 12 to 14 new firms for every existing business establishment. Today, that number has dropped to roughly 6 new firms.
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Because nobody actually paid those rates at the time because of the number of tax loopholes. Investment income was also taxed at a lower avg effective rate. That aside, I doubt very much Jobs or Gates contemplated the tax code when starting their businesses. However, investors probably did later on.
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The problems in your life are not because someone else is a billionaire. There is plenty of capital seeking ambitious entrepreneurs with great ideas.
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When you try to start a business and try to borrow, you will realize the capital seeks ambitious returns and not ambitious entrepreneurs. The capital is chasing great ideas in AI, not a software company that wants to leverage AI and build a new way of doing things (Just an example). Most of the VC capital is lemmings, they all go to same water hole and drink the same koolaid.
Bank loan growth is focused on existing companies and hardly provides capital for new enterprises. Credit card companies are the actual providers of capital for many small (mom & pop) type business startups.
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Nobody said the path to funding is easy. But, there are few if any great entrepreneurs being held back because of the current state of health insurance or that debt or equity funding is completely closed off.
There is no doubt the cost of capital has gone up. It’s a function of the current risk free rate as much as anything.
The effective tax rate was still substantially higher; something like 35%. People pay the effective rate.
From the CBO:
https://www.cbo.gov/sites/default/files/cbofiles/attachments/effective_rates_0.pdf
Highest effective quintile in 1979 was 27.5%, highest 1% was 37%.
By 2005, those numbers were 14% and 19%.
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My point was nobody was paying 70%. Drawing any conclusions that it would not impact business development if anybody paid that rate, it is an erroneous assumption.
I don’t have a position on what the actual tax rate should be at this point. There are though several economic realities to consider.
- There is a ceiling at which the tax rate harms economic development and capital that can go elsewhere will do so.
- Countries that have tried very high rates are doing incredibly poorly with economic growth or have taken aggressive measures to change course. Sweden being one such example.
- We have serious competency problem in terms of leadership in many cities and states. Rightfully so, it seems pointless to throw more money at these institutions but rather simply let individuals and businesses keep more of their own money and do what they does best with capital.
You know what would really help entrepreneurial growth and innovation? Socialized health care. How many people stay locked in their jobs because they are afraid to leave because they need the insurance? Probably not an insignificant number.
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Right. Pay out huge bonuses to the CEO.
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That shibboleth sounds like ol’ Charlie Munger saying people are just envious of the wealthy. Some, sure, but I believe most working people want justice and a fair system where dynastic wealth isn’t controlling and consuming everything, including our government. That’s where we’re headed, very quickly. The very wealthy can outbid everyone at the table, making us, and our children poorer and poorer.
Gary Stevenson lays it out pretty clearly. Give it a listen if you want to see the macro problem explained.
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I really don’t get the mindset of individuals that aren’t investors in a business that think they should determine for shareholders of the business what should be the upper band of executive pay. Somehow, they think they have a moral claim to what they view as enough. Why does this same logic never apply to the tax dollars that go to government spending? I think it has nothing to do with whether those additional dollars solve anything. It’s just about wanting someone with more than you to have a little bit less. Basically, somebody else works and you get to eat.
I think it is perfectly insane to pay someone a 100 million dollar contract to throw a baseball. The cost of salaries directly results in increased ticket prices and concessions making a trip to the ballpark unaffordable for many families. But, I accept what the market is willing to pay for those services and have no expectation that an athlete take what is my view of the reasonable price for his services.
California has spent between 27-32 billion of tax dollars over the last 5-10 years to address the homeless crisis. In that time and up through 2025, the homeless problem increased by more than 20%. Further, California’s entire budget has more than doubled over the last decade while quality of services and the state population has declined.
So yeah, if the choice is paying CEO’s what the market thinks is appropriate and shareholders keeping more or throwing more money at problems being managed by the incompetent, I’d rather the money stay with those that earned it and those that risked the capital to produce it.
Maybe, instead of holding executives financially accountable for problems not of their making, the public should be holding to account the officials they elected and spending their constituents’ hard earned money. Nearly two years after the Palisades fires, the majority of burnt out properties show no signs of rebuilding. Yet, Mayor Bass is up for re-election and likely to win. Despite massive displays of incompetencies, LA is going to continue down the same leadership path. With already some of the highest tax rates in the country, is this a money problem or a leadership issue?
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Gary Stevenson is an Economic dolt that cannot even understand the basic tax treatment of income vs assets. As Kisin explains, Gary is a character that has picked militating on behalf of the downtrodden as his schtick. Best line of the video, “Gary is the Greta Thunberg of Tax debate”
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Gary is… Gary is… Gary is… Sounds like an ad hominem attack.
Did you watch the video and listen to Gary’s points? Or just find a convenient refutation that, hilariously, ends with, “It’s about envy.”
Just like ol’ Charlie Munger said.
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