Re: Taxes direct and indirect
--- [EMAIL PROTECTED] wrote: I read the The Debate on the Constitution and discovered that direct taxes seemed to be one of those phrases that everybody thought he understood, but that in fact nobody could actually define. The distinction goes back to the French Physiocrat economists of the 1700s. In Physiocracy, there is a net product that comes from nature, which we now call an economic rent. A tax on the net product, or rent, is direct. Other factors, such as labor, do not have a net product, and a tax on these is ultimately shifted to rent. John Locke wrote along these lines also, so this proposition was thought of also in the UK. Locke wrote that all taxes are ultimately shifted to rent, and are therefore indirectly on rent. Consider a worker earning a substistance wage. If that wage is taxed, the worker goes below subsistence, so the employer will increase the gross wage to leave the net wage the same. This reduces his profitability, so he bids less to use land, and rent falls. So the wage tax is indirectly on rent. Thus, by this view, a tax on rent is direct, and all other taxes are indirectly on rent. This distinction between indirect and direct taxes drifted to America and into the constitutional convention, where it was only vaguely understood, which is why some thought it involved taxes on heads and slaves in addition to land. Interestingly, when the US Supreme Court knocked down the federal income tax in 1894 as violating the direct/indirect distinction, they referred to Physiocratic doctrine. Fred Foldvary = [EMAIL PROTECTED]
RE: going on about 'statists'
Title: RE: going on about 'statists' Two questions: 1) How was Medieval anarchic Icerland horrific? 2) It is possible to have a voluntary, non-state we, so there must be some other necessary distinction. As to 1) all I can say is that Medieval Iceland doesn't exist anymore, nor do I remember any classes explaining the great contributions Medieval Iceland made to world culture, whereas I DO seem to remember a number of advances made by mixed economy nations, such as Britain, the United States, Germany, and France. This brings to mind the problem I see with many Libertarians and Libertarian/Anarchists. The examples they choose of good states/societies generally demonstrates the fallacy of the arguments their proponents advance. Rothbard admires Medieval Ireland and laments its inability to deal the bad, centralized, militaristic English. Well, my response is that societies that can not deal with their neighbors and prosper, probably were not very good societies. Medieval Icaland may have been a nice place, what did it accomplish? As to 2) I thought it fairly obvious that we were discussing the State not state and society... If I must I say the state is that entity that has the legitimate authority for the use of proactive violence. In a number of societies, generally those considered Western we have that distinction between Civil/voluntary society and the state. I would give my definition for the essential characteristic of the state. I simply argue that an all encompassing state or a non-existent state provide bad outcomes. In fact, I would argue that the absence of the state leads, more often than not, to the creation of the all encompassing state. As the anarchy of no state leads to the Chaos of no state, examples, Beirut 1975 until 1990 (?) Somalia 1992 to present. When no state exists we have the Hobbesian world of the war by all against all. To escape that disaster, what generally emerges is an authoritarian state, to quell the chaos. It makes the trains run on time and that's what people will accept rather than the freedom of anarchy. So, I come back to the point, we need to debate at the margins about the proper mix of me and us in society and the state's role in this intermediation. Personally, I accept that Libertarian domestic polices are often the best. But only from a Utilitarian view point. They work and work well for most people, however, as a basis for society, they would be abject failures. Their needs to be an us that can restrain the various me's that make up a society. -Original Message- From: Fred Foldvary [mailto:[EMAIL PROTECTED]] Sent: Friday, January 10, 2003 5:31 PM To: [EMAIL PROTECTED] Subject: RE: going on about 'statists' --- Pinczewski-Lee, Joe (LRC) [EMAIL PROTECTED] wrote: ... A world with the all inclusive Corporatist State or NO state would all be equally horrific. So, we debate at the margins of the middle ground for the best mix of us and me that works best. Two questions: 1) How was Medieval anarchic Icerland horrific? 2) It is possible to have a voluntary, non-state we, so there must be some other necessary distinction. Fred Foldvary = [EMAIL PROTECTED]
Re: Babynomics
On Sat, Jan 11, 2003 at 03:45:40PM -0800, Fred Foldvary wrote: --- fabio guillermo rojas [EMAIL PROTECTED] wrote: By that logic, animals are economic actors - animals seem to choose their actions. To some degree, to the degree that choice is involved, some animals are economic actors. However, most animals seem to be controlled by genetic programming (instince), so choice is not involved, but the genetic behavior does indeed adhere to economizing, otherwise the species would not survive. The fittest are also the economizing. when do humans start to engage in *sophisticated* economic behaviors not found in animals? For example, at what age are children able to understand the concept of interest? In terms of discounting the future, or what? At what age do children understand that exchange can make you better off? When they understand that theft will not. For some people, that's never!
Re: News Coverage and bad economics
It might be worth noting that Bill's original complaint concerned not amateurs generally, but NEWS MEDIA reporters and anchors. It is quite possible that the average economics ability of news media people is lower than the average economics ability of other non-economists. This has been established with mathematics: The average math GRE scores of those entering graduate schools of journalism are lower than those for all sutdents taking the GRE. If it's true for math, it could be true for economics. As for the comment about amateurs not being taken seriously when it comes to medicine, I'm not sure it's entirely true, even if they do get more respect than economists. People take Meryl Streep seriously when she spouts nonsense about Alar, and take Julia Roberts seriously when she says more research is needed on Rett Syndrome than the doctors at NIH allocate. See, for example: http://www.acsh.org/press/editorials/rettsyndrome052102.html --Robert On Thu, Jan 09, 2003 at 08:05:06AM -0500, [EMAIL PROTECTED] wrote: Amateurs and economics? As I recall, in the General Theory, towards the end of the book, Keynes called for, or came close to calling for, nationalization of business investment. If implemented, the proposal would have quickly created an out-and-out socialist system, with disastrous consequences. Fortunately, such a decision was not in the hands of Keynes or other economists. It was in the hands of the American electorate, a bunch of amateurs. And among these amateurs, only about 2% had historically supported socialist candidates who called for what Keynes was proposing. The amateurs were right, and Keynes was wrong. Now, one can dismiss this evidence as a mere anecdote. But keep in mind that we are talking about the man who was the most acclaimed economist of the 20th century, and we are considering his position on nothing less than capitalism vs. socialism, the most important and fundamental issue in economics and perhaps all of social science. In fact, amateurs and the general public have often demonstrated a kind of intuitive and inarticulate wisdom on social issues that has eluded intellectuals, including economists. Marc Poitras
RE: study on whether phony degree helps??
The researchers compared income of those who had college degrees and evidence of having actually with those who claimed to have degrees but for whom the college had no records of attendance, i.e. phony degrees. They also looked at income of of students who went to college and earned no degree. What they found was that the degree itself had no significant impact, but instead a strong correlation existed between income earned and years attended. In other words, someone who attended for four years and didn't get a degree could expect to make as much as someone who went four years and got the degree as well. I can't help you with tracking this down, but when I was temping, this was the line of the temp agencies, too - that it was 'time served' :) that mattered more than degrees (I'm guessing that doesn't apply at the PhD level, though). It was a comfort to me because I had a bad habit of not completing graduate studies and have left two degrees unfinished :( Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
RE: going on about 'statists' -- what tax policy works best?
Title: RE: going on about 'statists' Joe, I agree with you, in essence, yet also support Fred's technicalities. I'm not at all sure that the freedom of anarchy, perhaps with chaos/spontaneous order,is as bad as Corporate State (or even what we have now); and I'm pretty sure that Libertarian policies "would be abject failures" -- NOT. But I certainly agree that the most short term relevant debates are in the "middle" ground mixes of "us" and "them", since the VAST majority of US voters consistently vote in a more statist way than I do, or than I think is optimal. 20 years ago, I was more optimistic for faster change, such as school vouchers/ tax credits (a neo-lib? position). You are also very right to imply that it is extremely unlikely that any large geographic area on Earth will be without some local organized 'monoply on the final use of violence' -- and such an org is the essence of gov't. Leading me ... to tax policy. I know most anarchists oppose most taxes, but it seems clear to me that some taxes are worse than others. I think corporate income taxes, for instance, are better than taxes on dividends; one moral reason being that corporations enjoy, justified or not, limited liability. Similarly, land resource taxes, including pollution, seem excellent candidates for higher taxes, to reduce income taxes. Help please -- is there a good tract on Austrian tax policy, ordering or ranking various taxes? And I'm familiar with, and support the idea that lower taxes generally increase growth Tom Grey When no state exists we have the Hobbesian world of the war by all against all. To escape that disaster, what generally emerges is an authoritarian state, to quell the chaos. It "makes the trains run on time" and that's what people will accept rather than the "freedom" of anarchy. So, I come back to the point, we need to debate at the margins about the proper mix of "me" and "us" in society and the state's role in this intermediation. Personally, I accept that Libertarian domestic polices are often the best. But only from a Utilitarian view point. They work and work well for most people, however, as a basis for society, they would be abject failures. Their needs to be an "us" that can restrain the various "me's" that make up a society. -Original Message- From: Fred Foldvary [mailto:[EMAIL PROTECTED]] Sent: Friday, January 10, 2003 5:31 PM To: [EMAIL PROTECTED] Subject: RE: going on about 'statists' --- "Pinczewski-Lee, Joe (LRC)" [EMAIL PROTECTED] wrote: ... A world with the all inclusive Corporatist State or NO state would all be equally horrific. So, we debate at the margins of the "middle" ground for the best mix of "us" and "me" that works best. Two questions: 1) How was Medieval anarchic Icerland horrific? 2) It is possible to have a voluntary, non-state "we", so there must be some other necessary distinction. Fred Foldvary = [EMAIL PROTECTED]
Re: questions about dividend tax cut
On Mon, Jan 13, 2003 at 01:44:59PM -0800, Fred Foldvary wrote: There is also a supply-side effect from cutting the marginal tax rate, from less uncertainty about the company as it shifts to less debt and more equity, as well as more investor confidence when the profits are sent to the shareholders rather than retained by possibly theiving executives. Any idea why the dividend tax, instead of the corporate income tax, is being proposed for a cut? If we want to end double taxation of dividends, it makes more sense to me to eliminate the corporate income tax instead of the dividend tax. My guess is politics. Cut taxes on Corporations! does not sound like a winning issues, given the level of economic literacy of the news media (as Bill pointed out).
Re: Tax cuts and US citizen responses
Koushik Sekhar wrote: Can anyone explain why ordinary Americans are not objecting to tax cuts (such as dividend tax cuts) that will only favour the top percentiles of the wealthy ? Bryan Caplan wrote: Among other things, this assumes that people's views on tax policy are driven by self-interest. Most of the empirical evidence finds that this is false. For a good summary, see Sears and Funk's chapter in Jane Mansbridge, ed., *Beyond Self-Interest*. Bryan, Could we rephrase that as, Americans are not as selfish as Democrats would like them to be? ;-) Keep in mind that a huge percentage of Americans own stock. I don't know the latest figures, but it's at least a third, maybe a half. Certainly not just the top percentiles of the wealthy. As others have pointed out, dividend tax cuts may not favor the wealthy at all. Lots of older people (including my grandmother) are not rich, but live off the dividends from stocks they or their spouses got from their employers decades ago. (Putting aside the advisability of holding stock in one's own employer... .) Generally speaking, the richer you are, the more you will prefer capital gains rather than other income, since the gap between the capital gains tax rate and the regular income tax rate is larger. Since rich people are more likely than others to sit on corporate boards of directors that determine dividends, this may results in dividends being too low for ordinary (non-rich) shareholders. On other words, taxing dividends more than capital gains makes rich people transfer wealth from my grandmother to her broker (if she has to sell stock, and therefore pay a commission, to get her money). --Robert
Re: Taxes direct and indirect
In a message dated 1/15/03 9:34:26 AM, [EMAIL PROTECTED] writes: Interestingly, when the US Supreme Court knocked down the federal income tax in 1894 as violating the direct/indirect distinction, they referred to Physiocratic doctrine. Fred Foldvary Thank you for the interesting explanation of the earlier direct-indirect distinction. It's been a while since I read Pollock, but I don't recall anything like what you're describing. I do recall, however, that the court mentioned a pass through doctrine In which they claimed the a direct tax was one that a person could not pass through to some ultimate customer and an indirect tax one they could. Thus, supposedly, a tax on carriage wheels could be passed through to a person's customers while a tax on land could not. It's been a couple of years since looked at Pollock, but here's what I wrote in my prospectus the last time I did: According to Chief Justice Fuller, who wrote the majority opinion in Pollock , the Founding Fathers believed that a business could pass through all of its taxes to the customer. Fuller dismissed the underlying economic theory of pass-through as a fallacy of the eighteenth century (one which by 1894 had been dispelled by neoclassical economics; indeed, even earlier David Riccardo had demonstrated that where land is a fixed factor of production, a tax on the value of land cannot be passed through at all). Fuller held nonetheless that as part of the original intent of the Founding Fathers, pass-through theory still governed the definition of direct taxes: direct taxes include all taxes which the Founding Fathers thought could not be passed through; indirect taxes include only taxes which the Founding Fathers thought could be passed through. If the Founding Fathers believed that a business could pass through all taxes the government imposed on it, and if they defined direct taxes as all taxes which a taxpayer cannot pass through, one might logically conclude under Fuller's argument that direct taxes would include only non-business taxes. Using quotations from the Constitutional Convention, Fuller made a plausible case that the Founding Fathers may indeed have defined direct taxes to include all those which under pass-through theory the taxpayer cannot pass through to customers. (Incidentally, I know people on the political right who still believe in pass-through theory; in political debates over raising taxes people on the left likewise regularly claim that a business will merely pass along any tax hike to the customer.) Given the content of quotations Fuller used as evidence for the definition of direct taxes, however, he made a more persuasive case that the Founding Fathers held no common definition for direct taxes; even Founding Fathers who defined direct taxes with reference to pass-through theory demonstrated by their specific examples of direct taxes that they did not in practice define direct taxes to include only those which they thought a taxpayer cannot pass through. David Levenstam
Re: questions about dividend tax cut
why the dividend tax, instead of the corporate income tax, is being proposed for a cut? If there are zero taxes on corporate profits, but taxes on dividends, then the incentive is to retain earnings rather than pay dividends, and the shareholders get the profits tax-free until the shares are sold for capital gains. The shares might never be sold, but passed on to heirs. For tax fairness, given the income tax, all income should be taxed equally, and for efficiency, the tax system should minimize the impact on decisions. So it is better to tax corporate profits and then credit that against tax liabilities of dividend income. To achieve neutrality, unrealized gains should be taxed annually, and then we can forget about capital gains. That being said, the income tax is inherently unjust, complex, and burdensome, but that is another story. Fred Foldvary = [EMAIL PROTECTED]
RE: going on about 'statists' -- what tax policy works best?
Help please -- is there a good tract on Austrian tax policy, ordering or ranking various taxes? Tom Grey Probably not, but a good book on tax policy and the effects of current taxes is: The Losses of Nations, ed. Fred Harrison, 1998, Othila Press, ISBN 1 901647 15 3 Fred Foldvary = [EMAIL PROTECTED]
Re: Taxes direct and indirect
It's been a while since I read Pollock, but I don't recall anything like what you're describing. David Levenstam See: http://www.geocities.com/antitaxprotestor/harvard.html From Pollock v. Farmers': All the acts passed levying direct taxes confined them practically to a direct levy on land. True, in some of these acts a tax on slaves was included, but this inclusion, as has been said by this court, was probably based upon the theory that these were in some respects taxable along with the land,... Fred Foldvary = [EMAIL PROTECTED]
Neutral taxation?/was Re: questions about dividend tax cut
On Wednesday, January 15, 2003 7:11 PM Fred Foldvary [EMAIL PROTECTED] wrote: To achieve neutrality, unrealized gains should be taxed annually, and then we can forget about capital gains. But this assumes that taxes can be neutral. I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? Cheers! Dan http://uweb.superlink.net/neptune/
Re: Taxes direct and indirect
In a message dated 1/15/03 7:35:14 PM, [EMAIL PROTECTED] writes: It's been a while since I read Pollock, but I don't recall anything like what you're describing. David Levenstam See: http://www.geocities.com/antitaxprotestor/harvard.html From Pollock v. Farmers': All the acts passed levying direct taxes confined them practically to a direct levy on land. True, in some of these acts a tax on slaves was included, but this inclusion, as has been said by this court, was probably based upon the theory that these were in some respects taxable along with the land,... Fred Foldvary Yes, Pollock is a long decision, and I focused on the pass-through theory since that seems to be what the Court focused on itself in rendering its decision. Given that the earlier direct taxes included (whether incidentally or not) slaves as well as land, it's not surprising that many of the Founding Fathers should include a tax on slaves in their own definition. Thank you for the url. I did contain one error--it omitted the fact that the Supreme Court in Hylton accepted a tax on slaves as a direct tax--but contained some information on the Lockean view which I don't recall. It seems that you have an abiding interest in the history of income taxations, Fred. As I'd planned to do my history dissertation on it, obviously I do too. :) David Levenstam
Re: Neutral taxation?/was Re: questions about dividend tax cut
Dear Dan, I actually do agree, which is part of why when my conservative friends would support a national sales tax instead of an income tax as though a national sales tax were a panacea I'd just shake my head and tell them, there's no such thing as an unburdensome tax. There's no unburdensome way for the federal government to confiscate a third of national income. Some taxes bear more heavily on some people than others, so shifting between them may change how much of the burden a particular individual shares. People naturally tend (and I do say tend) to support moving to a sytem that shifts some of the burden they bear to somebody else, or on keeping the status quo if the current system rests relatively little burden on themselves. (As a case in point, a farmer showed up to listent to Indiana Senator Dick Lugar, campaigning for president in Iowa, speak about replacing the income tax with a sales tax. The farmer felt no compunction at all about complaining that while under the income tax system he pays no tax, under a sales tax he'd pay a hefty tax. He pays nothing and he thinks he's entitled to pay nothing while everyone else pays something.) I can't imagine any tax that would be neutral, but some might be less injurious to economic growth than others. I'm not persuaded, however, that taxing consumption more heavily than income will discourage economic growth any less than taxing income more heavily than consumption, since the ultimate goal of producing income is to consume it anyway. In a message dated 1/15/03 10:51:58 PM, [EMAIL PROTECTED] writes: On Wednesday, January 15, 2003 7:11 PM Fred Foldvary [EMAIL PROTECTED] wrote: To achieve neutrality, unrealized gains should be taxed annually, and then we can forget about capital gains. But this assumes that taxes can be neutral. I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? Cheers! Dan
