Jump to content

Menu

poverty and protective services


mtomom
 Share

Recommended Posts

But the point is that the tax remains whether there are renters or not, and the rent that can be charged is what the traffic will bear whether it covers the property taxes or not.  So saying that the renters pay the property tax is false at worst, very misleading at best.  And that was where we started.

 

ETA:  In your example, if you don't have a son who needs lunch, the expense goes away.  Whereas in the case of the property taxes, they remain whether there is a renter or not.

 

But if you are looking at who ultimately will bear the burden on any taxes that are imposed, you have to follow the money on down the line.  In the context of who will bear the burden, it's totally reasonable to say that renters will ultimately pay out of their pockets the money that pays the property taxes.  You can't get at who will be effected accurately otherwise.

 

I really don't think anyone was confused about what the post in question meant.

  • Like 3
Link to comment
Share on other sites

Well, I think that your last two paragraphs seem contradictory, the way you have said it here.

 

On the one hand, you are saying private enterprise has no obligation to consider the public good, beyond what has been made illegal.  It's oriented to the private good.  The market is amoral, in that conception.

 

So directing action to the public good is left up to the state.

 

OTOH, you don't want the state to step in too much either.  So one element is weighted wholly to the individual while the other needs to be balanced - that seems to tip to one side.

 

I think the fundamental problem with this approach is that it assumes the purpose of economic activity is really to enrich individuals, and I think that's pretty reductive.  It seems more plausible if you think of one guy buying a single rental property as an investment.  Less so when you think of the developers or large landlords building hundreds of units, and essentially driving the shape of the community based on their personal best interests.  Why should that shape the community?  And why would it be that our individual duty to consider the needs of the community is somehow not part of our actions in business?

 

It seems to me that is the kind of attitude that makes people feel cynical about morality and business both - who respects the guy who goes to church every week, or gives a bunch of money to charity, and yet pursues his own private good in business whether or not it serves the community?  If every business looked not just to the well-being of the owner, but the needs of community as a whole, how would that affect our communities?

 

I don't know that I would say communism is unsuccessful economically.  People tend to think of it as complete management of the economy like many communist states tried  in the 20th century, and that certainly was not very effective - to say the least.  Most communist states now don't use that kind of management, though, and it seems to work better and be much more flexible - the state still sees the economic activity of the nation as being about the good of the people, not just individuals, and it expects individuals to conform to those needs.  I think as westerners we tend to recoil from the authoritarianism we see in that - OTOH, they seem to recoil from the sense that we only need to serve ourselves.

 

It is not so much that I think it is the purpose of economic activity to enrich individuals. I just think this is the reality of human nature. So I am not saying so much that it should be like this but that I think it unlikely that it will work differently. 

 

And when I say that everyone should be free to maximize their own "profit" that doesn't just mean money. Many/most people do get something out of being charitable/good. People have different opinions about risk. Or maybe the opinion of their friends/peers is important to them. For larger companies acting in bad faith can have a significant negative impact on business. And who wants to live in a polluted area/world? So there are lots of "natural" forces at work that help to steer people's economic decisions. 

 

I do think the state has a very important role to fulfill (including laws that will curb behavior that makes economic sense for individuals but is detrimental). I just feel that states can do more harm than good if they interfere too much.

 

Sure, if every business looked to the needs of the community that would be great. And if every person acted in the way I think Jesus wanted us to we would live in something close to paradise. But I don't see that happening any time soon (which doesn't mean we shouldn't strive for it).

 

Which communist states are you thinking of? I can't really think of many any more and definitely not ones that seem successful...

Link to comment
Share on other sites

All this stuff about renters paying property tax.  Let's say I grant you that.  Even so, after figuring in refundable tax credits and tax-funded benefits/services, a high % of those people's taxes still approach zero.

 

I would say that paying property tax is closer to the grocery store idea suggested by Tanaqui (IIRC) earlier.  The variation isn't nearly as big as it is for progressive income taxes, and what it pays for is somewhat more likely to benefit the people who pay in.  Of course you could argue all day over the exceptions to that, but for most people, they pay property taxes (directly or indirectly), they get county services and public schools.  Rah rah for that.

Link to comment
Share on other sites

But the taxes do go away if you get rid of the property. It's a tax on the property and not on the renter. But the purpose of a rental property is to rent it out, correct? And you wouldn't do so unless you could make a reasonable profit which is determined by rental income - cost (which includes taxes). So you'd only be willing to be a landlord if you expect that the rental income is high enough to cover your cost (including taxes) and give you the same or more profit you could make some other way (for example by buying shares). Of course there can be miscalculations (e.g. renters don't pay or you can't find renters) and it is harder to get rid of a house than of shares.

No, this really isn't how it works for private parties around here.

 

For one thing, you can't sell a piece of property all that quickly, as you mention.  It's not like cashing a check.

 

For another, private party landlords often fall into that role rather than setting out for it.  They have a house and they decide to rent it because they got married or because they are living elsewhere for a while and hope to move back at some point, or because they hope to supplement their income or at least cover some of their carrying costs on a property that they don't live in all the time.  In all these cases they charge more or less what they can, regardless of expenses.  

 

All of the landlords that I know personally do this.  

 

It's the big corporate landlords that assess purchases the way that you say.

  • Like 1
Link to comment
Share on other sites

But the point is that the tax remains whether there are renters or not, and the rent that can be charged is what the traffic will bear whether it covers the property taxes or not.  So saying that the renters pay the property tax is false at worst, very misleading at best.  And that was where we started.

 

ETA:  In your example, if you don't have a son who needs lunch, the expense goes away.  Whereas in the case of the property taxes, they remain whether there is a renter or not.

Often the property tax does not remain the same regardless whether there is a rental market or not because property taxes are generally based on a percentage of the value of the property.  In a strong rental market the property values are higher, and the taxes paid are higher.

 

But, the fact of whether or not the tax would be collected from the property owners whether or not the property is rented is not the issue.  The issue is do the renters pay more for rent when there is a property tax than they would for rent when there is not a property tax.  If so, they are bearing a portion of the economic burden of the tax, and in any basic economics/public finance use of terminology they are said to be paying a portion of the tax.  

 

The fact that if I don't have a son who needs a lunch, so I don't have an expense of lunch doesn't change the fact that if I DO have a son who needs a lunch and I give him money that he then hands over to the restaurant, it is not distorting the situation to say that I am paying for lunch.  Another way to look at it would be is if 10 of us go to lunch.  The lunch costs $5 per person.  I pay for the lunch if I give the restaurant $5.  If you collect $5 from each of the 10 people at lunch and pay the restaurant the $50, you "paid" the restaurant.  But, it is not distorting to say that I paid for my lunch even though I am not the one who gave the dollar bills to the restaurant.  

  • Like 4
Link to comment
Share on other sites

No, this really isn't how it works for private parties around here.

 

For one thing, you can't sell a piece of property all that quickly, as you mention.  It's not like cashing a check.

 

For another, private party landlords often fall into that role rather than setting out for it.  They have a house and they decide to rent it because they got married or because they are living elsewhere for a while and hope to move back at some point, or because they hope to supplement their income or at least cover some of their carrying costs on a property that they don't live in all the time.  In all these cases they charge more or less what they can, regardless of expenses.  

 

All of the landlords that I know personally do this.  

 

It's the big corporate landlords that assess purchases the way that you say.

 

How much property do big corporate landlords own compared to the ones you are talking about?

 

It's a pretty significant question whether people should thin about property as an investment at all.  But if they do, I don't think that it's all that appropriate to complain that when an investment is bad, they might lose money.  It's still normative that when you have a business investment where there are customers, the expectation is that the money the customers pay is what pays for the business costs.

 

If it's working, it's actually a huge advantage for the owner, who gets to acquire capital while the renter puts up the cash.

  • Like 1
Link to comment
Share on other sites

We are renters. The property taxes went up on our house after the recession, and our landlord raised the rent. Property taxes are publix record here, so I looked, and it went up around the same amount he raised it. It does affect what people pay, in a lot of cases, I think.

 

He's not a corporate landlord, but he was well placed with the recession and mortgaged our (paid for) house, which enabled him to buy a good number of properties. We have rented here 7 years. He has gone from 2 properties to about 25.

  • Like 1
Link to comment
Share on other sites

All this stuff about renters paying property tax. Let's say I grant you that. Even so, after figuring in refundable tax credits and tax-funded benefits/services, a high % of those people's taxes still approach zero.

 

I would say that paying property tax is closer to the grocery store idea suggested by Tanaqui (IIRC) earlier. The variation isn't nearly as big as it is for progressive income taxes, and what it pays for is somewhat more likely to benefit the people who pay in. Of course you could argue all day over the exceptions to that, but for most people, they pay property taxes (directly or indirectly), they get county services and public schools. Rah rah for that.

How you define tax benefits/services matters greatlly. It's not as if wealthy people and corporations do not benefit from government services, infrastructure, etc. In fact, depending on the item, they may benefit more.

 

If you take all taxes into consideration, not just federal income taxes, it is simply not true that a high % of people pay zero. Overall, the system is only slightly progressive, unlike the very progressive federal income tax system. In general, people pay taxes roughly in proportion to their share of overall income.

 

http://www.pbs.org/newshour/making-sense/column-much-poor-actually-pay-taxes-probably-think/

  • Like 1
Link to comment
Share on other sites

The reason I am pushing on the issue of whether the landlord or the tenant pays the property taxes is that there is a big disagreement in this country about who actually pays into the system and to what extent.  Setting aside for a moment the question of 'tax burden' and just looking at tax paying, it is clear that the property owner bears the entire risk associated with the property tax, and actually does pay it.  Sometimes he gets rental income to cover that, and sometimes he doesn't, but either way he is absolutely liable for it.

 

Low income folks arguably would be anticipated to pay a higher proportion of their income in sales tax than high income folks, although I don't have data to back up that conjecture.

Sales taxes, like flat taxes, are considered regressive.

 

High income folks clearly pay a far higher proportion of their income in income taxes.  Income taxes are considered progressive.  There are provisions in the income tax code that were put in to make sure that high income folks pay their 'fair share' that were not indexed to inflation or the local COL, and which are increasingly falling on middle income people.  Additionally, there were additions to the tax code within the last few years to fund the ACA that fall only on high income folks.

 

Most people forget that high income is not the same as wealthy.  High net worth individuals who are not high income, who are mostly living off of their investments, pay extremely low income taxes.  For some reason this is hardly ever talked about, except for brief flare ups when, say, Warren Buffett tries to call attention to it, or the Gates's make a large donation to their private foundation.  To me, this is the elephant in the living room of our tax structure.  And I find it very interesting how dead that carcass is, and how smelly, and yet how invisible.

 

  • Like 4
Link to comment
Share on other sites

The reason I am pushing on the issue of whether the landlord or the tenant pays the property taxes is that there is a big disagreement in this country about who actually pays into the system and to what extent.  Setting aside for a moment the question of 'tax burden' and just looking at tax paying, it is clear that the property owner bears the entire risk associated with the property tax, and actually does pay it.  Sometimes he gets rental income to cover that, and sometimes he doesn't, but either way he is absolutely liable for it.

 

Low income folks arguably would be anticipated to pay a higher proportion of their income in sales tax than high income folks, although I don't have data to back up that conjecture.

Sales taxes, like flat taxes, are considered regressive.

 

High income folks clearly pay a far higher proportion of their income in income taxes.  Income taxes are considered progressive.  There are provisions in the income tax code that were put in to make sure that high income folks pay their 'fair share' that were not indexed to inflation or the local COL, and which are increasingly falling on middle income people.  Additionally, there were additions to the tax code within the last few years to fund the ACA that fall only on high income folks.

 

Most people forget that high income is not the same as wealthy.  High net worth individuals who are not high income, who are mostly living off of their investments, pay extremely low income taxes.  For some reason this is hardly ever talked about, except for brief flare ups when, say, Warren Buffett tries to call attention to it, or the Gates's make a large donation to their private foundation.  To me, this is the elephant in the living room of our tax structure.  And I find it very interesting how dead that carcass is, and how smelly, and yet how invisible.

Yes, the landlord has the legal liability for the property tax.  From a finance perspective, a tax would not be considered a "risk".  Risk means there is some uncertainty.  The property tax is an expense, not a risk.  

 

Flat taxes are not, by nature, regressive.  A pure flat tax is proportional with everyone paying the same marginal and average tax rate.  If some items are exempted then a flat tax can become regressive or progressive.  

Link to comment
Share on other sites

The reason I am pushing on the issue of whether the landlord or the tenant pays the property taxes is that there is a big disagreement in this country about who actually pays into the system and to what extent. Setting aside for a moment the question of 'tax burden' and just looking at tax paying, it is clear that the property owner bears the entire risk associated with the property tax, and actually does pay it. Sometimes he gets rental income to cover that, and sometimes he doesn't, but either way he is absolutely liable for it.

 

Low income folks arguably would be anticipated to pay a higher proportion of their income in sales tax than high income folks, although I don't have data to back up that conjecture.

Sales taxes, like flat taxes, are considered regressive.

 

High income folks clearly pay a far higher proportion of their income in income taxes. Income taxes are considered progressive. There are provisions in the income tax code that were put in to make sure that high income folks pay their 'fair share' that were not indexed to inflation or the local COL, and which are increasingly falling on middle income people. Additionally, there were additions to the tax code within the last few years to fund the ACA that fall only on high income folks.

 

Most people forget that high income is not the same as wealthy. High net worth individuals who are not high income, who are mostly living off of their investments, pay extremely low income taxes. For some reason this is hardly ever talked about, except for brief flare ups when, say, Warren Buffett tries to call attention to it, or the Gates's make a large donation to their private foundation. To me, this is the elephant in the living room of our tax structure. And I find it very interesting how dead that carcass is, and how smelly, and yet how invisible.

The article I linked above that talks about the taxes paid by lower income people also discusses the point you make in your final paragraph. That when looking at all taxes, not just federal income taxes, they are actually only somewhat progressive overall and not nearly as progressive at the very top.
  • Like 1
Link to comment
Share on other sites

Water and trash is one separate bill from property for us. If my water were to be turned off due to not being paid, trash pick up wouldn't happen either. We had a foreclosed house down the road that did that much to neighborhood ire. They just left everything a mess to pile up and it took the bank fooorrreeevveer to clean up and turn everything back on.

 

Water is two bills for us.  We pay a local tax and we pay the residential usage rate. Local tax is based on a percentage of property value, so illegally converting a single family into a multifamily means freeloaders.  That residential rate is so high compared to commercial that its a disincentive to garden, even without the poor quality being a disincentive.  When the well is drying up, the water is so mineral heavy it kills the garden plants.  So yeah, now I have to collect water from rain...and it hasn't rained enough since July to support more than a few square feet of plants.  Its the real life version of the olden days of war, with an Army moving in and consuming all the resources.

 

Edited by Heigh Ho
Link to comment
Share on other sites

It is not so much that I think it is the purpose of economic activity to enrich individuals. I just think this is the reality of human nature. So I am not saying so much that it should be like this but that I think it unlikely that it will work differently. 

 

And when I say that everyone should be free to maximize their own "profit" that doesn't just mean money. Many/most people do get something out of being charitable/good. People have different opinions about risk. Or maybe the opinion of their friends/peers is important to them. For larger companies acting in bad faith can have a significant negative impact on business. And who wants to live in a polluted area/world? So there are lots of "natural" forces at work that help to steer people's economic decisions. 

 

I do think the state has a very important role to fulfill (including laws that will curb behavior that makes economic sense for individuals but is detrimental). I just feel that states can do more harm than good if they interfere too much.

 

Sure, if every business looked to the needs of the community that would be great. And if every person acted in the way I think Jesus wanted us to we would live in something close to paradise. But I don't see that happening any time soon (which doesn't mean we shouldn't strive for it).

 

Which communist states are you thinking of? I can't really think of many any more and definitely not ones that seem successful...

 

China, mainly.

 

As far as people's behaviour - I think there is a little more room here than we think.  Human nature is what it is, but it is also shaped by our expectations as a society.

 

If west - the purpose of running a business is primarily about the owner making money (not just earning a living and being enumerated for his work, but creating profit beyond that), it means we start think in a particular way - we say, oh, of course we expect a person to make the decision that will enrich him.  Of course we expect the corporation to do what is good for it's bottom line so long as it can get away with it legally.  

 

We actually in many instances go beyond that and say that it is the duty of the person to do those things - maximize profit.

 

But, if we say, no, economic activity has other purposes.  It is to provide a living for the owner, but also the workers.  It is provide for the needs of the community with good products and services.  If we believe these things about our economic life, it creates a whole different discussion about how to exist as a community, and it tends to pull against our selfish tendencies, rather enabling them to be stretched to their fullest possible level of self-interest.  Maybe the people most inclined to be selfish will be less likely to be hailed as great at business.

 

I'd also say that the former approach is extremely reductive and artificial, while the latter looks at us as integrated human beings.  Individuals and community are related and dependant.  A livelihood is required not just for owners but workers. Our work is really to save a need.  Our need leads to work.  Our moral life isn't separate from our business decisions.

  • Like 1
Link to comment
Share on other sites

China, mainly.

 

As far as people's behaviour - I think there is a little more room here than we think.  Human nature is what it is, but it is also shaped by our expectations as a society.

 

If west - the purpose of running a business is primarily about the owner making money (not just earning a living and being enumerated for his work, but creating profit beyond that), it means we start think in a particular way - we say, oh, of course we expect a person to make the decision that will enrich him.  Of course we expect the corporation to do what is good for it's bottom line so long as it can get away with it legally.  

 

We actually in many instances go beyond that and say that it is the duty of the person to do those things - maximize profit.

 

But, if we say, no, economic activity has other purposes.  It is to provide a living for the owner, but also the workers.  It is provide for the needs of the community with good products and services.  If we believe these things about our economic life, it creates a whole different discussion about how to exist as a community, and it tends to pull against our selfish tendencies, rather enabling them to be stretched to their fullest possible level of self-interest.  Maybe the people most inclined to be selfish will be less likely to be hailed as great at business.

 

I'd also say that the former approach is extremely reductive and artificial, while the latter looks at us as integrated human beings.  Individuals and community are related and dependant.  A livelihood is required not just for owners but workers. Our work is really to save a need.  Our need leads to work.  Our moral life isn't separate from our business decisions.

 

I do agree with what you are saying. That is basically what I meant with everyone will try to get the most out of their investment - not just money but also other aspects. Maybe it makes me feel good to rent out my apartment to a poorer family even though I could get more money from someone else. Or maybe I feel there is less risk renting long-term to a family than in short-term lets. Or maybe the good opinion of my friends/neighbors is important to me and makes me invest more in a property than absolutely necessary. Society does and should exert some pressure on individual behaviour. 

 

There are lots of things that will influence our decision but monetary gain is certainly an important aspect. I just feel that people should be free to determine what gives them the most value. I do not want the government enforcing decisions unless absolutely necessary for the public good as I do think the market is an excellent way to allocate resources in most cases (though there are exceptions e.g. health care). And I think it is okay if people find a balance between what is best for them and what is optimal for society. So if I had an apartment to rent out (I wish) I might rent it out to a nice family that needs to find a place to live instead of a single person who would maybe pay a bit more (or pose less risk as far as wear and tear is concerned). But I probably wouldn't rent it to someone who needs a home but is likely to not be able to pay rent.

 

The fact that human behaviour is influenced by so many considerations and is hard to predict is one of the main reasons I am uncertain about UBI. I am hesitant to make such a big step with potentially huge impacts without more of an idea what exactly would happen.

Edited by Twolittleboys
  • Like 2
Link to comment
Share on other sites

...  Most people forget that high income is not the same as wealthy.  High net worth individuals who are not high income, who are mostly living off of their investments, pay extremely low income taxes.  For some reason this is hardly ever talked about, except for brief flare ups when, say, Warren Buffett tries to call attention to it, or the Gates's make a large donation to their private foundation.  To me, this is the elephant in the living room of our tax structure.  And I find it very interesting how dead that carcass is, and how smelly, and yet how invisible.

 

But they do pay property tax to the extent that is invested in taxable assets.

 

And more importantly, their income was most likely taxed at a high rate (possibly on several levels) when they earned it.  And much of it gets taxed again when they pass it down.  And the income on the corpus gets taxed.  So, how many more times should the same wealth be taxed?  How much should a person be punished for investing their money in ventures that create jobs and improve neighborhoods?

 

And while we're discussing what wealthy people do with their money, what about the amounts most of them donate to charities?

 

If you're looking for equal wealth for all, then yeah, the present situation is "smelly" etc.  I don't believe that should be the goal though. 

 

And speaking of the elephant in the room, I think it is laughable to see extremely rich people complaining about the fact that there are rich people who aren't being taxed to death.  I guess if they say something about it, that makes them better than the other rich people who are quietly working to help others.

Edited by SKL
  • Like 1
Link to comment
Share on other sites

China, mainly.

 

As far as people's behaviour - I think there is a little more room here than we think.  Human nature is what it is, but it is also shaped by our expectations as a society.

 

If west - the purpose of running a business is primarily about the owner making money (not just earning a living and being enumerated for his work, but creating profit beyond that), it means we start think in a particular way - we say, oh, of course we expect a person to make the decision that will enrich him.  Of course we expect the corporation to do what is good for it's bottom line so long as it can get away with it legally.  

 

We actually in many instances go beyond that and say that it is the duty of the person to do those things - maximize profit.

 

But, if we say, no, economic activity has other purposes.  It is to provide a living for the owner, but also the workers.  It is provide for the needs of the community with good products and services.  If we believe these things about our economic life, it creates a whole different discussion about how to exist as a community, and it tends to pull against our selfish tendencies, rather enabling them to be stretched to their fullest possible level of self-interest.  Maybe the people most inclined to be selfish will be less likely to be hailed as great at business.

 

I'd also say that the former approach is extremely reductive and artificial, while the latter looks at us as integrated human beings.  Individuals and community are related and dependant.  A livelihood is required not just for owners but workers. Our work is really to save a need.  Our need leads to work.  Our moral life isn't separate from our business decisions.

How do you separate out being enumerated for work and creating a profit beyond that?  At what point is a business owner going beyond being enumerated for his work?  

 

Just because a business person maximizes profit does not mean that the business is not fulfilling other purposes.  If the business is not providing the community with good products and services, it will not be able to sell them and will not profit.  As far as having the purpose to provide a living for workers, does that mean that a business owner has an obligation to hire workers?  How many workers?  

 

I agree that our moral life isn't separate from out business decisions; however, I find it problematic when we move from a point of expecting moral behavior in business (as we would in any other walk of life) and saying that the purpose of the business is broader than maximizing the utility of the owner of the business.  

  • Like 2
Link to comment
Share on other sites

But they do pay property tax to the extent that is invested in taxable assets.

 

And more importantly, their income was most likely taxed at a high rate (possibly on several levels) when they earned it. And much of it gets taxed again when they pass it down. And the income on the corpus gets taxed. So, how many more times should the same wealth be taxed? How much should a person be punished for investing their money in ventures that create jobs and improve neighborhoods?

 

And while we're discussing what wealthy people do with their money, what about the amounts most of them donate to charities?

 

If you're looking for equal wealth for all, then yeah, the present situation is "smelly" etc. I don't believe that should be the goal though.

 

And speaking of the elephant in the room, I think it is laughable to see extremely rich people complaining about the fact that there are rich people who aren't being taxed to death. I guess if they say something about it, that makes them better than the other rich people who are quietly working to help others.

In the case of warren Buffet, he does quietly and loudly work to help others. A huge amount of his personal wealth is given to help others and he lives a very modest lifestyle himself. And the older he gets the more he gives away. And other wealthy people do this as well. It's not an either or. It's both possible to decry wrong they see in their own class and also work to even the playing field by helping others.

  • Like 5
Link to comment
Share on other sites

How do you separate out being enumerated for work and creating a profit beyond that?  At what point is a business owner going beyond being enumerated for his work?  

 

Just because a business person maximizes profit does not mean that the business is not fulfilling other purposes.  If the business is not providing the community with good products and services, it will not be able to sell them and will not profit.  As far as having the purpose to provide a living for workers, does that mean that a business owner has an obligation to hire workers?  How many workers?  

 

I agree that our moral life isn't separate from out business decisions; however, I find it problematic when we move from a point of expecting moral behavior in business (as we would in any other walk of life) and saying that the purpose of the business is broader than maximizing the utility of the owner of the business.  

 

Being enumerated for your work is generally going to be about covering your costs (including things like maintaining equipment, making sure you can replace it, and all that), plus covering the cost of your time and expertise.  Profit is generally what goes beyond that.  Different types of work will look a it different of course.

 

As I've said many times here, we take the idea of profit as a god-give natural way of things, but that is cultural - other cultures and times have not always believed in profit.  It's the kind of thing where we really have to set back and consider our own cultural assumptions about the way things are, and realize there are other viable ways of thinking that might have different results.  For some reason this is an issue where a lot of people have a hard time doing that - like you are saying, imagine a world where gravity goes up.

 

Yes, maximizing profit does not mean that a business does not do other thing.  But if we make it the sole or even primary criteria we recognize in our thinking and planning, it makes a difference to the decisions we make as individuals, the way we shape public policy, and how we think about the economic activity around us.  

 

The framework we use to think about the things we do is important.  Just as an example, if we think about the purpose of the economy as not primarily profit, but say it equally important is giving people work, how would that affect the way an individual business owner might think about automation in his business?  How might it affect how our public policy treats automation? 

 

On what basis do you think that the sole limits of the concern of business, including legally, is to maximize utility of the owner?  That is a huge set of cultural assumptions, and not even really justified in our current framework - there are many things a business owner can't do because we consider them immoral in some sense - dump waste, fail to give a safe workplace to employees, and many others.

 

It is our culture that says that the purpose of business it primarily to be good for a business owner, and that viewpoint has to be justified rationally like any other.  Most of the time though people seem to think its a clear and obvious fact, like gravity.

Link to comment
Share on other sites

But they do pay property tax to the extent that is invested in taxable assets.

 

And more importantly, their income was most likely taxed at a high rate (possibly on several levels) when they earned it.  And much of it gets taxed again when they pass it down.  And the income on the corpus gets taxed.  So, how many more times should the same wealth be taxed?  How much should a person be punished for investing their money in ventures that create jobs and improve neighborhoods?

 

And while we're discussing what wealthy people do with their money, what about the amounts most of them donate to charities?

 

If you're looking for equal wealth for all, then yeah, the present situation is "smelly" etc.  I don't believe that should be the goal though. 

 

And speaking of the elephant in the room, I think it is laughable to see extremely rich people complaining about the fact that there are rich people who aren't being taxed to death.  I guess if they say something about it, that makes them better than the other rich people who are quietly working to help others.

 

I find it really weird that people keep talking in language like "being taxed to death".  Or as if we are going to give a blank check to those in need, etc.

 

No one is saying those things.  You don't have to live on the street in rags while paying for others to live a comfortable life.

 

There are places in the world where all you have is not enough for anyone - even if you share - in which case you might as well have not enough together.  And there are places where you might have just enough to get by, but if you share you won''t, which is a real dilemma.

 

But that is really not our situation in the west, and there is something unpleasant about speaking as if it is.

  • Like 2
Link to comment
Share on other sites

I find it really weird that people keep talking in language like "being taxed to death". Or as if we are going to give a blank check to those in need, etc.

 

No one is saying those things. You don't have to live on the street in rags while paying for others to live a comfortable life.

 

There are places in the world where all you have is not enough for anyone - even if you share - in which case you might as well have not enough together. And there are places where you might have just enough to get by, but if you share you won''t, which is a real dilemma.

 

But that is really not our situation in the west, and there is something unpleasant about speaking as if it is.

The more I read and learn and hear how others think about material things the more wise I think I was as a young child asking my mom if all the things in the entire world were added up would there be enough for everyone. She told me yes.

 

I still think about that all of the time. The disparity between the haves and have nots is not going to be solved by humans. I firmly believe that. It brings me a little comfort believe it or not. In the meantime I just do my best to live with integrity and work as best I can to provide for everyone that I can. Which unfortunately is barely myself and my kids, but I do what I can in other ways.

  • Like 2
Link to comment
Share on other sites

But they do pay property tax to the extent that is invested in taxable assets.

 

And more importantly, their income was most likely taxed at a high rate (possibly on several levels) when they earned it.  And much of it gets taxed again when they pass it down.  And the income on the corpus gets taxed.  So, how many more times should the same wealth be taxed?  How much should a person be punished for investing their money in ventures that create jobs and improve neighborhoods?

 

And while we're discussing what wealthy people do with their money, what about the amounts most of them donate to charities?

 

If you're looking for equal wealth for all, then yeah, the present situation is "smelly" etc.  I don't believe that should be the goal though. 

 

And speaking of the elephant in the room, I think it is laughable to see extremely rich people complaining about the fact that there are rich people who aren't being taxed to death.  I guess if they say something about it, that makes them better than the other rich people who are quietly working to help others.

These are good points.

 

What I think is weird is how the media and popular opinion conflate 'wealthy' with 'high income'.  People frequently talk about needing to tax the wealthy more, but the proposals they make fall only on the high income, not the wealthy, for instance.  

  • Like 2
Link to comment
Share on other sites

Yes, the landlord has the legal liability for the property tax.  From a finance perspective, a tax would not be considered a "risk".  Risk means there is some uncertainty.  The property tax is an expense, not a risk.  

 

Flat taxes are not, by nature, regressive.  A pure flat tax is proportional with everyone paying the same marginal and average tax rate.  If some items are exempted then a flat tax can become regressive or progressive.  

IMHO flat taxes are an awful idea since I think it is perfectly reasonable and fair for the well off to be paying more in income, estate, and capital gains taxes especially since all of those taxes are at historically low levels. And the fact that the top 10% of earners pay 68% of taxes and of that then top 1% pay 40% of all taxes is meaningless to me since these earners earn most of the money! They certainly can afford to pay modest increases in taxes. My grandfather who was very wealthy thrived and his business thrived when the highest income taxes were 70% and estate taxes were higher and capital gains taxes were higher as well. 

 

Our country can certainly afford to have the very wealthy (and I am not talking upper middle class) go back to the income and capital gains taxes we had under Clinton and then add a several more income tax brackets for the ultra-wealthy since it is ridiculous that the top bracket is $418,400! What about the folks who earn millions a dollar a year? They should pay more and it is totally fair IMHO especially since they often benefit form the work of others or from corporate welfare.

 

I am tired of folks blaming the poor folks who do not pay income taxes as if it were unfair. Give me a break. They don't pay taxes because they are poor and in many cases struggling to get by! Oh and maybe if they were paid more and given more set schedules so that they could work second jobs then maybe they would be paying taxes. And maybe if we had unviversal healthcare they would be struggling less and making more and paying more!

  • Like 2
Link to comment
Share on other sites

All this stuff about renters paying property tax.  Let's say I grant you that.  Even so, after figuring in refundable tax credits and tax-funded benefits/services, a high % of those people's taxes still approach zero.

 

I would say that paying property tax is closer to the grocery store idea suggested by Tanaqui (IIRC) earlier.  The variation isn't nearly as big as it is for progressive income taxes, and what it pays for is somewhat more likely to benefit the people who pay in.  Of course you could argue all day over the exceptions to that, but for most people, they pay property taxes (directly or indirectly), they get county services and public schools.  Rah rah for that.

 

That might be true where you live, but not all renters are low-income welfare recipients. We rent and we have to pay income tax. Dh makes too much to qualify for things like the EIC. Our rent went up this year because the property taxes went up, too.

 

Given everything that's happened with the housing market and job market over the last ten years, there are more middle-class people renting now either out of choice or necessity. And really, if we're deducting "tax-funded benefits and services" from the taxes people pay, you could say that the majority of people effectively pay zero taxes regardless of their housing situation.

  • Like 1
Link to comment
Share on other sites

Yeah there are people who rent all across the income spectrum. Heck, we are renting right now even though we have been homeowners and prefer to be, and have income to be again. Sometimes renting makes the most financial or lifestyle sense, especially in a area where home ownership costs are high indexed against rent.

Link to comment
Share on other sites

 

 

On what basis do you think that the sole limits of the concern of business, including legally, is to maximize utility of the owner?  That is a huge set of cultural assumptions, and not even really justified in our current framework - there are many things a business owner can't do because we consider them immoral in some sense - dump waste, fail to give a safe workplace to employees, and many others.

 

It is our culture that says that the purpose of business it primarily to be good for a business owner, and that viewpoint has to be justified rationally like any other.  Most of the time though people seem to think its a clear and obvious fact, like gravity.

I do not think that the sole limits of the concern of business is to maximize utility to the owner; I do believe that is the purpose of the business.  I base that belief on the fact that no one is required to be a business owner.  No one has a moral obligation to be a business owner.  No one has a responsibility to society to be a business owner.  I also believe that individuals are rational in that they make choices that they think will maximize their utility.  A person starts a business when he or she thinks it will increase his or her utility (more than spending resources on the next best alternative).  Therefore, the purpose of the business--the reason it exists--is to maximize the utility of the owner.  There are moral questions regarding what one things should and should not enter into an owner's utility function.  The owner's ability to maximize his or her utility is also limited by the rights of others (just as my purpose in driving my car is to go to the grocery store but that does not mean I can cut across a neighbor's yard because it is faster or run a red light because I am fulfilling my purpose.)

Link to comment
Share on other sites

OK nothing I said was about renters vs. homeowners.  I didn't bring up renters.  I said OK, let's say renters pay property taxes.  Whatever.  It doesn't change the fact that some people pay a lot more taxes than other people.  And a high % of people pay a minimal amount of net tax.  So yes, when we talk about something being tax funded, we are really saying we want a transfer of wealth from one segment to another.  It's not like everyone going to the grocery store to buy their share of civilization.

 

Once we start calling it what it is, we can have an honest discussion about policy.

Link to comment
Share on other sites

Being enumerated for your work is generally going to be about covering your costs (including things like maintaining equipment, making sure you can replace it, and all that), plus covering the cost of your time and expertise.  Profit is generally what goes beyond that.  Different types of work will look a it different of course.

 

 

The framework we use to think about the things we do is important.  Just as an example, if we think about the purpose of the economy as not primarily profit, but say it equally important is giving people work, how would that affect the way an individual business owner might think about automation in his business?  How might it affect how our public policy treats automation? 

 

What is an objective measure of the cost of a business owner's time and expertise?  I know of no way of determining what profit (and whether it even exists) is in this case.  And, how is it determined what needs to be put aside for maintaining and replacing equipment?  I could see two people looking at a business and one saying there is a huge profit and the other saying there is none.  With no objective measure or definition, it is hard to discuss what profit is or of it is the primary purpose of a business.

 

If I were a business owner and I said that it is equally important to give people work, then is it better for me to give 40 hours of work to 10 people or 20 hours of work to 20 people?  If I decide to start an embroidery business, buy an embroidery machine, do all of my own marketing and bookkeeping, and hire no workers, am I failing at my purpose as a business owner?  I could have hired workers to do the embroidery by hand. Why would I have a duty to hire those people instead of them having a duty to start a business and hire me?  

 

Would this idea extend to other entities?  The purpose of the school system is to educate, but it is equally important to give people work?  Instead of having an automated bell system, the school could hire someone to ring the bell.  Instead of email communication, the school could hire someone to handwrite each parent and then hand deliver the letters.  I don't think we would be better off as a society if we made those choices.

Link to comment
Share on other sites

And speaking of remuneration - the fees for my work are below market, which is why I am so busy.  Why below market?  Well maybe because I don't have rent/occupancy charges, nor a desk, nor do I need to drive for work (usually), have very few personal needs that cost money, use very limited admin assistance, am nearly paperless, don't charge overtime or sick time etc., ....  So - given my fees are below market, which part of the fee does the payer send me for the purpose of making me rich vs. compensating my work?

Link to comment
Share on other sites

OK nothing I said was about renters vs. homeowners. I didn't bring up renters. I said OK, let's say renters pay property taxes. Whatever. It doesn't change the fact that some people pay a lot more taxes than other people. And a high % of people pay a minimal amount of net tax. So yes, when we talk about something being tax funded, we are really saying we want a transfer of wealth from one segment to another. It's not like everyone going to the grocery store to buy their share of civilization.

 

Once we start calling it what it is, we can have an honest discussion about policy.

When considering all taxes, people pay roughly proportional to their share of income, with a modest amount of progressivity that disappears at the very top. What's unfair about that except the uber wealthy not paying their fair share? Of course some people pay a lot more than others. Do you think someone making $30k a year should pay the same as someone making $30M?

 

And again,when you are talking about transferring wealth, you are neglecting the fact that the wealthy also benefit from government programs, infrastructure, etc. Just as one example, who do you think benefits most from patent laws and protections in this country? It's not just poor people who get things from the government, although it is often framed that way.

Edited by Frances
  • Like 2
Link to comment
Share on other sites

When considering all taxes, people pay roughly proportional to their share of income, with a modest amount of progressivity that disappears at the very top. What's unfair about that except the uber wealthy not paying their fair share? Of course some people pay a lot more than others. Do you think someone making $30k a year should pay the same as someone making $30M?

 

And again,when you are talking about transferring wealth, you are neglecting the fact that the wealthy also benefit from government programs, infrastructure, etc. Just as one example, who do you think benefits most from patent laws and protections in this country? It's not just poor people who get things from the government, although it is often framed that way.

 

Sure.  The point is that if the US Treasury starts paying a bunch more people for not working, the net taxes of some people are going to go up significantly.  We are not really all in this together as some people are trying to say.  The majority of people will receive a net positive transfer of wealth, or pay a relatively tiny share of the cost of this program.

 

So again ... if that is what people think we should do, let's call it what it is.

 

Why don't people want to admit this?  I mean we all know there are many who want to tax higher incomes more steeply i.e. transfer the wealth from the upper quintiles to the lower ones.  This is a straightforward way to do just that.

  • Like 4
Link to comment
Share on other sites

How do you separate out being enumerated for work and creating a profit beyond that? At what point is a business owner going beyond being enumerated for his work?

 

Just because a business person maximizes profit does not mean that the business is not fulfilling other purposes. If the business is not providing the community with good products and services, it will not be able to sell them and will not profit. As far as having the purpose to provide a living for workers, does that mean that a business owner has an obligation to hire workers? How many workers?

 

I agree that our moral life isn't separate from out business decisions; however, I find it problematic when we move from a point of expecting moral behavior in business (as we would in any other walk of life) and saying that the purpose of the business is broader than maximizing the utility of the owner of the business.

I agree with you, and I think you have posed some excellent questions. In addition to the things you're thinking about, I also wonder who gets to decide how much profit is too much.

 

Personally, I encourage my ds to become a business owner and to make as much money as possible in that business. I also encourage him to pay employees fairly and to donate to charity, but I would be lying to you if I said I didn't want him to become wealthy and to be able to save for a comfortable (and hopefully early) retirement, as well as to provide a great life for his future family.

 

So basically, how wealthy can a person be before he or she is classified as being greedy and evil? Or is it not a matter of a dollar figure, but of being an ethical business owner who treats his customers, suppliers, and employees fairly no matter how much money that business owner is putting aside for himself?

  • Like 5
Link to comment
Share on other sites

What is an objective measure of the cost of a business owner's time and expertise?  I know of no way of determining what profit (and whether it even exists) is in this case.  And, how is it determined what needs to be put aside for maintaining and replacing equipment?  I could see two people looking at a business and one saying there is a huge profit and the other saying there is none.  With no objective measure or definition, it is hard to discuss what profit is or of it is the primary purpose of a business.

 

 

 

Figuring out the value of a person's time and expertise isn't a new idea - it's how the pay for most jobs is determined now.  What do we consider a fair wage for a manager, a butcher, an accountant? We consider the cost of living, how much it takes to maintain the person in daily life, how difficult or expensive it is to become qualified in the job, how rare the sill is, how much experience the person has.

 

And figuring out how much it will cost to maintain and replace equipment over time is also something that people already calculate in order to run a business effectively.  If you have a factory and you don't know what to budget for these things your business is going to fail.

 

These aren't new skills that need to developed. 

 

 

If I were a business owner and I said that it is equally important to give people work, then is it better for me to give 40 hours of work to 10 people or 20 hours of work to 20 people?  If I decide to start an embroidery business, buy an embroidery machine, do all of my own marketing and bookkeeping, and hire no workers, am I failing at my purpose as a business owner?  I could have hired workers to do the embroidery by hand. Why would I have a duty to hire those people instead of them having a duty to start a business and hire me?  

 

 

Those are certainly questions that you would need to consider.  So, you consider them.  I'm not sure what is difficult about that - we all have to make these kinds of determination all the time.

 

 

Would this idea extend to other entities?  The purpose of the school system is to educate, but it is equally important to give people work?  Instead of having an automated bell system, the school could hire someone to ring the bell.  Instead of email communication, the school could hire someone to handwrite each parent and then hand deliver the letters.  I don't think we would be better off as a society if we made those choices.

 

 

It certainly could be.  If the government is deciding about whether it should cut out a part of the civil service, that's something that happens even now.  Part of the question is whether the work itself will be well done.  The cost of salaries another.  But the elimination of a lot of good jobs that contribute to a larger economy is another important consideration.

 

You seem to be worried that there isn't one single principle that will govern all business decisions.  But most areas of life involve banking various elements.

Link to comment
Share on other sites

When considering all taxes, people pay roughly proportional to their share of income, with a modest amount of progressivity that disappears at the very top. What's unfair about that except the uber wealthy not paying their fair share? Of course some people pay a lot more than others. Do you think someone making $30k a year should pay the same as someone making $30M?

 

And again,when you are talking about transferring wealth, you are neglecting the fact that the wealthy also benefit from government programs, infrastructure, etc. Just as one example, who do you think benefits most from patent laws and protections in this country? It's not just poor people who get things from the government, although it is often framed that way.

 

Not to mention that many opportunities for making money are only available to those who have higher incomes.  

 

Over time, that would have an effect on wealth distribution that would make it almost impossible for people to move up in terms of class.

Link to comment
Share on other sites

I agree with you, and I think you have posed some excellent questions. In addition to the things you're thinking about, I also wonder who gets to decide how much profit is too much.

 

Personally, I encourage my ds to become a business owner and to make as much money as possible in that business. I also encourage him to pay employees fairly and to donate to charity, but I would be lying to you if I said I didn't want him to become wealthy and to be able to save for a comfortable (and hopefully early) retirement, as well as to provide a great life for his future family.

 

So basically, how wealthy can a person be before he or she is classified as being greedy and evil? Or is it not a matter of a dollar figure, but of being an ethical business owner who treats his customers, suppliers, and employees fairly no matter how much money that business owner is putting aside for himself?

 

The question is, where does profit come from?

 

The money a customer pays covers all the costs involved in creating the product or service, including things like salaries, health plans, etc.  It covers the time and expertise of the owner or manager of the business, their savings and retirement money that they need to get by later 9though that might be embodies in the business itself if the owner plans to sell the business eventually.  Those are all real costs associated with the product or service.  

 

Depending on the nature of the business, the owner's salary might be a high one.  Or it might be more modest.  But still a reasonable expense of the business.

 

But if you are charging the customer for something else, profit, what is it you are really charging that person for?

Link to comment
Share on other sites

I do not think that the sole limits of the concern of business is to maximize utility to the owner; I do believe that is the purpose of the business.  I base that belief on the fact that no one is required to be a business owner.  No one has a moral obligation to be a business owner.  No one has a responsibility to society to be a business owner.  I also believe that individuals are rational in that they make choices that they think will maximize their utility.  A person starts a business when he or she thinks it will increase his or her utility (more than spending resources on the next best alternative).  Therefore, the purpose of the business--the reason it exists--is to maximize the utility of the owner.  There are moral questions regarding what one things should and should not enter into an owner's utility function.  The owner's ability to maximize his or her utility is also limited by the rights of others (just as my purpose in driving my car is to go to the grocery store but that does not mean I can cut across a neighbor's yard because it is faster or run a red light because I am fulfilling my purpose.)

 

 

Well, they are kind of required to.

 

If you live in a community where no one farms, or no one makes clothes, and so food or clothing aren't available - and the wold is essentially a big community - you are going to have to make those things for yourself.  

 

We don't really work to make money - we work to have the things we need to live.  Specializing our production has advantages for the community as well as individuals.  You trade your squash for my wool, so we both have what we need.  

 

Now, in our economy, most people are employees, and only relatively few are business owners, so in that sense no one HAS to do the latter.  But that doesn't really change the fundamental nature of economic activity, which is to provide all the things we need to live as a society.  Not to create profit for a few.

Link to comment
Share on other sites

Sure.  The point is that if the US Treasury starts paying a bunch more people for not working, the net taxes of some people are going to go up significantly.  We are not really all in this together as some people are trying to say.  The majority of people will receive a net positive transfer of wealth, or pay a relatively tiny share of the cost of this program.

 

So again ... if that is what people think we should do, let's call it what it is.

 

Why don't people want to admit this?  I mean we all know there are many who want to tax higher incomes more steeply i.e. transfer the wealth from the upper quintiles to the lower ones.  This is a straightforward way to do just that.

 

Of course it would be a re-distribution of some kind from people with more money to those with less. Depending on how UBI is structured it might not have a huge negative impact as society already redistributes to the poorest group (via welfare benefits of various kinds) because society has decided that it is for the public good not to have people starve. So that part of UBI (going to people with little or no income) would not change the current situation much (a slightly higher cost might be offset by streamlining/less administration expense).

 

How much impact it otherwise would have depends largely on how income is distributed in that society (percentages of low vs. middle vs. high earners) and how it is paid for. Even though everyone gets it, only a small segment will truly have the whole amount in addition as it will be offset by higher taxes for other groups. If everyone for example receives a UBI of 800 only a certain group will have 800 more than before. People with middle incomes would probably reap some benefit (let's say they get UBI of 800 but their taxes go up by 400 so they only net 400) and at the very top it would be just an expense. 

 

UBI could be structured so that it peters out fairly quickly (i.e. people with slightly above average incomes have a small increase in taxes) or to really redistribute money (i.e. top earners will pay the bulk of expense). 

 

The question is, where does profit come from?

 

The money a customer pays covers all the costs involved in creating the product or service, including things like salaries, health plans, etc.  It covers the time and expertise of the owner or manager of the business, their savings and retirement money that they need to get by later 9though that might be embodies in the business itself if the owner plans to sell the business eventually.  Those are all real costs associated with the product or service.  

 

Depending on the nature of the business, the owner's salary might be a high one.  Or it might be more modest.  But still a reasonable expense of the business.

 

But if you are charging the customer for something else, profit, what is it you are really charging that person for?

 

Well, you also have to set your prices according to the market. I work as a freelancer and there is no point in me calculating how high my rates should be and setting them there. I will have to set them to be competitive or I won't get jobs. Of course I have to check and see whether the  rates I can get make it worth doing the job. If not, I need to find a different occupation. But if I can up my income (e.g. by choosing only jobs with higher rates or by working faster) than I will do so. I am not going to tell a client that I can do the job for a lower rate just because it might still be enough to cover my costs.

  • Like 1
Link to comment
Share on other sites

The question is, where does profit come from?

 

The money a customer pays covers all the costs involved in creating the product or service, including things like salaries, health plans, etc.  It covers the time and expertise of the owner or manager of the business, their savings and retirement money that they need to get by later 9though that might be embodies in the business itself if the owner plans to sell the business eventually.  Those are all real costs associated with the product or service.  

 

Depending on the nature of the business, the owner's salary might be a high one.  Or it might be more modest.  But still a reasonable expense of the business.

 

But if you are charging the customer for something else, profit, what is it you are really charging that person for?

 

Pricing is based on how the buyers value the good / service in the market.

 

In my case, say I earn $300 (which is a bargain price in the market), and my cost is $100 (because I am efficient), and I use  $100 to

invest in new business ventures in low-income communities (which will not cash flow for years, if ever).  Then of course the other $100 goes to pay taxes.

 

The person paying me for the service doesn't know or care how the money breaks down on my side, but they certainly want me to make a profit so I will stay in business.  Because if I go out of business, their costs will go up.  Ditto for the investees / employees of the businesses I invest in.  And the IRS would like me to keep making money, also.

Edited by SKL
  • Like 2
Link to comment
Share on other sites

Of course it would be a re-distribution of some kind from people with more money to those with less. Depending on how UBI is structured it might not have a huge negative impact as society already redistributes to the poorest group (via welfare benefits of various kinds) because society has decided that it is for the public good not to have people starve. So that part of UBI (going to people with little or no income) would not change the current situation much (a slightly higher cost might be offset by streamlining/less administration expense).

 

How much impact it otherwise would have depends largely on how income is distributed in that society (percentages of low vs. middle vs. high earners) and how it is paid for. Even though everyone gets it, only a small segment will truly have the whole amount in addition as it will be offset by higher taxes for other groups. If everyone for example receives a UBI of 800 only a certain group will have 800 more than before. People with middle incomes would probably reap some benefit (let's say they get UBI of 800 but their taxes go up by 400 so they only net 400) and at the very top it would be just an expense. 

 

UBI could be structured so that it peters out fairly quickly (i.e. people with slightly above average incomes have a small increase in taxes) or to really redistribute money (i.e. top earners will pay the bulk of expense). 

 

 

Well, you also have to set your prices according to the market. I work as a freelancer and there is no point in me calculating how high my rates should be and setting them there. I will have to set them to be competitive or I won't get jobs. Of course I have to check and see whether the  rates I can get make it worth doing the job. If not, I need to find a different occupation. But if I can up my income (e.g. by choosing only jobs with higher rates or by working faster) than I will do so. I am not going to tell a client that I can do the job for a lower rate just because it might still be enough to cover my costs.

 

Sure, that's part of ho we decide what wage is appropriate.

 

Though there is such a thing as price gouging, and that can happen even when we aren't in an emergency situation.

 

Or you could look at something like crazy compensation for certain kinds of executives and CEOs.  They are getting"wages" that are far and beyond the value that they could reasonably be ascribed to their productivity - in that case they may not be taking advantage of customers so much (though one wonders with some tech devices) but their employees, who are getting less than their productivity would indicate is right.

Link to comment
Share on other sites

Pricing is based on how the buyers value the good / service in the market.

 

In my case, say I earn $300 (which is a bargain price in the market), and my cost is $100 (because I am efficient), and I use  $100 to

invest in new business ventures in low-income communities (which will not cash flow for years, if ever).  Then of course the other $100 goes to pay taxes.

 

The person paying me for the service doesn't know or care how the money breaks down on my side, but they certainly want me to make a profit so I will stay in business.  Because if I go out of business, their costs will go up.  Ditto for the investees / employees of the businesses I invest in.  And the IRS would like me to keep making money, also.

 

I'm not sure why you think that not making a profit would mean you go out of business.  Employees don't make a profit and yet somehow they manage to carry on.  If you cover the costs of the business, and the costs of your productivity, there is no reason you should.

 

In any case, this is a pretty good example of what I meant by not being willing to think about other ways we could conceptualize price or value.

Link to comment
Share on other sites

I'm not sure why you think that not making a profit would mean you go out of business.  Employees don't make a profit and yet somehow they manage to carry on.  If you cover the costs of the business, and the costs of your productivity, there is no reason you should.

 

In any case, this is a pretty good example of what I meant by not being willing to think about other ways we could conceptualize price or value.

 

But you see, I have the opportunity due to my business's value and efficiency to use profits to create jobs and improve the community.  That is exactly what I do with the profits.  That is what you (apparently) think I should not be allowed to do.

 

We are a mission-driven business.  We are actively working all the time to improve low-income communities.  We cannot do this without profits.

 

You trust the government to do this better.  Well guess what - even the US government thinks private business does it better.

 

And as to your last sentence, how do you know what our thoughts have been about "conceptualizing price or value"?  I told you how we decide to do it.  We have other options, but this is what most clients prefer.  What is your problem with that?

 

Why do you think it would be better if we charged our clients less?  Then that would just result in more profit for them, or for someone else down the chain.

 

Edited by SKL
Link to comment
Share on other sites

OK nothing I said was about renters vs. homeowners.  I didn't bring up renters.  I said OK, let's say renters pay property taxes.  Whatever.  It doesn't change the fact that some people pay a lot more taxes than other people.  And a high % of people pay a minimal amount of net tax.  So yes, when we talk about something being tax funded, we are really saying we want a transfer of wealth from one segment to another.  It's not like everyone going to the grocery store to buy their share of civilization.

 

Once we start calling it what it is, we can have an honest discussion about policy.

Actually if you want to talk wealth transfer, then the very wealthy have been a very large wealth transfer  from the rest of us. The income gap has widened tremendously and it like having robber barrons all over again.

 

What are you saying about the wealthy paying more in taxes ? That is is unfair or bad? Shall we just have folks starving in the streets or dying from lack of medical care? Shall we forget about public schools, public roads, public parks, etc? I am sorry but I think it is very fair for the very wealthy to pay more and it does not bother me in the least that the poor pay no or very little taxes since that is the way it should be.

  • Like 2
Link to comment
Share on other sites

Actually if you want to talk wealth transfer, then the very wealthy have been a very large wealth transfer  from the rest of us. The income gap has widened tremendously and it like having robber barrons all over again.

 

What are you saying about the wealthy paying more in taxes ? That is is unfair or bad? Shall we just have folks starving in the streets or dying from lack of medical care? Shall we forget about public schools, public roads, public parks, etc? I am sorry but I think it is very fair for the very wealthy to pay more and it does not bother me in the least that the poor pay no or very little taxes since that is the way it should be.

 

I'm saying call things what they are.

 

I'm not sure why that is so hard to understand.

 

Not sure where I said people should starve in the street etc. etc.

  • Like 1
Link to comment
Share on other sites

 

Personally, I encourage my ds to become a business owner and to make as much money as possible in that business. I also encourage him to pay employees fairly and to donate to charity, but I would be lying to you if I said I didn't want him to become wealthy and to be able to save for a comfortable (and hopefully early) retirement, as well as to provide a great life for his future family.

 

So basically, how wealthy can a person be before he or she is classified as being greedy and evil? Or is it not a matter of a dollar figure, but of being an ethical business owner who treats his customers, suppliers, and employees fairly no matter how much money that business owner is putting aside for himself?

 

 

I think our sons are about the same age.  I am not encouraging my son to make as much money as possible.  In fact we have had many conversations about this topic.  His dad is encouraging that, but not me.  I am encouraging him to determine how much money he needs to live a life of dignity and then find a way to make that much money without his entire life being all about money and wealth.

 

It is a different way of thinking about things that is for sure.

 

But I don't think wealthy people are evil.  Or even greedy.  Wealth comes to people through all sorts of means and ways.  

  • Like 4
Link to comment
Share on other sites

Figuring out the value of a person's time and expertise isn't a new idea - it's how the pay for most jobs is determined now.  What do we consider a fair wage for a manager, a butcher, an accountant? We consider the cost of living, how much it takes to maintain the person in daily life, how difficult or expensive it is to become qualified in the job, how rare the sill is, how much experience the person has.

 

And figuring out how much it will cost to maintain and replace equipment over time is also something that people already calculate in order to run a business effectively.  If you have a factory and you don't know what to budget for these things your business is going to fail.

 

These aren't new skills that need to developed.

I think that if 10 people were asked what a fair wage for a particular manager was, we would come up with 10 different answers.  Therefore, I have difficult with the idea that what is beyond this fair amount is profit.  

 

Yes business need to estimate the cost to maintain equipment over time, but that is far from an exact science.  In fact, in many regulated industries this is an area in which there is great disagreement.  The regulated company is allowed to keep a certain money for capital replacement but the company, the regulators, and the economists and accountants who serve as expert witnesses all come up with a different number.  So, I have a difficult time with the idea that if the owners are keeping more than that non-specific amount,t hey are earning a profit.

 

I think it is easy, then to say, "if it is more than I think is a fair wage and a proper amount to use to replace capital, it is profit."  But, someone else may see no profit because they think a higher wage is fair.  

Link to comment
Share on other sites

Well, they are kind of required to.

 

If you live in a community where no one farms, or no one makes clothes, and so food or clothing aren't available - and the wold is essentially a big community - you are going to have to make those things for yourself.  

 

We don't really work to make money - we work to have the things we need to live.  Specializing our production has advantages for the community as well as individuals.  You trade your squash for my wool, so we both have what we need.  

 

Now, in our economy, most people are employees, and only relatively few are business owners, so in that sense no one HAS to do the latter.  But that doesn't really change the fundamental nature of economic activity, which is to provide all the things we need to live as a society.  Not to create profit for a few.

I do not know that anyone is required to be a business owner who employees workers.  

  • Like 1
Link to comment
Share on other sites

I'm not sure why you think that not making a profit would mean you go out of business.  Employees don't make a profit and yet somehow they manage to carry on.  If you cover the costs of the business, and the costs of your productivity, there is no reason you should.

 

In any case, this is a pretty good example of what I meant by not being willing to think about other ways we could conceptualize price or value.

I don't think that people are not willing to think about other ways; I think the issue revolves around how one defines profit.  in a perfectly competitive market, businesses will not earn an economic profit in the long run (although they will earn an accounting profit).  Ironically, the process that ensures zero profits in the long run for these businesses is the process of all of the businesses seeking profits.

Link to comment
Share on other sites

Sure, that's part of ho we decide what wage is appropriate.

 

Though there is such a thing as price gouging, and that can happen even when we aren't in an emergency situation.

 

Or you could look at something like crazy compensation for certain kinds of executives and CEOs.  They are getting"wages" that are far and beyond the value that they could reasonably be ascribed to their productivity - in that case they may not be taking advantage of customers so much (though one wonders with some tech devices) but their employees, who are getting less than their productivity would indicate is right.

 

I do agree with you up to a certain point. But I think that these extra profits (or whatever you want to call it) serve as a major incentive. Maybe I don't need a fancy car or big mansion (and maybe in some cases I don't "deserve" it based on my contribution) but wanting it (and having some chance of possibly achieving it) is the reason many work harder/more than they would otherwise. Obviously, this is not always good as it can lead to overwork etc. but I do think overall it is good for the economy/development. Actually, I think that is one of the main problems in communism - there is little incentive to work substantially harder than necessary which is detrimental to society as a whole. Yes, we can say nurses are just as important as doctors and their contribution just as valuable (I am not disagreeing with this) but it takes a lot longer/more work to become a doctor (this is more pronounced where I live than in the US). Why should I spend 10 years longer in school, spending money on education instead of earning it, if I can't expect to make (much) more money later? Even if you factor in these additional costs there is still timing effect to consider. Obviously, people do not just decide due to expected earnings but it is a big consideration for most.

 

For me, the potential to become rich (unfair as it may be) is a major motivational factor/represents hope. It isn't even that I badly want to be rich or am doing anything that will lead to riches. But somewhere deep down I feel that if I wanted to I could probably get there (yeah, I am rather optimistic in general). And that makes a difference to me. I would find it very depressing to live in a society where there is no chance for significant advancement.

 

I do realize that people do not have the same chances when they start out and do feel it is crucial to even chances as much as possible though.

 

 

And why do you say employees don't earn profits?

When I was an employee I was able to sock away money and give a lot to charities and other needy people.  Those were profits, since they exceeded my costs. 

 

How exactly do you define profit?

 

I think there is a difference in how you and bluegoat interpret profit. It sounds like for you profit is anything above your costs (and in that case you would be in trouble if your business didn't generate any profits). Bluegoat I think considers the money you get (or maybe more exactly the money you should get) as a cost. So let's say you earn 100 and have costs (computer, advertising, employees etc.) of 75. Let's also say with your abilities etc. you could reasonably expect to get a job that pays 15 (as an employee for someone else) and let's add on another 5 because you are taking on more risk etc. So the "cost" of your work would be 20. Total cost (including you) would be 95. Then 5 would be the extra profit.

 

Personally, I think there is nothing wrong with you getting that extra 5 BUT if you didn't because you just charged 95 you'd not go broke and be just fine.

Link to comment
Share on other sites

But you see, I have the opportunity due to my business's value and efficiency to use profits to create jobs and improve the community.  That is exactly what I do with the profits.  That is what you (apparently) think I should not be allowed to do.

 

We are a mission-driven business.  We are actively working all the time to improve low-income communities.  We cannot do this without profits.

 

You trust the government to do this better.  Well guess what - even the US government thinks private business does it better.

 

And as to your last sentence, how do you know what our thoughts have been about "conceptualizing price or value"?  I told you how we decide to do it.  We have other options, but this is what most clients prefer.  What is your problem with that?

 

Why do you think it would be better if we charged our clients less?  Then that would just result in more profit for them, or for someone else down the chain.

 

 

You are taking this discussion very personally.  I have no idea how much you charge your clients, how much you ought to charge then, and in any case it isn't really possible for one person to just decide to use a totally different economic model than everyone else in the entire world, and I wouldn't expect that.

 

The question is, as a society even as a people on a planet, is this way of thinking fair, sustainable, does it have the best outcomes?

 

It's not the only way to think about the question - it has been thought about in other ways.  If we changed the way we thought about it, to better reflect what is true and just, what would that look like?

 

As far as your starting up other businesses with your profits.  That is really just a small version of what happens at a larger scale - the so called promise of trickle down economics.  We let the capital owners are these profits and supposedly they invest it in new business ventures that improve life for everyone.  Well, we all know how that looked in the end - it did not make things better, it increased inequality and bad conditions for workers.  It was, really, trickle-up economics - where the capital owners took the "profits" which rightfully belonged to the customers and used them for their own benefit.  

 

It seems much more humane a small scale, but the mechanism is the same.

Link to comment
Share on other sites

The question is, where does profit come from?

 

The money a customer pays covers all the costs involved in creating the product or service, including things like salaries, health plans, etc. It covers the time and expertise of the owner or manager of the business, their savings and retirement money that they need to get by later 9though that might be embodies in the business itself if the owner plans to sell the business eventually. Those are all real costs associated with the product or service.

 

Depending on the nature of the business, the owner's salary might be a high one. Or it might be more modest. But still a reasonable expense of the business.

 

But if you are charging the customer for something else, profit, what is it you are really charging that person for?

But again, who determines the owner's salary? Who determines the definition of "a reasonable expense of the business?" And if I own the business, why should someone else get to tell me how much of my business's profits I'm allowed to keep?

 

My idea. My business. My time. My effort. My money.

 

I'm wondering if you think people should be allowed to be millionaires or billionaires or if they should only ever be permitted to keep a certain amount of money.

 

I feel like I'm misunderstanding you, and I apologize for that. I'm not trying to be argumentative; I'm trying to figure out what you mean. :)

  • Like 3
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...