Taxing wealth?
Michael Edelman
genius had discovered that the real secret to properity, economic
justice and world hunger was to tax wealth instead of income. This was
such a blinding insight that this genius further disclosed only a
conspiracy of truely global proportions could be responsible for hiding
it from the people.
Pardon me for being a wet blanket, but this is not the first time this
has been propose. Most halfway intelligent intro Econ students come up
with this one a few weeks into the class. If they pay attention, of course,
they usually drop it a few weeks later.
The motivation for this idea seem to be that you can soak the rich who,
one would think, have no income. At least that seems to be the logic.
In the real world we discover that wealth and income are often quite
different. Take the typical farmer. Here's someone with what seems like
a lot of wealth- maybe $250,000 in land, for a small farm. Probably more
like $1,000,000, morgaged. He or she might have an actual net income of
more like $20,000 per annum. An even clearer example is the typical
retiree. They probably have a modest income (if they palnned well) of
40-80% of their best income while working. Maybe much less. But if they
own a home, and they've been in a growing area, they probably have full and
free title to a house worth far more than they paid for it. It's not
inconceiveable that they might have a $250,000 house if middle class.
Let's tax them, oh, 10% of their wealth per annum, shall we?
If you really want a fair tax, look at VATs. Economics may not always
be obvious, but there are limits.
SCOTT I CHASE
>Michael Edelman writes:
><Diatribe about how a net asset tax would destroy the world.>
>
>Since Mr. Edelman obviously didn't bother to read the proposed NAT
>reform and since he clearly knows nothing about the market valuation
>of assets, I strongly suggest that interested parties ignore his
>diatribe and concentrate on the actual proposal posted in this group
>which was:
>
A "strong suggestion" that we ignore what his opponent in the discussion has to
say...
I strongly condemn all such attempts to silence the opposition. If you can't
argue your own case clearly enough to convince us without silencing your
opponents, then give it up. You should have stuck to the facts. You've lost
my vote for sure.
-Scott
Michael Edelman
their ignorance, but heck, it's a slow day and I'm bored. So....
In article <NHJ3HB...@netlink.cts.com>
j...@netlink.cts.com (Jim Bowery) writes:
>
>Michael Edelman writes:
><Diatribe about how a net asset tax would destroy the world.>
>
>Since Mr. Edelman obviously didn't bother to read the proposed NAT
>reform and since he clearly knows nothing about the market valuation
>The government should tax net assets, in excess of levels
>typically protected under personal bankruptcy, at a rate
>equal to the rate of interest on the national debt, thereby
>eliminating other forms of taxation. Creator-owned
>intellectual property should be exempt.
Well, out genius poster thinks we should tax everyone at the same rate
that we are paying to those who loan money to the government. Why? Read on:
>The use of government-backed debt instruments as a baseline
>for the calculation of asset value in the net present value
>formula indicates the existence of a de facto negative tax
>on net assets pervading all sectors of the economy.
I think he's confused inflation with debt interest here. Let's read on:
>
>This situation, which provides a form of "capital welfare" or
>capital safety-net for those who are qualified by the SEC to
>make high growth investments.
This is pretty confusing. Does the SEC give permits to make high-growth
investments? Can I get one of these? No, wait, there's more:
>
>Simple removal of this capital safety-net for SEC-qualified
>investors would raise more federal revenue than is currently
>raised in other forms of taxation.
>
So would out-and-out confiscation, up to a point :-) He never did deal with
the problem of all those asset-rich farmers and retirees, or those asset-poor,
high-income young doctors ::-)
>
>PS: I strongly suggest that people who value Jewery cease
>promoting government-backed usury...(Ohh, is that a threat??)
>... anyone who reads "Mein Kampf" sees that this sort of
>subversion of the financial system generated the antisemitism
>that gave Hitler his political base. (Ah, the Jews brought it on themselves!)
>to happen again. The Jewish people may very well be God's chosen
>people but God has turned his back on them in the past and
>with the way the Jewish leadership is handling the current
>situation, the Jewish people, innocent as they are, are increasingly
>suffering hatred for crimes their leadership, not they, committed.
>
>I only say this because I've noticed about HALF of the
>responses that attack the NAT reform are both highly
>irresponsible and authored by people with Jewish surnames --
>usually their location is in New York.
Goddamn commie pinkto new york jews. (Not me; I live near Detroit.)
>
>I offer this advice out of genuine concern and in good will.
>I see antisemitism growing at an explosive rate, even among people
>who have been quite liberal in the past. My assessment is
>that this explosion in antisemitism is directly linked to
>the explosion in government backed usury and the negative
>impact it is having on our people.
>
And people wonder why I belong to the NRA...
Jim Bowery
>Normally I avoid getting in pissing matches, especially with those who
flaunt
>their ignorance, but heck, it's a slow day and I'm bored. So....
>In article <NHJ3HB...@netlink.cts.com>
>j...@netlink.cts.com (Jim Bowery) writes:
>
>>The government should tax net assets, in excess of levels
>>typically protected under personal bankruptcy, at a rate
>>equal to the rate of interest on the national debt, thereby
>>eliminating other forms of taxation. Creator-owned
>>intellectual property should be exempt.
>
>Well, out genius poster thinks we should tax everyone at the same rate
>that we are paying to those who loan money to the government. Why? Read on:
bankruptcy puts the lie to your assertion. Do the math. Try something
like $50,000 personal exemption and $100,000 married couple exemption.
>>The use of government-backed debt instruments as a baseline
>>for the calculation of asset value in the net present value
>>formula indicates the existence of a de facto negative tax
>>on net assets pervading all sectors of the economy.
>I think he's confused inflation with debt interest here. Let's read on:
don't understand how interest rates and inflation interact in the
financial markets to support the validity of the net present
value calculation of asset value.
For those who need a quick lesson: In the net present value calculation,
for a given asset you look at what kind of profit stream it will
produce. You adjust it downward for risk. Then you figure out
how much money you would have to put into government securities
to get the same profit stream. That amount of money is the "net
present value" of the asset.
Different people make different estimates based on their unique
knowlege and/or skills, as well as changing circumstances that
provide new knowledge and/or skills. The market reallocates
asset distribution (ownership) based on these estimates to
maximize asset utilization in the economy.
>>This situation, which provides a form of "capital welfare" or
>>capital safety-net for those who are qualified by the SEC to
>>make high growth investments.
>
>This is pretty confusing. Does the SEC give permits to make high-growth
>investments? Can I get one of these? No, wait, there's more:
have to qualify you according to SEC rules. One dimension they
look at is your net assets and whether they exceed levels which
are about at the levels typically protected by bankruptcy and/or
deposit insurance. Look into venture financing for a quick
lesson in how the economy works or fails. The NAT is all about
increasing the stock of entrepreneurial capital at the expense
of idle capital.
>>Simple removal of this capital safety-net for SEC-qualified
>>investors would raise more federal revenue than is currently
>>raised in other forms of taxation.
>So would out-and-out confiscation, up to a point :-)
>He never did deal with the problem of all those asset-rich farmers
like any other asset. In fact, with the standard deduction, family
farms would have a much better shot at competing with corporations
than they do now.
>and retirees
The AARP puts median retired household net assets at about $70,000
which is below the standard household exemption. Under the NAT, most
retirees pay no taxes and only retirees with net assets above the
80th percential pay more in taxes than they pay now on interest/dividend
income alone.
>, or those asset-poor, high-income young doctors ::-)
insurance premiums and his salary level. Young doctors have lost
net income at a rate far exceeding the general population over the
last 10-15 years, while the older doctors have gone into ownership
of hospitals, HMO's and other bureaucratic forms of medicine which
enslave young doctors at much lower net income than the older
doctors enjoyed at the same age. Young doctors have lowered
net wages and far greater NEGATIVE net assets than older doctors
did at the same age. Now socialized medicine threatens their
ability to pay back their enormous medical school debts.
The quality of medical care is going down because more of the
medical dollar is going to corporate bureaucrats and their owners
rather than to primary care physicians.
The NAT relieves nearly all young people of all federal
taxation. In the case of young doctors, it isn't enough. To
provide real relief for them we need malpractice reform as well.
>>PS: I strongly suggest that people who value Jewery cease
>>promoting government-backed usury...(Ohh, is that a threat??)
try to convince others to take it as well.
>>... anyone who reads "Mein Kampf" sees that this sort of
>>subversion of the financial system generated the antisemitism
>>that gave Hitler his political base. (Ah, the Jews brought it on
themselves!)
over-representation in a financial community that was giving
Hitler his political base and in the press that was not only not
reporting the failings of that financial community, but indicting
as "provincial" the legitimate complaints of average Germans about
illegal immigration. Some leading Jews, along with many leading
gentile Germans, were cuplable, but the Jewish population
was blamed and suffered the holocaust as a result.
This is all terrifyingly familiar. All that is missing from
our society is a "leader" who will come along and say all the
politically incorrect things that the establishment press and
politicians currently denounce as immoral to say or even think.
Among those things? "The Jews Are Over Represented in the press
and financial establishment!!! They're the ones who are
responsible for our ills!!!" If times are hard enough people will
eat it up like candy and you know it. Cursing me for pointing this
out will only make things worse. Help me correct this situation.
At some point you have to accept that yet more moral outrage at
others, as effective as it may have been in the past, is only going
to make the problem worse. You must act rationally, effectively and
decisively to solve the problem. There is only one such solution
that I know of: The NAT. It attacks the real problem.
>>I only say this because I've noticed about HALF of the
>>responses that attack the NAT reform are both highly
>>irresponsible and authored by people with Jewish surnames --
>>usually their location is in New York.
>
>Goddamn commie pinkto new york jews. (Not me; I live near Detroit.)
50% misc., 25% New York Jew, 25% misc. Jew. You fit the last 25%
category. This means Jews here, as in other very vulnerable areas,
are overrepresented and support the case made by hate mongers.
If you honestly can't support the NAT, try providing responsible
criticism. I'm not bending over backwards just to avoid your
epithets anymore. It's doing neither of us any good.
>>I offer this advice out of genuine concern and in good will.
>>I see antisemitism growing at an explosive rate, even among people
>>who have been quite liberal in the past. My assessment is
>>that this explosion in antisemitism is directly linked to
>>the explosion in government backed usury and the negative
>>impact it is having on our people.
>>
>And people wonder why I belong to the NRA...
part of the problem for which the hate mongers will offer their
"final solution". Go ahead and hate/fear me. Write paranoid
articles about the "new breed of antisemitism" that I represent.
I'm going to try and save your stupid hostile ass anyway.
Your "crime" deserves contempt, not hate, violence, enslavement
and/or death.
--
INTERNET: j...@netlink.cts.com (Jim Bowery)
UUCP: ...!nosc!ryptyde!netlink!jim
NetLink Online Communications * Public Access in San Diego, CA (619) 435-6181
Michael Edelman
j...@netlink.cts.com (Jim Bowery) writes:
>Wrong. The exemption of assets at levels typically protected by
>bankruptcy puts the lie to your assertion. Do the math. Try something
>like $50,000 personal exemption and $100,000 married couple exemption.
>
depending on the rate tresuries are paying. That's easily manipulated
by the government, of course. Want to raise the confiscation rate? Sell
more bonds. It's pretty obvious this wan't thought through.
>>>The use of government-backed debt instruments as a baseline
>>>for the calculation of asset value in the net present value
>>>formula indicates the existence of a de facto negative tax
>>>on net assets pervading all sectors of the economy.
>>I think he's confused inflation with debt interest here. Let's read on:
>
>No. Inflation is factored into long term treasuries. You just
>don't understand how interest rates and inflation interact in the
>financial markets to support the validity of the net present
>value calculation of asset value.
>
*not* long term rates. As a Keynes said, in the long run we're all dead. :-)
>For those who need a quick lesson: In the net present value calculation,
>for a given asset you look at what kind of profit stream it will
>produce. You adjust it downward for risk. Then you figure out
>how much money you would have to put into government securities
>to get the same profit stream. That amount of money is the "net
>present value" of the asset.
>
does it make your case?
> (...blah, blah...)
>
>If someone sells you a security in an entrepreneurial start up, they
>have to qualify you according to SEC rules.
invest in startups.
...The NAT is all about
>increasing the stock of entrepreneurial capital at the expense
>of idle capital.
>
capital available. A little historical perspective wouldn't hurt here.
Back when we had a 90% maximum rate, no one really paid this. There are
always ways to shelter income. Some aren't terribly productive, of course,
but they're still probably far better than paying 90%.
The easiest thing to do is to move you capital overseas. Now your brilliant
plan is helping to develop Europe and the US has very little working
capital. You can shelter capital far easier than income.
>
>Which the NAT is not. It eliminates all taxes on productivity.
>
a higher rate than the inefficient ones. That doesn't sound too bright.
>
>The AARP puts median retired household net assets at about $70,000
>which is below the standard household exemption. Under the NAT, most
>retirees pay no taxes and only retirees with net assets above the
>80th percential pay more in taxes than they pay now on interest/dividend
>income alone.
>
income you're in big trouble. And that median $70K isn't productive; it's
a house. You'll be effectively taxing the capital they're living off.
>
>Ask any young doctor about his medical school debt, his malpractice
Boy, have you bought into a fairy tale. Take a look at what MDs out of
residency are making. *They're not paying the high costs of health care.
We are.
>
>No. It is advice and I strongly suggest you take it and
>try to convince others to take it as well.
>
>gentile Germans, were cuplable...
Speaks for itself, doesn't it? Eventually it emerges. See, there are
*good* jews and *bad* jews, and our friend is only against the *bad* ones.
If you support him, you're a good one. For now.
The theory is neither original nor well thought out. The insistence on a
conspiracy is familiar as well. Next week he'll be lining his hat with
aluminum foil to keep out the rays the aliens are beaming at him.
Jim Bowery
>In article <0Fg7HB...@netlink.cts.com>
>j...@netlink.cts.com (Jim Bowery) writes:
>
>>Wrong. The exemption of assets at levels typically protected by
>>bankruptcy puts the lie to your assertion. Do the math. Try something
>>like $50,000 personal exemption and $100,000 married couple exemption.
>>
>So it's graduated, in effect. Big deal. So we confiscate x% of the excess
>depending on the rate tresuries are paying. That's easily manipulated
>by the government, of course. Want to raise the confiscation rate? Sell
>more bonds. It's pretty obvious this wan't thought through.
government. What is the basis of your criticizm?
>>>>The use of government-backed debt instruments as a baseline
>>>>for the calculation of asset value in the net present value
>>>>formula indicates the existence of a de facto negative tax
>>>>on net assets pervading all sectors of the economy.
>>>I think he's confused inflation with debt interest here. Let's read on:
>>
>>No. Inflation is factored into long term treasuries. You just
>>don't understand how interest rates and inflation interact in the
>>financial markets to support the validity of the net present
>>value calculation of asset value.
>>
>T-bill prices reflect *expected* inflation rates over the term of the bond,
>*not* long term rates. As a Keynes said, in the long run we're all dead.
:-)
rates over the profitable life of the asset. So what?
>>For those who need a quick lesson: In the net present value calculation,
>>for a given asset you look at what kind of profit stream it will
>>produce. You adjust it downward for risk. Then you figure out
>>how much money you would have to put into government securities
>>to get the same profit stream. That amount of money is the "net
>>present value" of the asset.
>>
>So? You've defined present value. I could look that up in Samuelson. How
>does it make your case?
economy enjoys a subsidy -- the level of that subsidy is the interest
rate on the national debt.
>>If someone sells you a security in an entrepreneurial start up, they
>>have to qualify you according to SEC rules.
>
>What ignorance. You don't need to be "qualified" to buy new issues or
>invest in startups.
of the entrepreneurial start up phase.
The people selling you the start up securities must qualify you or they
are legally liable for securities violations. I've been through
this stuff first hand. It's a real pain.
> ...The NAT is all about
>>increasing the stock of entrepreneurial capital at the expense
>>of idle capital.
>>
>No it isn't. The effect would be to shrink the amount of investment
>capital available. A little historical perspective wouldn't hurt here.
>Back when we had a 90% maximum rate, no one really paid this.
with existence across time and legal records galore).
But you're forgetting the elimination of all other taxes:
Income, capital gains, dividends, interest, sales, value added,
inheritence, gifts, etc.
The only people who would move their capital overseas with these
kinds of incentives are the nearly brain-dead who just HAVE to have
a government acting as their personal loan shark. When you put
wealth in the hands of those kinds of people and let them into
the country, it is only a matter of time before you have a revolt
on your hands. Let some European country that likes patents of
nobility deal with these assholes and their money. We need them
like a tumor.
>>Which the NAT is not. It eliminates all taxes on productivity.
>>
>No it doesn't. It's worse. It taxes the more efficient businesses at
>a higher rate than the inefficient ones. That doesn't sound too bright.
If you can answer to the following question, I'll join you
in fighting proposals like the NAT. I'll even send you money as a
reward for keeping me from promoting a highly destructive reform.
If you can't answer the following question, you join me in fighting
for wider study of the NAT:
How can it be that businesses with few assets that make a lot of
profit (the definition of business efficiency) end making less
after-tax profits under the NAT than under the current system?
I really want to see the answer to this question.
Is it a deal?
>>The AARP puts median retired household net assets at about $70,000
>>which is below the standard household exemption. Under the NAT, most
>>retirees pay no taxes and only retirees with net assets above the
>>80th percential pay more in taxes than they pay now on interest/dividend
>>income alone.
>>
>But that 20% will get socked.
$100,000 into govt. treasuries and retain their asset base. But
do you REALLY believe the top 20% wealthiest, most experienced
people in the country are such poor investors that they can't do
better than the government with their money?
>And that median $70K isn't productive; it's
>a house. You'll be effectively taxing the capital they're living off.
2) But let's talk about retirees with homes worth $200,000 or so.
Even for the owners of large homes, one of the biggest problems we
have in this country is old people hanging out in big homes with lots
of empty bedrooms while young mothers are aborting babies for a lack
of affordable housing. I don't think the retirees of America would
support this situation if they could see it in the stark light that
a young pregnant woman sees it in while the abortionist rips her
fetus apart within her womb. This is some heavy karma we're dealing
with here.
>>No. It is advice and I strongly suggest you take it and
>>try to convince others to take it as well.
>>
> ....Some leading Jews, along with many leading
>>gentile Germans, were cuplable...
>
>Speaks for itself, doesn't it? Eventually it emerges. See, there are
>*good* jews and *bad* jews, and our friend is only against the *bad* ones.
>If you support him, you're a good one. For now.
and colonialism as their archetypal moral failure modes, so Jews have
this propensity to engage in parasitic usury and moral hypocriscy as
their archetypcal moral failure. You are working awfly hard to
live up to the negative stereotype of the Jewish usurer.
The correlations are all there to support a racist view
of the situation. Jews are overrepresented in the debt instrument
business by a factor of 10 over their what their demography
would suggest. I have no problem with that. Statistically Jews are
better than WASPS or other ethnic groups at that business due to
a long cultural history in it. But they are overrepresented by
almost a factor of 20 in the irresponsible attacks against the NAT.
Now, THAT I have a problem with.
I am a racist in that I refuse to ignore such statistical correlations
with race. I denounce those who claim that I am immoral for my refusal
to do so. However, I am also prosemitic in my support of the nation
of Israel and the cultural traditions of Judaism. If that breaks your
brain or makes you think I'm lying, that's your problem, not mine.
>The theory is neither original nor well thought out.
40 years and neither of them talk about a NAT tax derived by
generalizing Henry George's "single tax" proposal, I'd say it is
one of the most original proposals put forth in recent history.
Given its historical basis and the fact that I've worked on it
with quite a number of people, including people in major economic
think tanks over a number of years, I'd say it is a helluva lot
better thought out than just about any other system being put
forward today, including Jerry Brown's profoundly destructive VAT.
>The insistence on a conspiracy is familiar as well.
the theory that there is a conspiracy of wealth to suppress investigation
of wealth distribution and/or study the implications of an asset tax.
I've even had people in major think tanks tell me that they want to
support me covertly but that they don't dare let their financial
supporters know they are looking at any wealth tax proposals.
Come on.... be real. Wealthy people underwrite the economic
institutions. Wealthy people like being given more wealth
simply because they are wealthy. Can you think of any sane
reason to suspect that they WOULDN'T try to suppress a wealth
tax and, instead, promote taxes on productive people?
>Next week he'll be lining his hat with
>aluminum foil to keep out the rays the aliens are beaming at him.
But I read Janov too. He's another reason I'm prosemitic (although
Freud certainly isn't).
Thomas Omar Smith
>profit (the definition of business efficiency) end making less
>after-tax profits under the NAT than under the current system?
>
>I really want to see the answer to this question.
Ok, let's try this as an example.
Expected long run inflation rate=4%
Current Debt interest rate=4%
Asset base=0, we have a pure service industry.
Cash flows=$1 million a year, with no change forseable.
Assume that the expected lifetime of the business is thirty years, after
which the owner retires. Also assume that we can expect the $1 million
cash flow each year. The present value of this company is
24,691,681.33. Now, this asset rate is taxed at the 4% debt rate, minus
the $100,000 deductable. This amount is
(24,691,681.33-100,000)*.04=983,667.25 in taxes. therefore, total
profits for the year are 1,000,000-983,667.25=16,332.75.
Under the current tax system, the business receive a 28% tax on income.
Therefore, taxes are 1,000,000*.28=280,000.
Profits=1,000,000-280,000=720,000.
The valuation is textbook example. I've followed the NAT proposal to
the letter. Your response?
Tom the non hacker
Read my lips, no second term
Buchanan in 92!
Michael Edelman
j...@netlink.cts.com (Jim Bowery) writes:
> ... so Jews have
>this propensity to engage in parasitic usury and moral hypocriscy as
>their archetypcal moral failure. You are working awfly hard to
>live up to the negative stereotype of the Jewish usurer.
>
he really isn't "protecting us poor Jew-folk after all.
>
>
>Given only two books have been written on asset taxation in the last
>40 years and neither of them talk about a NAT tax derived by
>generalizing Henry George's "single tax" proposal, I'd say it is
>one of the most original proposals put forth in recent history.
>
further on that discusses such ideas and why they're not very good.
>
>EVERY major author who has written on asset taxation supports
>the theory that there is a conspiracy of wealth to suppress investigation
>of wealth distribution and/or study the implications of an asset tax.
it has is among the crackpots.
>I've even had people in major think tanks tell me that they want to
>support me covertly but that they don't dare let their financial
>supporters know they are looking at any wealth tax proposals.
>
very original nor very well thought out. There's a very good book by,
I think, Atkinson & Shifferen on public fiscal policy that is both
mathematically rigrous and very readable. Anyone who still wonders
about Jim's notions- and Jim himself- would be well served by looking
it up. These guys aren't lightweights or net.paranoids. One, in
particular, is probably due for a Nobel in the next 5 years, from what
Economists in the field are saying. If Jim reads this book and
understands it he may learn a thing or two.
--mike
Jim Bowery
>>How can it be that businesses with few assets that make a lot of
>>profit (the definition of business efficiency) end making less
>>after-tax profits under the NAT than under the current system?
>>
>>I really want to see the answer to this question.
>
>Ok, let's try this as an example.
>
the standard exemption, hence there is no NAT liability. The
owner can simply declare the value of his assets to be 0 since
there is nothing to purchase out from under him. He can simply
go on running his business and making his profits unimpeded by
taxation or takeover of his business assets, since there are none.
If the business itself is to be treated as an asset, then you
have to look at the investment entity that owns the business,
how accurately it calculates the net present value of the asset
at the time of purchase, and what it does with the asset to
improve on that value after purchase, since the capital gains
in the asset aren't taxed under the NAT. Only in that way
can you decide whether the relevant business is "efficient" or
not. In other words, "efficiency" means you are getting a
high return on your assets, however you define them.
Here is a mathematical argument:
Let's say ROR is the BEFORE TAX rate of return an entity can typically
get from its assets including capital gains as well as profits. Let's
say ITR is the income tax rate and ATR is the government debt rate
and therefore would be the hypothetical asset tax rate. Let's say
the entity owns net assets with a market value totalling MV.
For simplicity, let's ignore the standard exemption and assume
that the capital gains tax rate is the same as the income
tax rate:
The income I = ROR*MV.
Income tax IT = I*ITR.
After income tax income AITI = I-IT
After income tax rate of return AITROR = AITI/MV
Asset tax AT = MV*ATR.
After asset tax income AATI = I-AT
After asset tax rate of return AATROR = AATI/MV
Now we can ask:
What how efficient does a business currently have to be in order
to prefer the NAT over the current tax system?
This is the same as asking:
At what values of ROR is AATI>AITI?
First let's set AATI=AITI:
I-AT = I-IT ; Substituting for AATI and AITI
I-MV*ATR = I-I*ITR ; Substituting for AT and IT
MV*ROR-MV*ATR = MV*ROR-MV*ROR*ITR ; Substituting for I
ROR-ATR = ROR-ROR*ITR ; Dividing by MV
1-ATR/ROR = 1-ITR ; Dividing by ROR
ATR/ROR = ITR ; Subtracting 1
ROR = ATR/ITR ; Solving for ROR
So if your BEFORE tax rate of return on net assets is greater than
the hypothetical asset tax rate divided by the income tax rate,
you want the NAT. If it is less, you want the present system.
In terms of current AFTER INCOME TAX rates of return, this translates to:
AITROR = AITI/MV ; Definition of AITROR
AITROR = (I-IT)/MV ; Substituting for AITI
AITROR = (I-I*ITR)/MV ; Substituting for IT
AITROR = (ROR*MV-ROR*MV*ITR)/MV ; Substituting for I
AITROR = ROR-ROR*ITR ; Simplifying
AITROR = (ATR/ITR-ITR*ATR/ITR) ; Substituting for ROR
AITROR = ATR/ITR-ATR ; Simplifying
AITROR = ATR*(1/ITR-1) ; Collecting ATR
So under current conditions (approximately)
Setting ATR = .06 ; Interest on national debt is about 6%
Setting ITR = .28 ; Income tax is about .28% (ignoring social
security)
AITROR = .06*(1/.28-1)
AITROR = .154
In other words, if your current after tax (ignoring social security) income
is more than 15.4% of your net assets, you benefit from the NAT.
If you factor in the standard exemption, it is even more appealing.
Jim Bowery
The most regressive of all taxes, Social Security payroll tax, is
at 15.3% of your income (I) up to $53,400 (split 7.65% for you and
your employer half and half). Taking this into account, for
incomes (I) up to $53,400, the income tax rate is close to 40%.
So adjusting for social security tax relief the critical After
Income Tax Rate of Return (still excluding the exemption) that you
need to achieve on your total net assets (including all sources of
income) is 9%. With the exemption the formula is:
Critical AITROR = (1/.40-1)*(1-$100,000/MV)*.06
This formula is a good approximation for MV's up to approximately
$500,000. As MV values rise beyond $500,000, the Critical AITROR
factor of .40 decays, approaching .28.
For each level of net asset ownership, there is a critical After
Income Tax Income (AITI) above which we prefer the NAT over the
current tax system. This critical AITI is simply the critical
AITROR multiplied by one's net asset holdings.
Taking into account social security tax relief under the NAT, as
well as the $100,000 standard household exemption on net assets,
the critical AITI levels needed to prefer the NAT are:
For various values of MV (market value of net assets), the
levels of income we need to prefer the NAT over the current
tax system are approximately:
MV Critical AITROR Critical AITI/YEAR
$0 - $100,000 0% $0
$150,000 3% $4500
$200,000 4.5% $9000
$300,000 6% $18,000
$500,000 7.2% $36,000
Jim Bowery
>In article <P8H8HB...@netlink.cts.com>
>j...@netlink.cts.com (Jim Bowery) writes:
>
>Looks like we've finally gotten him to show his true colors. Guess
>he really isn't "protecting us poor Jew-folk after all.
which I characterized my own race genocidal and colonial. As I
said, moral hypocrisy is your stereotypical weaknesses. Stop
feeding into the hatred just because you are angry at it.
When I start calling for violence against Jews, you can engage in
the kind of rhetoric you just did without feeding racial hatred.
In short, although I understand your paranoia, you have no right
to do what you did.
Retract your statement and reclaim your integrity.
Thomas Omar Smith
>>>How can it be that businesses with few assets that make a lot of
>>>profit (the definition of business efficiency) end making less
>>>after-tax profits under the NAT than under the current system?
>>>
>>>I really want to see the answer to this question.
>>
>>Ok, let's try this as an example.
>>
>>Asset base=0, we have a pure service industry.
>
>The taxable assets of this sole proprietership are less than
>the standard exemption, hence there is no NAT liability. The
>owner can simply declare the value of his assets to be 0 since
>there is nothing to purchase out from under him. He can simply
>go on running his business and making his profits unimpeded by
>taxation or takeover of his business assets, since there are none.
Ok, so far you've told us that all consultants can pay 0 taxes no matter what.
But lets continue.
>If the business itself is to be treated as an asset, then you
>have to look at the investment entity that owns the business,
>how accurately it calculates the net present value of the asset
>at the time of purchase, and what it does with the asset to
>improve on that value after purchase, since the capital gains
>in the asset aren't taxed under the NAT. Only in that way
>can you decide whether the relevant business is "efficient" or
>not. In other words, "efficiency" means you are getting a
>high return on your assets, however you define them.
I thought it was very clear that the business itself was being treated
as an asset. If you don't define the business as an asset, then you
would pay 0 taxes on it. Silly in the extreme.
(long mathematical argument deleted for space, but leads to conclusion)
>In other words, if your current after tax (ignoring social security) income
>is more than 15.4% of your net assets, you benefit from the NAT.
>
>If you factor in the standard exemption, it is even more appealing.
However, to achieve a After tax income rate of 15.4% requires a before
Income tax rate of 21%. Since very few businesses ever achieve such a
level of profitability, most businesses, by your own argument, still
prefer income tax. NAT is being based on a level of performance that is
rarely achieved in the real world. And its inclusion will only harm
those businesses that are trying to grow to reach the level it sets.
They will have less available capital to reinvest in their own business.
And more ironically, every time they reinvest their money, they
increase their capital base and, therefore, their taxes. now the
argument we're about to hear is that capital gains are not taxed.
however, by that logic, a business can grow infinitely and never pay
more taxes. Wrong answer.
Since Mr. Bowery liked my first example so much, lets look at a few more.
Farmer brown owns a 1000 acre farm. His land is valued at $700 an acre,
and he owns $300,000 in equipment. This year, farmer Brown expects to
make $60,000 from his crops, after paying for seed and fertilizer.
After taxes, How much does farmer brown have?
Under an income tax, farmer Brown has 60,000-.28*60000=43200.
Under Asset tax, farmer brown has 60,000-.06*(700*1000+300,000)=0
So, we've just destroyed the farm industry. next example.
Mr. Jones is trying to decide how much to spend to build a new home, and
how much to give to charity. He has $100,000 he inherited from his
father, and earns $25,000 a year. He expects his earnings to remain
relatively constant. He also expects to retire in 25 years. How much
money should Mr. Jones spend on his house
Under Income Tax, Mr. jones gets depreciation on the home for 25 years.
therefore, the more he spends on his home, the more he saves later. he
spends $100,000 on the home.
Under Asset tax, If his total assets exceed $100,000, he will pay taxes.
Depreciation is no longer a factor, since the assets are now to be
valued at the fair market price. therefore, he should only spend
$75,000 on the house. Any more, and he takes on a tax liability for the
next 25 years.
So, Asset tax causes less investment in new home starts too. Sounds
real good for the economy.
Now, what I want people to do is this. Look at my examples and numbers.
Look at Mr. Bowery's numbers and examples. Decide which set of numbers
more closely represents reality. Then decide if you want an asset tax.
Jim Bowery
Thomas Omar Smith writes:
>Ok, so far you've told us that all consultants can pay 0 taxes no matter
what.
deliberately, untaxed in the NAT.
Second, consultants are typically consultants only because they are
trying to start a business and are having difficulty raising
outside capital because the knowledge required for their business
is too specialized.
They will create far more jobs under the NAT than they can currently
>>I thought it was very clear that the business itself was being treated
>>as an asset. If you don't define the business as an asset, then you
>>would pay 0 taxes on it. Silly in the extreme.
efficient in the use of ITS assets. The business isn't it's own asset.
>>In other words, if your current after tax (ignoring social security)
income
>>is more than 15.4% of your net assets, you benefit from the NAT.
>>
>>If you factor in the standard exemption, it is even more appealing.
>
>However, to achieve a After tax income rate of 15.4% requires a before
>Income tax rate of 21%.
appeared later, include the exemption and the fact that the NAT
relieves businesses of social security payroll tax.
After those are taken into account, the critical level at which
businesses prefer the NAT is about half of the above figures.
We have to remember that just because many businesses won't prefer
such a tax doesn't mean they won't be able to adapt to it -- which
is exactly the intent. The NAT, as with any tax reform, changes
incentives so at first introduction, there are going to be about
as many winners as losers.
> Its inclusion will only harm
>those businesses that are trying to grow to reach the level it sets.
If you look at the valuation placed on corporate stocks from their
moment of formation, the highest rates of return INCLUDING CAPITAL
GAINS (which aren't taxed in the NAT) are at the start, then they
level out with maturity. The NAT virtually eliminates taxes on
startups. It works like an investment tax break in the case of start
ups. In the case of mature stocks, it becomes much more difficult
for people to "play the market" and much easier for them to finance
growth companies.
IBM, GM and several other such corporations will probably bit the
dust under the NAT and be replaced by a large number of small to
medium sized innovative and highly entrepreneurial firms owned by
their empolyees. That's the precise intent.
Since most people aren't taxed on their income, there is more
investment capital available to individuals to start up their
own small firms and grow them with the help of others. The
great American success stories began this way.
> And more ironically, every time they reinvest their money, they
>increase their capital base and, therefore, their taxes.
higher after tax rate of return than the current system. The
answer depends on what the current after tax rate of return
is expected to be.
>now the
>argument we're about to hear is that capital gains are not taxed.
>however, by that logic, a business can grow infinitely and never pay
>more taxes. Wrong answer.
NEXT TAX YEAR, capital ASSETS that contribute to the tax base, but
at a much lower rate of taxation than either current income OR
capital gains taxation. Hence the incentive to invest for growth
is compatible with a growing tax base.
>Farmer brown owns a 1000 acre farm. His land is valued at $700 an acre,
>and he owns $300,000 in equipment. This year, farmer Brown expects to
>make $60,000 from his crops, after paying for seed and fertilizer.
>After taxes, How much does farmer brown have?
>
>Under an income tax, farmer Brown has 60,000-.28*60000=43200.
farm town in Iowa. People in Iowa LOVE the NAT, almost without
exception.
First, this is a NET asset tax. You are assuming that Farmer
Brown owns his land and equipment outright -- no leins or
liabilities. This is not realistic. The Amish typically
run smaller farms whose NAT liability would be dominated by
the exemption.
Second, at $60,000 total income (which has not yet factored in
all of farmer Brown's costs, including his own labor) is the
basis for calculating the value of the land. So let's see
exactly how reasonable your example is:
We'll be nice and assume that with "fertilizer" etc. you are
including ALL of his expenses, including labor costs (which
must include himself to be realistic).
The land's net present value according to you is 1000*$700 = $700,000.
To support this level of land value, at 6% govt. debt rate the
portion of the AFTER TAX profit attributable to the LAND ALONE
(ignoring all other capital invesments) must be approximately $60,000.
Since farmer brown is only making $60,000 BEFORE tax, the $700/acre
land value figure unrealistically high. Then we must consider the
other capital equipment. Either the example isn't credible or the
market for land is highly inefficient for some reason (like centralized
wealth) and is sapping farmers, particularly young ones, of their
livelihood.
The biggest problem in rural America is the inability of young
farmers to make a go of it. The "graying of the farm" is a VERY
serious problem and is resulting in an increasing centralization
of our food base without corresponding increases in food production
efficiency.
>Mr. Jones is trying to decide how much to spend to build a new home, and
>how much to give to charity. He has $100,000 he inherited from his
>father, and earns $25,000 a year. He expects his earnings to remain
>relatively constant. He also expects to retire in 25 years. How much
>money should Mr. Jones spend on his house
to spend time analyzing his predicament while young families who
can't afford children are postponing child bearing to the point that
mongolism, abortion and simple barren families are exploding.
Sorry, try again.
>Now, what I want people to do is this. Look at my examples and numbers.
> Look at Mr. Bowery's numbers and examples. Decide which set of numbers
>more closely represents reality. Then decide if you want an asset tax.
arguments from economists paid by the wealthy. Look at at your OWN
life and lives of people you know. Look at the NAT.
Draw your own conclusions.
Michael Edelman
j...@netlink.cts.com (Jim Bowery) writes:
>Consultants are human capital. Investments in human capital are, quite
>deliberately, untaxed in the NAT.
>
>Now, what I want people to do is this. Cease listening to theoretic
Guess that's his way of saying he's not going to read Atkinson & Shifferen.
Or maybe he already tried and couldn't figure out the arguments.
>Draw your own conclusions.
>
Oh, I have, I have. :-)
I'm tired of this idiot. Let's talk about which of our neighbors are
really pod people, and how to spot them...
Thomas Omar Smith
>Thomas Omar Smith writes:
>>Ok, so far you've told us that all consultants can pay 0 taxes no matter
>what.
>
>Consultants are human capital. Investments in human capital are, quite
>deliberately, untaxed in the NAT.
>
>Second, consultants are typically consultants only because they are
>trying to start a business and are having difficulty raising
>outside capital because the knowledge required for their business
>is too specialized.
>
>They will create far more jobs under the NAT than they can currently
Um, have to disagree. Most consultants are consultants because they
figure they can make more bucks on their own than working for a company.
>The 15.4% is an intermediate result. Further calculations which
>appeared later, include the exemption and the fact that the NAT
>relieves businesses of social security payroll tax.
>
>After those are taken into account, the critical level at which
>businesses prefer the NAT is about half of the above figures.
>
>We have to remember that just because many businesses won't prefer
>such a tax doesn't mean they won't be able to adapt to it -- which
>is exactly the intent. The NAT, as with any tax reform, changes
>incentives so at first introduction, there are going to be about
>as many winners as losers.
Well, there's a few major problems with your calculations at that point.
1) Eliminating the social security tax means about half the elderly in
America die from a lack of support.
2) You seem to assume that the only expense a business has is payroll.
Otherwise you could never derive the figures you do.
3) You are incessantly confusing individual taxes with corporate taxes.
they are very different.
>> Its inclusion will only harm
>>those businesses that are trying to grow to reach the level it sets.
>
>You are confusing first and second derivatives.
>
>If you look at the valuation placed on corporate stocks from their
>moment of formation, the highest rates of return INCLUDING CAPITAL
>GAINS (which aren't taxed in the NAT) are at the start, then they
>level out with maturity. The NAT virtually eliminates taxes on
>startups. It works like an investment tax break in the case of start
>ups. In the case of mature stocks, it becomes much more difficult
>for people to "play the market" and much easier for them to finance
>growth companies.
>
>IBM, GM and several other such corporations will probably bit the
>dust under the NAT and be replaced by a large number of small to
>medium sized innovative and highly entrepreneurial firms owned by
>their empolyees. That's the precise intent.
Of course most companies register best growth at inception. That's
because most companies are started to deal with excess demand in a
market. And as the market reaches equilibrium, the excess profits
approach 0.
And of course, as companies grow, NAT punishes them, by your own
admission above. Now, let me explain a little economic concept to you.
Its called economy of scale. What it tells us is that in general a
larger company can produce more efficiently due to the availability of
more resources. Under your system, a company is punished for attempting
to reach that level. This means that most companies will seek to remain
smaller, and overall efficiency will decrease. And R&D will be totally
destroyed, since most smaller companies don't have the resources to
support full time labs for experimentation, while large corporations do.
>Since most people aren't taxed on their income, there is more
>investment capital available to individuals to start up their
>own small firms and grow them with the help of others. The
>great American success stories began this way.
This is based on an assumption that individual savings generate a large
part of the investment income in America. This simply isn't so, since
most Americans have very poor saving habits. I believe the national
average is somewhere around 2-3% of income. Most investment income is
generated by the money markets you've been deriding. The destruction of
most money markets does not guarantee that people will fill in the
investment void with their own money.
>> And more ironically, every time they reinvest their money, they
>>increase their capital base and, therefore, their taxes.
>
>The question is will such investment under the NAT result in a
>higher after tax rate of return than the current system. The
>answer depends on what the current after tax rate of return
>is expected to be.
Well, under NAT, most such investments will have to produce at a rate
above the tax rate to be worth making. In fact, the will have to
produce at a rate equal too twice the tax rate, since the other option
is to buy government bonds. This is somewhere around 12% break even
point. This will most certainly discourage new investment.
>>now the
>>argument we're about to hear is that capital gains are not taxed.
>>however, by that logic, a business can grow infinitely and never pay
>>more taxes. Wrong answer.
>
>Your logic is wrong. All of those capital GAINS become, IN THE
>NEXT TAX YEAR, capital ASSETS that contribute to the tax base, but
>at a much lower rate of taxation than either current income OR
>capital gains taxation. Hence the incentive to invest for growth
>is compatible with a growing tax base.
But, the investment under NAT is taxed evey year, while under Income tax
it gets taxed once. So lets look at present value before making any
decisions.
Lets assume the real tax rate is the 40% quoted above. Then the real
value of my income, if I reinvest, is .6I.
However, under NAT, if I reinvest, I get the full value of my investment
minus the tax liability into the future. Suppose for simplicity I can
assume that my investment will remain forever (or at least as long as I
do). the calculation looks like this:
I-.06I/.06=0.
That's right, ladies and gentleman, a simple present value analysis
shows that my investment is worthless under NAT.
But wait, we have some revenue generated, so we better factor that in too.
The present value of income earned by Income tax is .6X/.06=10X
Under NAT, its X/.06=16.7X
Now, lets compare the two, and see at what level the income flow balances.
.6I+10X=16.7X
X=.09I
Therefore, the break even point is at 9%. I have to be assured of a 9%
long run return to break even between the two systems. First, this is
way above the numbers quoted earlier by Mr. Bowery for NAT preference.
Secondly, getting a 9% return is still very difficult in a long run
business investment. So in almost all cases, a business still prefers
the Income tax. Doesn't look like much growth incentive there.
>First, this is a NET asset tax. You are assuming that Farmer
>Brown owns his land and equipment outright -- no leins or
>liabilities. This is not realistic. The Amish typically
>run smaller farms whose NAT liability would be dominated by
>the exemption.
>
>Second, at $60,000 total income (which has not yet factored in
> all of farmer Brown's costs, including his own labor) is the
>basis for calculating the value of the land. So let's see
>exactly how reasonable your example is:
ok, granted most farmers are buried in debts. NAT might offer some
relief in the short run, but in the long run my argument holds. In
fact, under NAT farmers have to maintain large debts to avoid being
taxed out of existence.
Also, you don't use the $60,000 to value the land. You use the assessed
value. This includes the lands value as a farm, plus the lands
potential value as a development sight, plus what people are willing to
pay for it. And $700 an acre is cheap land.
How come every time I use a proper definition of present value and asset
value you change your definition to make certain that someone doesn't
owe a tax?
>The land's net present value according to you is 1000*$700 = $700,000.
>To support this level of land value, at 6% govt. debt rate the
>portion of the AFTER TAX profit attributable to the LAND ALONE
>(ignoring all other capital invesments) must be approximately $60,000.
>Since farmer brown is only making $60,000 BEFORE tax, the $700/acre
>land value figure unrealistically high. Then we must consider the
>other capital equipment. Either the example isn't credible or the
>market for land is highly inefficient for some reason (like centralized
> wealth) and is sapping farmers, particularly young ones, of their
>livelihood.
>
>The biggest problem in rural America is the inability of young
>farmers to make a go of it. The "graying of the farm" is a VERY
>serious problem and is resulting in an increasing centralization
>of our food base without corresponding increases in food production
>efficiency.
I've addressed the valuation of the land above. I think you're making a
grave error in judgement about farming here. the idea that letting lots
of new people into farming will somehow make farming more efficient is
wrong. I see no data to support the theory that a new group of farmers
can out perform the old ones. If such farmers existed, would they
really have a problem entering the market, given the large amount of
land being made available by bankrupcy?
>>Mr. Jones is trying to decide how much to spend to build a new home, and
>>how much to give to charity. He has $100,000 he inherited from his
>>father, and earns $25,000 a year. He expects his earnings to remain
>>relatively constant. He also expects to retire in 25 years. How much
>>money should Mr. Jones spend on his house
>
>Some guy inherits $100,000 from his father at age 40 and we're supposed
>to spend time analyzing his predicament while young families who
>can't afford children are postponing child bearing to the point that
>mongolism, abortion and simple barren families are exploding.
>
>Sorry, try again.
Mr. Bowery, are you trying to increase production or redistribute
wealth? It seems apparent the real goal is the latter. We've recently
had a few too many examples of why redistributing wealth just plain
doesn't work.
>>Now, what I want people to do is this. Look at my examples and numbers.
>> Look at Mr. Bowery's numbers and examples. Decide which set of numbers
>>more closely represents reality. Then decide if you want an asset tax.
>
>Now, what I want people to do is this. Cease listening to theoretic
>arguments from economists paid by the wealthy. Look at at your OWN
>life and lives of people you know. Look at the NAT.
>
>Draw your own conclusions.
So, we should ignore everyone who's been educated about the economy
except Mr. Bowery when we try to figure out if we support a NAT tax.
And we should especially ignore those people who have distinguished
themselves in the field and earned high positions.
And then draw your own conclusions.
Thomas Omar Smith
to generate new revenues.
Well, under the NAT proposal, the tax rate is always equal to the debt
rate. So, to increase taxes, you have to increase the debt.
Now, here's where the problems start...
Lets assume that, as Mr. Bowery argues, the majority of Americans don't
pay taxes. Now, as a politician, I can increase spending indefinitely,
since I'm pleasing the majority of the people at the expense of a
smaller group, and therefore getting re-elected. but, every time I
increase spending, I add to the national debt, causing taxes to
increase. But this is okay since the majority of people are benefitting.
Well, up until a point. At some point, the government will be absorbing
so much money in loans that the investment market will collapse.
Business will rapidly follow, and everyone will lose their jobs in a
massive depression.
But, ask yourself this. Given the average politician, will he be able
to resist the urge to increase spending to get votes?