Bill Gross weighs in on the central question of our time

[photon555]

Re: Bill Gross weighs in on the central question of our time

That is one way of looking at things. And, tbh, one that I think holds a lot of water.

BUT there is another point along those lines and it is this: Housing in a sane environment would not be something that should appreciate all that much in the first place. It is a depreciating commodity, it goes out of style and needs constant upkeep. For most of our history it was something that barely kept up with inflation in the first place.

Housing aside (and here is where the populist in my comes to the fore) I have a very real problem with a system that rewards investment in a much greater way than labor. Sorry but to me this is just plain unfair. We like to talk a good game about rewarding "hard work" but in almost every way imaginable we rig the system to where those who actually do the hard work pay a much higher percentage of their labor to taxes than those who simply buy investments.

It especially gets my blood boiling when the "investment" is nothing more than fever dreams of financial gimmickry or carried interest of pension raiders and the like. To my way of thinking my local mechanic makes a much greater contribution to the greater good of society than these vultures ever could. Plus he can actually do whatever repair work I don't have time for without giving me a double serving of self righteousness and narcissism.

Will

+1 I'll go along with the spirit of that. And now there is good news and bad news. Good news first: A plane load of central bankers crash landed next to a deserted island. There was no loss of life, and the bankers quickly established a financial/commodity system based upon seashells, crabs, and coconuts. This is not yet public knowledge, but my source assures me that the confidence level is high.

The bad news: A week before rescue a mild storm washed ashore a great surplus of shells, damaged the coconut crop, and drove the crabs to a nearby island. The bankers were highly leveraged and the shock to their derivative structure resulted in a systemic collapse. They are demanding to be bailed out; at the current USD/seashell exchange rate this would require about 3 trillion USD. Apparently this is not a problem, but the Fed cannot decide how to list securitized seashell mortgages on its balance sheet, and so the rescue has been postponed and a news blackout imposed. While the accountants waffle, the bankers' debt is increasing by 6 billion USD per day. There is a rumor that the recent dismissal of a high ranking military leader by Obama resulted from the admiral's suggestion that the island be made ground zero for a nuke test.

[LorenS]

Re: Bill Gross weighs in on the central question of our time

Housing aside (and here is where the populist in my comes to the fore) I have a very real problem with a system that rewards investment in a much greater way than labor. Sorry but to me this is just plain unfair. We like to talk a good game about rewarding "hard work" but in almost every way imaginable we rig the system to where those who actually do the hard work pay a much higher percentage of their labor to taxes than those who simply buy investments.

I agree. If income is going to be taxed it all should be taxed the same. I am also OK with a progressive tax provided the rates are not punitive and there are no loopholes. I'd go for a sliding scale of 0% on the first $20k up to around 30% for the top brackets. No deductions, no exemptions.

I know that for me, as I've moved up the income brackets I find the taxes less of a burden even as the incremental rate goes up. Inflation causes me more problems than the progressive nature of the tax system. Inflation reduces the value of ALL of my income. Taxation only reduces the value of incremental income.

[jiimbergin]

Re: Bill Gross weighs in on the central question of our time

I agree. If income is going to be taxed it all should be taxed the same. I am also OK with a progressive tax provided the rates are not punitive and there are no loopholes. I'd go for a sliding scale of 0% on the first $20k up to around 30% for the top brackets. No deductions, no exemptions.

I know that for me, as I've moved up the income brackets I find the taxes less of a burden even as the incremental rate goes up. Inflation causes me more problems than the progressive nature of the tax system. Inflation reduces the value of ALL of my income. Taxation only reduces the value of incremental income.

+1

[Woodsman]

Re: Bill Gross weighs in on the central question of our time

I have a very real problem with a system that rewards investment in a much greater way than labor. Sorry but to me this is just plain unfair. We like to talk a good game about rewarding "hard work" but in almost every way imaginable we rig the system to where those who actually do the hard work pay a much higher percentage of their labor to taxes than those who simply buy investments.

Haven't you heard? Labor is no longer connect to value in this new world of FIRE financial engineering. The producers and job creators like it better that way.

[ProdigyofZen]

Re: Bill Gross weighs in on the central question of our time

I agree. If income is going to be taxed it all should be taxed the same. I am also OK with a progressive tax provided the rates are not punitive and there are no loopholes. I'd go for a sliding scale of 0% on the first $20k up to around 30% for the top brackets. No deductions, no exemptions.

I know that for me, as I've moved up the income brackets I find the taxes less of a burden even as the incremental rate goes up. Inflation causes me more problems than the progressive nature of the tax system. Inflation reduces the value of ALL of my income. Taxation only reduces the value of incremental income.

But the inflation is occurring in any asset linked to debt not necessarily in the CPI.

This is one reason why the proliferation of credit attached to medical bills is worrying to me. It can increase the cost of medical procedures across the board.

IMO labor income should not be taxed except for FICA etc up to 50k then progressively taxed higher all the way to say 30%.

[photon555]

Re: Bill Gross weighs in on the central question of our time

I don't believe finagling tax rates is going to offer more than temporary relief. The power to tax the individual is the power to control behavior. Right now the state incentivizes mortgages, green anything, and employer provided health care to name just a few. Replacing the income tax with a national sales tax would incentivize savings and remove most of the complexity from the tax system. Individuals could decide how much tax they wanted to pay, within limits, by how much they wanted to spend versus savings. At the same time corporate law should be drastically reformed. The privilege of incorporation should be accompanied by the obligation of sharing ownership with employees. Incorporation should be limited to one level only; no more holding companies. The size of corporations should be limited by a wealth tax on corporate cash and cash equivalents; but the threshold should be set high enough that small and medium size corporations are not affected. A wealth tax would also incentivize corporate R & D, debt reduction, and owner dividend payouts, which would also include employees. Payouts would increase consumer demand and generate more economic activity.

Again, incorporation should be viewed as a privilege with obligations and not a right. Concentrations of wealth and/or power are dangerous to liberty and free societies. They must be bound down from mischief with the chains of the Constitution, ie., an Amendment to limit corporate power through financial requirements. Significant employee ownership must be strongly incentivized financially. Mutual corporations that are 100% employee and user owned such as insurance companies, public utilities, and medical facilities should be even more financially incentivized.

A lower rate investment tax instead of the national sales tax on stocks, bonds, etc. would reduce market fluctuations. It would also hopefully destroy High Frequency Trading Platforms. Good Riddance!

Such a drastic system of changes would require an extended transitional period. As long as the schedule is slow, steady, and completely public disruptions should be minimal.

The current system is so broke it is bizarre. We have been staring at the emperor's bare buttocks so long we think it is a fashion accessory instead of a demonstration of insolent disdain by a small group of elitists.

[jk]

Re: Bill Gross weighs in on the central question of our time

re gross: i have been following his writings for many years, decades i think - i can't recall how far back he started writing his commentaries. anyway, he's been consistent in his outlook and values from the very beginning. back when paul mcculley was at pimco, he also did a monthly commentary, and he was quite clearly a keynesian and shared those same values.

i will restrain my impulse to get involved in the discussions of what a fair system would look like, and all the problems various proposals would entail [e.g. what about spending abroad? should coporations be 'persons'? and so on- oops, i guess i couldn't restrain myself completely], because i don't think any of these proposals will gain any traction until AFTER a HUGE crisis, which we will have to navigate before worrying about the niceties of the system of the future.

[photon555]

Re: Bill Gross weighs in on the central question of our time

re gross: i have been following his writings for many years, decades i think - i can't recall how far back he started writing his commentaries. anyway, he's been consistent in his outlook and values from the very beginning. back when paul mcculley was at pimco, he also did a monthly commentary, and he was quite clearly a keynesian and shared those same values.

i will restrain my impulse to get involved in the discussions of what a fair system would look like, and all the problems various proposals would entail [e.g. what about spending abroad? should coporations be 'persons'? and so on- oops, i guess i couldn't restrain myself completely], because i don't think any of these proposals will gain any traction until AFTER a HUGE crisis, which we will have to navigate before worrying about the niceties of the system of the future.

Yes, I agree that the crisis will almost certainly have to come first before anything will get done about our problems. But some people need to be ready and able to get across two messages when that happens. First, that elites in both the government and big business colluded to bring about this mess; and we the people let them do it, and so ultimately it is our fault that government and big business acquired too much power. Second, that we the people must step up and fix the system, and so we need to have some ideas of what a better deal might be. We're not talking about a re-write of the Constitution, but an amendment or two to limit the concentration of power and incentivize wide spread ownership of capital. The specific ideas are not as important as that we the people take the initiative to educate and to lead the way with rational solutions. Failure to do this will allow the same people who caused the problems to stay in charge and screw things up again.

We must be ready to take advantage of that golden moment of time when almost anything will be possible politically, either for good or ill, and bring something good out of the crisis. You can be certain there will be a small but powerful group trying their best to bring the worst out of it.

[jk]

Re: Bill Gross weighs in on the central question of our time

We must be ready to take advantage of that golden moment of time when almost anything will be possible politically, either for good or ill, and bring something good out of the crisis. You can be certain there will be a small but powerful group trying their best to bring the worst out of it.

+1

[newnewthing]

Re: Bill Gross weighs in on the central question of our time

I don't have a problem with short term capital gains being taxed as regular income at the same graduated rate.

What gets me riled up is the whole lie behind "capital gains". Keeping up with inflation is NOT a capital gain. If I keep a house for 30 years, nearly all of the "gain" on sale is really just the illusion of inflation. If you tax me on inflation by calling it a gain, it's fraud, plain and simple.

Yep, and that tends to reduce investing for longer periods. Taxing cap gains as regular income but indexing the basis to inflation would go a long way towards incenting long term investing. It would also eliminate the rationale for separating long term and short term gains.

[BadJuju]

Re: Bill Gross weighs in on the central question of our time

I think it is inevitable that the worst 'solutions' will be reached. That's how it has always played out. That's how the Nazis came, the fascists, and every other despotic government heretofore. A crisis always begets scoundrels and they are the ones most poised to seize power or effect the most prominent changes.

[Bundi]

Re: Bill Gross weighs in on the central question of our time

Yes, I agree that the crisis will almost certainly have to come first before anything will get done about our problems. But some people need to be ready and able to get across two messages when that happens. First, that elites in both the government and big business colluded to bring about this mess; and we the people let them do it, and so ultimately it is our fault that government and big business acquired too much power. Second, that we the people must step up and fix the system, and so we need to have some ideas of what a better deal might be. We're not talking about a re-write of the Constitution, but an amendment or two to limit the concentration of power and incentivize wide spread ownership of capital. The specific ideas are not as important as that we the people take the initiative to educate and to lead the way with rational solutions. Failure to do this will allow the same people who caused the problems to stay in charge and screw things up again.

We must be ready to take advantage of that golden moment of time when almost anything will be possible politically, either for good or ill, and bring something good out of the crisis. You can be certain there will be a small but powerful group trying their best to bring the worst out of it.

Now this is something that does make a great deal of sense to me. I am following this path. My take though is not to wait but to where and when possible, try to share perspectives with those currently in power. A little at a time and in ways that don't overwhelm and alienate any more than is inevitable. This is my way of investing in the future. I don't doubt that guys like Gross and other "plutocrats" have outsized influence but that doesn't mean we can't each do something to help those that may be in power when a real crisis once again appears, to know how to understand and react to it.

I really don't know what else to do. I certainly am not comfortable waiting/relying on Gross and any others that may now be espousing what amount to piecemeal approaches to symptoms.