The benefits of a basic income // much higher min wage

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IlliniDave
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Re: The benefits of a basic income // much higher min wage

Post by IlliniDave » Wed Jun 05, 2019 4:19 pm

unemployable wrote:
Wed Jun 05, 2019 12:31 pm
If a company has zero current and expected future profits then there is no reason to invest in it and the fair value of its shares is $0, whether it is publicly or privately held. Now multiply this across the entire economy... I'll let the rest of you with your VTSAX and 4% hypothetical withdrawal rates and whatnot take the thought from there.
There are actually a lot of companies that pay no dividend and reinvest their earnings. I'm not one of them, but a lot of investors favor that for their personal income tax reasons. Aside from personal income tax considerations, another facet of the discussion is that investors believe the companies will reinvest the money wisely and ROI on the investments will also flow back to them through inflated valuations.

I guess the distinction is between earnings and taxable earnings.

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Re: The benefits of a basic income // much higher min wage

Post by unemployable » Wed Jun 05, 2019 4:32 pm

IlliniDave wrote:
Wed Jun 05, 2019 4:19 pm
There are actually a lot of companies that pay no dividend and reinvest their earnings.
If you mean they buy back stock, that's functionally the same as a dividend, and it doesn't reduce earnings (profit) anyway. A buyback is a balance sheet transaction, not an income statement transaction. It simply cancels one part of the balance sheet with another, namely equity (company stock) with assets (cash).

A stock is valued based on expectations of future profits that one way or another accrue to the shareholder. If a company signals there will be no more profit stream, its correct valuation is zero.

IlliniDave
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Re: The benefits of a basic income // much higher min wage

Post by IlliniDave » Wed Jun 05, 2019 6:47 pm

unemployable wrote:
Wed Jun 05, 2019 4:32 pm
If you mean they buy back stock, that's functionally the same as a dividend, and it doesn't reduce earnings (profit) anyway. A buyback is a balance sheet transaction, not an income statement transaction. It simply cancels one part of the balance sheet with another, namely equity (company stock) with assets (cash).

A stock is valued based on expectations of future profits that one way or another accrue to the shareholder. If a company signals there will be no more profit stream, its correct valuation is zero.
No, not buybacks, plowing all the company's net earnings into business growth/expansion. If done cleverly much, sometimes all of it can go untaxed, which is what Yang seems to want to get a bite of by other means. So the business is operating in the black but minimizing tax liability and (shareholders hope) using the money to accelerate growth of future earnings. About 15% of the SP500 don't pay a dividend. A famous example is Warren Buffet BKH, they pay no dividend, afaik do no buybacks, then keep all the "profits" and reinvest them. In their case being a holding company they probably don't avoid taxes.

Campitor
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Re: The benefits of a basic income // much higher min wage

Post by Campitor » Wed Jun 05, 2019 8:58 pm

IlliniDave wrote:
Wed Jun 05, 2019 7:03 am
I've never "gotten" the math of how taking money from one consumer and giving it to another would create net new economic activity--seems it would just shuffle existing economic activity around. That might be desirable from a social engineering perspective, not so sure it's an economic efficiency boon.
Most people are under the illusion that the wealth owned by individuals and corporations sits around doing nothing - it's just a pile of gold and cash that the rich rub their hands over a-la Scrooge McDuck. That capital isn't sitting idle. The government may not be "taxing" these earnings/savings efficiently but private entities are generating a living off this aggregated capital. Just because the government isn't redistributing this wealth doesn't mean that it isn't being redistributed by other means. The difference is government redistributes wealth by force while private individuals and groups find mutually beneficial terms to trade good/services for money.

I know you get it but sadly most people don't. They complain about the cost of an iPhone as they stand in line to get the latest model while owning a perfectly good phone. No one is forcing them to consume but yet they complain about their lack of wealth and agency. If someone lives in a major metropolitan region and can't make ends meet, perhaps the person who deserves their contempt is the one staring at them in the mirror and the politicians advocating to rob Patty to pay Paula.

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Re: The benefits of a basic income // much higher min wage

Post by unemployable » Wed Jun 05, 2019 9:42 pm

IlliniDave wrote:
Wed Jun 05, 2019 6:47 pm
No, not buybacks, plowing all the company's net earnings into business growth/expansion. If done cleverly much, sometimes all of it can go untaxed, which is what Yang seems to want to get a bite of by other means. So the business is operating in the black but minimizing tax liability and (shareholders hope) using the money to accelerate growth of future earnings. About 15% of the SP500 don't pay a dividend. A famous example is Warren Buffet BKH, they pay no dividend, afaik do no buybacks, then keep all the "profits" and reinvest them. In their case being a holding company they probably don't avoid taxes.
Yes, deferred tax assets are a thing. About all I remember from the CFA exams (not even sure which level it was, 2 or 3) is that in income statement analysis they should be counted as income. Separately, BRK has done buybacks recently and shareholders approved a plan last year for Buffett and Munger to do more. But I'm not sure what we're arguing about anymore, considering how we seem to agree that "making those greedy corporations pay for their evil ways" isn't even hypothesizing a putative problem validly.

A few states tax "gross receipts", i.e., revenue, rather than profits. This might be easier to consistently collect and enforce. But I'd suspect a VAT would be easier still.

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Re: The benefits of a basic income // much higher min wage

Post by IlliniDave » Thu Jun 06, 2019 3:58 am

unemployable wrote:
Wed Jun 05, 2019 9:42 pm
Yes, deferred tax assets are a thing. About all I remember from the CFA exams (not even sure which level it was, 2 or 3) is that in income statement analysis they should be counted as income. Separately, BRK has done buybacks recently and shareholders approved a plan last year for Buffett and Munger to do more. But I'm not sure what we're arguing about anymore, considering how we seem to agree that "making those greedy corporations pay for their evil ways" isn't even hypothesizing a putative problem validly.

A few states tax "gross receipts", i.e., revenue, rather than profits. This might be easier to consistently collect and enforce. But I'd suspect a VAT would be easier still.
I didn't think we were arguing, just sharing perspectives and getting our terminology aligned (I have only a layman's financial vocabulary), and was trying to bridge Yang's way of describing the world while promoting his desired gov't policies with what I'd picked up essentially from having hung around on bogleheads.org in the past.

Another potential way to simplify collection would be to make corporate tax essentially a flat tax with no special interest loopholes forcing all reinvestment to be on an after-tax basis. But Yang's Freedom Dividend will require a roughly 75% increase in gov't revenue which I don't think can be raised from a few "bad actor" corporations who are reinvesting their revenue, and to borrow from Campitor, all the Scrooge McDucks who take a noon swim through a pool of gold coins in their treasure vaults.

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Re: The benefits of a basic income // much higher min wage

Post by 7Wannabe5 » Thu Jun 06, 2019 4:30 am

IlliniDave wrote:
I've never "gotten" the math of how taking money from one consumer and giving it to another would create net new economic activity
Well, not all consumers are created equal, so one easy observation is that it is generally the case that increasing the amount of money available to women of child-bearing age will create net new economic activity.

For example, a lot of money is currently being "wasted" in the ecological-economical system of the U.S. in the attempt to maintain the skin-sac boundary integrity of old wealthy humans for a few extra years, so if this money was transferred to young healthy fertile human females, then the known successful mechanism of simple reproduction would be much more likely to increase the total surface area of human skin-sac boundary, thereby increasing net new economic activity.

In general if we assume Money = Available Energy, then consider the three core effects of increased energy availability:

1) Growth of individual body mass
2) Maintenance of skin-sac boundary
3) Sexual reproduction

Then common sense analysis will reveal that your average Scrooge McDuck is likely "spending too much money" on 2 and also often 1, especially when placed in direct comparison with the likes of Penelope Pureheart, IF that which we wish to maximize is net new economic activity.

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Re: The benefits of a basic income // much higher min wage

Post by 7Wannabe5 » Thu Jun 06, 2019 5:53 am

IOW, my modest proposal for funding UBI would be to nick-of-time before wave of Boomers reform Medicare to provide palliative care only for individuals older than 80. This plan will also, obviously,help do the trick of bailing out S.S.

IlliniDave
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Re: The benefits of a basic income // much higher min wage

Post by IlliniDave » Thu Jun 06, 2019 6:36 am

Campitor wrote:
Wed Jun 05, 2019 8:58 pm
Most people are under the illusion that the wealth owned by individuals and corporations sits around doing nothing - it's just a pile of gold and cash that the rich rub their hands over a-la Scrooge McDuck.
I got a good laugh out of that--Scrooge McDuck is an image I draw upon often when thinking about the cartoon view some people hold about the wealthy, ha!

https://www.youtube.com/watch?v=aPX5mRSQ3pw

IlliniDave
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Re: The benefits of a basic income // much higher min wage

Post by IlliniDave » Thu Jun 06, 2019 7:16 am

7Wannabe5 wrote:
Thu Jun 06, 2019 4:30 am
Well, not all consumers are created equal, so one easy observation is that it is generally the case that increasing the amount of money available to women of child-bearing age will create net new economic activity.

For example, a lot of money is currently being "wasted" in the ecological-economical system of the U.S. in the attempt to maintain the skin-sac boundary integrity of old wealthy humans for a few extra years, so if this money was transferred to young healthy fertile human females, then the known successful mechanism of simple reproduction would be much more likely to increase the total surface area of human skin-sac boundary, thereby increasing net new economic activity.

In general if we assume Money = Available Energy, then consider the three core effects of increased energy availability:

1) Growth of individual body mass
2) Maintenance of skin-sac boundary
3) Sexual reproduction

Then common sense analysis will reveal that your average Scrooge McDuck is likely "spending too much money" on 2 and also often 1, especially when placed in direct comparison with the likes of Penelope Pureheart, IF that which we wish to maximize is net new economic activity.
That's a way of looking at it. The alternate is to look at how many such women and children, and their fathers, are thriving by working for yacht builders, luxury car manufacturers, landscaping companies, gourmet cuisine providers, cosmetic companies, spas, etc. (even rare book dealers). You know the drill. Looking at the world's population, seizing money to pay women to have babies is sort of like seizing money to pay the sun to come up in the morning. It'll happen regardless of the financial backing, and for the most part the present system in this country steers enough money through voluntary interaction so that people can rear their children, and there are already gov't programs in place at many levels to offset shortfalls (granted their effectiveness is often arguable).

If we want to reduce ourselves to units of biomass then sure, turning the breeding knob up to 10 (heck we might be able to get it to 11 or 12 via technology and compulsory participation) is clearly the way to go. Maybe we could apply the principles of husbandry and create superior biomass? However, that sort of stuff isn't anything I, for one, want as a world for my descendants. I don't disagree that luxury consumption on the surface might be suboptimal/inefficient on a macro scale, but it's hard to know all the downstream impacts (beyond the huge number of people who make a living doing something other than providing bare subsistence items and services for themselves or others) and what the long-term cost of heavy-handed socialist manipulation would be. Go back in time to various points and houses, toilets, phones, autos, televisions, air conditioning, etc., were all luxury consumption items.

There's something appealing about a world full of Hobbits in The Shire, I admit. :)

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Re: The benefits of a basic income // much higher min wage

Post by Campitor » Thu Jun 06, 2019 8:49 am

IlliniDave wrote:
Thu Jun 06, 2019 6:36 am
I got a good laugh out of that--Scrooge McDuck is an image I draw upon often when thinking about the cartoon view some people hold about the wealthy, ha!

https://www.youtube.com/watch?v=aPX5mRSQ3pw
That video made me laugh and brought back some nice memories. Too bad most people don't remember this one: https://youtu.be/8jEZraf0eDI - work smarter not harder although I got ahead by doing both.

In regards to the increase of biomass incentivized by taking the aggregate wealth of the rich, it's a bad idea. The accumulation of wealth/capital is the foundation of civilization otherwise we'd all still be farmers and hunters. Government can only exist because someone somewhere accumulated enough capital to either hire people or exchange it for goods and service.

No accumulation of capital, no businesses. No businesses, no payroll taxes. No payroll taxes, no funds to run government. If you take away the incentives to generate wealth by implementing punitive taxes, the rich will either move to another country that doesn't have punitive taxes or they will reduce production to the most profitable tax margin which reduces the supply of goods and services thereby making them more expensive to the average consumer - too many dollars chasing fewer goods.

You can not divorce any economic policy from the incentives it creates - negative or otherwise.

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Re: The benefits of a basic income // much higher min wage

Post by unemployable » Thu Jun 06, 2019 11:17 am

IlliniDave wrote:
Thu Jun 06, 2019 3:58 am
Another potential way to simplify collection would be to make corporate tax essentially a flat tax with no special interest loopholes
That's basically what Trump did. Instead of trying to eliminate every tax break and loophole and fighting every special interest one at a time, the corporate rate was lowered to a level where it is easier/cheaper to just pay that. The reduced incentive to itemize on the personal side was similar, just raise the standard deduction so much that far fewer people itemize.
IlliniDave wrote:
Thu Jun 06, 2019 7:16 am
seizing money to pay women to have babies
Much of Europe already does this. It's not working. Although school taxation is a wealth transfer from the childless and rich (who own the most valuable real estate and send their kids to private schools) to the lower classes and larger families and everyone does this already.

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Re: The benefits of a basic income // much higher min wage

Post by 7Wannabe5 » Thu Jun 06, 2019 6:32 pm

@IlliniDave:

I am just making the obvious observation that if $12,000/year extra income was enough to convince a young woman to have a baby or another baby, the net lifetime economic activity of that human would be much greater than the economic productivity of any additional share of productive assets Scrooge McDuck would buy with his $12,000. I am not suggesting that it would be the better choice. Obviously, increased economic activity correlates very well with resource depletion and environmental degradation. But, also obviously, it seems unlikely that Scrooge McDuck would be highly motivated to buy X more shares in Costco with his $12,000 if there was no profit to be made in selling bulk lot diapers etc.

Of course, if the goal is to increase economic activity, the very worst sort of person to give $12,000/year to would be somebody like me who would promptly spend it all on more free time to wander about in the morning playing amateur naturalist and then lounge about in the afternoon reading old novels.

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Re: The benefits of a basic income // much higher min wage

Post by Campitor » Fri Jun 07, 2019 9:55 am

Of course, if the goal is to increase economic activity, the very worst sort of person to give $12,000/year to would be somebody like me who would promptly spend it all on more free time to wander about in the morning playing amateur naturalist and then lounge about in the afternoon reading old novels.
And this makes the point for aggregated capital. How do people or corporations build wealth? They do so by producing goods and services that people want to buy - the capital accumulators are adding value and increasing the standard of living for a larger group of people. Taking their money forcefully to give it to other people will do nothing to raise or maintain the standard of living once the corporations are gone - no one is going to innovate if the fruits of their efforts are forcefully redistributed; there is no getting around this conundrum.

One of Yang's main point is that giving everyone 12K will lead to more innovation. So he's going to take money from the people who are actually innovating and providing goods and services at scale to people that are not innovating and producing goods and services at scale in the hopes that the non-innovators will become innovators. How can people not see the logical flaws in Yang's thinking?

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Re: The benefits of a basic income // much higher min wage

Post by 7Wannabe5 » Fri Jun 07, 2019 12:38 pm

I agree that Yang’s reasoning is incorrect, but I don’t agree with you either.

Based on my reading of the biographies of true innovators, such as Claude Shannon, vs those of efficient thugs, such as Rockefeller, it is my strong belief that innovators are only motivated by money to the extent that it allows them to have the free time to continue to innovate.

Also, recent research on the topic of innovation reveals that the two factors shared by individuals with important or multiple patents are high IQ and family money. Therefore, if the goal is to increase innovation, the money would best be distributed to low income or asset individuals with high iqs in order to give them the free time to engage in pure research and development in accordance with their druthers.

I like this plan better, because then I will even maybe be able to afford to buy some more land for my projects .

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Re: The benefits of a basic income // much higher min wage

Post by bigato » Fri Jun 07, 2019 1:14 pm

Yeah, and look what we've got from what goes for inovation nowadays: novel ways to gossip, a new internationally recognized disease classfication for "depression caused by social media", complete loss of privacy, brains that were hacked to keep addicted to screens, guerrilla propaganda putting fascists in power around the world, anti-vaxxers and flat-earth advocates, mass production and delivery of landfill stuff faster than ever. I posit that Shannon juggling balls around was way more useful.

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Re: The benefits of a basic income // much higher min wage

Post by unemployable » Fri Jun 07, 2019 2:34 pm

bigato wrote:
Fri Jun 07, 2019 1:14 pm
Yeah, and look what we've got from what goes for inovation nowadays: novel ways to gossip, a new internationally recognized disease classfication for "depression caused by social media", complete loss of privacy, brains that were hacked to keep addicted to screens, guerrilla propaganda putting fascists in power around the world, anti-vaxxers and flat-earth advocates, mass production and delivery of landfill stuff faster than ever. I posit that Shannon juggling balls around was way more useful.
But it's easier than ever to ERE, including learning about ERE in the first place.

Doesn't one of those "novel ways to gossip" include this very message board?

All that stuff you mentioned is a choice. Public policy generally should neither keep people from having choices available to them nor insulate them from the consequences of the choices they make. There are exceptions, generally involving large-scale, easily quantifiable negative externalities to society.

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Re: The benefits of a basic income // much higher min wage

Post by bigato » Fri Jun 07, 2019 3:16 pm

No, this board was possible in the 80's already.

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Re: The benefits of a basic income // much higher min wage

Post by unemployable » Fri Jun 07, 2019 3:38 pm

bigato wrote:
Fri Jun 07, 2019 3:16 pm
No, this board was possible in the 80's already.
That argument applies to most of the other things you mentioned, and with about the same validity.

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Re: The benefits of a basic income // much higher min wage

Post by bigato » Fri Jun 07, 2019 3:59 pm

Exactly. So do you stand by your argument that the money going to big tech is generating innovation? They are just cementing their position. We are still gathering the fruits from the era where real innovation was acctually happening. The ammount of research made by AT&T Bell Labs is such that we didn't even look at everything they produced. To cite a few, the laser, the transistor and unix, which is at the root of most computers and phone's operating system. What are google, facebook and amazon innovatiing?

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