Eliminate Minimum Wage and Wall Street “Minimum” Pay

Wow, they said it before … in Jan. of 1987, and we still have a minimum wage law. I don’t understand how sitting at a place doing nothing, purely serving as a human fixture, sometimes can earn you the minimum wage, and working hard like a dog as a young lawyer earn you 5 bucks more than minimum wage.

R has disseminated this idea in a bar talk over left-over nachos and crappy draft, which I mentioned here.

I know there are an infinite number of chain loops between overpaid min wage earner and sad aspiring lawyers, but

1) I believe in the organicity? organism in the societal economics; it’s a formed opinion, and I don’t have evidence ready to back it up;

2) the big firm’s “min wage” of 160k for the undeserving lucky few (not really, some are really brilliant, but 160k still lotsa money for the work they do), works in the same manner as higher min wage being a barrier for the entry-level people.

Not that I don’t want buckets of money. So reform after I got a job. Thanks!

Revisiting My Socialist Root: How About Guaranteed Basic Income To All?

I am so easily sold on free food and beer: when the old boy club professor who seems to be a die-hard  Republican and Obama hater invited the class to the pub for beer and appetizers, I went, for the free food, and conversed with some female colleagues on lawyer fashion and stuff, hording over the food and being patronized by the old boy. It’s easy when you don’t give a flying sugar.

That’s my introductory ranting. SKIP ABOVE.

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Bob and Michi and I continued some discussion over equality and efficient tax system (tax lawyers with souls <3) over the left-over nachos. Basically this elitist professor suggested a low income(or anything rather) tax rate would be beneficial to the social welfare, as it reduces the stake people have in tax planing, thus saves the resources spent on tax compliance and planning/evasion. Making being smart on tax not worth the time, basically.

To ensure revenue, we can broaden the tax base, grant less exemptions (I forgot whether he mentioned this point but I think it makes sense because who cares about tax exemptions when you only have a 15% rate and it costs a lot to comply with the requirements for that exemption. of course, quantitative study needed), etc. Also, prof suggested that people should be left with their money to do whatever they want to, maybe he thinks this would reflect a truer market. High tax rate also induces lobbying, which wastes resources and distorts the market to a great extent (like taxation on carried interest, easily enabling the hedge fund managers to have a better rate on their wage compensation than others, as it is taxed at cap rate).

I certainly hope the tax rate goes up, because it would give me tons of work, and I will become a fat cat, and then I will lobby like a maniac to have the government exempt the exact form of my income.

Anyways. Taxation is thought to be existing for a few reasons:  generating revenue for the government (to do what? keep the machine running, and redistribute ), providing some incentive/disincentive for certain economic/social behaviors. Revenue generating is a vague concept, and where to “lay the incidence of taxation”, i.e. who to tax and how much, depends on the fair share based on usage of social resources, ability to pay, and of course ideological and lobbying consequences.

So I think it is fair to say, we 1) would like to make sure the society is functioning properly and provide a decent life for people living on the land; 2) improving the economy, with different schools fighting over how much government should get involved.

To realize these two goals, we can use 1) positive taxation, where government ask people for money, or 2) negative taxation, meaning the government gives money out to “deserving” people. (there is an interesting article on whether lazy people deserve our money, at here)

If one agrees with there should be progressivity in income taxation,one probably would agree that we ought to tax the right people at the right amount (actually flat rate and regressive income tax folks might think the same too).  The efforts to devise a tax system on these beliefs would be : taxing the rich at a reasonable amount to “subsidize” the society, and taxing the poor at a lower amount to have them pay their fair share, and redistributing the subsidies to the poor in various forms, including but not limited to: minimum wage, safety net (social security), child support, etc, which are forms of Guaranteed Minimum Income (GMI). Whether we should have a welfare system is beyond the scope of this discussion.

But there is one other form of GMI, which, if you are OK with giving people some money, you should not be TOO alarmed by this idea, which is: BASIC INCOME GUARANTEE. According to Wikipedia, the idea is this

A basic income guarantee (basic income, citizen’s income) is a proposed system^[1] of social security, that regularly provides each citizen with a sum of money. In contrast to income redistribution between nations themselves, the phrase basic income defines payments to individuals rather than households,^[2] groups, or nations, in order to provide for individual basic human needs. Except for citizenship, a basic income is entirely unconditional. Furthermore, there is no means test; the richest as well as the poorest citizens would receive it. The U.S. Basic Income Network^[3] emphasizes this absence of means testing in its precise definition, “The Basic Income Guarantee is anunconditional, government-insured guarantee that all citizens will have enough income to meet their basic needs.”

I think the current tax system does address the “basic human needs” in form of deduction, basically saying we won’t tax you for an amount of income you have to spend to live like a human being. So, rather than having people take out those expenses first (where a lot of problems arise: what if they dont have the money to spend, no income to deduct from? some people dont have the chance to take advantage of the deduction/tax system as a redistribution system first), why not convert that “reimbursement” kind of system into an “allowance” type?

Granted, we now have SS and other things in the welfare system, and I am no expert in welfare system, aside from knowing the following things: it’s broken and incoherent, it lacks the support system to guarantee its proper functioning (outreach and advocacy). One thing  the welfare system struggles is the eligibility issue, and lot of resources are wasted on this area.

Basically what happens, roughly, is that we try to give people who have no resources to take deductions based on their own income some money, and on top of that, allow deductions for basic living expenses. In a perfect world, if equilibrium is achieved, deserving poor will get appropriate amount of govt subsidies and deductions and taxation will work out well.

But we don’t live in a perfect world, do we?

How about, approach this “we respect you need as a human being” from a different angle. Not a tax rebate system, but a prebate system. Just simply because of your being a member of this decent society, we grant you….(drum roll)….

BASIC INCOME GUARANTEE , which relates to  SOCIAL MINIMUM

Originally I accept this idea kinda naturally. As Bob said, maybe it is easier for ideologically socialist countries to adopt this, because we are brought up with this kind of noble ideas. Well, it does seem to ring a bell, similar to the communism ideas. But for the sake of dog, ideology worth less back home than here. Look at tbaggers and occupiers, and even the pro-life folks, they go all out for their (stupid) beliefs.

I guess my support originates more from a vague philosophical idea. In the Stanford Encyclopedia of Philosophy, on the subject of Social Minimum, it starts

‘People should not be allowed to starve in the streets.’ ‘No one should be denied access to a decent minimum of health-care.’ ‘Every citizen should be able to meet his or her basic needs.’ These statements all express a widespread view that a political community should seek to ensure that its members are all able to enjoy at least a minimally decent standard of living. They assert the importance of what is often called the social minimum. However, the exact nature of the social minimum, the considerations that support it, and, indeed, its basic justifiability, are all matters of intense philosophical controversy.

I guess I am just naturally gang-ho about social justice. I can’t stand injustice. I am such a baby.

In Wikipedia, there is a more economics-based explanation

…The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet-unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact…From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work…Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: ‘the micro-chip revolution’. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and service sectors. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The work ethic ceases to be viable in such a situation and work-based society is thrown into crisis…

—André Gorz, Critique of economic Reason, Gallile, 1989

It’s interesting. I am totally buying it. Granted there are barriers and hard to implement, but a nice approach nevertheless. Actually some of the objections directly linked to the Karl Smith argument I mentioned above. So a lot of it can be, theoretically, solved by scientific advancement. So where are all the scientists???

I need to follow up on this. But now, time for food. and PARTEYYYYY.

Should One-Percenters Be Hated So Much

One of the reasons, which I bet is shared by many, that I hate politics: the deviation from the pressing agenda, scoring points from the mass by swaying their emotion, the loudest duck wins. It disgusts me. The argument that this is the means to the end, and hopefully we get someone decent elected and do something good, is just, not enough. The direction all the “discussion” lead the public discourse into, the momentum it created that pushes the societal focus into a frenzy state, and the impact on everyone’s mind, makes me hate God a bit (more). Sorry dude. And by politics I don’t mean stuff politicians do; I mean all the things that captures mass’ attention, becomes a campaign, and confined itself to represent a small group of interest. I don’t understand how occupiers are that much different from t-baggers.

Except that they are cuter maybe.

Anyways. When Mitt Romney’s tax returns were to be released and everyone was so excited to see how this one-percenter can defend his ridiculously low tax rate, my reaction was like when I find out (surprisingly) how many people are religious. Simply said, I don’t understand what the hype is all about.

People who believe one-percenters should be taxed at a higher rate thinks it is “fair”.  So where do we base this notion of “fairness”? This will be some kind of tax policy question, which I do not know enough about and wonder whether the ultimate battle on this ground will be somewhat ideological (which I both admire and despise).

But since the one-percenters derive most of their income from non-wage income, basically investment income, it is very interesting to see how this part of income is taxed, overall.

Capital income is money made out of money, not (directly) from anyone sweat and blood. Basically (I think) a premium the users pay to the owner of money to utilize this capital. It seems like rent (I am just making things up here, based on my understanding). Should this kind of profits be subject to a higher rate of taxation than money made in sweatshops?

Occupiers may say, hell yah! They make the money by sitting on their ass, enjoying so much privilege from the society, and should contribute back to the society/country by paying more taxes. It is because all the work of 99% that 1% can make all that money. Et cetera, et cetera.

I am a supporter of progressivity in income taxation, as a complicated modern world, it seems to be the best way to spread the costs of having the society running. Without doing empirical and quantitative study on how much each dollar costs the “society”, and what manner of profits generating is most “taxing” for the society, we can only hope for the best, right? So I rest my case on this. But I will be ecstatic if I ever encounter some insightful explanation on this point (dig out some tax policy articles maybe, note to self)

So let’s establish the baseline here: progressivity in the income taxation. Then another question comes: should different types of income tax at different rate?

It is easy to lose sight when we look at individual taxation. Capital income, unlike other income such as wage, cascades down from some sort of business entity, first appears in the form of business profits, and then later in the form of individual capital income. Taxation happens, at least theoretically, at each appearance.

Should capital income be taxed so many rounds? I mean, why is it so hated? From an utility perspective, is hard-earned money really more solid than money from money? Should we tax based on how easy it is earned, how much it costs to be earned, or…?

But in the risk of oversimplying, Mitt Romney’s low tax rate is not necessarily unfair. I mean, it can be unfair if all the capital income is taxed on corporate level and then again at 15% or whatever his individual rate it, then this part of income can even be categorized as overtaxed. There is the problem of negative tax rate in many corporation, so if the corporate level tax is somewhat escaped, Romney is getting a god-damned one-percenter windfall. But presently, we don’t know. I hope some media can dig out some real data and then we can analyze the effective rate, rather than nominal rate, on his income stream.

WAIT, why do I care? It is so obviously politics. But maybe some one-percenter should throw in some money to hire someone do this research. It may give them some tool to fight back.

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Some final notes on today’s R&R and FinProd class.

For someone like Prof.P who believes that income should be taxed once (he doesn’t believe corporate tax is the price to pay for the privilege of access to public equity market – for him, it is either too steep a price, or basically a highway robbery that is counterproductive), corporate integration, which essentially eliminates doublet taxation on the corporate level, is the way to go. Practically, I think it makes perfect sense for reasons including, but not limited to, promoting capital deployment and re-deployment, increase financial efficiency, preventing lock-in effect, putting debt and equity on equal footing (so business are not so leveraged that the whole world is on the verge of bankruptcy). Overall, reduce the distortion effect from taxation on business/finance decisions.

When we talk about corporate integration, we are talking about converging two separate set of tax regimes into on, namely integrating corporate level taxation and individual shareholder level taxation. If there is only one level of taxation,  which set should be eliminated? Should the corporation be taxed as a juristic person, and just consider taxation another business expense which are diffused by business as they wish? The concept of “incident of taxation” is repeatedly mentioned, but the question is, why do we care? This issue wasn’t addressed much at today’s class, but maybe disincentivizing people from conducting business in corporate form is one of it? Apparently evidence shows that people are being creative in shifting away from corporate form (Sub Chapter C) to avoid the tax pressure.

So we care about how taxation can influence corporate behavior and negatively impact economic efficiency. The taxation should be at a proper rate level and paid by the proper person. I think it is Avi-Yonah, who points out that it is not shareholders who make the corporate finance decision, but the officers (well, there is some corporate governance issues here, but at face it is a passable argument). So the real decision makers need to be properly incentivized; deduction, which gives them a better number to brag out, may work out better in this regard.

Something in the Fin Prod class may actually back up the argument that the one-percenters are creating enormous value/utility: they facilitate the financial products markets, which is basically the scaffolding of global economy and enables complex business transactions happening on a regular basis.

This thought needs to be dug further. But I have a dentist appointment at 830 tmr.

Ciao.

The wasted good intentions

Say, human beings as a whole are equally bad and good. Re-phrase:  50% of human beings are good, and 50% human beings are bad. Everyone chips in for the good-intentions fund. Unless you are ultra-bad or super sleazy.

Good people works hard with strong ethics, have integrity, and values self-sufficiency.

Bad people just wanna get by.

Shit happens, to good and bad people, for different reasons probably. We give them money from the good-intentions fund when shit happens.

We don’t know whether shit really happened or not, for good or bad reasons.

We don’t know who are good or who are bad. We can’t tell. We are in no position to tell.

Question: should we sacrifice the welfare of good people who got unlucky by cutting off the good intentions fund, or waste some good intentions fund money wasted on bad people by preserving the fund. Which is more valuable, the life-saving moneys in bad times or accumulated supposedly large sum of money over the good times?

And are we obligated to keep this fund? Where is there such a fund to start with? Is the world so warped and unnatural that we can’t fend for ourselves naturally anymore?  Should people be allowed to be… selfish?

Are there more good people than bad people? Vice versa?

Let’s start to make more good people?  Nice final solution.

[and the solution to not posting is posting something for the sake of posting something]