{"items": [{"author": "BDan", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638345413552", "anchor": "fb-638345413552", "service": "fb", "text": "The counter-incentive might be that the people in charge of the government are generally rich, and thus get a substantial portion of their income from capital gains, so they wouldn't want inflation to be underreported. That's also an argument against adjusting the tax for inflation, though: since only relatively well off people have significant amounts of capital, it makes sense to keep the tax higher; effectively, it's a bit of a wealth tax.", "timestamp": "1385180861"}, {"author": "David Chudzicki", "source_link": "https://plus.google.com/106120852580068301475", "anchor": "gp-1385181132479", "service": "gp", "text": "Giving rich people an incentive to oppose inflation sounds worse.", "timestamp": 1385181132}, {"author": "David Chudzicki", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638346411552", "anchor": "fb-638346411552", "service": "fb", "text": "That's not an argument against adjusting for inflation--just an argument for increasing capital gains tax an appropriate amount when you switch to adjusting for inflation. (Edit: Oops. I'm wrong, sorry.)", "timestamp": "1385181311"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638348921522", "anchor": "fb-638348921522", "service": "fb", "text": "Are you seriously worried the government is going to underreport inflation? I think that is not something we should worry about at all.", "timestamp": "1385183036"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638374255752", "anchor": "fb-638374255752", "service": "fb", "text": "@BDan: \"people in charge of the government are generally rich, and thus get a substantial portion of their income from capital gains, so they wouldn't want inflation to be underreported\"

I think this is backwards. The higher reported inflation is, the lower the inflation-adjusted gain, which means paying less capital gains tax.", "timestamp": "1385213845"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638374694872", "anchor": "fb-638374694872", "service": "fb", "text": "@BDan: \"since only relatively well off people have significant amounts of capital, it makes sense to keep the tax higher; effectively, it's a bit of a wealth tax.\"

It's a wealth tax equal to (inflation * capital gains tax rate). That's a pretty weird way to tax wealth. On the other hand, in the US the constitution prohibits a straight-up wealth tax so if you want one this might be the best you can do.", "timestamp": "1385214167"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638374979302", "anchor": "fb-638374979302", "service": "fb", "text": "@George: \"Are you seriously worried the government is going to underreport inflation?\"

Mildly worried. The government is supposed to track inflation but is also a major user of the numbers they generate. They benefit from lower inflation reporting because TIPS and transfer payments pay less, but higher inflation reporting because tax brackets are indexed to inflation. These are relatively small and in opposite directions, and the BLS is somewhat robust to external pressure, so I'm not too worried. But if we changed this balance to where the government stood to bring in tens of billions in additional taxation based on lower reported inflation then the BLS might start finding ways to end up with lower numbers.", "timestamp": "1385214393"}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1385220601526", "service": "gp", "text": "This seems like a good idea. \u00a0I think the reason given in the 1983 paper (\"reducing the penalty for switching assets which currently distorts investor behavior\") is more compelling than the reasons you mention, though.", "timestamp": 1385220601}, {"author": "Daniel", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638387958292", "anchor": "fb-638387958292", "service": "fb", "text": "As a meta-comment, any thought process that results in statements of the form \"the government should do X\" is probably not a worthwhile time expenditure.", "timestamp": "1385221230"}, {"author": "BDan", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638388577052", "anchor": "fb-638388577052", "service": "fb", "text": "Jeff: Yes, the higher inflation is reported, the less capital gains tax the wealthy will pay. So senators and congresspeople have an incentive to *over* report inflation, not under report it.", "timestamp": "1385221871"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638389684832", "anchor": "fb-638389684832", "service": "fb", "text": "Ok: if we inflation-adjust then the government brings in more money when inflation reported as low, wealthy influential people pay less tax when it's reported as high.", "timestamp": "1385222689"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638390103992", "anchor": "fb-638390103992", "service": "fb", "text": "BDan You have a fundamentally faulty assumption that people of high office are motivated by money, when they are much more motivated by power and secondarily that they feel that taxes will significantly impair their ability to gain wealth. I do however agree with your fundamental assumption that they will game the system to get what they want.", "timestamp": "1385223032"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638390408382", "anchor": "fb-638390408382", "service": "fb", "text": "As a tax preparer I strongly feel wealth taxes are evil. Many people with similar incomes have great disparities in wealth for two reasons 1) Many people are willing to fore go consumption to, for example, pay for their children's education and 2) Some people will pay for advice and invest wisely thus giving themselves outsized gains and 3) Most wealthy started their own business, avoided consumption today, and hired capable people (both internally and as consultants) to enhance their business. Punishing this behavior penalizes the economy.", "timestamp": "1385223308"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638390483232", "anchor": "fb-638390483232", "service": "fb", "text": "Jeff Kaufman The government has many many reasons to under-report inflation, particularly given how many transfer payments have cost of living adjustments (COLA) built in. Not to mention that it justifies easy money policy.", "timestamp": "1385223402"}, {"author": "George", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638390997202", "anchor": "fb-638390997202", "service": "fb", "text": "If legitimate economists start distrusting inflation numbers they will make their own. I think you are wrong about incentives. The government isn't some monolithic agent. Some economist at the BLS doesn't care if TIPS pay out more, her job is only in jeopardy if the wider economics community can show she is doing it badly. If I am some civil servant in the government, I don't care if the government collects more tax revenue broadly speaking. The premises of your worry seem completely misguided to me.", "timestamp": "1385223764"}, {"author": "Arthur", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638404964212", "anchor": "fb-638404964212", "service": "fb", "text": "Actually, no, hoarding like you describe is exactly what causes recessions and is exactly what governments should penalize.

https://en.wikipedia.org/wiki/Paradox_of_thrift", "timestamp": "1385230760"}, {"author": "Jesse", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638415228642", "anchor": "fb-638415228642", "service": "fb", "text": "1) Billion Price Index closely tracks CPI: http://bpp.mit.edu/usa/
Independent verification of inflation is possible.
2) Indexing capital gains values and other things like minimum wages to inflation makes a lot of sense to me.
3) Also favor a more progressive capital gains tax - either at income tax rates or with higher tiers for very high gains.
4) Phillip, do you have evidence for #3? I'm curious about the composition of modern wealth, and not aware of good research. Agree protections for responsible savings are necessary, but there should exist ways to differentiate.", "timestamp": "1385235455"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638416311472", "anchor": "fb-638416311472", "service": "fb", "text": "Jesse I strongly recommend the Millionaire Next Door a survey of close to 1,000 millionaires. The stats I have seen indicate 4 in 5 millionaires are first generation. I tend buy into most of this because my personal experience with clients matches it. I note that it disagrees with most media descriptions of millionaires.", "timestamp": "1385235873"}, {"author": "Jesse", "source_link": "https://www.facebook.com/jefftk/posts/638341765862?comment_id=638420612852", "anchor": "fb-638420612852", "service": "fb", "text": "Part of that is expected, due to inflation. My offhand calculation is $1M in 1928 is $13.4M in 2012, and perhaps more notably $1M in 2012 was $75K in 1928.
http://research.stlouisfed.org/.../CPIAUCNS/downloaddata...

Thanks for the recommendation. Does the book lay out different strata of millionaires, or is it handling anything over $1M as a group?

For me the break point between upper middle and lower rich is around $20M wealth or $1M annual income. Progressive taxation of income and capital gains should have 1-3 tiers only affecting this upper range.

The top current tax bracket kicks in at $400K income, which affects about 1% of the population already.
Recall that only dollars beyond the last bracket are taxed at the highest rate, so even if we added a 50% income tax rate at $1M every dollar below $1M income is taxed at lower rates.
http://economix.blogs.nytimes.com/.../measuring-the.../...", "timestamp": "1385238185"}]}