A question of table manners & human relations

[SloopJonB]

Sloop, I've never paid close to that much in taxes. Here the rates are 43.4% on investment gains, 39.6% on income, 5.15% state income tax.

And sales tax and excise tax and property tax and vehicle license tax and liquor tax and gas tax and....and...

As I said, that 74% was total tax - what the governments ended up with in the end, not just income tax.

Re: your 43.4% rate - do you not have a reduced capital gains tax? Here IIRC it's 1/2 your marginal rate (full disclosure: I'd have to check with my tax accountant to be certain that's still the exact rate).

[Panope]

I'd vote for a complete elimination of the current tax code and and put in a simple, progressive tax rate. I don't know and I don't care if my rate would need to go up. Just make it consistent.

My income has gone up and down over the years (from not much to hardly any) and the level as absolutely zero correlation with my happiness.

Steve

[kdh]

Sloop, I've never paid close to that much in taxes. Here the rates are 43.4% on investment gains, 39.6% on income, 5.15% state income tax.

And sales tax and excise tax and property tax and vehicle license tax and liquor tax and gas tax and....and...

As I said, that 74% was total tax - what the governments ended up with in the end, not just income tax.

Re: your 43.4% rate - do you not have a reduced capital gains tax? Here IIRC it's 1/2 your marginal rate (full disclosure: I'd have to check with my tax accountant to be certain that's still the exact rate).

For those who pay mostly the top rate other taxes are not material.

The lower rate (20%) is only for long-term gains. Private equity people, index investors, and grannies with automobile stocks they've had forever benefit, but not most active investors. There's a special election to have all investment gains taxed at the ordinary income rate (39.6%) that ends up being beneficial as gains and losses are netted over the year. The 3.8% Obamacare tax, which most people thought would only apply to long-term gains, in the fine print specifically also applies to this special election. Thus, 43.4%.

Steve, there have been a lot of studies to answer the "Can money buy happiness?" question. The findings are mostly that once you have shelter and food and money to enjoy family and friends you have all that money can buy.

[SloopJonB]

Those studies apparently overlooked sailboats.

[kimbottles]

Once you have food, shelter and a sailboat, the rest is just extra. (Well, a nice cute little powerboat adds some enjoyment too.)

[kimbottles]

For those who pay mostly the top rate other taxes are not material.

Keith, you property tax rates must be less than ours!

[kdh]

For those who pay mostly the top rate other taxes are not material.

Keith, you property tax rates must be less than ours!

Likely not, but they're deductible. Whoops, not any more President Kim!

[Orestes Munn]

I have heard of one transcultural study, which found that most people, regardless of economic status, felt they'd be perfectly content with about 20% more income.

[kimbottles]

I have heard of one transcultural study, which found that most people, regardless of economic status, felt they'd be perfectly content with about 20% more income.

I read somewhere that people would be happy with their income no matter what it was if it were 20% more than everyone else! Crazy!

[SloopJonB]

That fits that old saying - It's not enough that you succeed, your best friend must fail.

Unfortunately I think that falls under "The human condition".

[kimbottles]

That fits that old saying - It's not enough that you succeed, your best friend must fail.

Unfortunately I think that falls under "The human condition".

Sad! What a weird desire!

[Orestes Munn]

Makes Darwinian sense, though.

[BeauV]

I do think that Kim and I were brothers in a prior life, and not just because he agrees with me.

I couldn't agree more with Kim's assertion (which I'll restate) that fairness is paramount in the tax system. Having a progressive but evenly applied tax rate makes tremendous sense. I can't speak to what the end resulting tax rate would be, but having it be evenly applied to everyone would make a world of difference.

While we're changing everything, I have mixed feelings on "income" tax for corporations. Despite the idiocy of our current supreme court, corporations are not "people". They are a organization of people for the express purpose of making money. Why are they taxed on their income? Why not tax the shareholders on the corporation's income at the time it occurs, as one does in a Sub-S Corp? If we did this, I can guarantee that corporations would be much more responsive to shareholders. The counter argument is that corporations need to have capital to use (which I agree with) and that they should be taxed on the creation of profit which is retained by the corporation and used as capital. But this argument doesn't make sense. Shouldn't the shareholders be taxed on their profit when it's made? If they then choose to leave their earnings in the corporation as capital, then they are "investing" after tax dollars. Of course this raises the entire discussion about tax on profit from labor vs tax on profit from capital.

I believe that what actually happens is nothing like the rational proposal Kim has made. What happens is that those who gain power tax those who don't have it. We have not progressed at all from when the Barons taxed whomever they pleased in any way they wanted. We have, of course, substituted the whims of a Baron for the whims of a Congress. But I've no evidence that anything different is actually happening. Those with power tax those without it as they please. In a republic like ours (do keep in mind we do NOT live in a democracy but a republic) the "power" winds up in the hands of those who we've elected to represent us and in those who support those elections most aggressively.

Finally, as to the various middle-class deductions (like mortgage) I think most tax payers would be thrilled to get a 30-40% tax cut in exchange for giving up all their special little loopholes.

[kdh]

I have heard of one transcultural study, which found that most people, regardless of economic status, felt they'd be perfectly content with about 20% more income.

I read somewhere that people would be happy with their income no matter what it was if it were 20% more than everyone else! Crazy!

I've read this too, but with Sloops's modification in that people are happy when they're more wealthy than their friends. Two corollaries:

1) Social climbing, having gained wealth, makes people less happy.

2) You and your friends can't both be happy.

[Orestes Munn]

I have heard of one transcultural study, which found that most people, regardless of economic status, felt they'd be perfectly content with about 20% more income.

I read somewhere that people would be happy with their income no matter what it was if it were 20% more than everyone else! Crazy!

I've read this too, but with Sloops's modification in that people are happy when they're more wealthy than their friends. Two corollaries:

1) Social climbing, having gained wealth, makes people less happy.

2) You and your friends can't both be happy.

Competition, like cooperation, is wired deep into human behavior. From the point of view of the organism competing to increase the prevalence of its genes in the pool, or the gene itself, if youre a Richard Dawkins fan, it doesn't necessarily matter if it succeeds or another fails to enhance its likelihood of transmission. When it does matter, as when group survival depends on cooperation, you' get altruistic behavior, but it's always in tension with individualistic strategies. At least that's the way I see it.

[SloopJonB]

You've covered it pretty well OM. We like to think that we have developed intellectually to the point that we are masters of our own fate but we haven't - instincts and other "lizard brain" behaviours are still the underlying drivers of most of what we do. Our higher brain functions merely modify it somewhat through conscience and rationalization and suchlike.

[Orestes Munn]

You've covered it pretty well OM. We like to think that we have developed intellectually to the point that we are masters of our own fate but we haven't - instincts and other "lizard brain" behaviours are still the underlying drivers of most of what we do. Our higher brain functions merely modify it somewhat through conscience and rationalization and suchlike.

Well, presumably Dietrich Bonhöffer went back to Germany and defied the Nazis to enhance his genetic chances, but I'm still impressed.

[Ish]

I read somewhere that the people who win lotteries fall into two camps. Below $13M people feel their happiness has not increased, above $13M people feel more optimistic.
I'm happy to get a free draw, so some of those winners must be really picky.

[kimbottles]

I read somewhere that the people who win lotteries fall into two camps. Below $13M people feel their happiness has not increased, above $13M people feel more optimistic.
I'm happy to get a free draw, so some of those winners must be really picky.

a remarkable number of lotto winners end up broke........

[JoeP]

I read somewhere that the people who win lotteries fall into two camps. Below $13M people feel their happiness has not increased, above $13M people feel more optimistic.
I'm happy to get a free draw, so some of those winners must be really picky.

a remarkable number of lotto winners end up broke........

True. My wife worked for a doctor's office back when the Washington State lottery first came out. One of their patients won several million but it was gone within a year or so and they couldn't even pay their bills.

[SloopJonB]

One of my staff won $4.2 Mil back in the 90's. She gave 1/2 of it to family, quit work, bought a house and got married - don't know what happened after that.

It couldn't have happened to a nicer person. The day she won, I didn't know about it and called her to pull an extra shift because we were short - she actually came in. Needless to say we were all happy for her and sad to lose her.

There was a TV show here a few years back about winners and what happened to them. The general result was that it didn't change their lives fundamentally, they just had more of whatever they were already doing - the stable people had bigger & better houses, toys, trips etc. The fuckups just got more & better drugs or booze or bet bigger.

[Orestes Munn]

I am never surprised when a gambler proves incapable of managing money wisely.

[BeauV]

I read somewhere that the people who win lotteries fall into two camps. Below $13M people feel their happiness has not increased, above $13M people feel more optimistic.
I'm happy to get a free draw, so some of those winners must be really picky.

a remarkable number of lotto winners end up broke........

Given the actual odds of the Lotto, buying a ticket is prima facia evidence that one doesn't have the basic skills to manage money. IMHO

[kdh]

Given the actual odds of the Lotto, buying a ticket is prima facia evidence that one doesn't have the basic skills to manage money. IMHO

The expected gain is negative otherwise lotteries wouldn't exist as is the case with Las Vegas gambling. But I can imagine a "utility" for some people that has a lottery ticket every week a value given the chance and hope, though tiny, of having financial independence.

About wealth providing "bigger and better." I always think of the people who sailed in when we were anchored at Third Beach once. They saw us, said "Nice boat, we got ours on Ebay!," which was obvious. There was a breathtaking harvest moon that night, the kids on the dilapidated boat were jumping in the water naked. Pure joy for all of us.

[kdh]

By the way, I'm a gambler for a living. I pick stocks for endowments and foundations.

Outside of picking stocks here's everything I know about investing. Buy risky assets while paying low fees. Stocks in developed markets globally do the job well. Use low-fee index funds from Vanguard or elsewhere, say 60% that tracks a US index and 40% that tracks a non-US developed market index. Try to buy when everyone seems to think the world is ending so is selling. Don't sell.

[Orestes Munn]

By the way, I'm a gambler for a living. I pick stocks for endowments and foundations.

Outside of picking stocks here's everything I know about investing. Buy risky assets while paying low fees. Stocks in developed markets globally do the job well. Use low-fee index funds from Vanguard or elsewhere, say 60% that tracks a US index and 40% that tracks a non-US developed market index. Try to buy when everyone seems to think the world is ending so is selling. Don't sell.

OK, there's "gambling," very broadly defined, and there's habitually taking astronomical sucker bets because it feels good.

[kdh]

OK, there's "gambling," very broadly defined, and there's habitually taking astronomical sucker bets because it feels good.

Of course you're right. Sometimes I wonder if for the habitual gambler it's simply that the joy of winning more than makes up for the anguish of losing. Classic Tversky/Kahneman loss aversion says the opposite is usually true.

[kimbottles]

By the way, I'm a gambler for a living. I pick stocks for endowments and foundations.

Outside of picking stocks here's everything I know about investing. Buy risky assets while paying low fees. Stocks in developed markets globally do the job well. Use low-fee index funds from Vanguard or elsewhere, say 60% that tracks a US index and 40% that tracks a non-US developed market index. Try to buy when everyone seems to think the world is ending so is selling. Don't sell.

Yup, that is pretty much what I have done, low fee Vanguard Indexes, that and a portfolio of real estate.

Oh, and I have invested in a wooden sailboat; which is the best of all of my investments for delivering happiness.

[Orestes Munn]

OK, there's "gambling," very broadly defined, and there's habitually taking astronomical sucker bets because it feels good.

Of course you're right. Sometimes I wonder if for the habitual gambler it's simply that the joy of winning more than makes up for the anguish of losing. Classic Tversky/Kahneman loss aversion says the opposite is usually true.

If I remember correctly, intermittent reward at the right frequency, increases dopamine release during the expectation phase and that's what keeps the gambler coming back. There is also some understanding of the physiology behind "chasing" losses, which I was never quite able to follow. The strange thing for me is that all of this stuff evolved to maximize survival in a partially predictable world, but it's so easy to fool.

[cap10ed]

We had an oiler on our ship called Vegas. I asked him how he fared over the winter gambling in Las Vegas. He replied " Not to bad actually. I drove down there in a $5000 K car and came home in a $150,000 Greyhound"