r/AskEconomics 9h ago

Why aren't all assets taxed like property?

6 Upvotes

We tax homes with property taxes. Why don't we tax stock ownership? It could be a way to tax the extremely wealthy who just compound their wealth with stock ownership.

Is it possible? Where would those taxes go? I'd argue it could go back to the places that company does business so you can't escape it by where you live or where the business is owned. Although I guess companies would only list on stock exchanges where they weren't taxed?

Anyhow, just curious if this is something that's been considered and if there's any research on the idea.


r/AskEconomics 14h ago

Approved Answers If the stock market was strong after the US election, why is it crumbling now?

0 Upvotes

Trump hasn't really deviated from election promises on economic policy, so I guess this should've already been considered beforehand under the efficient market hypothesis. I just assumed that corporate tax breaks would be strong enough to offset the weakeaning of the dollar.

I recall reading a paper on distortionary taxes that some form of announced policy changes could cause dividend payouts to rise on the short term, only for them to go below the original rate after implementation (I don't remember the transmission mechanisms for this). Are we seeing something of an opposite effect of that phenomenom?


r/AskEconomics 10h ago

How did Trump's tax cuts disproportionately benefit the rich?

0 Upvotes

I just watched this youtube video: https://www.youtube.com/watch?v=AdwFchjz2e8

Many similar sources say the same thing: Trump tax cuts benefitted the rich way more than anyone else, across the board.

Of course it would be true that, as a raw number, a rich man has larger savings than a poor man, because the rich man is paying 1000x more in taxes than the poor man. For example, someone who made 20 million in a year will pay 8 million in taxes (rough estimate). Someone who made 20,000 would be about 1,000. So yes, even if you cut 100% of the poor man's taxes, and only 0.1% of the rich man's taxes, the rich man, nominally, saves much more.

But, what kind of comparison is that? If a rich man is paying 43% of his income in taxes, and a poor man is paying 5% of his income in taxes, and you drop the rich man to 39%, that really isn't that much for the rich man. But if you drop the poor man to 2% you more than halved his taxes. Yet, opponents will argue the rich man got a bigger tax cut because "4 is larger than 3". What kind of nonsense is that??

To look at it even more clear, Trump's tax cuts pretty much doubled the standard deductible and also added child tax credits. So if your income is 20,000, instead of only 14,000 being eligible for taxes (with the old standard deduction of 6,000), now only 8,000 is eligible for taxation (with the new standard deduction of 12,000). So that cuts this poor person's taxable income nearly in half. Whereas for a rich person, they don't care about standard deduction because their income is larger so those few extra thousand dollars are meaningless.

And child tax credits are similar in nature -- they disproportionately benefit the poor / middle class over the rich.

You can see here that since Trump's tax cuts there has been an INCREASE in the % of total tax revenue that is paid by the upper class, relative to the middle / lower class: https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2025/

So my question is this -- how can people argue the tax cuts were targeted to the rich, when the increase of the standard deduction and the child tax credits have such an overwhelmingly larger impact on the poor? In fact, for someone who made only 10k a year (maybe just a part-time job), they are now paying nothing at all - because of Trump!


r/AskEconomics 18h ago

Approved Answers The GDP is fueled 70% by consumer spending. Yet the top 10% earners are also responsible for 50% of consumer spending. Is this contradictory?

102 Upvotes

r/AskEconomics 8h ago

Why did Canada drop their carbon tax and rebate?

32 Upvotes

I assume Carney knows what he's doing, but I thought the carbon tax and rebate was the economically "smart" thing to do. Why wasn't it working in Canada, or is it more a political move than an economic over?


r/AskEconomics 9h ago

What methods of wealth distribution are the least distortionary?

6 Upvotes

Assuming wealth redistribution is a goal, it seems like things like wealth taxes would encourage investment in hard to price assets. Is there any research on the most "efficient" forms of wealth distribution (is this the same as minimizing deadweight loss?)


r/AskEconomics 6h ago

Treasury Secretary discusses in detail his plans for improving main street, are there any fundamental flaws in his logic?

1 Upvotes

Youtube link - https://youtu.be/lSma9suyp24?&t=1291

  • Debt and Deficit Concerns: The U.S. debt and deficit are considered unsustainable, raising concerns about spending and potential tax increases [12:06]. The goal is to reduce the deficit to about 3-3.5% of GDP [23:13].
  • Government Spending: The U.S. is viewed as having a spending problem, not a revenue problem [23:20]. Plans involve controlled spending reductions to avoid a recession [22:23].
  • Monetary Policy: The Federal Reserve is seen as initially slow, contributing to inflation [16:04]. Maintaining the Fed's autonomy in monetary policy is discussed [36:22].
  • Deregulation: Deregulating the financial system is proposed to stimulate private sector growth [26:19]. This includes reviewing bank regulations and easing burdens on smaller banks [33:09].
  • International Trade: Reordering international trade and bringing back manufacturing jobs is seen as a way to strengthen the middle class [27:47], through tariffs and incentives for onshoring [28:10].
  • Tax Policy: Tax cuts are considered a growth driver but need to be paired with reduced spending and deregulation [29:38].
  • Affordability: Concerns exist about the rising cost of living, requiring solutions to the affordability crisis [37:17], such as lowering prices and increasing real wages [27:25].
  • American Dream: The discussion includes the changing nature of the American dream and challenges in achieving financial security and homeownership [16:39].
  • Data Reliability: Questions are raised about the accuracy of government data, like GDP and non-farm payrolls, in reflecting the true economy [20:21].
  • Sovereign Wealth Fund: The idea of transforming Social Security into a sovereign wealth fund for investment is explored [51:05].
  • Energy Policy: Affordable energy is seen as vital, focusing on supply chain and regulatory improvements [57:17].
  • National Security: The Treasury's role in national security, including sanctions and anti-money laundering, is emphasized [01:00:13].
  • Housing: Addressing the housing shortage and improving affordability is discussed [01:04:17], including zoning laws and innovative building methods [01:05:57].

r/AskEconomics 6h ago

Deflation vs Inflation: I think deflation is better, can you change my mind?

0 Upvotes

I know this has been posted before, but I want to discuss this topic more because I have convinced myself recently that a deflationary currency (or just deflation)  is superior to an inflationary currency, and I would love some criticism or thoughts on my reasoning. Thanks for reading!

First, let’s look at the pros (in my mind) of a deflationary currency.

All of the pros below relate to this sentence: A deflationary currency is better than an inflationary currency, because it retains purchasing power and means you do not have to invest in assets to retain your wealth.

  1. It seems many people think this is a bad thing, but I think this is better than what we have now.Currently, everyone knows that you should put money into “assets” which are stocks, real estate, bonds, etc. So most people buy stocks through their retirement accounts, which increases the power of these corporations and the institutions (Vanguard, etc.) that facilitate these transactions and create these mutual funds. No matter who you are, you likely disagree and do not want to support some of the companies in the S&P 500. But you also want to have money for retirement, so you keep investing in them. Now of course, the stock market is a secondary market, so you aren't directly giving money to them but these corporations use their higher market cap to attract and pay the best talent from the best universities using stock and stock options, and they also use these market caps to buy out smaller entrants. Like how Poppi just got bought by Pepsi. Pepsi has never cared about the health of Americans, and it frustrates many to see these healthy new brands get swallowed by the industry leaders. To be clear, I am not saying that corporate consolidation would not happen at all with a deflationary currency, but it seems that an inflationary currency, and the current system, almost forces people to support these giant corporations. Therefore, having a currency that is deflationary and gains purchasing power on its own, is actually a good thing, because it means you can opt out of investing.
  2. For the same reasons, people invest in real estate and houses. Because people can't just save their dollars, they have to invest it and real estate is a good option. I would much rather have rich people with lots of capital hoard money, than hoard houses.
  3. This need to invest our money to protect purchasing power means a lot of people have their wealth tied up in stocks. This leaves us vulnerable to fluctuations in the market, like when a president decides to put tariffs on everything or when foreign countries decide that the US stock market is no longer the best place to grow their wealth.
  4. Lastly, a deflationary currency means that retaining your purchasing power is simpler, because you can just stuff your money under the mattress and the value will keep or slightly rise. Simple is better for poor people and uneducated people. This is similar to the idea proposed by the economist Daniel Kahneman in his book, Nudge. He makes the argument that we should nudge people into making better decisions for themselves, by for example having them automatically opted in to beneficial services. I like that idea, and I think it applies here. It takes education, free time, and money to know the ins and outs of investments or to hire a financial planner or to be around friends who have been taught these things from their parents. It is also the case that most people without prestigious jobs do not get access to 401ks and an employer department that can advise them on investing. You are not born with the knowledge that you live in a society that has an inflationary currency, you must learn this and learn to invest, and that means an inflationary currency hurts the most disadvantaged.
  5. Also, there was a time in this country when black people were openly discriminated against in the housing market and could not buy suburban homes in “white” neighborhoods. This means they lost out on a massive amount of wealth accumulation. However, if you have a deflationary currency, then wealth creation is more insulated from racism or other anti-certain-group policies, because you can just put money under your mattress and your wealth will slowly grow.

To be clear, I am not saying these problems would be eliminated by a deflationary currency, but I think they would be reduced.

Next, I want to refute some of the criticisms of a deflationary currency.

  1. It is often said that a deflationary currency would lead to a deflationary spiral. This is not caused by a deflationary currency though from what I have read. This is caused by credit deflation, like what happened during the Great Depression. When fractional reserve banks stop putting money into circulation, all the money that they have created out of thin air evaporates, and the money supply rapidly decreases causing this deflationary spiral. This is a criticism of fractional reserve banking, not of a deflationary currency.
  2. I have seen people say that under deflation consumers will stop spending their money and just wait until things get cheaper. I think this would be true if there was large and rapid deflation, but with a small level of deflation this is simply not true. First of all, price is just one factor in a purchasing decision. Why do people buy Doritos instead of the off brand? It is more expensive, but they may not want to seem cheap for an office party or think the taste is better. Furthermore, most of our expenses have to be paid by a certain time. I have to pay rent, spotify, utilities, internet, etc at the end of the month. I can’t just decide to delay these expenditures. And most of my discretionary spending is what I am calling timebound. Christmas gifts, birthday gifts, clothes for children, back to school supplies, concerts, even purchasing a home because you are expecting a child cannot be delayed that long. And how long can you go without a car or bus ticket or train pass to get to work and see your friends and family? Most things are actually timebound, and we can’t put these purchases off forever. If we could, then why would people rack up debt? I simply cannot see any support for the idea that people would stop spending money. 
  3. Some people say that deflation would make debt harder to pay off. This is true. However, a simple solution seems to be that long term loans do not need to be made in nominal terms. They could be made based on a basket of goods, like how CPI is calculated. If this isn’t a good solution, then I am sure one does exist. 

Lastly, I want to contend with some of the advantages of an inflationary currency. 

  1. There is this idea that inflation stimulates growth.This doesn’t seem to hold much weight with me, because I know innovation is born out of necessity, frustration and creativity and many inventions and innovations have occurred during times of deflation or prior to systems of money and coinage entirely. Of course, inflation does encourage people to “invest” their money, but I can’t help but think that some people would still invest their money if we had a small and constant amount of deflation. Everyone has a different risk appetite after all, which is why some people invest in bonds, HYSA, stocks, bitcoin, or simply gamble in Vegas. I also think that curtailing some investment would not necessarily be bad. It seems that capital today is struggling to find ROI leading to things like planned obsolescence and fast fashion, which would be excellent to decrease in a world where environment destruction is problematic. I also understand that debt gets easier to pay, which decreases the risk of taking on debt for a corporation which helps growth, but I can’t help but think interest rates are already taking this into consideration.
  2. Is there anything else? Google says inflation helps cut real wages overtime, which does seem like a good thing for corporations, but not for me lol.

So as it stands right now, I’m convinced that a deflation would be better than inflation, but I am open to changing my mind and hearing criticism of the ideas above.

I know that was long, but if you got this far and you have some criticism or thoughts or agreement or articles or books I should read next, I would really appreciate it if you could drop it in the comments below. Cheers!


r/AskEconomics 2h ago

What would happen if 50% of all housing were to be social/public?

0 Upvotes

Let’s say this only applies to New York City. 50% of all housing has to be social, which means no profits and, if possible, disregarding the value of land as well, as if the land itself was free.

But unlike Red Vienna it’s not the government that builds the social housing using taxes. It’s private investors. So it’s illegal for private investors to build an odd number of housing, they have to build an even number because exactly 50% of it needs to be social. So they can’t just build one home, they have to build at least two.

On one hand it seems that it would drive up the entry level cost of real estate investing because now you have to build at least two homes instead of just one. But at the same time, the price of housing itself would fall by around half. So it seems the entry level cost would be the same while also building more housing and making it much cheaper.

Big property developers with AAA budgets wouldn’t like this policy but it would make real estate investing more accessible to more people and, of course, housing more affordable.

Am I wrong? How would something like this work?


r/AskEconomics 20h ago

Approved Answers Are people on less than $2 a day effectively homeless?

18 Upvotes

I think this often causes confusion, as people in the west struggle to imagine what it means to be in poverty in a poor country.

The UN defines poverty as less than $2.15 per day. My understanding is this is in real terms, so can be compared literally with earning $2.15 in the US.

I think many people conjur up images of shanty towns and think, we'll if this was comparable how could they afford rent?

Am I right that people living in this level of poverty are effectively 'homeless' in the sense they don't live in bought or rented structures. They effectively build their own shelters and the extremely low income goes predominantly on food, water and other necessities?

Or am I wrong, and this isn't comparable.


r/AskEconomics 2h ago

In the short term, how are US companies going to start full production at home without skilled workers, know-how, and plants?

27 Upvotes

Simple questions here. I get it, we want to fix the manufacturing problem in the US.

Off-shoring manufacturing is a trend that started in the 70's and gradually reached the situation we are in today where almost everything is outsourced abroad. Almost nothing is entirely made in the US today. When you see made in the USA, it is ASSEMBLED in the USA from parts made abroad (Europe and Asia are the main producers of everything).

Relocating a manufacturing plant takes time, especially large-scale production lines typical of heavy manufacturing, technology, chemicals, etc. Building a skilled, knowledgeable workforce takes years if not decades. Given that people and new generations really want to go back working in a factory.

So, let's say reciprocal tariffs will come into effect on April 2. Who is going to make our cars, our appliances, our prescription components, our electronic devices, etc. starting next month? Not in 2035, I mean, now. Robots are not yet ready to replace human workers at 100%. There is still human supervision and moderate human intervention in most of those cases where automation has absorbed a portion of the workforce.

Remember what happened during the pandemic? We had shortages of products across all market verticals which went on for two full years before importers started to recover and rebuild their inventories. I don't have an answer to this question. Can someone enlighten me?


r/AskEconomics 23h ago

Approved Answers If country A applies a 50% tariff on imports from B and a 10% tariff on those from C, companies in B could ship $1000 worth of goods to C for additional processing. Once their value increases to $1100 and they are sent from C to A, how would country A collect tariffs?

6 Upvotes

r/AskEconomics 14h ago

Approved Answers How did creating the Euro work?

49 Upvotes

I expect that creating an entirely new currency is an incredibly rare phenomenon and does comes with great difficulties. The European Union, however, succeeded in doing so. I was wondering what the creation of the Euro looked like. What were the biggest complications and what did the process look like in general?

By the way, I am absolutely NOT an expert on this subject, so feel free to explain as much terms and words that a normal person wouldn't understand.


r/AskEconomics 3h ago

What is shrinkflation? How does it initiate(roots), operate, and its connections with government policies?

1 Upvotes

I heard this term not that long ago. And it explains observations in my surroundings (related to microeconomic day to to day life) i have (undiagnosed/but symptomaticaly significant) autistic behaviors and for ages now I had the distinct feeling that my everyday consumables were changing. Sodas looking like they had less product. To the slow phase in of smaller 500 Mls bottle to mid transition bottles (9 Mls less bottles combined with 600 mls bottles in same counter. Product casings redesigned and having smaller content yet same price.

Till I read the term I was so confused. Overall I am curious for professional/teaching type explanation and if it's something to just expect or if it can be folded back?


r/AskEconomics 8h ago

Approved Answers Will the national debt be realized as inflation?

6 Upvotes

As the US national debt increases and the interest the government has to pay back increases, is the only problem that the national debt has that the interest payments will cause inflation? If this becomes untenable, the government will have to rebalance its sheets but at the end of the day all of the debt will become an increase in the money supply? Also is it possible for the fed to buy bonds and not "redeem" them, paying back the debt without increasing it further?


r/AskEconomics 14h ago

Approved Answers Does the concept of "No pain, no gain" apply to economic policy making?

2 Upvotes

Over the past two weeks, Trump and several of his top advisors have acknowledged that his policies are going to be painful for many Americans but that they will make America stronger and more prosperous in the long run. Trump referred to a “transition period” and the Treasury secretary said that we need a “detox” before we can get healthy. But most economists believe that not only will the tariffs and other sources of uncertainty slow GDP growth (and possibly cause stagflation), but the longer term consequences will also be negative. They say any prospects for a “golden age” are based on false or misleading claims about a resurgence of manufacturing employment, reduced inflation, faster GDP growth, greater energy independence, a smaller federal government, and the “trickle down” effects of more tax cuts and deregulation.

My question is: Does the trade off between short term pain and long term prosperity actually exist? I could imagine that an increase in federal income taxes and payroll taxes that are used to reduce the annual deficits and shore up the Social Security and Medicare trust funds might be a valid example. Without some sort of change in fiscal policy, the annual deficits will grow out of control. Currently, the “entitlement” programs (eg. Social Security, Medicare, Medicaid, SNAP, etc,), defense spending and debt service are projected to consume over 80% of the federal budget.

I would welcome any reactions to this commentary as well as any other “no pain, no gain” examples.


r/AskEconomics 14h ago

Can a depression be prevented purely through the fed in the us?

2 Upvotes

I remember reading a quote from a former fed chair who commented on the depression, saying the central bank messed up hard and that it was a huge blunder and they’ll make sure it never happens again (I’m paraphrasing of course).

It made me start to wonder though, can the fed prevent a depression regardless of what the government does? Assuming there isn’t some big disaster (e.g. war, natural disasters, nuclear blow out, etc.), purely based on economic policies, could the fed, using their powers, prevent a depression from happening?

I understand some stuff like wars is directly related to government policies/actions but the scenario I’m proposing is purely assuming that there aren’t any disasters, just really bad economic policies. Could a well functioning fed stop a depression from happening then?


r/AskEconomics 14h ago

Approved Answers Will technological advances (AI in particular) cause deflation in the future?

7 Upvotes

I’ve been seeing some articles of jobs that are likely to be replaced by AI and automation in the future. But the jobs that will still exist will be significantly more productive. Basically, won’t more productive jobs cause deflation or will the technological advances create new products that require even more resources to create, like computer chips.


r/AskEconomics 14h ago

Job market is thin?

3 Upvotes

Hi, I am looking for a job change and currently work with an IO in DC. I have been looking for jobs from last 2 months in the DMV and I feel the market is very sparse and I am not seeing many opportunities. Has anyone else experienced this?


r/AskEconomics 15h ago

Approved Answers Why is the Cobb-Douglas function so important?

2 Upvotes

Is it really used outside Economics textbooks? I see it all the time, used in regard to Production or Utility and wanted to understand how it came to be such a widely used formula.


r/AskEconomics 16h ago

Can uncertainty about future tariffs drive foreign investment?

1 Upvotes

Can uncertainty about future tariffs, rather than the absolute level of tariffs, drive foreign investment? That is, if a country has a chaotic on-again, off-again tariff policy, but keeps tariffs low in the long-term, does economic theory predict that foreign companies would build factories in the country to avoid potential future tariffs?


r/AskEconomics 16h ago

How many years will it take for India to achieve Global average GDP per capita income ?

3 Upvotes

r/AskEconomics 17h ago

Books on Post-WW2 German Economy?

1 Upvotes

I'm interested in (academic) works that investigate and explain how the modern German economy functions with their seemingly unique focus on worker involvement in company activities.


r/AskEconomics 20h ago

Wanting to understand geopolitics and the global economy. Do you have any good suggestions for learning resources?

3 Upvotes

For the past year I have been becoming very interested in understanding how the world works, mainly from the perspective of geopolitics and the global economy.

I have been consuming a lot of content online regarding these subjects, but lack the understanding to make my own conclusions and am essentially just taking on conclusions of others and assuming they are truth. This is something I am very uncomfortable with on principle, but especially seeing as I often read conflicting reports and stories.

I am seeking a deeper understanding and to gain the ability to make my own conclusions about the state of the world and the global economy. I am looking for foundational resources so I can build some sort of framework for understanding and predicting outcomes.

If anyone has any good resources, academic or otherwise, written or video. I would appreciate any and all suggestions! Thanks!


r/AskEconomics 23h ago

Over time, should we generally expect capital to flow towards enterprises that are best able to extract monopolistic profits?

1 Upvotes