Re:The “Sharing Economy” Is the Problem
by dragonwriter on Tuesday July 07, 2015 @01:48AM
(#9843818)
> And so if I consume immediately, I get $80 worth of consumption for every $100 I earn, whereas if I invest I consume only $77.2 of consumption for every $100 I earn. That's the core of Sumner's argument.
With the numbers you gave, the first number was correct ($80 of consumption on $100 in pre-tax labor income), but with investment the actual number is $88.75 on $110 of pre-tax labor and capital income, or $80.68 per $100 of income.
Re:The “Sharing Economy” Is the Problem
by grinnbearit on Tuesday July 07, 2015 @03:22AM
(#9844039)
No, yummyfajitas' numbers are right, given a 25% tax rate on capital gains and a 2.8% discount rate
consuming immediately gives you 80% of income
assuming you invested all of it, 80$ and made back 10$ which was then taxed at 25%, you're left with 87.5$ out of 110$ in total income.
consuming after a year gives you 87.5/110 = 79.5% of income, 1 year in the future. After discounting at 2.8%, you're left with only 77.38% of income.
In that case, you'd rather splurge than invest.
Re:The “Sharing Economy” Is the Problem
by yummyfajitas on Tuesday July 07, 2015 @07:25AM
(#9844736)
The NPV of $88.75 in future consumption is $77.2 (assuming the investment achieved average returns, which the average investment will).
Comparing dollar values of money in the future to dollar values of money in the present is simply incorrect.
And so if I consume immediately, I get $80 worth of consumption for every $100 I earn, whereas if I invest I consume only $77.2 of consumption for every $100 I earn. That's the core of Sumner's argument.
Do you have any argument beyond playing with definitions and arbitrary divisions of wealth as to why a person who invests should consume only $77.2 while a person who consumes immediately should consume $80.0?