"I’m scared. ... the income gap will most likely be resolved in one of two ways: by major social unrest or through oppressive taxes, such as the 80 percent tax rate on income over $500,000"
I stopped reading here. Try again. Current top income tax rates are insanely slow by historical standards. They were 90% in the 40s and 50s and 70% in the 70s [0]
I had s similar reaction to this example of an "oppressive tax". This is just the sort of taxes that were in place when America was taking over the world. It's not oppressive. It's a good idea. It hurts the oligarchs, it helps the 99 percent, which is who drives the economy.
I have never understood the notion that taxes at or above 50% are at all ethical, and yet some argue openly for 80%+.
The idea that the government is entitled to more of someone's earnings than they are is shocking. To then suggest the government is entitled to 4 out of every 5 dollars a person earns is, quite frankly, beneath consideration in my eyes.
What right do you, i or anyone else have to call this anything but theft?
Tax brackets. The government isn't entitled to 80% of what _any_ person earns, just a portion of what the _richest_ earn.
Looking at GP's PDF for 1945:
Income Take home
$10,000 $7,060
$20,000 $12,140
$50,000 $21,680
$100,000 $29,680
$200,000 $37,180
$500,000 $55,180
Of course, this is for income, the people being taxed the highest rates will also have capital gains.
Inspired by michaelchisari below, here's the same table in 2015 $$
Income Take home
$132,576.67 $93,599.13
$265,153.33 $160,948.07
$662,883.33 $287,426.21
$1,325,766.67 $393,487.55
$2,651,533.33 $492,920.05
$6,628,833.33 $731,558.05
> The government isn't entitled to 80% of what _any_ person earns, just a portion of what the _richest_ earn.
Astounding double standards. Some numbers: if Ted makes $100,000/yr and Jim earns $1,000,000/yr and both are taxed at 30%, Jim is already paying $270,000 _more_ in taxes every year. Even at the same tax rate. Crank Jim's rate to 90% and we are looking at an $870,000/yr difference! Through what greed can we morally justify such insatiable lust for the money other's have earned?
Furthermore, the capital gains argument is rife with unintended consequences. It, quite literally, disincentives the wealthiest folks from innovating and earning money through economically productive means. Instead, we send the message "if you insist on earning money by working like the rest of us, we are going to take 80% of it. But, if you want to rest on the laurels of your investments and be otherwise unproductive, by all means. The choice is yours."
It terrifies me that this mindset is the majority opinion these days.
I am aware how they work. I get that all earning up to a point are taxed under bracket x, and then after that are taxed at bracket y, and so forth. Unless you mean something else in which case i welcome you to explain where i have erred here.
If that is in fact what you mean, it still changing absolutely nothing. The effective tax rate on folks in these upper brackets would still be enormous.
But i guess piggybacking baseless comments is an easy way to avoid justifying these stances. I still have not seen someone say how they are justified in taking that much money from people while feeling ethical.
My POV: Even with extraordinarily high taxes at the higher tiers of the brackets, is that not enough for the rich to live quite well? IFF funding government (for example, if an effective basic income program was in place) was better than everyone doing their own thing, then I see no big loss from flattening the take-home income curve. If they want to live extravagantly, income tax isn't going to be a big hurdle, which is why I mentioned capital gains as well.
When kids born today are unable to afford to go to college, while the same people who are against +80% tax were born in an era when tax was way higher at +90% that helped pay for their education and create the infrastructure that allowed them to earn their wealth.
"Surplus Wealth is a scared trust which its possessor is bound to administer in his lifetime for the good of the community " - Andrew Caregie.
Guess what if you think the government is treating you unfairly then be prepared when society bifurcates and returns a stack error in the form of "bolsheviks".
Having little choice but to sign yourself up for a mortgage-sized debt that can't be discharged isn't the most obvious definition of "affordable" I've ever encountered.
I'm defining "afford to go to college" as "have enough money to actually attend if they choose to". The number of people who actually attend is a lower bound on this number.
A quick google search yields an average cost of $9k for a state school, $22k for out of state, and $31k for private. Maybe the expensive side of college is "mortgage-sized" debt, provided you are comparing to the cheapest mortgages.
Little choice? There is a wide spectrum of choices for higher-education in the US.
While I think the idea that everybody should go to college is fundamentally harmful, I do think that everybody who wants to should be able to go to college. On the other hand, taking out $200,000 in loans to study comparative literature at an ivy league school, and then demanding that the universe provides means to pay it all back is ridiculous. People should buy into their education with a long-term plan. Most people cannot afford the luxury of majoring in an unprofitable subject while incurring enormous debt.
I think you'll find few who disagree that there's income inequality (it will always exist, however, it's at extreme and unsustainable levels currently). However, hiking up taxation to extraordinary levels is absurd.
It's a trend to try and take from the rich and give to the poor. If you truly want more distributed income across the people (I wouldn't call it income equality because that's impossible.) then you'll find instituting more taxation does little to fix that. Most of the 1%'s wealth doesn't come from their income. There's a reason many CEOs take $1/year as salary.
The entitlement system is absolutely broken. I'm all for a smaller government, but if we could replace the broken system with some sort of basic income (and that idea seems quite contrary with my political beliefs), I doubt it'd cost more than what's currently being paid out -- and it might actually be better.
Many individual billionaires in the US donate more money to charities in one year than most americans will earn in their entire lives. Think about that for a moment. And this is in addition to the top 10% of americans already paying 68% of all the taxes.
Your inclusion of Mr. Carnegie's quote is quaint. He was freely entitled to his own ideas. The beauty of freedom is that those who disagree are empowered to amass and donate their money as they personally see fit. It is neither the job, nor the right, of the populace to spend the money earned by any individual, regardless of their level of success.
I am not arguing for no taxes. I am saying that an effective tax rate above 50% is theft. Taxing more successful people at multiplicatively higher %'s is lunacy. They already are paying way more than lower income folks at the same rate.
If your argument is that more successful people consume more resources and thus owe the government a greater debt, then i would argue we should be taxing consumption more. Not income.
> i would argue we should be taxing consumption more
Consumption tax disproportionately affects the poorest citizens. It is a non-workable solution.
Consumption is what drives the economy, disincentives to consumption would hurt the economy as a whole (causing the wealthy to lose money via investments).
Further, a citizen has no hope to pay off the debt that it owes the government for the things i listed previously. There is no tax rate at which you would effectively pay back the government for its investments in society.
The yearly budget of the US Department of Transportation alone, is 77 billion - that's just to keep federal roads drivable.
If you think theres some tax level at which you have paid for the initial investment and upkeep of the federal highway system, by all means share it here, i would love to know what number you think is 'fair' since its 'your money' even though they aren't 'your roads'
You have an extremely entitled view of what "fair" is.
It also created a larger market for hugely expensive cars and other luxury items. The 1970's had a 70% tax for the richest. In 1982, that dropped to 50% and coincidently was when the boom in excess really got started.
I don't think it's that simple. Oligarchs will go live in another jurisdiction which taxes less. Rich people have alternatives, so unless you have a global tax agreement of some sort, I don't think this is viable.
Potentially, one could end up collecting fewer tax dollars because they are "living" in the Bahamas or Cayman Is.
Truly rich people tend to invest their balance sheet mostly illiquidly in trusts and pay themselves a low-as-possible allowance from low interest, short-term loans against assets. Personally, they don't tend to own much directly to avoid the taxman's reach and for liability too.
The highest one I see is a 94% tax on income over $200,000 in 1945. First of all, that was towards the end of a World War during which we developed an entirely new kind of bomb. Nothing our government is currently doing requires that level of commitment from its citizens. Second, that income bracket in 1945 would be at $2.676 million today [1]. Even the top 0.1% of US incomes today start at just $1.6 million [2]; a tax bracket like the 1945 one would have barely any people in it.
Nobody paid those rates. There were a ton of deductions available to reduce taxable income.
Also the top rate would apply to income over $5M in today's dollars (can't remember the exact number, but it was high). How much money do you think you can raise from folks making over $5M per year? The answer is not much, there aren't that many of them relatively speaking.
Also, if you include the earned income tax credit, low income folks are paying way less in taxes than they were back then.
I think your comment is a bit cynical, but I can't disagree. There are many ways to make money and if the gov't decides to tax one more highly, the money just shifts to the low tax routes. The gov't eventually clamps down and the process starts all over again.
Hell, the reason the US has employer sponsored healthcare is because there were wage caps during WW2. So what did companies do? Compensate with something other than wages.
That's misleading. Marginal tax rates on the highest tax brackets were nominally high, BUT there were way more deductions and loopholes. There was no Alternative Minimum Tax like there is today. A big part of Reagan's tax reforms was eliminating these deductions while bringing the rates down.
Also, America was the only game in town during those years. All of the competition was still recovering from WW2 and/or being suffocated by communist rule. And it was a single market the size of the rest of the Western world combined. If you had money, America was the place to invest it. Major technological breakthroughs, even when originating overseas, generally took off in the US.
On a moral note, I think that an 80% tax rate is oppressive. That money would otherwise be flowing into business investments & consumption, charity, and civil society, the natural institutions of free people.
> That money would otherwise be flowing into business investments & consumption, charity, and civil society, the natural institutions of free people.
What do you think the gov't does with it, burn it? 5 of the 6 startups I worked for wouldn't have happened without government assistance (DARPA-funded university project spinouts, SBA, government contracting.) Consumption is spending money. They government spends it, or give it to people who do (that seems to cover consumption and charity.) What is more civil than banding together to take some of the variance out of life?
> What is more civil than banding together to take some of the variance out of life?
Letting people decide how to spend their own money. Private charity is "banding together to take some of the variance out of life". Like all of the government's authority, taxation flows from the end of a gun. You can be imprisoned and fined if you don't pay what you owe.
> What do you think the gov't does with it, burn it? 5 of the 6 startups I worked for wouldn't have happened without government assistance
Government investment in certain sectors can be good, such as for fundamental sciences. But in general, private investment does better with the same amount of money. Even when government programs are well designed at their birth, the world around them changes faster than politics and bureaucracy can keep up with.
Stop taxing away so much income. Resolve the entitlements cliff that makes earning more than $12/hr untenable until breaking even at $38/hr. Back off the regulations that make inexpensive living practically illegal. Help people relocate out of high cost of living areas (NY Times location take note). Slash the red tape making business startups near impossible. Squelch the tort, liability, insurance and other laws making risk costs overwhelming.
You can't fix social problems by demanding capitalism be socialism.
Democratic Socialist parties have been in power in many Scandinavian countries for decades. The current systems evolved from Socialism - and Democratic Socialism really defines the modern, functioning form of Socialism -- a type of Socialism that provides a positive alternative to the unfettered Capitalism suggested by the original poster.
The ignorance of economic systems here on HN is just unbelievable. Scandinavian countries are very pro free trade and capitalist. They have that alongside a relatively large welfare system. That is not socialism. They are capitalist with few regulations and few state owned enterprises. It's shocking how the myth continues to persist among the economically uninformed.
Democratic Socialism? You have no idea what you are talking about and have clearly received this misinformation from a Bernie Sanders talking point (bless the man, but he is has done nothing to help rectify the broken American political lexicon.). The ideology that has pervaded Nordic politics for the past decades is Social Democracy, not Democratic Socialism. There is a very significant difference.
Denmark basically has the most indebted households on earth. Their economy hasn't expanded since 2007.
Finland has been in an eight year recession / stagnation. Their household debt to income ratio doubled from 2002-2012 or so. They've got a near 10% unemployment rate, which has been getting worse. Their economy hasn't expanded since 2007.
Sweden has done slightly better than those two, courtesy of market friendly reforms they performed a few decades ago. Prior to that reform, Sweden had several decades of terrible economic performance. Their household debt to income levels are also vastly inflated and unsustainable, nearly at 200%.
Norway is falling into a recession, taking the same commodity hit Canada and Australia are. Their economic success and much celebrated welfare state is almost solely dependent on the price of oil remaining high. There is now talk of having to cut into the sovereign fund to pay for deficits and spending demands. They have no other major exports to pick up the slack. Their GDP lifting off occurred directly in line with the price of oil soaring after 2001. They got rich on the back of irrational US policies around the dollar and the Iraq war. Prior to that, their GDP per capita was no better than the US or similar nations. Their household debt to income ratio is also dramatic, around 220%. That won't go well with a ten year slump in oil prices. If oil hangs around $40-$60 for ten years, Norway will look very different than it does today.
The picture is obvious: to maintain their standard of living, Scandinavia has been living far beyond its means to fake a better reality than the one they would otherwise have.
How does your anti-regulation theory explain that until the 70s wages and productive increased together, afterwards wages have stayed flat with all gains going to shareholders. Is the idea that after the Reagan revolution regulation has increased significantly?
Gold standard ended in 70's. Government could just declare money into existence, which was distributed into banking and drifted into the "easy money" of stocks.
One of the things he suggests --raising minimum wages and medium wages as well, I think would go a great way to curb the disparity... (the extreme example is the Seattle company having a $70k/yr minimum salary... but I'm also afraid this would make quite a few low-skilled people permanently unemployable as it becomes cheaper to invest in automation.
Young adults can be retrained, but there are lots of people in their 30s 40s etc. who don't have a secondary education some of which never finished elementary school in their native languages (thus illiterate). What happens to them? Do we let them find themselves back as they can't find a job and contribute to a high-skills economy?
It's only cheaper to invest in automation right now because those individuals who are paid to create said automation are paid well under what they should be.
What if software engineering, hardware design, and all the other positions required to create autonomous things were paid 3-4x what they are now?
Sure that wouldn't necessarily be the case in the future, but certainly right now it is.
We should stop looking at the bottom and look at the top. CEO take-home has increased by orders of magnitude, making the bottom completely untenable.
That company with the $70k min salary is hurling toward bankruptcy. Top performing employees quit because they got nothing while low performers got fat raises. More than quit had to be hired to replace them. Customers left anticipating increased prices. Stockholders sued CEO for incompetence.
I think part of the problem is that our welfare system is also very flaky. Take for example a single mother who isn't working currently which takes in some amount of money from SNAP and TANF. If she takes a job immediately of any wage her SNAP benefits go down by some percentage (sometimes it's small but sometimes it's very large as much as 80% as it was for my sister) and her TANF benefits go away immediately. There's no gradient or curve for the sun-setting of the benefits as her income increases. Even the 'workfare' program is a joke because it doesn't pay enough to make sure hypothetical single mother has enough to pay rent, groceries, and other necessities. And I'm not going to talk about daycare but it's clear that's FUBAR by default (it doesn't exist in the US at least as I know of as a benefit).
So, if the US were to fix bottom end of poverty it would have to be in restructuring and probably centralizing the dispensation of welfare. I think no state or local government should be involved in the administration of said benefits since the lion's share of the funds come from the US government itself (not from the budgets of the state or local governments). But the chances of that happening is about as good as my chances of winning the Power Ball.
Short version: USA welfare benefits are very generous until you earn about $12/hr, peaking at a total income approaching $80k/yr. Above that point of earned income, welfare is rapidly cut off, plunging total income until earned reaches $38/hr. It's stupid and few realize how broken the very generous system is.
Technically, that's how it works in Cook County. I imagine the situation is different places
It's so annoying that the system works like this. It takes all of 5 minutes to realize that these should be sliding scales. I bet making these sliding in a revenue neutral way would make a great talking point for the upcoming presidential elections
I agree. Penalizing people for working and getting a paycheck makes little sense. Wealthy people pay a much smaller tax rate than middle income earners due to low capital gains, which just adds to the wealth gap. I'd like to see a move away from income tax to a more equitable progressive consumption tax (necessities < consumer items < luxury items), increasing short-term capital gains (active traders, etc) and eliminating long-term capital gains (retirement, etc).
And bravo on your inexpensive living comment. I believe there's a huge need for reasonably priced housing, but zoning does not allow for it. I read somewhere about how mobile home parks are not getting built any more because middle class and up don't want to see them. It's a similar situation with nimbyism in places like San Francisco. This results in lower income folks spending the majority of their income on housing, widening the wealth gap.
What's interesting is it's the middle income and up who are screwing themselves in the long term by marginalizing the very people they depend on. What's even more interesting is that this situation is not the result of free market capitalism, but crony capitalism (aka. cronyism). The market is being manipulated by the wealthy who intentionally restrict choice of those who don't have a voice via the police power of the state (lobbying, etc).
I think something akin to a Land Value Tax is a better option since I believe both income and capital improvements should not be taxed be it a factory owner adding capacity to said factory or your grandma adding solar panels to the roof of her house. Property and income taxes are probably the worse offenders in terms of punishing people who improve their standing in life. But I doubt state and local governments will ever support LVT or anything close to it.
Am I supposed to take the article seriously? A rich guy suggesting that the first thing to do to solve the 1% having 50% of our wealth is "Government can provide tax incentives to business". It made me think of the quote from John Kenneth Galbraith."It is a strange idea that the rich work better if they constantly get richer, while the poor just work better if they get poorer".
We need to stop incentivizing the rich - they have been incentivized for too long already.
Amen brother- -the only way to solve this is a Guaranteed Basic Income across the board... With maybe a 50-60% tax on the rich, we don't need to go all the way up to 80%. They'll get it back probably in loopholes, and business breaks anyways.
I'm not sure exactly what you think will happen if the tax rate is 50-60%. My tax rate in California is already over 50%, and I just see my dollars funding the murder of lots of brown people.
Agreed. "Higher taxes" is a lazy excuse for just fixing how the money is being utilized in the first place. I'd agree to higher taxes, but only after political jurisdictions have proved they are good stewards of my money.
As a libertarian, basic income seemed quite against everything initially. However, if basic income were to completely replace the current entitlement system and all it's defects, I would absolutely support it.
It would cost considerably less and thus higher taxation would be less of a concern (as a way to stifle more money from the rich to the poor).
I like the basic income idea, but from what I've read it would cost considerably more than our current entitlement system, if it provided anything like the same level of benefits. The big reason, as I understand, is the number of young, low-income men who currently receive no support at all, but would under a basic income system. (Many low-income young women, by contrast, are already eligible for support, as they have children.)
Do you still like the idea if it's more expensive rather than less?
As with anything, details matter. There are no single definition of what basic income would entail. For example, would it truly be unconditional, regardless of income? I doubt those who make $200,000/year want a basic income cheque.
I think the difference would be in the efficiency and simplicity of such a system. Currently, the U.S. spends over a trillion dollars on state and federal welfare programs (spread across 126+ programs). However, the government spends it quite poorly and in many indirect ways. Giving them a cheque would certainly be better.
You're right in that it could actually be more expensive. I'm not sure what my stand on the subject would be in that case. Even with my libertarian beliefs, (and there are good arguments that basic income is perfectly compatible with libertarianism) I have to keep in mind of the realities related to the surging amount of poverty and that it's unsustainable.
The idea behind a basic income is that it is funded through a land value tax, not income tax. UBI is not an income redistribution scheme. It is a method for paying out to society the 'rent' charged to land owners for the privilege of owning land at the expense of the commons.
No, the idea behind a basic income is that it "is a form of social security system in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere." (from https://en.wikipedia.org/wiki/Basic_income).
One possible way to fund it is through a land value tax. Another possible way to fund it is through income tax.
What does that mean? Income, capital gains? Also, what prevents them from moving out of the jurisdiction? Instead, wealthy people should be encouraged to immigrate to the jurisdiction (brining their skills and capital with them).
What about getting rid of the loopholes, business breaks, income tax and move to a (very) progressive consumption tax? Then drop much of the current inefficient and convoluted entitlement programs and replace with basic income.
>Also, what prevents them from moving out of the jurisdiction?
Exit tax, having to give up citizenship.
> (brining their skills and capital with them).
What skills does the inheritance class have exactly? Why do we want to incentivize the hoarding of wealth?
What creates more jobs:
100k investment in your company
10k new customers for your company
>(very) progressive consumption tax?
So we want to provide disincentives to consume?
We want to incentivize saving money over spending money?
Seems like a negative for the economy - people will consume less, or they will consume elsewhere.
What will likely happen is, a wealthy person can avoid consumption tax by purchasing something lavish elsewhere, say purchasing a yacht in spain - then having it delivered to their US home.
How about buying a BMW in germany, having it shipped to the US.
This is something a poor person cannot do, but a rich person can. Especially on the types of goods we would most want to tax based on consumption (luxury goods)
So now you are hurting the local economy by depressing local consumption, hurting the poor the most by adding taxes to consumption, meanwhile the rich can easily afford to avoid taxes and have things shipped from overseas.
This is borderline fascism. A modern day Berlin Wall. Besides, the US already charges an exit tax for those who relinquish their citizenship (which is a growing trend - and it's not rich people doing it).
> What skills does the inheritance class have exactly?
I agree this is a problem, and a growing one. But I think you over estimate the % of wealth by inheritance vs. earned. Either way, I'd rather have these folks living, spending and investing that money in my community.
> We want to incentivize saving money over spending money?
Yes, people would consume less and save more. This is a good thing as thrift vs. debt would be encouraged. Debt payments transfer money the banking class and contribute to the up/down economic cycles.
> What will likely happen is, a wealthy person can avoid consumption tax by purchasing something lavish elsewhere
Not likely except perhaps on small portable items. Anyways, you can't just purchase a vehicle overseas and register it in the US due to differences in vehicle safety. And import tariffs can be modified to mitigate.
> ...hurting the poor the most by adding taxes to consumption...
This is why it must be very progressive. Basic necessities should be either tax free or close to it. And used goods sold person-to-person (non retail) should not be taxed at all.
In fact, this would be better for low income folks. Instead of taxes withheld from each paycheck, only to be returned at the end of the tax season but with no interest payed, they'd get all of their paycheck.
Overall, this encourages thrift and introduces more control over how much tax one pays. It also gives conscientious objectors a legal way to reduce their tax. That's pretty powerful if you're say against the war in Iraq or against planned parenthood.
Oh, and illegal immigrants and those participating in black market activities are instantly brought into the taxation system as there is no longer such a thing as income tax avoidance. There's billions on the table here.
Utopian ideas such as that are predestined to failure because human nature doesn't work the way you think it does.
You can raise taxes as much as you want. The wealthy don't care. Why should they? They can just leave. Look at the UK. They tax the bejesus out of people. Now count how many wealthy UK entertainers (selected for having acquired new wealth, as opposed to old family money that's more or less tied to the land) emigrate after they score.
So who's going to fund your basic stipend after you tax away the wealthy and the corporate taxpayer?
>(selected for having acquired new wealth, as opposed to old family money that's more or less tied to the land)
Those are exactly the people we want to tax higher.
the nouveau riche generally actually do something to earn money, the trust-fund/inheritance class produces very little benefit but captures vast amounts of wealth.
Also, London has ever increasing real estate costs specifically because of all of the ultra rich foreign investors buying property in London. That seems to run counter to your claim that rich people will flee anywhere with high taxes.
Also to leave the country, you would have to pay an exit tax. You will also have to relinquish your US citizenship.
Those are two costs that i would bet the vast majority of the wealthy would not be willing to pay, no matter what the current tax climate is.
Exit tax? LOL. Good luck collecting. The operative part of that term is EXIT.
Citizenship that guts your wealth is not worth having. Any number of countries that don't have such avaricious tax laws would be happy to have a new, monied resident to spend money there.
Absentee Landowners. I'll bet the Irish are laughing up their sleeves at England being reduced to foreign ownership.
And by that logic we should be giving WalMart and McDonalds tax breaks for their recent wage increases. The rich don't need more money. They need to be stopped from destroying our society.
Ok, let's deal with the root cause of why income inequality soared from 1995-2015:
The Federal Reserve debased the dollar, paying for wars, terrible government spending choices and entitlements that are ballooning. They also spurred numerous asset bubbles through bad policy choices. It's entirely understood that the Fed can cause asset bubbles by holding interest rates too low for too long. They've been aggressively using that understanding for the last six years.
The rich can deal with the dollar losing half of its value in a decade. Nobody else can. The rich have capital, and make a lot of money on the Fed's intentional asset bubbles in real estate and stocks. The S&P 500 - and the wealthy who own most of it - benefits massively from a debased dollar, as their exports boom - while most of America suffers from a vast loss of purchasing power.
The end of the strong dollar of the 1990s, is what began the era of dramatically increased inequality. It's not a coincidence. The currency race to the bottom, is really code for a decimation of the median standard of living. This is especially true in a country that consumes so much of its own manufacturing.
Debasing the dollar and sending commodities soaring benefited a very small group of people (Saudi Arabia, Canada, Australia, Norway, commodity investors). Who it didn't benefit: US manufacturing that is consumed domestically. The oil price boom of the mid 2000's, caused by the weak dollar, also harmed the US dramatically as deficits soared and the Middle East got uber rich. It acted as a huge wealth transfer to Canada as well.
The soaring inequality was caused by the Fed's horrendous, and repetitive monetary policy mistakes. You'll find people on the left go out of their way to evade ever pinning any blame to the Fed (it makes the welfare state possible through deficits and debt, so they love the Fed), and the people on the right don't want to talk about inequality at all.
What did QE accomplish? Primarily it reinflated wealthy people's balance sheets, and reinflated the housing market (which disproportionately benefits the top half in the US). The median net wealth of Americans still hasn't recovered, even with housing and stocks so high. Skeptics will claim QE helped to heal the economy, generate jobs and so on - as though the US economy didn't do that on its own for 200 years prior to the Fed utilizing QE.
I'm not saying you're completely wrong...but it is worth noticing that the middle class had growing prosperity until the mid 1970's - and since then has either stagnated or slid down. The GDP during that time was rising - but going disproportionately to the wealthy. So it is worth examining other factors in the change - I would argue that "debasing the currency" becomes no more than an occasionally contributing factor.
I'll suggest the change is the globalization of the US economy. The US effectively added a billion low income workers to its economy, and that group has seen large relative gains in income over the past few decades. Some of those gains were, as predicted, effectively a transfer of wealth from the US middle class. Although newspaper articles about globalization are now relatively rare, it is a day to day reality that I'm sure many HN readers live and breathe.
While the massive destruction of poverty in the developing world has been an unqualified good, it was no secret that the trade-off was stagnating wages in the developed world until the developing world 'caught up'. There has been a reduction in income inequality, but it has been at the global scale. The US is not a gated community like Scandinavia. The US is deeply embedded in the global economy. Any attempt to ignore the global economic perspective will be misleading at best and ultimately futile.
I was recently having a conversation with some friends about what major technological changes we might see in the future. The idea was that when these changes happen, they tend to alter society in ways that couldn't easily have been predicted beforehand. It would have been hard to imagine the ubiquity of the internet or smartphones in our lives before they existed. So what could the next major change be? Self-driving cars on the scale where manual driving is illegal on city streets perhaps? That actually isn't too hard to envision. Something else?
One thought that came out of that is that a major change I would love to see, although not a technological one, is for a major economy to implement a workable guaranteed basic income. It's been a popular subject on HN, and does seem to be starting to gain traction in the 'real world'. While obviously there are issues to solve, it's something I see as really having a chance of working. _Something_ will have to happen to address the growing inequality as technology keeps moving us closer to a post-scarcity society, and a basic income seems to fit the bill.
Or perhaps it will be something else. But some kind of a transition to a post-scarcity society seems inevitable at _some_ point if the human race survives long enough, so maybe significant strides in that direction will be made in our lifetimes. It would certainly be exciting.
I know programmers are thrilled at the magic of modern AI but its very simple to tip it over even theoretically.
Self Driving cars are not even that good, they are better than the average and that is an immense amount of creative labour destruction. But if you look back at history there has been a greater amount of labour destruction both physical and mental.
Coming back to basic income.
Do you think the way we use resources in the modern world is anyway efficient ? Speaking from Physics we are still way off from having solved major problems in society.
Right now 1/2 of adults in the UK are on entitlement which puts immense debt burden on the other half.
Both US and Europe are heading in that direction.
Both US and Europe need a massive restructuring of their infrastructure if climate change is to be dealt with.
Not to mention helping african countries get on their feet.
Right now that burden is shared mostly be china who are helping build roads and other developed nations within africa like nigeria.
The faster we can get contraceptives to africa we can stop the problem of the african baby boom due to industrialization right at its toes. We know from data that the country of Nigeria alone will have 750 Million people by 2100.
These are real problems facing the globalized economy.
There also the problem of deflation.
Economically once the poor global south industrialize there will be immense downward pressure of wages for all forms of jobs.
We know what happened when 700 million chinese joined the global economy. What happens when the rest of the 3 billion join ? Most of them of younger age and would constitute higher labour productivity.
China as a country is already much more efficient - they have high speed rail links connecting their entire nation. No need to buy fossil fuels when all their transportation is powered via electric. which is generated by solar panels in the gobi desert.
They have one of the most sophisticated supply chain producing all our iphones and computers.
Now they are interested in doing the same in central asia which geographically is the most mineral rich regions on earth.
Yes all of this doesn't matter if you are in Europe where the population is low enough and the resources is high. But the cost of production will get lower and labour gets cheaper along with resources. We will end up with a situation where something in Europe costs significantly higher than produced in africa.
Basic income could absolutely create a better minimum for the poor (and everyone, really) if it replaces the current entitlement disaster. It would most likely be cheaper (edit: it might not be, depends on the details) and become much more efficient considering you're sending a cheque that would ideally have no conditions associated with it.
When large quantities of manual labor jobs or easily automated jobs are replaced, basic income, I think, would push that class of folks to a livable standard. Not much, but just enough. You'll have more people transitioning off the streets and into normal lives.
(Even as a libertarian, I say this, which at first, might be at odds with the philosophy but there are good arguments that make it perfectly compatible.)
Yes, exactly. A basic income would both make sense for the ideal future we're trying to create (but which the parent correctly states is a long way off) and also for many of the issues of the present.
I'm personally pretty skeptical that it would indeed cost less than what we have. (I'm in Canada, but basically the same arguments apply.) I expect there would have to be a significant tax hike, which could be structured so that it cancels out the basic income somewhere in the middle class range, leaving the poor better off and the wealthy nominally paying more.
However, it could also achieve so much more than the current minimally effective (if that) safety nets. People would not be forced to take a job just to survive. They could instead pursue work that they enjoy, and most likely end up making a greater contribution to society. This would apply for the middle class as well. Rather than being so focused on compensation, people would have more freedom to pursue the job that gives them maximum satisfaction, again benefiting all of society. Sure, some few would just milk the system, but it's ingrained in human nature both to produce something of value and to try to better one's state in life, so I expect that would be the minority.
Even though I wouldn't directly benefit financially from a system like that, I would love to see it seriously explored.
It might be more expensive than the status-quo. It depends on the details of such a system.
To add to your point about people working not to survive but to thrive: re-education, or education would be a more realistic possibility. Currently, going back to school at 30 or 40 years old when you've held low wage jobs is really hard.
A family member of mine, after a divorce that ended her up with nothing, was able to raise her 6 kids, upgrade her high school and get a university degree, all without a job. This is simply not possible with the safety nets currently available (welfare helped but definitely wasn't enough). This was only possible because of her family taking a second mortgage to buy a house that she "rented" and a line of credit for food and necessities.
The amount of people that will have to be re-educated to find a job will only increase. This would only be a positive for the workforce.
I agree that the status-quo is terrible. Here in the UK the welfare state has gone out of control.
No one is arguing for people to be homeless and its not the fault of the working class.
It lies squarely on the fault of the govt.
I notice houses falling apart at the same time 23 year old are on welfare.
I am sympathic towards disabled people but a lot of disabled people could help run shops and participate in white collar work.
Heck - There is a massive demand for teaching english to Africans and Chinese.
My point is there is no shortage of work.
Right now not only are a huge percentage of adults on welfare due to demographics reasons - average age is higher.
But adults with perfectly good education are also on welfare. How is that possible ?
It shows a massive loss of potential in society.
And its going to get worse as more people enter old age and are unable to work for any job.
I think a lot of people in the west are completely oblivious to the fact that so much labour is needed to produce their clothes, iphones, fossil fuels, coffee, . .
Just because you cannot see it doesn't mean some person in rural china is not picking tea for you.
And because of deflation ppl complain that its "too expensive to hire in canada/england/US"
The fact is the world price point has shifted and money supply hasn't been keeping up.
Almost everything is cheaper due to the force of the globalization economy. Not politically but economically.
This should have resulted an aggressive move towards a more unified form of global governance, but there wasn't enough political will. Imagine when a english major graduates in the States they get to travel to africa to teach thousand of kids english.
Or labour moving to Europe to transform the infrastructure and install solar panels.
Or a concession amoung europeans and africans to solarize the sahara and provide clean energy for europe and africa.
The only country that is able to do this ( limited form ) is china in 2015. But I hope more countries can work to solve the big problems of humanity.
Why is that every such time a system is extorted/exploited to the point of disaster, the same individuals who pushed it to that point then want to say 'We need to deal with the problem'.. The problem they very well and knowingly created.. And they never speak up before this point.. It's only after they've sucked every last drop out of the system.. And Oh' b.t.w:
> lets not solve it by fixing the exploits that created the problem in the first place
> lets not go after the individuals who exploited it the most and their gains
Lets solve it by :
> extorting/exploiting the income of everybody
> Putting a band-aid on the problem
> And Oh', btw, lets put the people who created the disaster in charge of administering the program
Is this supposed to be a joke? And why does society fall for it every-time?
And I like how socialism is being promoted as a solution while the very same jokers who decimated American culture/free market capitalism are pumping in illegals by the boatloads. It's as if they're already prepping to tank/exploit the next system that gets paraded as a solution. Yeah, so there's not enough jobs and the jobs there are don't pay enough because we allow corporations and individuals to extort the crap out of everything a person needs. So, lets ignore all of that and have :
> Guaranteed income
> Free healthcare
And since there isn't enough to go around in way of jobs, lets have :
> Open borders so people can overload the system
> Tons more legal immigrants
> Tons more illegal immigrants
And lets not focus at all on education so people can actually be productive... In fact, lets make it harder for the educated individuals by importing tons of competition from outside the country...Yeah, that'll work out great
Who pays for all of this? Certainly not those who create/created this disaster. But yeah, socialism will fix things. After-all, it works in Europe where they have all of the things we don't have :
> Far more strict immigration
> Far more Homogeneous culture and population
> Far less exploitative economic system
> Far more educated and involved populous
> Far less corrupt government
*Facepalm .. Here we go again .. For anyone who doesn't see that this country is in sharp decline, I wonder.
Every time, America puts the foxes in charge of the hen house and then people wonder why it ends in disaster...
When you fix a bug, do you target the root or do you try to find the most inefficient and indirect way of fixing the code issue? If you have an unreliable code base (economic equality), do you initiate an unbridled code blitz among your worst software engineers (Unbounded illegal immigration)?
I feel like I'm in the twilight zone sometimes in this country... But then, I stop and look around and I decide to see it for what it is and then things don't see that strange after-all.
Who says we are falling for it ? Most people think: "What are we going to do about it ?" And that's actually a rather good question. At this point the best solution are avoiding buying from abusers, and voting better (if that is a choice where you live).
The alternative are mobs/pitchforks/revolutions. But that's a bit like war, you only start one (well any sane person/country anyway) if it's (one) of your last resorts.
This article is incoherent. Title discusses income inequality, then 13 paragraphs discussing issues which are completely orthogonal to inequality (mobility, "poverty" and overconsumption). The article never actually addresses inequality at all.
Then it starts comparing unrelated statistics (productivity and wages) and cribbing about how they diverge, and ignoring the real cause (the rise of non-wage benefits) for the divergence.
Finally, it devolves into random peripheral solutions like reducing share buybacks. Because somehow it'll be good for America if Qualcomm can't return money to shareholders to invest in Tesla? I guess it's better for CEO's to spend profits on empire building than for investors to seek returns?
Productivity and wages are most definitely related. Increased productivity is surplus value created per worker. In a strong labor market workers are able to demand some of the generated productivity surplus as wages. When workers have no power all the gains go to the owners which is what causes inequality to rise.
In a strong labor market workers are able to demand some of the generated productivity surplus as compensation. Wages have been somewhat flat because employers are paying workers in (untaxed) health and retirement benefits instead of (taxed) wages.
Secondly, there is no particular reason wages should track productivity. Productivity is output / workers. If output increases due to capital (e.g. automation), there is no reason for wages to go up.
This all just beats around the bush. What's killing incomes for some and raising others is automation. One day soon, the only asset people are born with (minds and bodies) will be essentially zero value. Until now, everyone has at least that asset and now they won't.
That might imply we need guaranteed income. And maybe we do. But if that's coming from the government, remember who we're talking about; they lie to start wars, they're replete with corruption. If we ask the government to redistribute out wealthy, they'll redistribute it to their friends. The power to take everyone's money is too tempting for anyone to have.
I think you're right. If not right now, some time in the future. I think at this time outsourcing and off-shoring are dampening wage growth --but in the future it will be automation which puts the kibosh on it. For sure higher minimum wages will accelerate the obsolescence of low-skill low productivity jobs.
The one question about guaranteed income is who is qualified for it? Anyone and everyone? What do rich countries with high automation do about illegal immigrants, send them back? If minimum income is offered to everyone, why wouldn't everyone for whom the guarantee is above their own incomes want to come and undermine everyone else's income?
Excuse my ignorance, but I have an honest question. I assume that income inequality can be approximated by measuring the difference between the income of a certain group of high-earners and a certain group of low-earners. If the income of the low-earners is increased by mandate then wouldn't the entire system, over time, adjust upward? Wouldn't the difference between the two groups (income inequality) remain the same?
We business leaders know what to do. But do we have the will to do it? Are we willing to control the excessive greed so prevalent in our culture today and divert resources to better education and the creation of more opportunity?
I think we need to wrestle with the fact that the world has changed and education and credentialing are different things. Education and information can be made available to large numbers of people for very little money via the Internet. It doesn't get you a status-y sheepskin, but that doesn't always matter.
This new reality requires a new approach to sharing the wealth. I don't know what exactly that will look like, but I am confident that we need to hammer that out.
The fact that real wages have been flat for about four decades, while productivity has increased by 80 percent, shows that has not been happening. Before the early 1970s, wages and productivity were both rising. Now most gains from productivity go to shareholders, not employees.
This is a serious problem and needs to be clearly addressed.
There is a way to start. Government can provide tax incentives to business to pay more to employees making $80,000 or less. The program would exist for three to five years and then be evaluated for effectiveness.
I have my doubts that this is the way to address it.
Generally speaking, poverty solutions that start by trying to help 'poor' people are dead ends that do not work. A more oblique approach, that defines the problem in other terms, is usually more effective.
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[ 5.4 ms ] story [ 108 ms ] threadI stopped reading here. Try again. Current top income tax rates are insanely slow by historical standards. They were 90% in the 40s and 50s and 70% in the 70s [0]
[0] http://taxfoundation.org/sites/default/files/docs/fed_indivi...
The idea that the government is entitled to more of someone's earnings than they are is shocking. To then suggest the government is entitled to 4 out of every 5 dollars a person earns is, quite frankly, beneath consideration in my eyes.
What right do you, i or anyone else have to call this anything but theft?
Looking at GP's PDF for 1945:
Of course, this is for income, the people being taxed the highest rates will also have capital gains.Inspired by michaelchisari below, here's the same table in 2015 $$
Whew, big numbers.Astounding double standards. Some numbers: if Ted makes $100,000/yr and Jim earns $1,000,000/yr and both are taxed at 30%, Jim is already paying $270,000 _more_ in taxes every year. Even at the same tax rate. Crank Jim's rate to 90% and we are looking at an $870,000/yr difference! Through what greed can we morally justify such insatiable lust for the money other's have earned?
Furthermore, the capital gains argument is rife with unintended consequences. It, quite literally, disincentives the wealthiest folks from innovating and earning money through economically productive means. Instead, we send the message "if you insist on earning money by working like the rest of us, we are going to take 80% of it. But, if you want to rest on the laurels of your investments and be otherwise unproductive, by all means. The choice is yours."
It terrifies me that this mindset is the majority opinion these days.
If that is in fact what you mean, it still changing absolutely nothing. The effective tax rate on folks in these upper brackets would still be enormous.
But i guess piggybacking baseless comments is an easy way to avoid justifying these stances. I still have not seen someone say how they are justified in taking that much money from people while feeling ethical.
When kids born today are unable to afford to go to college, while the same people who are against +80% tax were born in an era when tax was way higher at +90% that helped pay for their education and create the infrastructure that allowed them to earn their wealth.
"Surplus Wealth is a scared trust which its possessor is bound to administer in his lifetime for the good of the community " - Andrew Caregie.
Guess what if you think the government is treating you unfairly then be prepared when society bifurcates and returns a stack error in the form of "bolsheviks".
http://www.bls.gov/opub/ted/images/2010/ted_20100428.png
A quick google search yields an average cost of $9k for a state school, $22k for out of state, and $31k for private. Maybe the expensive side of college is "mortgage-sized" debt, provided you are comparing to the cheapest mortgages.
While I think the idea that everybody should go to college is fundamentally harmful, I do think that everybody who wants to should be able to go to college. On the other hand, taking out $200,000 in loans to study comparative literature at an ivy league school, and then demanding that the universe provides means to pay it all back is ridiculous. People should buy into their education with a long-term plan. Most people cannot afford the luxury of majoring in an unprofitable subject while incurring enormous debt.
It's a trend to try and take from the rich and give to the poor. If you truly want more distributed income across the people (I wouldn't call it income equality because that's impossible.) then you'll find instituting more taxation does little to fix that. Most of the 1%'s wealth doesn't come from their income. There's a reason many CEOs take $1/year as salary.
The entitlement system is absolutely broken. I'm all for a smaller government, but if we could replace the broken system with some sort of basic income (and that idea seems quite contrary with my political beliefs), I doubt it'd cost more than what's currently being paid out -- and it might actually be better.
Your inclusion of Mr. Carnegie's quote is quaint. He was freely entitled to his own ideas. The beauty of freedom is that those who disagree are empowered to amass and donate their money as they personally see fit. It is neither the job, nor the right, of the populace to spend the money earned by any individual, regardless of their level of success.
When an individual who grows up without ever taking advantage of a single piece of society, they will have an argument for taxes being unfair.
Lets not forget the debts that all citizens owe to the country:
Roads
Internet
Telephones
Water
Food regulation
Environmental regulation
Scientific advancements
Protection from outside forces (military)
Flight regulations
etc.
Once youve paid for all of those you can begin to complain about how taxes are unfair.
If your argument is that more successful people consume more resources and thus owe the government a greater debt, then i would argue we should be taxing consumption more. Not income.
Consumption tax disproportionately affects the poorest citizens. It is a non-workable solution.
Consumption is what drives the economy, disincentives to consumption would hurt the economy as a whole (causing the wealthy to lose money via investments).
Further, a citizen has no hope to pay off the debt that it owes the government for the things i listed previously. There is no tax rate at which you would effectively pay back the government for its investments in society. The yearly budget of the US Department of Transportation alone, is 77 billion - that's just to keep federal roads drivable.
If you think theres some tax level at which you have paid for the initial investment and upkeep of the federal highway system, by all means share it here, i would love to know what number you think is 'fair' since its 'your money' even though they aren't 'your roads'
You have an extremely entitled view of what "fair" is.
In other words if you don't steal so much from others, go meet won't steal it back.
Potentially, one could end up collecting fewer tax dollars because they are "living" in the Bahamas or Cayman Is.
[1]: https://www.wolframalpha.com/input/?i=US%24200000+%281945+US...
[2]: https://en.wikipedia.org/wiki/Affluence_in_the_United_States...
Also the top rate would apply to income over $5M in today's dollars (can't remember the exact number, but it was high). How much money do you think you can raise from folks making over $5M per year? The answer is not much, there aren't that many of them relatively speaking.
Also, if you include the earned income tax credit, low income folks are paying way less in taxes than they were back then.
FTFY. They wouldn't today, either.
Hell, the reason the US has employer sponsored healthcare is because there were wage caps during WW2. So what did companies do? Compensate with something other than wages.
[0] https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...
Also, America was the only game in town during those years. All of the competition was still recovering from WW2 and/or being suffocated by communist rule. And it was a single market the size of the rest of the Western world combined. If you had money, America was the place to invest it. Major technological breakthroughs, even when originating overseas, generally took off in the US.
On a moral note, I think that an 80% tax rate is oppressive. That money would otherwise be flowing into business investments & consumption, charity, and civil society, the natural institutions of free people.
What do you think the gov't does with it, burn it? 5 of the 6 startups I worked for wouldn't have happened without government assistance (DARPA-funded university project spinouts, SBA, government contracting.) Consumption is spending money. They government spends it, or give it to people who do (that seems to cover consumption and charity.) What is more civil than banding together to take some of the variance out of life?
Letting people decide how to spend their own money. Private charity is "banding together to take some of the variance out of life". Like all of the government's authority, taxation flows from the end of a gun. You can be imprisoned and fined if you don't pay what you owe.
> What do you think the gov't does with it, burn it? 5 of the 6 startups I worked for wouldn't have happened without government assistance
Government investment in certain sectors can be good, such as for fundamental sciences. But in general, private investment does better with the same amount of money. Even when government programs are well designed at their birth, the world around them changes faster than politics and bureaucracy can keep up with.
Nick Hanauer: Beware, fellow plutocrats, the pitchforks are coming
www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming
You can't fix social problems by demanding capitalism be socialism.
Scandinavia is in deep trouble financially.
Denmark basically has the most indebted households on earth. Their economy hasn't expanded since 2007.
Finland has been in an eight year recession / stagnation. Their household debt to income ratio doubled from 2002-2012 or so. They've got a near 10% unemployment rate, which has been getting worse. Their economy hasn't expanded since 2007.
Sweden has done slightly better than those two, courtesy of market friendly reforms they performed a few decades ago. Prior to that reform, Sweden had several decades of terrible economic performance. Their household debt to income levels are also vastly inflated and unsustainable, nearly at 200%.
Norway is falling into a recession, taking the same commodity hit Canada and Australia are. Their economic success and much celebrated welfare state is almost solely dependent on the price of oil remaining high. There is now talk of having to cut into the sovereign fund to pay for deficits and spending demands. They have no other major exports to pick up the slack. Their GDP lifting off occurred directly in line with the price of oil soaring after 2001. They got rich on the back of irrational US policies around the dollar and the Iraq war. Prior to that, their GDP per capita was no better than the US or similar nations. Their household debt to income ratio is also dramatic, around 220%. That won't go well with a ten year slump in oil prices. If oil hangs around $40-$60 for ten years, Norway will look very different than it does today.
The picture is obvious: to maintain their standard of living, Scandinavia has been living far beyond its means to fake a better reality than the one they would otherwise have.
https://1.bp.blogspot.com/-0MCZ3FJXJJs/UA7zeOEIanI/AAAAAAAAF...
Young adults can be retrained, but there are lots of people in their 30s 40s etc. who don't have a secondary education some of which never finished elementary school in their native languages (thus illiterate). What happens to them? Do we let them find themselves back as they can't find a job and contribute to a high-skills economy?
What if software engineering, hardware design, and all the other positions required to create autonomous things were paid 3-4x what they are now?
Sure that wouldn't necessarily be the case in the future, but certainly right now it is.
We should stop looking at the bottom and look at the top. CEO take-home has increased by orders of magnitude, making the bottom completely untenable.
Look up "Gravity Investments" in recent news.
To be fair it was the CEOs brother who sued and was part of a long time feud and not about the new minimum wage.
So, if the US were to fix bottom end of poverty it would have to be in restructuring and probably centralizing the dispensation of welfare. I think no state or local government should be involved in the administration of said benefits since the lion's share of the funds come from the US government itself (not from the budgets of the state or local governments). But the chances of that happening is about as good as my chances of winning the Power Ball.
Short version: USA welfare benefits are very generous until you earn about $12/hr, peaking at a total income approaching $80k/yr. Above that point of earned income, welfare is rapidly cut off, plunging total income until earned reaches $38/hr. It's stupid and few realize how broken the very generous system is.
It's so annoying that the system works like this. It takes all of 5 minutes to realize that these should be sliding scales. I bet making these sliding in a revenue neutral way would make a great talking point for the upcoming presidential elections
And bravo on your inexpensive living comment. I believe there's a huge need for reasonably priced housing, but zoning does not allow for it. I read somewhere about how mobile home parks are not getting built any more because middle class and up don't want to see them. It's a similar situation with nimbyism in places like San Francisco. This results in lower income folks spending the majority of their income on housing, widening the wealth gap.
What's interesting is it's the middle income and up who are screwing themselves in the long term by marginalizing the very people they depend on. What's even more interesting is that this situation is not the result of free market capitalism, but crony capitalism (aka. cronyism). The market is being manipulated by the wealthy who intentionally restrict choice of those who don't have a voice via the police power of the state (lobbying, etc).
We need to stop incentivizing the rich - they have been incentivized for too long already.
It would cost considerably less and thus higher taxation would be less of a concern (as a way to stifle more money from the rich to the poor).
Do you still like the idea if it's more expensive rather than less?
I think the difference would be in the efficiency and simplicity of such a system. Currently, the U.S. spends over a trillion dollars on state and federal welfare programs (spread across 126+ programs). However, the government spends it quite poorly and in many indirect ways. Giving them a cheque would certainly be better.
You're right in that it could actually be more expensive. I'm not sure what my stand on the subject would be in that case. Even with my libertarian beliefs, (and there are good arguments that basic income is perfectly compatible with libertarianism) I have to keep in mind of the realities related to the surging amount of poverty and that it's unsustainable.
One possible way to fund it is through a land value tax. Another possible way to fund it is through income tax.
What does that mean? Income, capital gains? Also, what prevents them from moving out of the jurisdiction? Instead, wealthy people should be encouraged to immigrate to the jurisdiction (brining their skills and capital with them).
What about getting rid of the loopholes, business breaks, income tax and move to a (very) progressive consumption tax? Then drop much of the current inefficient and convoluted entitlement programs and replace with basic income.
Exit tax, having to give up citizenship.
> (brining their skills and capital with them).
What skills does the inheritance class have exactly? Why do we want to incentivize the hoarding of wealth?
What creates more jobs:
100k investment in your company
10k new customers for your company
>(very) progressive consumption tax?
So we want to provide disincentives to consume? We want to incentivize saving money over spending money? Seems like a negative for the economy - people will consume less, or they will consume elsewhere.
What will likely happen is, a wealthy person can avoid consumption tax by purchasing something lavish elsewhere, say purchasing a yacht in spain - then having it delivered to their US home. How about buying a BMW in germany, having it shipped to the US.
This is something a poor person cannot do, but a rich person can. Especially on the types of goods we would most want to tax based on consumption (luxury goods)
So now you are hurting the local economy by depressing local consumption, hurting the poor the most by adding taxes to consumption, meanwhile the rich can easily afford to avoid taxes and have things shipped from overseas.
This is borderline fascism. A modern day Berlin Wall. Besides, the US already charges an exit tax for those who relinquish their citizenship (which is a growing trend - and it's not rich people doing it).
> What skills does the inheritance class have exactly?
I agree this is a problem, and a growing one. But I think you over estimate the % of wealth by inheritance vs. earned. Either way, I'd rather have these folks living, spending and investing that money in my community.
> We want to incentivize saving money over spending money?
Yes, people would consume less and save more. This is a good thing as thrift vs. debt would be encouraged. Debt payments transfer money the banking class and contribute to the up/down economic cycles.
> What will likely happen is, a wealthy person can avoid consumption tax by purchasing something lavish elsewhere
Not likely except perhaps on small portable items. Anyways, you can't just purchase a vehicle overseas and register it in the US due to differences in vehicle safety. And import tariffs can be modified to mitigate.
> ...hurting the poor the most by adding taxes to consumption...
This is why it must be very progressive. Basic necessities should be either tax free or close to it. And used goods sold person-to-person (non retail) should not be taxed at all.
In fact, this would be better for low income folks. Instead of taxes withheld from each paycheck, only to be returned at the end of the tax season but with no interest payed, they'd get all of their paycheck.
Overall, this encourages thrift and introduces more control over how much tax one pays. It also gives conscientious objectors a legal way to reduce their tax. That's pretty powerful if you're say against the war in Iraq or against planned parenthood.
Oh, and illegal immigrants and those participating in black market activities are instantly brought into the taxation system as there is no longer such a thing as income tax avoidance. There's billions on the table here.
Utopian ideas such as that are predestined to failure because human nature doesn't work the way you think it does.
You can raise taxes as much as you want. The wealthy don't care. Why should they? They can just leave. Look at the UK. They tax the bejesus out of people. Now count how many wealthy UK entertainers (selected for having acquired new wealth, as opposed to old family money that's more or less tied to the land) emigrate after they score.
So who's going to fund your basic stipend after you tax away the wealthy and the corporate taxpayer?
Those are exactly the people we want to tax higher.
the nouveau riche generally actually do something to earn money, the trust-fund/inheritance class produces very little benefit but captures vast amounts of wealth.
Also, London has ever increasing real estate costs specifically because of all of the ultra rich foreign investors buying property in London. That seems to run counter to your claim that rich people will flee anywhere with high taxes.
Also to leave the country, you would have to pay an exit tax. You will also have to relinquish your US citizenship.
Those are two costs that i would bet the vast majority of the wealthy would not be willing to pay, no matter what the current tax climate is.
Citizenship that guts your wealth is not worth having. Any number of countries that don't have such avaricious tax laws would be happy to have a new, monied resident to spend money there.
Absentee Landowners. I'll bet the Irish are laughing up their sleeves at England being reduced to foreign ownership.
The Federal Reserve debased the dollar, paying for wars, terrible government spending choices and entitlements that are ballooning. They also spurred numerous asset bubbles through bad policy choices. It's entirely understood that the Fed can cause asset bubbles by holding interest rates too low for too long. They've been aggressively using that understanding for the last six years.
The rich can deal with the dollar losing half of its value in a decade. Nobody else can. The rich have capital, and make a lot of money on the Fed's intentional asset bubbles in real estate and stocks. The S&P 500 - and the wealthy who own most of it - benefits massively from a debased dollar, as their exports boom - while most of America suffers from a vast loss of purchasing power.
The end of the strong dollar of the 1990s, is what began the era of dramatically increased inequality. It's not a coincidence. The currency race to the bottom, is really code for a decimation of the median standard of living. This is especially true in a country that consumes so much of its own manufacturing.
Debasing the dollar and sending commodities soaring benefited a very small group of people (Saudi Arabia, Canada, Australia, Norway, commodity investors). Who it didn't benefit: US manufacturing that is consumed domestically. The oil price boom of the mid 2000's, caused by the weak dollar, also harmed the US dramatically as deficits soared and the Middle East got uber rich. It acted as a huge wealth transfer to Canada as well.
The soaring inequality was caused by the Fed's horrendous, and repetitive monetary policy mistakes. You'll find people on the left go out of their way to evade ever pinning any blame to the Fed (it makes the welfare state possible through deficits and debt, so they love the Fed), and the people on the right don't want to talk about inequality at all.
What did QE accomplish? Primarily it reinflated wealthy people's balance sheets, and reinflated the housing market (which disproportionately benefits the top half in the US). The median net wealth of Americans still hasn't recovered, even with housing and stocks so high. Skeptics will claim QE helped to heal the economy, generate jobs and so on - as though the US economy didn't do that on its own for 200 years prior to the Fed utilizing QE.
While the massive destruction of poverty in the developing world has been an unqualified good, it was no secret that the trade-off was stagnating wages in the developed world until the developing world 'caught up'. There has been a reduction in income inequality, but it has been at the global scale. The US is not a gated community like Scandinavia. The US is deeply embedded in the global economy. Any attempt to ignore the global economic perspective will be misleading at best and ultimately futile.
One thought that came out of that is that a major change I would love to see, although not a technological one, is for a major economy to implement a workable guaranteed basic income. It's been a popular subject on HN, and does seem to be starting to gain traction in the 'real world'. While obviously there are issues to solve, it's something I see as really having a chance of working. _Something_ will have to happen to address the growing inequality as technology keeps moving us closer to a post-scarcity society, and a basic income seems to fit the bill.
Or perhaps it will be something else. But some kind of a transition to a post-scarcity society seems inevitable at _some_ point if the human race survives long enough, so maybe significant strides in that direction will be made in our lifetimes. It would certainly be exciting.
I know programmers are thrilled at the magic of modern AI but its very simple to tip it over even theoretically.
Self Driving cars are not even that good, they are better than the average and that is an immense amount of creative labour destruction. But if you look back at history there has been a greater amount of labour destruction both physical and mental.
Coming back to basic income.
Do you think the way we use resources in the modern world is anyway efficient ? Speaking from Physics we are still way off from having solved major problems in society.
Right now 1/2 of adults in the UK are on entitlement which puts immense debt burden on the other half.
Both US and Europe are heading in that direction.
Both US and Europe need a massive restructuring of their infrastructure if climate change is to be dealt with.
Not to mention helping african countries get on their feet.
Right now that burden is shared mostly be china who are helping build roads and other developed nations within africa like nigeria.
The faster we can get contraceptives to africa we can stop the problem of the african baby boom due to industrialization right at its toes. We know from data that the country of Nigeria alone will have 750 Million people by 2100.
These are real problems facing the globalized economy.
There also the problem of deflation.
Economically once the poor global south industrialize there will be immense downward pressure of wages for all forms of jobs.
We know what happened when 700 million chinese joined the global economy. What happens when the rest of the 3 billion join ? Most of them of younger age and would constitute higher labour productivity.
China as a country is already much more efficient - they have high speed rail links connecting their entire nation. No need to buy fossil fuels when all their transportation is powered via electric. which is generated by solar panels in the gobi desert.
They have one of the most sophisticated supply chain producing all our iphones and computers.
Now they are interested in doing the same in central asia which geographically is the most mineral rich regions on earth.
Yes all of this doesn't matter if you are in Europe where the population is low enough and the resources is high. But the cost of production will get lower and labour gets cheaper along with resources. We will end up with a situation where something in Europe costs significantly higher than produced in africa.
When large quantities of manual labor jobs or easily automated jobs are replaced, basic income, I think, would push that class of folks to a livable standard. Not much, but just enough. You'll have more people transitioning off the streets and into normal lives.
(Even as a libertarian, I say this, which at first, might be at odds with the philosophy but there are good arguments that make it perfectly compatible.)
I'm personally pretty skeptical that it would indeed cost less than what we have. (I'm in Canada, but basically the same arguments apply.) I expect there would have to be a significant tax hike, which could be structured so that it cancels out the basic income somewhere in the middle class range, leaving the poor better off and the wealthy nominally paying more.
However, it could also achieve so much more than the current minimally effective (if that) safety nets. People would not be forced to take a job just to survive. They could instead pursue work that they enjoy, and most likely end up making a greater contribution to society. This would apply for the middle class as well. Rather than being so focused on compensation, people would have more freedom to pursue the job that gives them maximum satisfaction, again benefiting all of society. Sure, some few would just milk the system, but it's ingrained in human nature both to produce something of value and to try to better one's state in life, so I expect that would be the minority.
Even though I wouldn't directly benefit financially from a system like that, I would love to see it seriously explored.
It might be more expensive than the status-quo. It depends on the details of such a system.
To add to your point about people working not to survive but to thrive: re-education, or education would be a more realistic possibility. Currently, going back to school at 30 or 40 years old when you've held low wage jobs is really hard.
A family member of mine, after a divorce that ended her up with nothing, was able to raise her 6 kids, upgrade her high school and get a university degree, all without a job. This is simply not possible with the safety nets currently available (welfare helped but definitely wasn't enough). This was only possible because of her family taking a second mortgage to buy a house that she "rented" and a line of credit for food and necessities.
The amount of people that will have to be re-educated to find a job will only increase. This would only be a positive for the workforce.
No one is arguing for people to be homeless and its not the fault of the working class.
It lies squarely on the fault of the govt.
I notice houses falling apart at the same time 23 year old are on welfare.
I am sympathic towards disabled people but a lot of disabled people could help run shops and participate in white collar work.
Heck - There is a massive demand for teaching english to Africans and Chinese.
My point is there is no shortage of work.
Right now not only are a huge percentage of adults on welfare due to demographics reasons - average age is higher.
But adults with perfectly good education are also on welfare. How is that possible ?
It shows a massive loss of potential in society.
And its going to get worse as more people enter old age and are unable to work for any job.
I think a lot of people in the west are completely oblivious to the fact that so much labour is needed to produce their clothes, iphones, fossil fuels, coffee, . .
Just because you cannot see it doesn't mean some person in rural china is not picking tea for you.
And because of deflation ppl complain that its "too expensive to hire in canada/england/US"
The fact is the world price point has shifted and money supply hasn't been keeping up.
Almost everything is cheaper due to the force of the globalization economy. Not politically but economically.
This should have resulted an aggressive move towards a more unified form of global governance, but there wasn't enough political will. Imagine when a english major graduates in the States they get to travel to africa to teach thousand of kids english.
Or labour moving to Europe to transform the infrastructure and install solar panels.
Or a concession amoung europeans and africans to solarize the sahara and provide clean energy for europe and africa.
The only country that is able to do this ( limited form ) is china in 2015. But I hope more countries can work to solve the big problems of humanity.
Why is that every such time a system is extorted/exploited to the point of disaster, the same individuals who pushed it to that point then want to say 'We need to deal with the problem'.. The problem they very well and knowingly created.. And they never speak up before this point.. It's only after they've sucked every last drop out of the system.. And Oh' b.t.w:
> lets not solve it by fixing the exploits that created the problem in the first place
> lets not go after the individuals who exploited it the most and their gains
Lets solve it by :
> extorting/exploiting the income of everybody
> Putting a band-aid on the problem
> And Oh', btw, lets put the people who created the disaster in charge of administering the program
Is this supposed to be a joke? And why does society fall for it every-time?
And I like how socialism is being promoted as a solution while the very same jokers who decimated American culture/free market capitalism are pumping in illegals by the boatloads. It's as if they're already prepping to tank/exploit the next system that gets paraded as a solution. Yeah, so there's not enough jobs and the jobs there are don't pay enough because we allow corporations and individuals to extort the crap out of everything a person needs. So, lets ignore all of that and have :
> Guaranteed income
> Free healthcare
And since there isn't enough to go around in way of jobs, lets have :
> Open borders so people can overload the system
> Tons more legal immigrants
> Tons more illegal immigrants
And lets not focus at all on education so people can actually be productive... In fact, lets make it harder for the educated individuals by importing tons of competition from outside the country...Yeah, that'll work out great
Who pays for all of this? Certainly not those who create/created this disaster. But yeah, socialism will fix things. After-all, it works in Europe where they have all of the things we don't have :
> Far more strict immigration
> Far more Homogeneous culture and population
> Far less exploitative economic system
> Far more educated and involved populous
> Far less corrupt government
*Facepalm .. Here we go again .. For anyone who doesn't see that this country is in sharp decline, I wonder.
Every time, America puts the foxes in charge of the hen house and then people wonder why it ends in disaster...
When you fix a bug, do you target the root or do you try to find the most inefficient and indirect way of fixing the code issue? If you have an unreliable code base (economic equality), do you initiate an unbridled code blitz among your worst software engineers (Unbounded illegal immigration)?
I feel like I'm in the twilight zone sometimes in this country... But then, I stop and look around and I decide to see it for what it is and then things don't see that strange after-all.
Who says we are falling for it ? Most people think: "What are we going to do about it ?" And that's actually a rather good question. At this point the best solution are avoiding buying from abusers, and voting better (if that is a choice where you live).
The alternative are mobs/pitchforks/revolutions. But that's a bit like war, you only start one (well any sane person/country anyway) if it's (one) of your last resorts.
Then it starts comparing unrelated statistics (productivity and wages) and cribbing about how they diverge, and ignoring the real cause (the rise of non-wage benefits) for the divergence.
Finally, it devolves into random peripheral solutions like reducing share buybacks. Because somehow it'll be good for America if Qualcomm can't return money to shareholders to invest in Tesla? I guess it's better for CEO's to spend profits on empire building than for investors to seek returns?
Why is this nonsense here?
Secondly, there is no particular reason wages should track productivity. Productivity is output / workers. If output increases due to capital (e.g. automation), there is no reason for wages to go up.
That might imply we need guaranteed income. And maybe we do. But if that's coming from the government, remember who we're talking about; they lie to start wars, they're replete with corruption. If we ask the government to redistribute out wealthy, they'll redistribute it to their friends. The power to take everyone's money is too tempting for anyone to have.
The one question about guaranteed income is who is qualified for it? Anyone and everyone? What do rich countries with high automation do about illegal immigrants, send them back? If minimum income is offered to everyone, why wouldn't everyone for whom the guarantee is above their own incomes want to come and undermine everyone else's income?
I think we need to wrestle with the fact that the world has changed and education and credentialing are different things. Education and information can be made available to large numbers of people for very little money via the Internet. It doesn't get you a status-y sheepskin, but that doesn't always matter.
This new reality requires a new approach to sharing the wealth. I don't know what exactly that will look like, but I am confident that we need to hammer that out.
The fact that real wages have been flat for about four decades, while productivity has increased by 80 percent, shows that has not been happening. Before the early 1970s, wages and productivity were both rising. Now most gains from productivity go to shareholders, not employees.
This is a serious problem and needs to be clearly addressed.
There is a way to start. Government can provide tax incentives to business to pay more to employees making $80,000 or less. The program would exist for three to five years and then be evaluated for effectiveness.
I have my doubts that this is the way to address it.
Generally speaking, poverty solutions that start by trying to help 'poor' people are dead ends that do not work. A more oblique approach, that defines the problem in other terms, is usually more effective.