As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
If they want to move, let them. The opportunities for making money would still be present.
There's a bizarre notion going around that protecting the economy requires protecting the rich. However if you look at it, it doesn't make any sense. The strength of an actor in the economic system is directly related to their participation in that system. The rich are where they are because they hoard more of their wealth. Hoarded wealth slows down an economy. The rich are poor economic actors, let them hoard their money elsewhere.
Let's use a hypothetical example. We bring in the wage cap, some wealthy people move elsewhere. Let's say one of the wealthy people ran a profitable supermarket. Are you saying we couldn't find someone who lived in the country to run a supermarket in the same location?
Inheritance is a separate issue, but one that you're right to raise. However, there's no reason you can't do both (set a maximum wage and set limits on inheritance).
What are you going to do, confiscate inheritances?
The government has already taken their cut of the wealth that goes into an inheritance on the first go-around, and they are actively eroding it already by printing additional money and inflating the currency. They shouldn't get to double-dip into the hard-earned and carefully stewarded generational wealth of my family, just because somebody died.
Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling.
> "What are you going to do, confiscate inheritances?"
You can call it that if you want. With regards to inheritance, I'm suggesting setting a maximum amount that any single individual can inherit. The rest can go towards funding public infrastructure.
> "Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling."
I'm not arguing for everyone to be poor, I'm suggesting that there should be a limit on how much richer someone can be. It's the ratio which is important. If a ratio is set, and you want to raise the upper bound, all you need to do is raise the lower bound along with it.
If you set a maximum wage like that, a lot of what is good in society would not happen because people would not be able to amass capital.
For example, you would not have a SpaceX or a Tesla. You would not have Y Combinator as it exists today. You would not even have the video game that I am about to release next month.
Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large.
Capital accumulation can still happen without wage accumulation. Just don't pay yourself too much and keep the money inside the business. Naturally the money will get spent on building things like tesla.
Tesla happened because individuals were able to take extremely large sums out of an unrelated business (Paypal), as did a huge part of early stage tech investments, funded at that point mainly by individuals who got multimillion exits in their previous businesses. If the money had been kept inside business, then you'd have the innovation rate that internal subsidiaries of IBM achieved, not the innovation rate of the Silicon Valley.
Or perhaps with sufficient tax revenue in its coffers, the federal government would be able to properly fund NASA, or a Manhattan Project aimed at reducing oil dependency.
>If you set a maximum wage like that, a lot of what is good in society would not happen because people would not be able to amass capital.
>
>For example, you would not have a SpaceX or Tesla
Yeah, just remember the bad old days when we had ~95% income tax and NASA actually had a serious budget.
We definitely wouldn't want to return to the days when space travel actually pushed real boundaries and we didn't have a toy supercar company for the superwealthy.
> "Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large."
I wish you well with your game launch, I hope it's a success.
The issue I'm tackling isn't about erasing the rich, it's about setting limits on the differences between the rich and the poor. If you believe the rich should be richer, why shouldn't the poor be richer too?
The issue with wealth accumulation is that it's a runaway process, wealth begets wealth, past a certain point it's no longer based on merit or contribution to the strength of the economy.
1. "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live).
2. even if #1 could be solved with some complex formula, it's very easy to argue a maximum imposes a hard limit on how much work a person is willing to do. Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?
3. estates are the extreme problem for 1 & 2: if they're counted against maximum wages than recipients of large estates likely have no incentive to ever work. If they're not counted then maximum wages are severely limited in its ability to affect change.
Perhaps a complex enough formula exists to make maximum wages work, but given how easily gamed our complex tax code is in the US, I can't imagine it's feasible.
> "Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?"
Whilst I can't speak directly for Elon, it does appear that his work is targeted at benefitting mankind. I'm sure that is plenty of incentive on its own.
> "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live)."
Sure, there will be loopholes, but let's start with the basics and wait for the loopholes to emerge. Tackling wages and inheritance should be enough to start off with.
Perhaps a better critique of a maximum wage would be:
What does it solve that graduated income, property, and estate taxes do not?
I can't imagine it could possibly be any less complex than a tax code since it needs to contain the same estimations of wealth ("wage" in your approach).
Whatever method is used, the important part is in slowing down the rate at which the inequality gap grows. Graduated income, property and estate taxes could do the job, but only if much stronger taxes were brought in, and there appears to be reluctance to raise taxes on the wealthy. If higher taxes end up being the solution, then so be it.
Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?
As far as I can tell, he does not have a history of taking all the money and blowing it on himself. Whatever he's still working for, it's not because he wants extra money for spending. He clearly has some motive other than just wanting more money to blow.
That's addressing the wrong side of the equation. The problem is phrased as "income inequality", but that's not the actual problem that needs solving (it doesn't necessarily hurt someone for one person to have a billion dollars, unless they use that money to influence policy in ways that harm others). The actual problem, as I see it, or, at least the variable that needs adjusting is the other side. The problem is that the middle class is nearly extinct in the US, huge swaths of people will never know a life free of debt, home ownership is a fantasy from another era, and rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact. So, adjusting the other side of the equation (how many people are living in poverty or debt) is the one that minimizes harm.
Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves. Capping wages does nothing to solve that problem.
pg, despite being a very bright and extremely sincere and decent person, is living in a world quite far removed from most American's reality and gets a lot of things wrong (sometimes hilariously so), based on that disconnect. But, a maximum wage is a ridiculous rebuttal, IMHO.
> "But, a maximum wage is a ridiculous rebuttal, IMHO."
Of course you're entitled to your opinion, but let's look at why a maximum wage can be used to tackle economic inequality, perhaps you'll not think it's quite so ridiculous after that.
> "The actual problem, as I see it, or, at least the variable that needs adjusting is the other side."
The main reason that a maximum wage impacts the poorest amongst us is that it provides a mechanism by which poverty and wealth can be linked.
For example, let's say every US state adopts a $15 per hour minimum wage. Let's now state that the maximum wage is set at 500x the minimum wage, so $7500 per hour. If the minimum wage worker works 40 hours a week, 52 weeks a year, they'll get $31,200 per year (before tax). If the maximum wage worker works the same number of hours they'll earn $15,600,000 (before tax). Let's say the bottom rate of tax is 15%, and the top rate of tax is 40%. What does that leave us with...
The minimum wage worker earned $26,520 a year.
The maximum wage worker earned $9,360,000 a year.
What we've set here are upper and lower bounds on how much someone can earn. Notice that we still have the rich and the poor, and we haven't taken away the incentive to want to get rich. What we have done is slowed down the rate at which the gap between the rich and poor grows, which is at the core of economic inequality. Inherited wealth is also an issue, but at least it would tackle the rate of change in newly generated wealth.
What does this do to an economy? First of all, the rich now have an extra incentive to raise the income of the poor. If the rate between the minimum and the maximum wage is fixed, raising the minimum wage will also raise the maximum wage. Secondly, it channels money that is more likely to have been hoarded back into economic activity. Money only works when it is traded, not when it is hoarded, hoarding past a certain level of security is a waste of economic potential.
> "Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves."
Being on the poor end of the spectrum leaves you more vulnerable to economic exploitation. If a maximum wage reduces the incentive for economic exploitation, then I see no reason why it wouldn't be welcomed. If you want a concrete example of economic exploitation, take a look at Walmart:
Massive wealth accumulation isn't just about having money to buy things, it's about influence, and entities with the ability to marshal more than x million dollars per year (Apple, GOOG, Unicorn LLC) would still need to exist. If your policy became law what would stop people from simply dumping huge sums into businesses/non-profits that they control? I believe capping yearly income would introduce a lot of weird bugs into our system without fixing (m)any real problems.
What's to stop people doing that now (dumping money into corporations and using the corporations as vehicles of political influence)? Strikes me as a separate (but related) bug that already exists.
One way to tackle this issue in the political space is to forbid for-profit corporations from funding political lobbying. All funding for lobbying efforts have to come from individuals or not-for-profit organisations.
Maximum wage would have little impact on maximum income of the wealthy.
Already in the current situation their main income is not as wages but simply the value increase of assets (companies, real estate, etc) that they own, and with a minimum of legal paperwork all high-end wage income can be restructured as such unless you prohibit owning and selling businesses.
It would be a symbolic statement with no practical effect.
If we set a maximum wage, driven people would simply move to another country. There is plenty of evidence for that as well. The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too.
> "The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too."
Both of those are examples of tax dodges. Maximum wage is different, in that people would be required to live in the country they made their main income in. Sure, you could move to the Cayman Islands, but good luck finding enough work there.
We should be closing tax loopholes too, it's not an either/or situation, we can do both.
I think you are missing basic principles of economics. Your arbitrary cap on income would move companies and jobs to countries free of weird policies like that.
If old companies move, new companies would spring up to take their place. The reason this would happen is because the demand is still there. People don't stop buying clothes just because a clothes shop stops trading in their country.
Why would they? If you knew that the potential rewards for a given business risk would be stolen from you via the government, why would you bother taking the risk in the first place?
What difference does that make, ZenoArrow? Regardless of whether it is oppressive taxes or corrupt government meddling in the rewards of labor, if you steal what rightfully belongs to someone under the guise of "making things fair," those who can will leave.
How about maybe that is sort immoral, let alone not serving any purpose of economic inequality. Now, your destroying entire industries for people that make things for multi-millionaires. Its just terribly naive, I'm not sure what this would achieve. Honestly, I'm not sure why you do not just argue for outright communism.
How is it immoral to set upper and lower bounds on what people can earn? Do you really think it's immoral that someone can only earn 1000x more (for example) than the poorest amongst us? Do you really find that oppressive?
> " Now, your destroying entire industries for people that make things for multi-millionaires."
You're not destroying industries, you're curbing the rate at which private wealth can be accumulated.
> "Honestly, I'm not sure why you do not just argue for outright communism."
Setting a maximum wage is socialist, but socialism is a broad church, communism is not the only system in the socialist umbrella.
I do think saying someone cannot be paid more than X by law is immoral and draconian. It's also a very naive "solution." It's like a child saying "nah nah nah, we're equal now" or something to that effect.
Except that the data support a particular theory: extreme income inequality limits growth because growth is ultimately driven by broad-based consumption. If there's a plausible theory purporting to explain how the causality could possibly be the other way around, I haven't heard it.
There might be other factor affecting both inequality and economic growth. For example, consider culture, natural resources, climate, etc. If you can't find a plausible way to explain something (inequality causes lower economic growth), it doesn't mean that there's no other way to explain it. Actually, the history of science shows that explanation of effects might be very surprising.
P.S. My comment doesn't support one side or the other. I am just pointing to a logical mistake.
> If you can't find a plausible way to explain something (inequality causes lower economic growth), it doesn't mean that there's no other way to explain it. Actually, the history of science shows that explanation of effects might be very surprising.
Indeed so. But the central principle of science is that at any time you (tentatively) accept the best available theory that is consistent with the evidence. Right now, AFAICT, that's the theory that concentrating wealth in a small minority reduces growth because it reduces demand.
Capital (and an executive elite) is more mobile then labor. When there's a local downturn, people who derive their income from labor suffer, but the capital class does not --> increased wealth inequality.
Although PG makes a few turns of phrase, one of which is quoted in OP, that implies a straw-man who wants to end all economic inequality, he also talks several times about tackling the effects of economic inequality. The footnote in OP referring to studies that cover the negative effects on economic inequality supports rather than disproves PG's stance on this: economic inequality has multiple negative effects.
One of PG's core arguments is that while the inequality is caused by a lot of factors, a big one of which is the snowball effect of capital, when all those factors are removed, the wealth creation aspect will still remain. He explicitly says that attacking the non-virtuous feedback loops that increase economic inequality is desirable for him, he's just interested in targeting those as well as specific negative effects (e.g. poverty) rather than have the conversation framed around "economic inequality".
> The footnote in OP referring to studies that cover the negative effects on economic inequality supports rather than disproves PG's stance on this: economic inequality has multiple negative effects.
No, that's the inverse causation of PG's stance. PG said "There are lots of things wrong with the US that have economic inequality as a symptom."
If we all agreed that economic inequality is the cause then nobody would be complaining about framing the conversation around economic inequality.
> Further, there are an abundance of studies that show that reducing economic inequality (even through redistributive means) actually boosts overall prosperity.
To me, this sentence and the ones that follow are by far the most salient point.
How many Zuckerbergs, Gates, Brins, Pages and Bezos are we missing out on due to the fact that huge swaths of our country do not have the ability to fully explore and develop their talents? How many trillions in lost GDP does that amount to?
To me, this entire debate is a missed opportunity to discuss inequality on the basis of shared wealth, growth and prosperity. Instead we tend to debate these things on a moral dimension which immediately politicizes and polarizes the matter. See renewable energy for another example of how that works.
I can't think of anything more democratic than using money to vote on how to best allocate resources. The reward for doing well is to get more money to decide how that should then be allocated. This system works great until it crosses a threshold when the most talented consolidate the ability to decide how to best allocate resources into a small group of people. A small group of billionaires deciding how to allocate resources is better but not by much than a small group of people at the Gosbank in the Soviet Union deciding how to allocate resources. Progressive taxation is a good solution. We just need to tweak it until it works effectively. Unfortunately, we have gone in the wrong direction for past couple decades.
I grew up in a scientific community. People innovated and did research because they were passionate about knowledge and learning. Of course, some of them went on to create startups like Biogen but money was never the biggest motivator. I don't buy the argument that taxing the wealthy slightly more than now stifles innovation.
> A small group of billionaires deciding how to allocate resources is better but not by much than a small group of people at the Gosbank in the Soviet Union deciding how to allocate resources.
How is it better even at all, even not by much?
If we imagine that the small group of central planners were actually democratically elected (in the Soviet Union they were not, although they ideologically pretended to be), it's unequivicably _more democratic_ to have them making decisions compared to unelected billionaires who are not in any way accountable to voters.
I'm not quite sure what you mean by 'democratic' when you say you can't think of anything more democratic than those with more money having more political power. I don't see how there's some specific threshold where this becomes more or less true than it was at smaller level of inequality, although it's certainly _less_ democratic the greater the level of inequality, it seems fairly proportional to me rather than there being a 'threshold'.
It seems ridiculously simple to me. Let's define wealth equality as 100 people all with 100,000 dollars a piece. Rather than having a small group of people either in a board room on the top floor of 85 Broad St. or a small group of communists allocate resources, let everybody use their money as a vote to decide how to allocate resources. People need to eat so some money will be spent on food. Most people will need transportation so money will spent on cars and trucks. In order to prevent running out of money people will invest some of it. Several people will purchase farm equipment and start growing food, individual small businesses. Others will create an organization and pool their money together to build a factory to make cars because without cooperation none have enough to cover the startup cost. People are rather stupid so there will be losers and some are smart so there will be winners when it comes to return on investment. There needs to be inequality, it's natural. Nobody needs to starve but people who are better at deciding how to allocate resources should be given more even if they decide to invest in a bigger house and a boat. This works until that small group of people in the board room at the top of the building at 85 Broad St. decide to allocate all the resources to build more houses than everybody else needs and bigger houses than they have resources to maintain. They are able to do that because they consolidated all the voting power of money into their control once a threshold is passed.
Keep the inequality. Some people will make better decisions and then others. The people who make better decisions for example investing the money into research should be rewarded with money and the ability to decide how to best further allocate it including buying a bigger house for themselves or hire a house cleaner because they are busy innovating. There are no problems with that. The problem happens when they become too powerful. The way to prevent that is a progressive tax. In this case, make it very hard but not impossible to get above controlling 1,000,000. No one person and no small group of people are better at making decisions than a large group of people. That is what I mean by wealth equality is democratic. Perhaps, it is better to say there needs to be a wealth equilibrium rather than wealth equality.
I question your assumption that in the actual real world, having more money has any kind of correlation to being a better decision-maker. Also, more power to people who make the best decisions isn't, I think, what people generally understand 'democracy' to be, in part because there's no "objective" way to determine who are the better decision makers.
I also still don't understand why there'd be some 'threshold' (threshold of what?) at which rich people would start making bad decisions (or at least decisions that are bad for everyone that's not them?), whereas before that they would be making 'good' decisions (meaning decisions that benefit people other than them, I guess?).
I'm still not sure what you think 'democracy' consists of exactly.
It's not a threshold of the amount of wealth a person has before he or she makes bad decisions. Have you read James Surowiecki's The Wisdom of Crowds?[1]"Large groups of people are smarter than an elite few, no matter how brilliant—better at solving problems, fostering innovation, coming to wise decisions, even predicting the future." If that is true, no matter how smart or stupid individual people are, a group of 100 people each worth $10,000,000 using their money as a 'vote' will be better at investing than a single billionaire. The Koch brothers have $100 billion between them. They will spend one billion this year on political influence. They control the conservative conversation which has lead to people who follow them controlling a majority of state legislatures, a majority of state governors, the House, the Senate, and the Supreme Court. Those two are not stupid. However, any single person or small group of people with that much power is dangerous no matter how smart they might be. The point isn't to take money from rich people to finally pay for the Iraq war. The point is to take money from the most wealthy to prevent any one person or small group of people from having that much influence. Even the president steps down from power after two terms because our form of democracy doesn't work when someone passes a threshold of power from consolidation. The threshold is an amount of power that is consolidated where a person or small group of people are not longer competitive because they can eliminate all competition. Don't allow the consolidation of wealth into a few too big to fail banks. Break up the banks. Tax inheritance above $10,000,000 90%. Their children can innovate and invest to make money like the rest of us. I don't feel bad for them at all. Have a progressive tax structure using income, capital gains, and corporate taxes to prevent people from acquiring more than $250,000,000. Don't threaten me saying they are going to leave the United States. Please, please, please make them leave. They leave behind Berkeley, Harvard, Princeton, MIT, Cal, Stanford, and every other research school and university which will probably do better without their influence on the faculty. They will leave behind the abundant natural resources and infrastructure which sadly lately under their influence has been neglected. They will leave behind the most productive work force in the world. Americans specialize in management and upper management will see an increase in income without them taking a bulk of it. Please, make them go away.
>"I don't feel bad for them at all. [...]Their children can innovate and invest to make money like the rest of us"
That's a very negative attitude to have towards people with wealth above some magical number you deem "too-much".
People will get very illogical and angry when they see you blatantly stealing from their children. I know I will, because at the end of the day, I work for my progeny. An estate/inheritance tax is not taking away from my well-being, but from that of my children.
So, instead of fixing the problems with your form of governance, you decide to impose even more tyranny over the few who can possibly take advantage of it. The problem is not the money that allows them to possibly take advantage, but the corruptible system you have in place. Use that effort in making it actually noble like it's claimed to be.
Exactly. Democracy is designed to prevent the positive feedback loop where people who happen to have more resources can vote for things that gives them even more resources next time. If a system has this feedback loop, it's definitely not a democratic one.
I don't see anything wrong with bread and circuses (although I think I prefer pork and porn ;-)).
This actually reminds me of Chomsky, who said that if people are really allowed to vote, they might decide to spend more on education and universal health care, rather than on nuclear weapons. Oh, the horrors!
Progressive taxation is a perfectly acceptable solution. Somewhere, there was some notion that said: "Already-rich people probably make money faster than the less well-off", therefore: "We should tax them more to even things out a little and have an upward push for the less well-off. And on the upside is we have a bit more funding for the state/infrastructure/services.".
The problem now comes that society in general are not happy with the outcomes of the above. It's now less about how to provide for a stable, secure society and infrastructure, and more about how will we "fix everything". I believe the very existence of a state means people will want it to fix things, because it's there.
And now, someone needs to pay for all the "fixing".
But taxes on inheritance and investment are totally regressive (and have become even more regressive), which undermines the benefits of a progressive system for earned income.
I don't understand how estate and capital gains taxes are regressive. Estate taxes (in the United States at least) only kick in on inherited assets > $5M or so (< 0.2% of estates). Capital gains are AFAIK assessed as normal income for short-term gains (so, progressive) and as a flat (neither progressive nor regressive) rate for long-term gains, and even then, only for people with actual investments, which excludes probably the majority of the poor.
When I think regressive taxes, I think things that are flat fees, or else things like fica, which cut out after a certain income.
They are progressive by their implementations, and by the definition of the word progressive.
What it sounds like you are trying to say is that it's not "progressive" enough for your liking. And then you turn the definitions upside down and label it "regressive".
Taxes on inheritance are not regressive when you include a sensible floor. Current US Policy places the floor so this tax only affects families somewhere in the upper 1-10% of wealth.
Taxes on investment are complex. Considering the fact that most humans do not have anything approaching a real investment portfolio, it's hard to understand what you could mean when you say this kind of tax is regressive.
A properly progressive income tax should mean that more people can join the investment class. If the taxation within the investment class is actually regressive, then maybe we worry about that when the majority of humans have this problem.
Inherited wealth shouldn't be taxed at all: the testator has already payed the taxes when he was earning all those money he left. Taxing it again is just plain robbery.
All taxation is already robbery. That doesn't get taken in to account when deciding what to tax and at what rate for any other source, I fail to see why inherited wealth should be the exception.
If you're worried about "double taxation" I've got some bad news for you: That money was taxed many, many, many times before. When it was earned through labor? Taxed. When it was spent in a store? Taxed. When the store owner made an investment in a company? Taxed. When that company issued a dividend? Taxed. "Taxing it again" is the normal state of things.
My argument is that not that the state needs to be 'fixing' things. I'm not saying wealthy people should contribute more just because they are wealthy. It is very unhealthy for the whole if money and the amount of power and control that comes with money gets consolidated into the hands of a very few. We don't need billionaires. I'd much, much rather have 10 people with $100,000,000 than one billionaire; even better is a 1000 people with $1,000,000 to invest. They will keep on make smart investments because they will wont to keep that $1,000,000 or try to get to $2,000,000 or $3,000,000. With the number of people worth more than $250,000,000 that we have now is just a massive disaster that ended with $15,000,000,000,000 debt on the backs of everybody.
>"My argument is that not that the state needs to be 'fixing' things."
But that's exactly what you're advocating. According to this entire discussion, the state itself is broken in this case, and you want to use the state to cap/prevent the ultra-rich as a remedy to it being broken. How does that not count as "fixing things"?
>"We don't need billionaires."
Whether we need them or not is irrelevant, they simply exist. Or is their existence something you want to "fix"?
>"With the number of people worth more than $250,000,000 that we have now is just a massive disaster that ended with $15,000,000,000,000 debt on the backs of everybody."
No, sorry, you have no one but your politicians and political system to blame for that. If you know you have a fallible/corruptible system, and don't change it, then the fault is on you. By you I mean you and the general population. Consequently, if your political system means it is slow to change, and is susceptible to the whims of the public that is easily swayed by the media, then you have to rethink democracy.
One thing that is more democratic than using money to "vote" is using actual voting to vote, whether on policy directly or on politicians who will determine policy.
I've generally agreed with this sentiment and usually sum it up with the thought "One million people will usually better allocate one million dollars than one investor allocating one million dollars". That said, this isn't a hard and fast rule. There are certain types of "moonshot" projects that will never get built under such a scenario because you'll almost always fail to allocate enough money to such projects. Moonshot doesn't even have to mean something like sending a human to the moon. Moonshot can also be relative to an economy locally, like the decision to invest in power plants and transmission lines in many parts of the developing World that are underserved with regards to electricity needs.
It seems to be that people are reacting to a potential threat to an axiom of their's. That is: "Income inequality is bad because A,B,C, and should be prevented at all costs." I'm not saying no part of this is founded in reasoning and evidence, but you are right that the author does not actually respond to PG's sentiment. Rather, his reaction is automatic.
> How many Zuckerbergs, Gates, Brins, Pages and Bezos are we missing out on due to the fact that huge swaths of our country do not have the ability to fully explore and develop their talents?
But this has nothing to do with inequality. It has to do with "too many people below economic level X". If this seems related to inequality it's because you've already bought into the pie fallacy.
No, it has nothing to do with the pie fallacy. Yes, even the poorest in America lead better lives in absolute terms than most people have throughout history. But regardless of the absolute "economic level x" of the poorest, the wealthiest among us will enjoy disproportionate access to the latest technology, education, healthcare, influence etc.
> the wealthiest among us will enjoy disproportionate access to the latest technology, education, healthcare, influence etc
What exactly do you intend to do to change that? If you start everyone at a baseline level, some of them are going to be smarter, stronger, savvier or whatever, and will be more successful, and thus wealthier, and thus have greater access to whatever benefits that wealth can buy. Even if you zero everyone out each generation, genes matter.
Unless you are artificially suppressing people from rising above mediocrity, you will have some that do better than others.
It seems to me that there is probably some optimized point between total economic equality and extreme inequality. I believe we are drifting further away from that point.
In concrete terms, I don't believe those with pre-existing access to capital should receive privileged tax treatment. I'm im favor of lowering taxes on earned income and raising taxes on inheritance and investment income.
So why should inheritances be taxed again? They've already been taxed at least once - when the original wealth was earned.
If you want positive social mobility, then you need to encourage generational wealth. The rags-to-riches, pull-yourself-up-by-the-bootstraps in a single generation story is more romantic, but the more realistic path to advancement is to build on the foundations of the family nest egg. Taking a haircut on that family wealth each generation makes it harder to climb the ladder from working class to lower middle class to upper middle class.
Sounds like you're saying the problem is poverty. That is also what PG is saying. If you want to increase the opportunities for the population as a whole, attacking the income of the rich is not obviously a good solution.
How are the issues you listed relative? How does Mark Zuckerberg being super-rich contribute to "huge swaths of our country do not have the ability to fully explore and develop their talents"?
Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them.
The US is fundamentally different than Nordic countries, where socialism appears to be working:
* The Nordic countries are tiny compared to the US.
* They are highly educated.
* Their society is homogenous.
It seems like everybody is assuming that there will be this rational actor collecting money from the rich and distributing them to the poor.
What actually is going to happen is that instead of entrepreneurs becoming rich, politicians will grow even richer than they are now. The politicians will have more power, power that they want to keep, and the only way to do that is to suppress the press and the people.
And that's how communism starts. It might sound like I'm taking it too far, but it's happened a number of times already.
> Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them.
You are inventing a complete straw man. That is not what I want nor is it what most other people who are concerned about wealth inequality want.
What we want are policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate while those who are not born under such fortunate circumstances live with an ever-increasing disadvantage.
Of course this is inevitable to some degree due to the nature of compound interest. But there are ways to mitigate it. See: progressive taxation. Now it's time to take a look at other things such as the estate tax and taxes on capital gains and dividends. The latter are the most egregious in my estimation. The U.S. currently taxes income earned through labor, time and talent at a higher rate than income earned through investment, thus continuing to privilege those who already have access to capital
> What we want are policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate
What specific policies are those? Most people who advocate for such policies recommend taxation, which is what the GP is referring to: the government forcibly seizes the money. The GP is not really addressing a straw man when the most common solution is tax.
It's worth remembering that taxing is taking, so a "policy" that prevents people from becoming wealthy is just a societal license for seizing their assets.
Personally I've seen the government squander or tax revenue on pointless wars and ineffective programs like F-35, and would be happy for those who are fortunate to keep their wealth and invest it smartly; they will drive more positive change in society than the government will.
When you say the government "squanders" money on projects like the F-35, it sounds like you think that the money spent just disappears and is gone, and all we're left with are some fighter jets of questionable value. But the money that the government spends goes back into the pockets of private citizens. Who then spend the money again, and spread it around. Silicon Valley, the symbol of entrepreneurship and self-made billionaires, owes it existence in part to huge, government sponsored, military and aerospace programs, ultimately funded by tax payers. A lot of private companies got very rich on the back of that. And now it's somehow unreasonable that the government wants to take some of that wealth and distribute it somewhere else?
The issue is not the desire to redistribute per se. The point is it matters what you actually do with the money. Some uses are productive and some are wasteful. Soviet Union was born out of the desire to redistribute - and failed. So this discussion can not be had in the abstract
Redistribution coupled with corruption (cronyism) results in new oligarchs.
This is a classic trade-off, just like surveillance and security. If you estimate that the chance of abuse is sufficiently low, then yes, those are great things to have.
If not. Holy shit, you know the drill.
So, the problem is not income inequality (lack of redistribution, or the network effects (the compounding) of capital), but the rationality of decision making. The stability of the utility function of those who make the decisions. Which is the aggregate of the whole power structure.
Do we see a stable trend in good governance?
I'd say that the US could use some internal redistribution. Less spending on war on things and more on education and social safety stuff. (It'd be probably much better for the US to stop funding the useless manpower-hungry parts of agencies - like the TSA and all the terror chasers - and send those guys that would get unemployed over to work as social workers, or even just pay them to get a degree and do something useful.)
But that's what they do! The ultrarich of the world can live handsomely off the interest of their fortunes and don't ever have to touch the principal, which just grows and grows.
That money still goes somewhere. You don't get interest by keeping money under your mattress. You get interest by loaning it out, or the value of something you own increasing. And even if you've "bought" something that appreciates in value, you've anyways lost the physical money which is now being spent by someone else.
Which is almost the same scenario as the one you suggested. So ultimately, it seems your complaint is not of the money being used/spread/churning throughout the economy, rather than being hoarded under the mattress. But rather, it seems you're complaint is with the fact that the rich have it and it's not being taxed for purposes you deem useful.
If I keep a million dollars in the bank, the bank can loan out a million dollars, and I earn interest.
If I spent half of that million dollars, then whoever got paid likely puts the money back in the bank and the bank can still loan out a million dollars.
This is in a nutshell why trickle-down economics don't work.
Families this rich are not just static forever, they usually have lots of ventures and businesses that are contributing to their wealth. They are well invested, but that's not the only thing.
They also do spend and consume a very high amount and there is the inevitable dilution through the generations as families grow and each person uses their fortune in a different way.
It depends how you define "we". It seems it's a very popular idea in Europe is a very high progressive income tax which punishes people who for example start their own businesses with close to 0 net worth, no capital and have a good year or two even if they haven't accumulated much wealth yet.
I am from one of the post communist countries and a party advocating 75% income tax for people who make more than 150k/year is gaining traction among my friends in tech. It is in fact a very common sentiment that "just tax the people who make a lot of money" is going to solve a lot of problems.
That's what the parent is addressing and it's in fact a very common view.
The focus on raising taxes is misguided in the following way: we should first figure out which policies are good how much they would cost and then find the cheapest way to raise the money with the least number of distortions and disincentives - not start by raising taxes by arbitrary amounts
>>policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate
This will happen no matter what policy you implement very simply because if you want a society based on freedom and merit there are various motivations for people to do or not do things, like: choosing careers paths, making decisions to save and invest, how much time they spend on improving personal skills, how hard and how many hours some one is willing to work to achieve what they want etc.
Based on what your value system and what you want in your life, with all the priorities there will always be some one who is frugal, hard working, is making sound financial decisions, working on personal skills and doing all that who will grow exponentially in comparison to others.
>>while those who are not born under such fortunate circumstances live with an ever-increasing disadvantage.
Here is a hint, unless you are born in war torn Syria or are trapped in some African civil war or born with disease you are already in a 'fortunate circumstance'. You may not realize, which is a very different problem altogether. Either there systems like social security designed to handle the exceptions.
>>Of course this is inevitable to some degree due to the nature of compound interest.
A tip, compound interests doesn't work just with money. It works with skills, knowledge, productivity, experience. You literally have to enforce laziness as a law if you want to stop this.
Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them.
Because the state is neither corrupt nor incompetent; this is the big fear of the cyber-selfish libertarians you will find on HN. Tell you what, why don't you start your rant with a list of these rich politicians who will grow even richer. Just a single name please.
No, this is not how communism starts. If you knew anything about the history of your own country (doesn't even matter which country this is) this would be readily apparent. Rich people becoming even richer and using the aparatus of the state to enshrine the power of their family or tribe is usually the outcome of a coup or war. Communism usually starts with a lot of rich people who did not make the last flight out having a short lean against a dusty wall somewhere after their family has spent several generations giving everyone in the country a reason to want to see their spleen paraded around the capital on a stick.
How someone can make such an unbelievably moronic and utopian statement is beyond my comprehension. A shame so few have yet to internalize the lessons of Buchanan and Tullock, though to presuppose the existence of a perfect government, I'm afraid is much more desperate than that.
You know, $8M for 200 speeches isn't that much. People like Seth Godin and Malcolm Gladwell make ~$100k per speech, and they're not even former POTUSes.
The point is, companies/lobby groups who directly benefitted from Hillary's decisions as a secretary of the state, paid Bill a lot of money to give speeches.
No, what politicians do is to build up debts (easy - it's other people's money) that no business would or could ever countenance. Thus you have a State with a $20 trillion debt and rising. One day it won't rise any more and the suffering will be immense.
The state is neither corrupt nor incompetant? Really?? If this is the case, why so much interest in black lives matter??
There seems to be this spread of misinformation (especially on HN) that evil business owners aren't paying their "fair share" when in reality, they pay the majority of taxes in the US.
High taxes and regulations will only make it harder for the non-rich to accumiliate wealth and the zuckerbergs of the world will just move to another country.
Do you like only having the choice of either working for a big corporation or the government? I sure don't.
nordic countries are a good example of what not to do, because this is exactly what has happened there.
I agree, thinking the politicians can handle anything is naive. Politicians seldom make the situation better, mostly they make it worse while enriching themselves.
Socialism don't work in the Nordic countries either. In Denmark where I am from we were in the top 5 richest countries only 60 years ago, before we introduced the Welfare State. Back then we actually had lower taxes than in the US.
Since then we have been sliding fast down that list, so we are today around 20th place. We now have an absurd situation where a small minority of ~33% in the private sector has to pay for ~66% of people on welfare or working in the public sector. And we are past the point of no return, we can not make any reforms to cut the public sector or welfare, because the majority is obviously against.
A high earner often pays 80% counting both taxes and levies/duties. It has killed almost all initiative in Denmark. People prefer time off instead of working extra hours, we are one of the countries with the lowest amount of entrepreneurs percent wise, like in France young people and entrepreneurs are fleeing the country in hordes.
I myself moved to Switzerland to start my startup.
60 years ago, Denmark was one of the few industrialized countries other than the United States which was not extremely devastated and still in the rebuilding process after WW2...
We're on a website called "Hacker News." We have the ability to make innumerable improvements to the way governments work. There is no reason to pick 1, 2, or 3. We can have anything in between. We can make something new, we can figure shit out. Not that it'll be easy, but we can...and we should.
All I'm reading in this thread is:" ______ system of government isn't perfect, so our only option is to keep doing what we have been doing even though we know it sucks."
I'm also from Denmark, and I find it hilarious that you think it's a problem that people prioritise free time. Do you think that all a society should aspire towards is to have people working as hard as they possibly can? To what end? So that a few people can get so rich that they (and their heirs) don't have to work hard while the rest of us do? Isn't it a testament to the success of the nordic model that most people, not just the elite few, can afford to prioritise leisure?
Your statement about how 66% of the population is payed for by the private sector is not only not right, it's not even wrong. It assumes that the public sector does not create any wealth at all. But obviously it does. And all the money that is spent in the public sector, eventually ends up in the pockets of private citizens or companies in the private sector. The public sector is as much a boon to the private sector as it is a burden.
What happened in the Nordics is that for the most part of the 1900's, there was a shared border with a huge imperialist and expansionist superpower, trying to convince the world that their economic and social models were superior. It often did it with some very dirty and violent tricks and supported its sympathizers around the world. Especially in neighboring countries.
In order to keep the people from revolting and gaining permanent global competitive advantage by murdering the factory owners, lenders and their families and stealing their property disregarding any repayment plans - the moderate socialists (who saw that the socialist system would be built organically without violence) and the right wing owner & trader classes made an alliance to fringe the hard-core communists.
Bargains were made and benefits established as all parties knew that every satisfied social democrat was much better than a soviet-devout communist. In Finland, there was a very bloody civil war right in the beginning of independence (where the communists lost), two big gunfights in the WW2 and decades of soviet pressure to turn communist.
The social programs and safety nets were established to ensure the survival of capitalism and private property. The problem being solved with reducing economic inequality was not "poverty" like PG claims, but threat of violent revolutions by people who felt unfairness.
The Soviet Union is gone now and thus the left wing these days has much less bargaining power. These are interesting times.
I also come from a previously communist country and I disagree. The world isn't so black and white. Progressive taxation is not equivalent to a centrally planned economic system. I've had state owned utilities and privately owned utilities, and I absolutely prefer the one that is subsidized by taxes and answers to voters. There's a huge difference between that and having state-chosen academia in Moscow decide how much electricity our city requires. Taxes on wealth and propert subsidize that.
I don't care how much money someone makes off a search engine company, but taxation should incentivize affordable housing and discourage the creation of wealthier landlords. Rent is not valuable entrepreneurship. Controlling the township's electric or water company is not valuable entrepreneurship. At least the state answers to the citizens it services, and has less of an incentive to be driven by profit. Let's have higher taxes in order to create a social safety net and pool of opportunity for the rest of the people.
The US already has the one of the highest corporate tax rate in the world and the wealthy pay the majority of taxes. There is no inequality here.
We shouldn't de-incentivize prosperity. We need to create more tax payers, not less (or the whole system will collapse). Larger safety-nets will not create this incentive.
If it did, we would see many more startup and technology companies in nordic countries.
Instead, we see companies neutered by the intense regulations and taxes. Ikea, the biggest company in Sweden,is a non-profit in another country. Why is this?
Actually succeeding with a startup in those countries is nearly impossible. Starting a company is pretty much the only real way to truly become rich (if you are poor) and you will be systematically removing this power.
There is a good radiolab episode of exactly this in Peru.
Education is the key to a citizen with advantages with money. With freely available education, for instance, you can pay leas in taxes.
The problem is that most people would rather not sacrifice fun times now for a good life later. With freedom comes also comes the freedom to make poor life choices, and a certain percentage of people will alwayw make poor choices.
I'm not even saying there should be no safety net, just that there needs to be a careful balance.
Yet the rate is a fraction of what it was 30+ years ago. While the wealthy may pay the "majority" of taxes, I thought it was common knowledge that the uber wealthy pay proportionately less of their income in taxes then the lower and middle class -- which is inequality defined.
"Yet the rate is a fraction of what it was 30+ years ago"
...yet the US is now the most prosperous nation on earth and our poor still have cell phones, a basic roof over their heads, and aren't eating rocks in the dirt.
A 90% marginal tax rate (like it was 30+ years ago) won't be all rainbows and kittens. It will be a very, very different US. 'Startup' probably won't even be a word any longer if this happened.
"I thought it was common knowledge that the uber wealthy pay proportionately less of their income in taxes then the lower and middle class"
More misinformation. The lower classes pay almost no income/state/federal taxes. I was unemployed for a year back in 2010, and I actually got money back when I filed my taxes based on my low income...and I never had any taxes deducted from my unemployment.
The 'uber wealthy' pay more in taxes than they will ever use in their lifetime..and probably 10,000 or more people's lifetime.
Not to mention they pay people in the form of income, which is then paid back to the government in the form of taxes. They are indirectly paying a ton more in taxes. The poor and middle class do no such thing.
Instead of focusing on how much more money we can appropriate from the wealthy, we should first be making politicians and governments accountable for the money we are paying into the system now. Without this accountability, we will continue to run out of money.
Detroit local government is a great example of this. Rampant corruption keeps causing a budget crises and the city council act like petulant children when asked for even the slightest bit of accountability.
"I mainly just don't believe in vagina lotteries"
There are many unfair "vagina lotteries". Should we open up NBA teams to people that don't have natural abilities or make them play with a handicap?
I will never be able to play for the NBA because I'm not tall enough. Should the NBA pay their "fair share" by being forced to allow me to play? Do those players really deserve all that money?
If I worked my entire life to build a business, so my kids can have a nice life..I shouldn't be punished.
I will be curious to see how many people in silicon valley can afford their same lifestyle when their inflated wages are cut by 40% and rent and expenses stay the same.
"...yet the US is now the most prosperous nation on earth and our poor still have cell phones, a basic roof over their heads, and aren't eating rocks in the dirt."
Lot of reasons for this, don't need to go into it. People have written books on it, and I am assuming you aren't directly correlating it with the tax rate.
"The 'uber wealthy' pay more in taxes than they will ever use in their lifetime..and probably 10,000 or more people's lifetime."
This isn't true, yea maybe they won't pull or have the need for a social security check, but their businesses and investments rely on public infrastructure, education, and the federal military protecting their international assets and trade rights MUCH more then the average joe. This is compounded by the fact that our corrupt system of government you so aptly pointed out, has allowed the policy making to overwhelming favor the established crony capitalists.
"Instead of focusing on how much more money we can appropriate from the wealthy, we should first be making politicians and governments accountable for the money we are paying into the system now. Without this accountability, we will continue to run out of money."
You are totally right, we should be figuring out how to be less wasteful -- and there is also plenty of legislation that creates unnecessary waste and bureaucracy. I think this is beyond a discussion about taxes though, and more about restructuring our government in a bipartisan effort -- which starts with who we elect. I think you can separate the two arguments. But yea, totally agree. One thing to keep in mind though, all large human organizations become less efficient and wasteful -- so this is not just a government problem. See HP.
Lastly, I don't think that the NBA analogy really works here. Just because someone is born with athletic ability doesn't automatically make them draft ready. They spend 10-15 years honing their skills, spending time with world class coaches, and working hard to get to the NBA. Someone born into obscene wealth usually comes with years of investment management and financial teams built around the family to maintain that wealth -- with a high potential for the child to be very disconnected from reality and never have that same urge to work that the NBA player had. See the affluenza case for example. I am not suggesting we should punish someones children by any means for your own success, but there is a difference between providing your kids a nice life and supporting modern day princes and kings.
Obviously this last bit is more of a generalization, but I hope it shows the fault in your NBA analogy. Otherwise I do agree with the sentiment that yes, there are natural vagina lotteries, but being smarter or more athletic is a net positive for a society -- whereas being born into inordinate amounts of wealth could actually end up being a negative over the long term when your ruling class is further removed and further concentrated from the average.
> Stockholm is the second most prolific tech hub in the world on a per capita basis, behind Silicon Valley.
> The Nordic region represents 2pc of global GDP but has accounted for almost 10pc of the world’s billion-dollar exits over the last decade, with more than half of these coming from Sweden,
> Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them.
Coming from a former communist country, I can explain why. Because the alternative, capitalistic "free market" where companies eventually end up as oligopolies, is actually worse and gives you less control over the resources involved. For example, botched privatization of water utilities here in Czech Republic hiked prices up 100x.
Yes, real democracy is quite a weak control, but at least it's some means of control. You don't get the same level of control over private corporation as you get as a citizen over public utility. And there are many examples of government run enterprises that prove this point, in Nordic countries and in Switzerland.
So state is something I can at least marginally influence by voting or by being involved in local politics (I have for example information laws that give me some insight about what's going on); and yeah, to me, giving state less control over resources by minimizing it is a losing proposition. If I could vote about the companies, then perhaps we could talk (but then they would be more like customer cooperatives than private companies).
Of course, you probably think competition is the solution, and I don't buy that. First, it doesn't exist in many places (as you're probably painfully aware), and I believe it actually tends to not exist. But the biggest point against the competition solution in my mind is that it's very "low information density" solution. People cannot come and to try to fix things (unless they make their own company, which is unrealistic to expect); they can only signal unhappiness by leaving. It promotes irresponsibility and fatalism. I think it's a kludge, frankly, compared to a possible system where you could really control citizen-owned companies via voting.
Huh? You are mistaking cause and effect here. People are highly educated because the state pays for our education and give and lend enough money to handle living expenses while we study.
No, increased government income is not required to decrease inequality. We just need basic fairness in US. Here are the policies I would suggest:
- Capital gains should be taxes at least at same rate as income generated by labor.
- Remove incentives from economically unproductive investments such as real estate. For example, discourage home ownership unless its primary residence.
- Limit political contributions from super rich.
- Discourage high return investment vehicles that typically manipulate markets to achieve their goals by reducing risks through government safety nets.
- Limit what can be charged by insurance providers for a given quality of service. Health insurance oligarchy and their political influence is core barrier in enabling healthcare for all.
- Limit what can be charged by educational institute to students. More financial aids is not the solution, its the problem.
The goal of the governments isn't ensuring wealth equality, but ensuring level playing field. If that is ensured then, IMO, wealth inequality will naturally be limited. Government must ensure equal access to two core areas which is health and education. It must make tax system fair and avoid scenario where secretory pays higher tax rate than their super rich bosses. It needs to prevent inflation of limited resources such as real estate by strongly discouraging economically unproductive investments.
To encourage the pursuit of financial independence from government at a reasonable retirement age:
- Progressive tax on consumption. No tax on labor.
- Zero capital gains if total assets is below $2M.
To discourage foreign home ownership:
- An non-primary residence or foreign investment in real estate can only be leasehold, maximum 25 years. At the end of which the control of property reverts back to the original owner and/or their beneficiaries.
To minimise effect of money on elected representatives that can't be removed mid-term:
- All bills voted by the public. Every citizen can elect a proxy for their votes. There are representatives, but the term of a representative is continuous rather than discrete 4 year terms, and anyone can be one.
To ensure affordable health care:
- Set up a government monopoly on purchasing pharmaceutical supplies, along with price ceilings for every type of drug that must not be breached to be eligible for purchase by government. Citizens may purchase drugs that are not on the list of drugs the government say they will purchase, but it must be imported from abroad.
The primary goal of government is always be security from other governments, so that it's citizens can live without subjugation. All other concerns should be secondary. Health and education is useless if next month the country will be invaded and its citizens exploited economically. All other concerns are secondary goals.
Even a flat tax on consumption (like the sales tax) is regressive in effect, because the poor spend a greater fraction of their income on consumption. Now, if you suggested a high tax on luxury goods and services, and no tax on necessities like unprepared food, basic clothes, etc. I might be able to get behind that.
It means the marginal tax rate for each dollar a person spends in a year increases with the number of dollars they spend.
An example of a progressive consumption tax bracket:
Dollars spent, marginal tax rate.
$0-$5000: 0%
$5001-$10000: 10%
$10001-$30000: 15%
$30001-$80000: 27%
$80000-$120000: 35%
$150000+: 40%.
So if a person spends $15000 a year, they have to pay an additional $1250 in tax.
They can spend on food, clothes, luxury boats, and are taxed according to the number of dollars they spend.
I don't see how that is regressive in anyway.
This way, as long as the spending of two people are the same, a person who makes and spends $20k a year, and a person who makes $80k and spends $20k a year, and works 5x harder, are both taxed at the same rate. This removes the disincentive to work hard while being frugal.
You can also pair this with a "Universal Basic Income" later on - e.g. first $10000 of spending in a year is -100% tax, meaning completely subsidised by the government.
Welfare could be means-tested on spending rather than income, so folks don't have to worry about losing welfare when they get a job.
The people don't give any money to the government. The government doesn't need their money, it creates money when it spends.
The more government spends, the greater the capacity of the private sector to save (so long as the government doesn't spend beyond the productive capacity of society to create excess inflation or compete with the private sector for resources which would stifle innovation).
1. Similarly to bourgeois in the Russian Empire they believe they can aim the redistributing horde at their enemies while remaining safe themselves.
2. Note how it's always the income inequality and never wealth?
If everybody's income had been the same then wealth had much more value. E.g. if everybody's income had been limited to $100k pa then somebody with just $10M in cash would had more money (and hence influence) than anybody who stated at 0 could possibly make in their lifetime and such a wealth would have never been surpassed. If you are seeking rent from your wealth then limiting everybody's income is a pretty good strategy usually expressed as "fuck you, got mine".
I think you're very wrong in your reasoning, on both counts.
> they believe they can aim the redistributing horde at their enemies
I can understand why you say that, and it may be hard to understand, but actually, most people on the left don't really have "enemies". They want equality, not to conquer someone rich.
> Note how it's always the income inequality and never wealth?
First, wealth inequality is almost always discussed too (Piketty, if you want a trite example) and is often mentioned as being worse. But in any case, I think the focus on income is given by the fact that societies try hard to avoid ex post facto laws. So we say, OK, what you got now is fine but the rules are going to change from now on. That's why you focus on future change (income) rather than existing assets (wealth).
>I can understand why you say that, and it may be hard to understand, but actually, most people on the left don't really have "enemies". They want equality, not to conquer someone rich.
Same as Russian bourgeois, who did not have personal vendetta against the "rich" (who had been the major capitalists and/or royal dynasty) they just thought it's unfair and those should not have as much wealth and influence. Is not it the sentiment of today's left against bankers/wall street/Koch brothers?
As for your theory why wealth is not targeted - so? Okay you do that for reasons you described, yet the effect is the same, is not it? I am pretty sure the 99% of the left do not care about this effect since they are not wealthy enough but it does not make it to disappear. The 1% who cares is, by definition, wealthy enough to instigate such a movement.
I seriously can't comment on motivation of Russian bourgeois; still, I would like to explain it, even though I think it's futile.
Here's an analogy. Let's say you have a weapon and I don't. And I honestly don't believe either of us should have weapons, because we can live in peace. So I attempt to convince you to give up your weapon, but you think it's an attack, because you cannot read my mind, and you're paranoid that I am going to kill you when you are without the weapon I might take from you. But that's not my actual intent.
So it's the similar thing you're thinking with respect to the left. You could have also noticed I used a qualifier "most".
Your other argument also shows a good amount of conspirational thinking. In particular, it ignores the fact that most people on the left are against rent-seeking too. And with limited income it becomes actually quite complicated to manage large wealth.
I don't see how you are arguing against anything what I've said. Here is a recap of this thread how I see it:
OP: I don't see why smart, capable people want to give their money to the government.
me (paraphrasing): Theory 1: they don't believe they are going to give the money themselves just like Russian bourgeois did not believe they are going to end up in exile/dead together with the "rich" they had been against (paraphrasing).
you: you are wrong, we just want equality.
me: it's okay, the Russians did want it too.
you: here is a weapon analogy, and you are just paranoid btw.
I am just trying to explain that your assumption about the intent of the left is wrong, that's all. You're basing this assumption on bad analogy with Russian revolution and on your fear, while you should base it on, I don't know, actually talking to some people on the left? Again, most of them don't think that revolutionary escalations are a good idea. (Although that's the path history often takes.)
But if you don't want to trust other people, then I don't see how could I convince you.
Honest question (not directed specifically to you sradu): I've seen this statement pop up now and again, and every time I've seen it, it is referring to Nordic countries. I am beginning to suspect that it's a dog-whistle: am I wrong?
What exactly is being referred to as 'homogenous' and why is it an advantage? What disadvantages are presented by heterogeneity of other countries?
I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them.
It's because I believe that there are many things that make my life better that I simply could not provide from my own resources but, when my contribution is pooled with everyone else's, become viable and make my life significantly better. Off the top of my head, the transport system, the judicial system and attendant sub-systems, the healthcare system, research investment. Environmental management. Regulation in food production. I'm sure I could come up with many more.
If you didn't understand this, then I'm shocked at your ignorance.
If you did understand this, then why did you ask? Are you taking some kind of ridiculous, hyperbolic extremist view that nobody is advocating, in order to create the illusion of being a child arguing in a playground?
"I’m going to be charitable here and assume that PG is not arguing against those that want to, literally, end economic inequality completely [...] I’ve never met anyone arguing for this."
Interesting. Perhaps I'm misinterpreting their rhetoric, but my impression has been that many people are arguing for precisely this.
I've also never seen anyone arguing for this. Many argue for specific issues and policies like estate taxes, single payer health, cost of housing and education, but I've never met anyone that thinks everyone should have the same income.
Is economic inequality a problem in and of itself? Why?
Economic quality seems like a red herring for actual issues like how well off people are. Is the actual concern about how poorly off the poor are? Imagine a thought experiment where aliens come to earth and give every human 100x the resources they have currently (or 100x a year's min wage), as an annuity. The poor are all now rich, and the wealthy can buy their own space stations.
Is this intrinsically a problem, and why?
If the actual concern is about how well off the lower and middle class are, then that's reasonable: we're talking about the welfare of actual people. But actual people are not harmed or affected directly by some mega-rich person being much richer.
I expect that someone will reply to explain that inequality is the symptom of or cause of some other dysfunction, and it is the actual problem - and that's great, that's what I'd like to understand better. Whatever the actual problem is, let's talk about it. If the problem is about lack of adequate education, opportunities, etc. then let's discuss those concerns directly.
The issue is always inequality and not absolute wealth, so your hypothetical of everybody having 100x the resources is not fundamentally different than the current situation.
The issue is that wealthy people do not have a monopoly on talent, good ideas or intelligence. But they have a monopoly on power and influence. Society therefore suffers when the best ideas do not necessarily compete on an equal basis within the marketplace or the political arena, if they make it there at all.
I think many of us agree that "society therefore suffers when the best ideas do not necessarily compete on an equal footing". Where many of us disagree is regarding the extent to which we have the moral license to do anything about it policy-wise.
Multiplying everyone's MONEY by 100x wouldn't make any difference, but multiplying everyone's RESOURCES (what OP said) by 100x would absolutely make a big difference in human society.
Excellent! Thank you for clarifying. It sounds like the concern is that some people hold a monopoly on power, such that good ideas don't compete on their merits. Is that a good way of saying it?
I ask because that problem does not seem to me to be directly related to income equality.
In communist societies everyone had very similar income, and yet a small group had all the power and functioned as kingmakers in business. Or even outside communism, simple corruption: for example, until the 90s you needed a very hard-to-get license in order to start a business or do business at all in India (known as "license raj"). This stifled their business environment and innovation for decades. This type of problem still affects many countries today, especially corrupt ones.
It seems to me that good ideas are capable of flourishing in the US without any gatekeepers getting in the way. It's easier than ever before to start a company. Why do you believe that good ideas aren't already competing effectively on merit? (Examples?) Take Google, Microsoft, Facebook, Uber, etc. Did these not win on merit? Is there a legislative barrier to you starting your own competitor to one of these services?
> In communist societies everyone had very similar income...
Again we're reverting to the straw man of 100% (or nearly) equal society.
Our society must be unequal to some extent because capital is a reasonable and effective reward for figuring out how to best allocate resources. But extreme inequality prevents a large % of the population from fully developing, exploring and disseminating their talents, shutting them out of this virtuous cycle altogether.
You bring up Google, Microsoft, Facebook and Uber as examples of companies that succeeded on their merits. All four of those companies were started by straight white men with upper middle class upbringings. Do you believe that's a coincidence? Or are there some "lost Zuckerbergs" out there who never had a chance to fully explore computers when they were kids? Is a family's ability to afford the latest technology a material advantage for the next Zuckerberg / Gates / Brin / Page / Kalanick? In your original example, who is going to invent the next great space tech? Probably the kid whose family is buying a space station.
It's not a straw man. I'm not saying that any argument for income equality is tantamount to communism. I'm simply saying that you can have income equality and still lack a healthy business environment where ideas compete on merit. So the problem is whether ideas compete on merit, not income equality. Income equality is neither necessary nor sufficient for those other things.
Regarding Brin, I don't think he has as privileged a background as you seem to believe. He had a pretty humble beginning, beginning with his birth in Soviet Russia (where his parents were discriminated against for being Jewish), after which he immigrated to USA at age 6:
> I'm simply saying that you can have income equality and still lack a healthy business environment where ideas compete on merit.
And I don't dispute that at all. What I am saying is that society's prosperity is optimized somewhere between total equality and extreme inequality, and that we seem to be drifting further away from that point.
> Those at the very top of the chain lived like kings, while those at the bottom starved.
I don't think that was always the case, in particular, I doubt it was the case in Czechoslovakia.
Being a member of UV KSC (board of directors of the Communist party, the central organ) had special benefits such as better access to health care, goods imported from the West and having an american-sized house, but they were quite modest compared to benefits of today's top American CEOs. And in fact, the best paid people out there were probably some popular singers, who had maybe 50x the average salary. Typical director of state enterprise had maybe 5-10x the average salary. At the bottom, people didn't starve even if they made trouble (that meant a prison sentence and a menial job).
There are people who disagree with this assessment, but I have never seen a good evidence for the claim they would "live as kings". I agree there was inequality, but it wasn't so much monetary as it was in power and status.
It was probably one of the reasons why there wasn't a bloody revolution. Everybody, even the top officials wanted a "better" system.
No, actual inequality does cause actual problems. 1) Happiness is affected by absolute wealth but as we get richer the effect wears off. Relative wealth however retain its effect on happiness regardless of absolute wealth level. 2) Inequality distorts supply and demand in society. In any society there is a limit to labour. If you shift larger part of society's wealth to a few they will command an increasing share of the labour of a society. This will affect what gets produced in society and relative prices. 3) High concentrations of wealth distorts politics. With more equal distribution politicians will mainly cater to the interests of the majority of the people. With extreme wealth concentration society will become increasingly like an oligarchy. Studies show that this has already started to happen in the US. Studies show that what becomes actual practical politics is generally not in line with the will of the majority, but rather with the will of the wealthy few.
If you look at societies with high wealth concentrations like those with large oil wealth or other resource wealth you find typically very weak political institutions and poor development of democracy. The super rich gulf states e.g. are far behind politically speaking from much poorer countries.
Human values are complex, but most of us have the instinct that inequality is bad, just as we have an instinct that murder or theft is bad. Even if everyone had 100x what they have now, the inequality would still feel wrong to me.
In terms of ethical theories: from a utilitarian perspective, inequality causes unhappiness, and even a partially destructive redistribution of wealth would probably be better for the greatest happiness of the greatest number. Other approaches (e.g. virtue ethics) I'm less familiar with.
>If the problem is about lack of adequate education, opportunities, etc. then let's discuss those concerns directly.
That is a large part of the concern and it is happening because of inequality. Funding for public education gets cut > rich people move towards private education > more education funding gets cut, partially swayed by rich people who have no vested interest in public education > public education gets shittier and shittier > private education becomes leagues ahead of public education > only rich can afford great education > only rich can afford nice jobs.
Things like this happen slowly over decades in all sorts of areas. That is how the middle class in the US has been hallowed out. It's not about the rich becoming richer, it's about the lower and middle classes becoming poorer. And in many cases, though not all, the poor becoming poorer is directly tied to the rich becoming richer.
This seems like the exact type of confusion Graham mentions. E.g., what does Bannon's insistence that public education is necessary have to do with Graham's essay? Graham clearly is not arguing against social programs or a mixed economy.
It is insane (and also very educational) that so many people are completely missing pg's point - author of this response included.
I blame pg a little for using the phrase "income inequality" at all since it seems to be a trigger for many people and shuts down their critical reading and reasoning abilities. Let me try to phrase it in a clearer way.
If you focus on reducing "income inequality" then you will reduce income inequality, but that will have many negative unintended consequences (killing startups at the extreme, etc). Instead, people should focus on the REAL problems which is lack of economic opportunity, crushing poverty, and political corruption.
The real solutions all come from helping the people at the lesser end of the inequality equation without having to touch many of the people at the greater end. Universal healthcare, universal education (day-care/pre-school/public schools/job retraining), universal basic income. Just those three policies alone would have an unimaginable positive impact on whatever country institutes them. And my guess the money for these things already exists if you eliminate ridiculous wasteful spending, subsidies, etc.
If, at the end of day you eliminate wasteful spending and there is still a shortage of funds for these programs, then sure increase taxes on the wealthiest. My guess is that many would be fine with it (since it's going to a "good" cause).
Exactly, and I'm not sure why you're downvoted. PG and the author of this Medium article are basically arguing for the SAME thing. They want policies that allow the poor to have more economic growth opportunity. The main point of contention is the terminology "income inequality."
The problems of economic inequality do not just boil down to lack of opportunities for the poor, it also encompasses disproportionate levels of power for the rich.
Improving opportunities for the poor is important, but so is providing a fairer playing field in both the economy and politics.
I know you mean well, but here's a counterargument. The more unequal societies tend to be less socially coherent and less interested in pushing universal whatever. So it's probably a chicken-egg problem, and the standard way to address a problem like that is to fix both ends at once, little by little.
And it's insincere to think that universal access doesn't affect the wealthiest at all. In many cases (not all, it's probably not the case of Y combinator kind of people), the wealthiest got where they are by abusing the poor.
The more unequal societies tend to be less socially coherent and less interested in pushing universal whatever. So it's probably a chicken-egg problem, and the standard way to address a problem like that is to fix both ends at once, little by little.
If the rich are the primary actors against social and economic progress ("universal whatever") and are powerful enough to prevent it, what makes you think we have any chance at stripping them of their wealth? It's akin to attacking the enemy's main castle in order to weaken their small fort. Why not just attack the small fort? If you win against the main castle, then your theory that the small fort was too strong must have been false.
In many cases (not all, it's probably not the case of Y combinator kind of people), the wealthiest got where they are by abusing the poor.
If that's true, why don't we just target those abusers?
I think you have a good point. But I still think polarization of the society is an obstacle that has to be overcome in sync with this. Things like people supporting Donald Trump. I wish I had a good recipe/idea how to reverse that (at least some of these authoritarian trends), but I don't.
So it's more like a distraction is needed at the main castle in order to take the small fort.
Out of curiosity, would it be possible to mitigate most of the perceived negative effects of inequality (unequal access to opportunities) by simply re-allocating our existing tax revenue? For example, instead of paying for costly wars in the US / silly development projects like the F35, could we use that money to grant our citizens free college education, better access to health care under a single payer system, basic welfare, and job training programs? Could we employ an infrastructure development program to put people to work at good wages?
First, it would be trivial to reroute inheritance funds through trusts or protected business assets, so very few wealthy families would fall victim to this sort of tax in reality. Governments have been trying to steal from the rich for a very long time, and the rich are fairly skilled at protective countermeasures.
Beyond that, your policy comes off as just the most base form of theft. Generational wealth is important, it's core to our survival instincts to look after our offspring when we die -- beyond just their basic needs, we want them to thrive. We want our grandchildren to thrive as well.
Also, generally speaking, I trust the children and grandchildren to spend money in more interesting / authentic ways than our government, who has, for example, the yearly defense budget we carry. And the yearly prison budget we maintain.
What if a child whose rich parents died would have started the largest cancer research center in the US with his billion dollars, but instead that money is seized by your "tax plan" and simply goes toward the defense industry coffers? Is that a net gain? Taking from the rich and giving to Halliburton and Blackwater?
While this might look like a superficially good idea, this means that the government gets 100% ownership of all businesses after 50 years or so. There are multiple reasons why this would be very bad, for example politicians would not have the specialized knowledge required to make the owner decisions of every business. It would also give politicians an unprecedented amount of power.
Universal income and job guarantees/full employment are PRO STARTUP but ANTI-VC.
Given PG makes all his money from the glorified HR scheme that is the VC industry, it's not surprising he is against a system that empowers people to take risks on starting companies that don't require any investment.
If people are able to start companies without risking the health of their family, or their long term prosperity, they don't need as much investment and there wouldn't be room in this world for VC funding, and thus not as much money to trickle down to the inaptly named "super angels" like PG and the YC crew.
> Bill Gates gave an excellent summary of the argument against unchecked levels of economic inequality[2]:
High levels of inequality are a problem — messing up economic incentives, tilting democracies in favor of powerful interests, and undercutting the ideal that all people are created equal.
This is the problem right here. The "ideal that all people are created equal." The truth is, they are not. There are differences in IQ, differences in emotional capacity, differences in physical strength, differences in programming ability, etc. Because every human has a unique set of DNA -- that will only ever occur once and never again be repeated -- they will have unique combinations of various skills and traits.
People are not equal and you cannot make them so. Thus they will have different outcomes economically. It couldn't be any other way.
What you can do is provide equal opportunities to those with objectively worse environments, i.e. those in poverty. Attacking this problem will be the most meaningful solution. But economic inequality is still not the yard stick to use for this.
How these obvious issues get conflated through the use of the trigger term "economic inequality" is beyond me. Perhaps it stems from the self-esteem movement where we started giving trophies to every kid who could kick the ball. Do people complain about "soccer inequality" because they don't play on FC Barcelona? And should one blame Messi for such a thing, or should they find ways to sponsor youth soccer leagues instead.
> This is the problem right here. The "ideal that all people are created equal." The truth is, they are not. There are differences in IQ, differences in emotional capacity, differences in physical strength, differences in programming ability, etc.
Here's what that phrase originally meant: European-style nobility is a mistake. It's not that you are better than me, not because of IQ, emotional capacity, physical strength, or anything of that nature. Instead, the idea was that you were better than me because your great-great-great-grandfather helped the king put his trousers on every morning, and got rewarded with a hereditary title, and you inherited it, and therefore you are my "better" because you have a title and I don't. And the older the title, the better it was, even though that means the less it had anything to do with you!
So when the Declaration of Independence says "all men are created equal", it's not talking about IQ or physical strength. It's not even talking about different economic outcomes. It's talking about social/political standing conferred by birth.
I'm not saying that you are wrong in your conclusions...
It takes a special type of arrogance to support using violent force to take from some group of people to give to another, who you believe to be more deserving of that plot of wealth. Bill Gates has it. Paul Graham doesn't. And thus the supporter of income inequality is the more humble of the two.
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[ 5.1 ms ] story [ 234 ms ] threadThere's a bizarre notion going around that protecting the economy requires protecting the rich. However if you look at it, it doesn't make any sense. The strength of an actor in the economic system is directly related to their participation in that system. The rich are where they are because they hoard more of their wealth. Hoarded wealth slows down an economy. The rich are poor economic actors, let them hoard their money elsewhere.
who will take advantage of those opportunities? people who take advantage of opportunities to make money have already moved out, haven't they?
Many high profile CEO's are worth tens / hundreds of millions but take $1 salaries.
The government has already taken their cut of the wealth that goes into an inheritance on the first go-around, and they are actively eroding it already by printing additional money and inflating the currency. They shouldn't get to double-dip into the hard-earned and carefully stewarded generational wealth of my family, just because somebody died.
Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling.
You can call it that if you want. With regards to inheritance, I'm suggesting setting a maximum amount that any single individual can inherit. The rest can go towards funding public infrastructure.
> "Sure, it feels good to say somebody who was born into the lucky sperm club isn't entitled to the fruits of their wildly successful parents' labors. But I'd rather bring up the floor than pull down the ceiling."
I'm not arguing for everyone to be poor, I'm suggesting that there should be a limit on how much richer someone can be. It's the ratio which is important. If a ratio is set, and you want to raise the upper bound, all you need to do is raise the lower bound along with it.
For example, you would not have a SpaceX or a Tesla. You would not have Y Combinator as it exists today. You would not even have the video game that I am about to release next month.
Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large.
It's not like you have to pay yourself all your earnings in wages as the owner of a business.
Yeah, just remember the bad old days when we had ~95% income tax and NASA actually had a serious budget.
We definitely wouldn't want to return to the days when space travel actually pushed real boundaries and we didn't have a toy supercar company for the superwealthy.
I wish you well with your game launch, I hope it's a success.
The issue I'm tackling isn't about erasing the rich, it's about setting limits on the differences between the rich and the poor. If you believe the rich should be richer, why shouldn't the poor be richer too?
The issue with wealth accumulation is that it's a runaway process, wealth begets wealth, past a certain point it's no longer based on merit or contribution to the strength of the economy.
1. "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live).
2. even if #1 could be solved with some complex formula, it's very easy to argue a maximum imposes a hard limit on how much work a person is willing to do. Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?
3. estates are the extreme problem for 1 & 2: if they're counted against maximum wages than recipients of large estates likely have no incentive to ever work. If they're not counted then maximum wages are severely limited in its ability to affect change.
Perhaps a complex enough formula exists to make maximum wages work, but given how easily gamed our complex tax code is in the US, I can't imagine it's feasible.
Whilst I can't speak directly for Elon, it does appear that his work is targeted at benefitting mankind. I'm sure that is plenty of incentive on its own.
> "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live)."
Sure, there will be loopholes, but let's start with the basics and wait for the loopholes to emerge. Tackling wages and inheritance should be enough to start off with.
What does it solve that graduated income, property, and estate taxes do not?
I can't imagine it could possibly be any less complex than a tax code since it needs to contain the same estimations of wealth ("wage" in your approach).
As far as I can tell, he does not have a history of taking all the money and blowing it on himself. Whatever he's still working for, it's not because he wants extra money for spending. He clearly has some motive other than just wanting more money to blow.
Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves. Capping wages does nothing to solve that problem.
pg, despite being a very bright and extremely sincere and decent person, is living in a world quite far removed from most American's reality and gets a lot of things wrong (sometimes hilariously so), based on that disconnect. But, a maximum wage is a ridiculous rebuttal, IMHO.
Of course you're entitled to your opinion, but let's look at why a maximum wage can be used to tackle economic inequality, perhaps you'll not think it's quite so ridiculous after that.
> "The actual problem, as I see it, or, at least the variable that needs adjusting is the other side."
The main reason that a maximum wage impacts the poorest amongst us is that it provides a mechanism by which poverty and wealth can be linked.
For example, let's say every US state adopts a $15 per hour minimum wage. Let's now state that the maximum wage is set at 500x the minimum wage, so $7500 per hour. If the minimum wage worker works 40 hours a week, 52 weeks a year, they'll get $31,200 per year (before tax). If the maximum wage worker works the same number of hours they'll earn $15,600,000 (before tax). Let's say the bottom rate of tax is 15%, and the top rate of tax is 40%. What does that leave us with...
The minimum wage worker earned $26,520 a year. The maximum wage worker earned $9,360,000 a year.
What we've set here are upper and lower bounds on how much someone can earn. Notice that we still have the rich and the poor, and we haven't taken away the incentive to want to get rich. What we have done is slowed down the rate at which the gap between the rich and poor grows, which is at the core of economic inequality. Inherited wealth is also an issue, but at least it would tackle the rate of change in newly generated wealth.
What does this do to an economy? First of all, the rich now have an extra incentive to raise the income of the poor. If the rate between the minimum and the maximum wage is fixed, raising the minimum wage will also raise the maximum wage. Secondly, it channels money that is more likely to have been hoarded back into economic activity. Money only works when it is traded, not when it is hoarded, hoarding past a certain level of security is a waste of economic potential.
> "Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves."
I'm reminded of this...
http://www.goodreads.com/quotes/328134-socialism-never-took-...
Being on the poor end of the spectrum leaves you more vulnerable to economic exploitation. If a maximum wage reduces the incentive for economic exploitation, then I see no reason why it wouldn't be welcomed. If you want a concrete example of economic exploitation, take a look at Walmart:
http://www.alternet.org/labor/ugly-walmart-truth-some-manage...
> "rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact"
Setting a maximum wage would impact the concentration of resources such as housing. More landlords = more competition = more price stability.
One way to tackle this issue in the political space is to forbid for-profit corporations from funding political lobbying. All funding for lobbying efforts have to come from individuals or not-for-profit organisations.
Already in the current situation their main income is not as wages but simply the value increase of assets (companies, real estate, etc) that they own, and with a minimum of legal paperwork all high-end wage income can be restructured as such unless you prohibit owning and selling businesses.
It would be a symbolic statement with no practical effect.
Okay, can you show me some evidence?
> "The Beatles, for example, came to America to avoid the grievous taxes being levied in England. U.S. companies locate offices in more tax-friendly locales all the time too."
Both of those are examples of tax dodges. Maximum wage is different, in that people would be required to live in the country they made their main income in. Sure, you could move to the Cayman Islands, but good luck finding enough work there.
We should be closing tax loopholes too, it's not an either/or situation, we can do both.
Look at the Rust Belt.
http://www.thedailybeast.com/articles/2014/12/07/the-rustbel...
How is it immoral to set upper and lower bounds on what people can earn? Do you really think it's immoral that someone can only earn 1000x more (for example) than the poorest amongst us? Do you really find that oppressive?
> " Now, your destroying entire industries for people that make things for multi-millionaires."
You're not destroying industries, you're curbing the rate at which private wealth can be accumulated.
> "Honestly, I'm not sure why you do not just argue for outright communism."
Setting a maximum wage is socialist, but socialism is a broad church, communism is not the only system in the socialist umbrella.
Actually it doesn't do this. It shows that income inequality is associated with lower economic growth. Mixing correlation and causation.
P.S. My comment doesn't support one side or the other. I am just pointing to a logical mistake.
Indeed so. But the central principle of science is that at any time you (tentatively) accept the best available theory that is consistent with the evidence. Right now, AFAICT, that's the theory that concentrating wealth in a small minority reduces growth because it reduces demand.
One of PG's core arguments is that while the inequality is caused by a lot of factors, a big one of which is the snowball effect of capital, when all those factors are removed, the wealth creation aspect will still remain. He explicitly says that attacking the non-virtuous feedback loops that increase economic inequality is desirable for him, he's just interested in targeting those as well as specific negative effects (e.g. poverty) rather than have the conversation framed around "economic inequality".
No, that's the inverse causation of PG's stance. PG said "There are lots of things wrong with the US that have economic inequality as a symptom."
If we all agreed that economic inequality is the cause then nobody would be complaining about framing the conversation around economic inequality.
To me, this sentence and the ones that follow are by far the most salient point.
How many Zuckerbergs, Gates, Brins, Pages and Bezos are we missing out on due to the fact that huge swaths of our country do not have the ability to fully explore and develop their talents? How many trillions in lost GDP does that amount to?
To me, this entire debate is a missed opportunity to discuss inequality on the basis of shared wealth, growth and prosperity. Instead we tend to debate these things on a moral dimension which immediately politicizes and polarizes the matter. See renewable energy for another example of how that works.
I grew up in a scientific community. People innovated and did research because they were passionate about knowledge and learning. Of course, some of them went on to create startups like Biogen but money was never the biggest motivator. I don't buy the argument that taxing the wealthy slightly more than now stifles innovation.
How is it better even at all, even not by much?
If we imagine that the small group of central planners were actually democratically elected (in the Soviet Union they were not, although they ideologically pretended to be), it's unequivicably _more democratic_ to have them making decisions compared to unelected billionaires who are not in any way accountable to voters.
I'm not quite sure what you mean by 'democratic' when you say you can't think of anything more democratic than those with more money having more political power. I don't see how there's some specific threshold where this becomes more or less true than it was at smaller level of inequality, although it's certainly _less_ democratic the greater the level of inequality, it seems fairly proportional to me rather than there being a 'threshold'.
Keep the inequality. Some people will make better decisions and then others. The people who make better decisions for example investing the money into research should be rewarded with money and the ability to decide how to best further allocate it including buying a bigger house for themselves or hire a house cleaner because they are busy innovating. There are no problems with that. The problem happens when they become too powerful. The way to prevent that is a progressive tax. In this case, make it very hard but not impossible to get above controlling 1,000,000. No one person and no small group of people are better at making decisions than a large group of people. That is what I mean by wealth equality is democratic. Perhaps, it is better to say there needs to be a wealth equilibrium rather than wealth equality.
I also still don't understand why there'd be some 'threshold' (threshold of what?) at which rich people would start making bad decisions (or at least decisions that are bad for everyone that's not them?), whereas before that they would be making 'good' decisions (meaning decisions that benefit people other than them, I guess?).
I'm still not sure what you think 'democracy' consists of exactly.
[1]http://www.amazon.com/The-Wisdom-Crowds-James-Surowiecki/dp/...
That's a very negative attitude to have towards people with wealth above some magical number you deem "too-much".
People will get very illogical and angry when they see you blatantly stealing from their children. I know I will, because at the end of the day, I work for my progeny. An estate/inheritance tax is not taking away from my well-being, but from that of my children.
So, instead of fixing the problems with your form of governance, you decide to impose even more tyranny over the few who can possibly take advantage of it. The problem is not the money that allows them to possibly take advantage, but the corruptible system you have in place. Use that effort in making it actually noble like it's claimed to be.
This actually reminds me of Chomsky, who said that if people are really allowed to vote, they might decide to spend more on education and universal health care, rather than on nuclear weapons. Oh, the horrors!
The problem now comes that society in general are not happy with the outcomes of the above. It's now less about how to provide for a stable, secure society and infrastructure, and more about how will we "fix everything". I believe the very existence of a state means people will want it to fix things, because it's there.
And now, someone needs to pay for all the "fixing".
Inheritance tax, on the other hand, usually has a "lower-bound" that prevents the very poor from being affected.
Taxes on investment? You mean, capital gains? Or something like dividends?
When I think regressive taxes, I think things that are flat fees, or else things like fica, which cut out after a certain income.
What it sounds like you are trying to say is that it's not "progressive" enough for your liking. And then you turn the definitions upside down and label it "regressive".
Taxes on investment are complex. Considering the fact that most humans do not have anything approaching a real investment portfolio, it's hard to understand what you could mean when you say this kind of tax is regressive.
A properly progressive income tax should mean that more people can join the investment class. If the taxation within the investment class is actually regressive, then maybe we worry about that when the majority of humans have this problem.
But that's exactly what you're advocating. According to this entire discussion, the state itself is broken in this case, and you want to use the state to cap/prevent the ultra-rich as a remedy to it being broken. How does that not count as "fixing things"?
>"We don't need billionaires."
Whether we need them or not is irrelevant, they simply exist. Or is their existence something you want to "fix"?
>"With the number of people worth more than $250,000,000 that we have now is just a massive disaster that ended with $15,000,000,000,000 debt on the backs of everybody."
No, sorry, you have no one but your politicians and political system to blame for that. If you know you have a fallible/corruptible system, and don't change it, then the fault is on you. By you I mean you and the general population. Consequently, if your political system means it is slow to change, and is susceptible to the whims of the public that is easily swayed by the media, then you have to rethink democracy.
But this has nothing to do with inequality. It has to do with "too many people below economic level X". If this seems related to inequality it's because you've already bought into the pie fallacy.
What exactly do you intend to do to change that? If you start everyone at a baseline level, some of them are going to be smarter, stronger, savvier or whatever, and will be more successful, and thus wealthier, and thus have greater access to whatever benefits that wealth can buy. Even if you zero everyone out each generation, genes matter.
Unless you are artificially suppressing people from rising above mediocrity, you will have some that do better than others.
In concrete terms, I don't believe those with pre-existing access to capital should receive privileged tax treatment. I'm im favor of lowering taxes on earned income and raising taxes on inheritance and investment income.
If you want positive social mobility, then you need to encourage generational wealth. The rags-to-riches, pull-yourself-up-by-the-bootstraps in a single generation story is more romantic, but the more realistic path to advancement is to build on the foundations of the family nest egg. Taking a haircut on that family wealth each generation makes it harder to climb the ladder from working class to lower middle class to upper middle class.
There's the pie fallacy: it would seem that alleviating poverty = alleviating inequality, when for most of history it has been exactly the opposite.
Poverty is always relative and is inextricable from the issue of inequality.
The US is fundamentally different than Nordic countries, where socialism appears to be working: * The Nordic countries are tiny compared to the US. * They are highly educated. * Their society is homogenous.
It seems like everybody is assuming that there will be this rational actor collecting money from the rich and distributing them to the poor.
What actually is going to happen is that instead of entrepreneurs becoming rich, politicians will grow even richer than they are now. The politicians will have more power, power that they want to keep, and the only way to do that is to suppress the press and the people.
And that's how communism starts. It might sound like I'm taking it too far, but it's happened a number of times already.
You are inventing a complete straw man. That is not what I want nor is it what most other people who are concerned about wealth inequality want.
What we want are policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate while those who are not born under such fortunate circumstances live with an ever-increasing disadvantage.
Of course this is inevitable to some degree due to the nature of compound interest. But there are ways to mitigate it. See: progressive taxation. Now it's time to take a look at other things such as the estate tax and taxes on capital gains and dividends. The latter are the most egregious in my estimation. The U.S. currently taxes income earned through labor, time and talent at a higher rate than income earned through investment, thus continuing to privilege those who already have access to capital
What specific policies are those? Most people who advocate for such policies recommend taxation, which is what the GP is referring to: the government forcibly seizes the money. The GP is not really addressing a straw man when the most common solution is tax.
It's worth remembering that taxing is taking, so a "policy" that prevents people from becoming wealthy is just a societal license for seizing their assets.
Personally I've seen the government squander or tax revenue on pointless wars and ineffective programs like F-35, and would be happy for those who are fortunate to keep their wealth and invest it smartly; they will drive more positive change in society than the government will.
This is a classic trade-off, just like surveillance and security. If you estimate that the chance of abuse is sufficiently low, then yes, those are great things to have.
If not. Holy shit, you know the drill.
So, the problem is not income inequality (lack of redistribution, or the network effects (the compounding) of capital), but the rationality of decision making. The stability of the utility function of those who make the decisions. Which is the aggregate of the whole power structure.
Do we see a stable trend in good governance?
I'd say that the US could use some internal redistribution. Less spending on war on things and more on education and social safety stuff. (It'd be probably much better for the US to stop funding the useless manpower-hungry parts of agencies - like the TSA and all the terror chasers - and send those guys that would get unemployed over to work as social workers, or even just pay them to get a degree and do something useful.)
Which is almost the same scenario as the one you suggested. So ultimately, it seems your complaint is not of the money being used/spread/churning throughout the economy, rather than being hoarded under the mattress. But rather, it seems you're complaint is with the fact that the rich have it and it's not being taxed for purposes you deem useful.
If I spent half of that million dollars, then whoever got paid likely puts the money back in the bank and the bank can still loan out a million dollars.
This is in a nutshell why trickle-down economics don't work.
They also do spend and consume a very high amount and there is the inevitable dilution through the generations as families grow and each person uses their fortune in a different way.
There are plenty of ultrarich who are no longer.
I am from one of the post communist countries and a party advocating 75% income tax for people who make more than 150k/year is gaining traction among my friends in tech. It is in fact a very common sentiment that "just tax the people who make a lot of money" is going to solve a lot of problems.
That's what the parent is addressing and it's in fact a very common view.
Who is we?
>>policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate
This will happen no matter what policy you implement very simply because if you want a society based on freedom and merit there are various motivations for people to do or not do things, like: choosing careers paths, making decisions to save and invest, how much time they spend on improving personal skills, how hard and how many hours some one is willing to work to achieve what they want etc.
Based on what your value system and what you want in your life, with all the priorities there will always be some one who is frugal, hard working, is making sound financial decisions, working on personal skills and doing all that who will grow exponentially in comparison to others.
>>while those who are not born under such fortunate circumstances live with an ever-increasing disadvantage.
Here is a hint, unless you are born in war torn Syria or are trapped in some African civil war or born with disease you are already in a 'fortunate circumstance'. You may not realize, which is a very different problem altogether. Either there systems like social security designed to handle the exceptions.
>>Of course this is inevitable to some degree due to the nature of compound interest.
A tip, compound interests doesn't work just with money. It works with skills, knowledge, productivity, experience. You literally have to enforce laziness as a law if you want to stop this.
Because the state is neither corrupt nor incompetent; this is the big fear of the cyber-selfish libertarians you will find on HN. Tell you what, why don't you start your rant with a list of these rich politicians who will grow even richer. Just a single name please.
No, this is not how communism starts. If you knew anything about the history of your own country (doesn't even matter which country this is) this would be readily apparent. Rich people becoming even richer and using the aparatus of the state to enshrine the power of their family or tribe is usually the outcome of a coup or war. Communism usually starts with a lot of rich people who did not make the last flight out having a short lean against a dusty wall somewhere after their family has spent several generations giving everyone in the country a reason to want to see their spleen paraded around the capital on a stick.
This needs to be proven. Oh wait, it is proven like every day. Just open a random newspaper on a random date. /european
Please don't make personal attacks on Hacker News.
Hillary Clinton.
https://www.rt.com/usa/327689-clinton-conflicts-state-depart...
And BTW grandparent is 100% correct. This is EXACTLY how communism starts. First they come for the people who are rich and successful ...
Throwaway account because it could hurt my career to declare my political views on a public forum in the US if I'm not a liberal.
http://www.wsj.com/articles/speaking-fees-meet-politics-for-...
The point is, companies/lobby groups who directly benefitted from Hillary's decisions as a secretary of the state, paid Bill a lot of money to give speeches.
Now that's what I call enriching the politicians. The Clinton's money is more like a regular CEO salary.
There seems to be this spread of misinformation (especially on HN) that evil business owners aren't paying their "fair share" when in reality, they pay the majority of taxes in the US.
High taxes and regulations will only make it harder for the non-rich to accumiliate wealth and the zuckerbergs of the world will just move to another country.
Do you like only having the choice of either working for a big corporation or the government? I sure don't.
nordic countries are a good example of what not to do, because this is exactly what has happened there.
Socialism don't work in the Nordic countries either. In Denmark where I am from we were in the top 5 richest countries only 60 years ago, before we introduced the Welfare State. Back then we actually had lower taxes than in the US.
Since then we have been sliding fast down that list, so we are today around 20th place. We now have an absurd situation where a small minority of ~33% in the private sector has to pay for ~66% of people on welfare or working in the public sector. And we are past the point of no return, we can not make any reforms to cut the public sector or welfare, because the majority is obviously against.
A high earner often pays 80% counting both taxes and levies/duties. It has killed almost all initiative in Denmark. People prefer time off instead of working extra hours, we are one of the countries with the lowest amount of entrepreneurs percent wise, like in France young people and entrepreneurs are fleeing the country in hordes.
I myself moved to Switzerland to start my startup.
All I'm reading in this thread is:" ______ system of government isn't perfect, so our only option is to keep doing what we have been doing even though we know it sucks."
But they specifically call out inequality as an issue:
"..there is a considerable gap between the richest and poorest – the top 20% of the population earn close to four times as much as the bottom 20%"
Your statement about how 66% of the population is payed for by the private sector is not only not right, it's not even wrong. It assumes that the public sector does not create any wealth at all. But obviously it does. And all the money that is spent in the public sector, eventually ends up in the pockets of private citizens or companies in the private sector. The public sector is as much a boon to the private sector as it is a burden.
In order to keep the people from revolting and gaining permanent global competitive advantage by murdering the factory owners, lenders and their families and stealing their property disregarding any repayment plans - the moderate socialists (who saw that the socialist system would be built organically without violence) and the right wing owner & trader classes made an alliance to fringe the hard-core communists.
Bargains were made and benefits established as all parties knew that every satisfied social democrat was much better than a soviet-devout communist. In Finland, there was a very bloody civil war right in the beginning of independence (where the communists lost), two big gunfights in the WW2 and decades of soviet pressure to turn communist.
The social programs and safety nets were established to ensure the survival of capitalism and private property. The problem being solved with reducing economic inequality was not "poverty" like PG claims, but threat of violent revolutions by people who felt unfairness.
The Soviet Union is gone now and thus the left wing these days has much less bargaining power. These are interesting times.
I don't care how much money someone makes off a search engine company, but taxation should incentivize affordable housing and discourage the creation of wealthier landlords. Rent is not valuable entrepreneurship. Controlling the township's electric or water company is not valuable entrepreneurship. At least the state answers to the citizens it services, and has less of an incentive to be driven by profit. Let's have higher taxes in order to create a social safety net and pool of opportunity for the rest of the people.
We shouldn't de-incentivize prosperity. We need to create more tax payers, not less (or the whole system will collapse). Larger safety-nets will not create this incentive.
If it did, we would see many more startup and technology companies in nordic countries.
Instead, we see companies neutered by the intense regulations and taxes. Ikea, the biggest company in Sweden,is a non-profit in another country. Why is this?
Actually succeeding with a startup in those countries is nearly impossible. Starting a company is pretty much the only real way to truly become rich (if you are poor) and you will be systematically removing this power.
There is a good radiolab episode of exactly this in Peru.
Education is the key to a citizen with advantages with money. With freely available education, for instance, you can pay leas in taxes.
The problem is that most people would rather not sacrifice fun times now for a good life later. With freedom comes also comes the freedom to make poor life choices, and a certain percentage of people will alwayw make poor choices.
I'm not even saying there should be no safety net, just that there needs to be a careful balance.
I mainly just don't believe in vagina lotteries
...yet the US is now the most prosperous nation on earth and our poor still have cell phones, a basic roof over their heads, and aren't eating rocks in the dirt.
A 90% marginal tax rate (like it was 30+ years ago) won't be all rainbows and kittens. It will be a very, very different US. 'Startup' probably won't even be a word any longer if this happened.
"I thought it was common knowledge that the uber wealthy pay proportionately less of their income in taxes then the lower and middle class"
More misinformation. The lower classes pay almost no income/state/federal taxes. I was unemployed for a year back in 2010, and I actually got money back when I filed my taxes based on my low income...and I never had any taxes deducted from my unemployment.
The 'uber wealthy' pay more in taxes than they will ever use in their lifetime..and probably 10,000 or more people's lifetime.
Not to mention they pay people in the form of income, which is then paid back to the government in the form of taxes. They are indirectly paying a ton more in taxes. The poor and middle class do no such thing.
Instead of focusing on how much more money we can appropriate from the wealthy, we should first be making politicians and governments accountable for the money we are paying into the system now. Without this accountability, we will continue to run out of money.
Detroit local government is a great example of this. Rampant corruption keeps causing a budget crises and the city council act like petulant children when asked for even the slightest bit of accountability.
"I mainly just don't believe in vagina lotteries"
There are many unfair "vagina lotteries". Should we open up NBA teams to people that don't have natural abilities or make them play with a handicap?
I will never be able to play for the NBA because I'm not tall enough. Should the NBA pay their "fair share" by being forced to allow me to play? Do those players really deserve all that money?
If I worked my entire life to build a business, so my kids can have a nice life..I shouldn't be punished.
I will be curious to see how many people in silicon valley can afford their same lifestyle when their inflated wages are cut by 40% and rent and expenses stay the same.
Lot of reasons for this, don't need to go into it. People have written books on it, and I am assuming you aren't directly correlating it with the tax rate.
"The 'uber wealthy' pay more in taxes than they will ever use in their lifetime..and probably 10,000 or more people's lifetime."
This isn't true, yea maybe they won't pull or have the need for a social security check, but their businesses and investments rely on public infrastructure, education, and the federal military protecting their international assets and trade rights MUCH more then the average joe. This is compounded by the fact that our corrupt system of government you so aptly pointed out, has allowed the policy making to overwhelming favor the established crony capitalists.
"Instead of focusing on how much more money we can appropriate from the wealthy, we should first be making politicians and governments accountable for the money we are paying into the system now. Without this accountability, we will continue to run out of money."
You are totally right, we should be figuring out how to be less wasteful -- and there is also plenty of legislation that creates unnecessary waste and bureaucracy. I think this is beyond a discussion about taxes though, and more about restructuring our government in a bipartisan effort -- which starts with who we elect. I think you can separate the two arguments. But yea, totally agree. One thing to keep in mind though, all large human organizations become less efficient and wasteful -- so this is not just a government problem. See HP.
Lastly, I don't think that the NBA analogy really works here. Just because someone is born with athletic ability doesn't automatically make them draft ready. They spend 10-15 years honing their skills, spending time with world class coaches, and working hard to get to the NBA. Someone born into obscene wealth usually comes with years of investment management and financial teams built around the family to maintain that wealth -- with a high potential for the child to be very disconnected from reality and never have that same urge to work that the NBA player had. See the affluenza case for example. I am not suggesting we should punish someones children by any means for your own success, but there is a difference between providing your kids a nice life and supporting modern day princes and kings.
Obviously this last bit is more of a generalization, but I hope it shows the fault in your NBA analogy. Otherwise I do agree with the sentiment that yes, there are natural vagina lotteries, but being smarter or more athletic is a net positive for a society -- whereas being born into inordinate amounts of wealth could actually end up being a negative over the long term when your ruling class is further removed and further concentrated from the average.
> The Nordic region represents 2pc of global GDP but has accounted for almost 10pc of the world’s billion-dollar exits over the last decade, with more than half of these coming from Sweden,
http://www.telegraph.co.uk/finance/newsbysector/mediatechnol...
Coming from a former communist country, I can explain why. Because the alternative, capitalistic "free market" where companies eventually end up as oligopolies, is actually worse and gives you less control over the resources involved. For example, botched privatization of water utilities here in Czech Republic hiked prices up 100x.
Yes, real democracy is quite a weak control, but at least it's some means of control. You don't get the same level of control over private corporation as you get as a citizen over public utility. And there are many examples of government run enterprises that prove this point, in Nordic countries and in Switzerland.
So state is something I can at least marginally influence by voting or by being involved in local politics (I have for example information laws that give me some insight about what's going on); and yeah, to me, giving state less control over resources by minimizing it is a losing proposition. If I could vote about the companies, then perhaps we could talk (but then they would be more like customer cooperatives than private companies).
Of course, you probably think competition is the solution, and I don't buy that. First, it doesn't exist in many places (as you're probably painfully aware), and I believe it actually tends to not exist. But the biggest point against the competition solution in my mind is that it's very "low information density" solution. People cannot come and to try to fix things (unless they make their own company, which is unrealistic to expect); they can only signal unhappiness by leaving. It promotes irresponsibility and fatalism. I think it's a kludge, frankly, compared to a possible system where you could really control citizen-owned companies via voting.
Huh? You are mistaking cause and effect here. People are highly educated because the state pays for our education and give and lend enough money to handle living expenses while we study.
- Capital gains should be taxes at least at same rate as income generated by labor.
- Remove incentives from economically unproductive investments such as real estate. For example, discourage home ownership unless its primary residence.
- Limit political contributions from super rich.
- Discourage high return investment vehicles that typically manipulate markets to achieve their goals by reducing risks through government safety nets.
- Limit what can be charged by insurance providers for a given quality of service. Health insurance oligarchy and their political influence is core barrier in enabling healthcare for all.
- Limit what can be charged by educational institute to students. More financial aids is not the solution, its the problem.
The goal of the governments isn't ensuring wealth equality, but ensuring level playing field. If that is ensured then, IMO, wealth inequality will naturally be limited. Government must ensure equal access to two core areas which is health and education. It must make tax system fair and avoid scenario where secretory pays higher tax rate than their super rich bosses. It needs to prevent inflation of limited resources such as real estate by strongly discouraging economically unproductive investments.
- Progressive tax on consumption. No tax on labor.
- Zero capital gains if total assets is below $2M.
To discourage foreign home ownership:
- An non-primary residence or foreign investment in real estate can only be leasehold, maximum 25 years. At the end of which the control of property reverts back to the original owner and/or their beneficiaries.
To minimise effect of money on elected representatives that can't be removed mid-term:
- All bills voted by the public. Every citizen can elect a proxy for their votes. There are representatives, but the term of a representative is continuous rather than discrete 4 year terms, and anyone can be one.
To ensure affordable health care:
- Set up a government monopoly on purchasing pharmaceutical supplies, along with price ceilings for every type of drug that must not be breached to be eligible for purchase by government. Citizens may purchase drugs that are not on the list of drugs the government say they will purchase, but it must be imported from abroad.
The primary goal of government is always be security from other governments, so that it's citizens can live without subjugation. All other concerns should be secondary. Health and education is useless if next month the country will be invaded and its citizens exploited economically. All other concerns are secondary goals.
An example of a progressive consumption tax bracket:
Dollars spent, marginal tax rate.
$0-$5000: 0%
$5001-$10000: 10%
$10001-$30000: 15%
$30001-$80000: 27%
$80000-$120000: 35%
$150000+: 40%.
So if a person spends $15000 a year, they have to pay an additional $1250 in tax.
They can spend on food, clothes, luxury boats, and are taxed according to the number of dollars they spend.
I don't see how that is regressive in anyway.
This way, as long as the spending of two people are the same, a person who makes and spends $20k a year, and a person who makes $80k and spends $20k a year, and works 5x harder, are both taxed at the same rate. This removes the disincentive to work hard while being frugal.
You can also pair this with a "Universal Basic Income" later on - e.g. first $10000 of spending in a year is -100% tax, meaning completely subsidised by the government.
Welfare could be means-tested on spending rather than income, so folks don't have to worry about losing welfare when they get a job.
The more government spends, the greater the capacity of the private sector to save (so long as the government doesn't spend beyond the productive capacity of society to create excess inflation or compete with the private sector for resources which would stifle innovation).
1. Similarly to bourgeois in the Russian Empire they believe they can aim the redistributing horde at their enemies while remaining safe themselves.
2. Note how it's always the income inequality and never wealth? If everybody's income had been the same then wealth had much more value. E.g. if everybody's income had been limited to $100k pa then somebody with just $10M in cash would had more money (and hence influence) than anybody who stated at 0 could possibly make in their lifetime and such a wealth would have never been surpassed. If you are seeking rent from your wealth then limiting everybody's income is a pretty good strategy usually expressed as "fuck you, got mine".
> they believe they can aim the redistributing horde at their enemies
I can understand why you say that, and it may be hard to understand, but actually, most people on the left don't really have "enemies". They want equality, not to conquer someone rich.
> Note how it's always the income inequality and never wealth?
First, wealth inequality is almost always discussed too (Piketty, if you want a trite example) and is often mentioned as being worse. But in any case, I think the focus on income is given by the fact that societies try hard to avoid ex post facto laws. So we say, OK, what you got now is fine but the rules are going to change from now on. That's why you focus on future change (income) rather than existing assets (wealth).
Same as Russian bourgeois, who did not have personal vendetta against the "rich" (who had been the major capitalists and/or royal dynasty) they just thought it's unfair and those should not have as much wealth and influence. Is not it the sentiment of today's left against bankers/wall street/Koch brothers?
As for your theory why wealth is not targeted - so? Okay you do that for reasons you described, yet the effect is the same, is not it? I am pretty sure the 99% of the left do not care about this effect since they are not wealthy enough but it does not make it to disappear. The 1% who cares is, by definition, wealthy enough to instigate such a movement.
Here's an analogy. Let's say you have a weapon and I don't. And I honestly don't believe either of us should have weapons, because we can live in peace. So I attempt to convince you to give up your weapon, but you think it's an attack, because you cannot read my mind, and you're paranoid that I am going to kill you when you are without the weapon I might take from you. But that's not my actual intent.
So it's the similar thing you're thinking with respect to the left. You could have also noticed I used a qualifier "most".
Your other argument also shows a good amount of conspirational thinking. In particular, it ignores the fact that most people on the left are against rent-seeking too. And with limited income it becomes actually quite complicated to manage large wealth.
OP: I don't see why smart, capable people want to give their money to the government.
me (paraphrasing): Theory 1: they don't believe they are going to give the money themselves just like Russian bourgeois did not believe they are going to end up in exile/dead together with the "rich" they had been against (paraphrasing).
you: you are wrong, we just want equality.
me: it's okay, the Russians did want it too.
you: here is a weapon analogy, and you are just paranoid btw.
me: ...
But if you don't want to trust other people, then I don't see how could I convince you.
Honest question (not directed specifically to you sradu): I've seen this statement pop up now and again, and every time I've seen it, it is referring to Nordic countries. I am beginning to suspect that it's a dog-whistle: am I wrong?
What exactly is being referred to as 'homogenous' and why is it an advantage? What disadvantages are presented by heterogeneity of other countries?
It's because I believe that there are many things that make my life better that I simply could not provide from my own resources but, when my contribution is pooled with everyone else's, become viable and make my life significantly better. Off the top of my head, the transport system, the judicial system and attendant sub-systems, the healthcare system, research investment. Environmental management. Regulation in food production. I'm sure I could come up with many more.
If you didn't understand this, then I'm shocked at your ignorance.
If you did understand this, then why did you ask? Are you taking some kind of ridiculous, hyperbolic extremist view that nobody is advocating, in order to create the illusion of being a child arguing in a playground?
Interesting. Perhaps I'm misinterpreting their rhetoric, but my impression has been that many people are arguing for precisely this.
Economic quality seems like a red herring for actual issues like how well off people are. Is the actual concern about how poorly off the poor are? Imagine a thought experiment where aliens come to earth and give every human 100x the resources they have currently (or 100x a year's min wage), as an annuity. The poor are all now rich, and the wealthy can buy their own space stations.
Is this intrinsically a problem, and why?
If the actual concern is about how well off the lower and middle class are, then that's reasonable: we're talking about the welfare of actual people. But actual people are not harmed or affected directly by some mega-rich person being much richer.
I expect that someone will reply to explain that inequality is the symptom of or cause of some other dysfunction, and it is the actual problem - and that's great, that's what I'd like to understand better. Whatever the actual problem is, let's talk about it. If the problem is about lack of adequate education, opportunities, etc. then let's discuss those concerns directly.
The issue is that wealthy people do not have a monopoly on talent, good ideas or intelligence. But they have a monopoly on power and influence. Society therefore suffers when the best ideas do not necessarily compete on an equal basis within the marketplace or the political arena, if they make it there at all.
Just my 2¢ :)
I ask because that problem does not seem to me to be directly related to income equality.
In communist societies everyone had very similar income, and yet a small group had all the power and functioned as kingmakers in business. Or even outside communism, simple corruption: for example, until the 90s you needed a very hard-to-get license in order to start a business or do business at all in India (known as "license raj"). This stifled their business environment and innovation for decades. This type of problem still affects many countries today, especially corrupt ones.
https://en.m.wikipedia.org/wiki/Licence_Raj
It seems to me that good ideas are capable of flourishing in the US without any gatekeepers getting in the way. It's easier than ever before to start a company. Why do you believe that good ideas aren't already competing effectively on merit? (Examples?) Take Google, Microsoft, Facebook, Uber, etc. Did these not win on merit? Is there a legislative barrier to you starting your own competitor to one of these services?
Again we're reverting to the straw man of 100% (or nearly) equal society.
Our society must be unequal to some extent because capital is a reasonable and effective reward for figuring out how to best allocate resources. But extreme inequality prevents a large % of the population from fully developing, exploring and disseminating their talents, shutting them out of this virtuous cycle altogether.
You bring up Google, Microsoft, Facebook and Uber as examples of companies that succeeded on their merits. All four of those companies were started by straight white men with upper middle class upbringings. Do you believe that's a coincidence? Or are there some "lost Zuckerbergs" out there who never had a chance to fully explore computers when they were kids? Is a family's ability to afford the latest technology a material advantage for the next Zuckerberg / Gates / Brin / Page / Kalanick? In your original example, who is going to invent the next great space tech? Probably the kid whose family is buying a space station.
Regarding Brin, I don't think he has as privileged a background as you seem to believe. He had a pretty humble beginning, beginning with his birth in Soviet Russia (where his parents were discriminated against for being Jewish), after which he immigrated to USA at age 6:
https://en.m.wikipedia.org/wiki/Sergey_Brin
And I don't dispute that at all. What I am saying is that society's prosperity is optimized somewhere between total equality and extreme inequality, and that we seem to be drifting further away from that point.
Plenty of immigrants from early 20th century that came to the US now have successful kids/grandkids because they valued education.
Computers are now cheap and you can get lots of free knowledge on the Internet and at the library (MIT has free classes).
There are no excuses. We need to stop with the victim mentality if we are ever going to progress.
I really don't think that was the case. In a practical sense, communist regimes were the extreme endgame of inequality.
Those at the very top of the chain lived like kings, while those at the bottom starved.
I don't think that was always the case, in particular, I doubt it was the case in Czechoslovakia.
Being a member of UV KSC (board of directors of the Communist party, the central organ) had special benefits such as better access to health care, goods imported from the West and having an american-sized house, but they were quite modest compared to benefits of today's top American CEOs. And in fact, the best paid people out there were probably some popular singers, who had maybe 50x the average salary. Typical director of state enterprise had maybe 5-10x the average salary. At the bottom, people didn't starve even if they made trouble (that meant a prison sentence and a menial job).
There are people who disagree with this assessment, but I have never seen a good evidence for the claim they would "live as kings". I agree there was inequality, but it wasn't so much monetary as it was in power and status.
It was probably one of the reasons why there wasn't a bloody revolution. Everybody, even the top officials wanted a "better" system.
Now the extent to which money begets power and therefore undermines democracy is a subject open to much debate.
If you look at societies with high wealth concentrations like those with large oil wealth or other resource wealth you find typically very weak political institutions and poor development of democracy. The super rich gulf states e.g. are far behind politically speaking from much poorer countries.
In terms of ethical theories: from a utilitarian perspective, inequality causes unhappiness, and even a partially destructive redistribution of wealth would probably be better for the greatest happiness of the greatest number. Other approaches (e.g. virtue ethics) I'm less familiar with.
True, but that goes for welfare as well. Someone who is freezing cold does not get colder when someone with 100 blankets gets 100 more.
That is a large part of the concern and it is happening because of inequality. Funding for public education gets cut > rich people move towards private education > more education funding gets cut, partially swayed by rich people who have no vested interest in public education > public education gets shittier and shittier > private education becomes leagues ahead of public education > only rich can afford great education > only rich can afford nice jobs.
Things like this happen slowly over decades in all sorts of areas. That is how the middle class in the US has been hallowed out. It's not about the rich becoming richer, it's about the lower and middle classes becoming poorer. And in many cases, though not all, the poor becoming poorer is directly tied to the rich becoming richer.
I blame pg a little for using the phrase "income inequality" at all since it seems to be a trigger for many people and shuts down their critical reading and reasoning abilities. Let me try to phrase it in a clearer way.
If you focus on reducing "income inequality" then you will reduce income inequality, but that will have many negative unintended consequences (killing startups at the extreme, etc). Instead, people should focus on the REAL problems which is lack of economic opportunity, crushing poverty, and political corruption.
The real solutions all come from helping the people at the lesser end of the inequality equation without having to touch many of the people at the greater end. Universal healthcare, universal education (day-care/pre-school/public schools/job retraining), universal basic income. Just those three policies alone would have an unimaginable positive impact on whatever country institutes them. And my guess the money for these things already exists if you eliminate ridiculous wasteful spending, subsidies, etc.
If, at the end of day you eliminate wasteful spending and there is still a shortage of funds for these programs, then sure increase taxes on the wealthiest. My guess is that many would be fine with it (since it's going to a "good" cause).
Improving opportunities for the poor is important, but so is providing a fairer playing field in both the economy and politics.
And it's insincere to think that universal access doesn't affect the wealthiest at all. In many cases (not all, it's probably not the case of Y combinator kind of people), the wealthiest got where they are by abusing the poor.
If the rich are the primary actors against social and economic progress ("universal whatever") and are powerful enough to prevent it, what makes you think we have any chance at stripping them of their wealth? It's akin to attacking the enemy's main castle in order to weaken their small fort. Why not just attack the small fort? If you win against the main castle, then your theory that the small fort was too strong must have been false.
In many cases (not all, it's probably not the case of Y combinator kind of people), the wealthiest got where they are by abusing the poor.
If that's true, why don't we just target those abusers?
So it's more like a distraction is needed at the main castle in order to take the small fort.
Give a flat amount to the family (capped at say 5 million), then a flat 100% tax after that
No living person pays more taxes
Children can get an incredible windfall, but not eye-popping.
Tax revenue goes through the roof.
Bing it.
Beyond that, your policy comes off as just the most base form of theft. Generational wealth is important, it's core to our survival instincts to look after our offspring when we die -- beyond just their basic needs, we want them to thrive. We want our grandchildren to thrive as well.
Also, generally speaking, I trust the children and grandchildren to spend money in more interesting / authentic ways than our government, who has, for example, the yearly defense budget we carry. And the yearly prison budget we maintain.
What if a child whose rich parents died would have started the largest cancer research center in the US with his billion dollars, but instead that money is seized by your "tax plan" and simply goes toward the defense industry coffers? Is that a net gain? Taking from the rich and giving to Halliburton and Blackwater?
Given PG makes all his money from the glorified HR scheme that is the VC industry, it's not surprising he is against a system that empowers people to take risks on starting companies that don't require any investment.
If people are able to start companies without risking the health of their family, or their long term prosperity, they don't need as much investment and there wouldn't be room in this world for VC funding, and thus not as much money to trickle down to the inaptly named "super angels" like PG and the YC crew.
This is the problem right here. The "ideal that all people are created equal." The truth is, they are not. There are differences in IQ, differences in emotional capacity, differences in physical strength, differences in programming ability, etc. Because every human has a unique set of DNA -- that will only ever occur once and never again be repeated -- they will have unique combinations of various skills and traits.
People are not equal and you cannot make them so. Thus they will have different outcomes economically. It couldn't be any other way.
What you can do is provide equal opportunities to those with objectively worse environments, i.e. those in poverty. Attacking this problem will be the most meaningful solution. But economic inequality is still not the yard stick to use for this.
How these obvious issues get conflated through the use of the trigger term "economic inequality" is beyond me. Perhaps it stems from the self-esteem movement where we started giving trophies to every kid who could kick the ball. Do people complain about "soccer inequality" because they don't play on FC Barcelona? And should one blame Messi for such a thing, or should they find ways to sponsor youth soccer leagues instead.
Here's what that phrase originally meant: European-style nobility is a mistake. It's not that you are better than me, not because of IQ, emotional capacity, physical strength, or anything of that nature. Instead, the idea was that you were better than me because your great-great-great-grandfather helped the king put his trousers on every morning, and got rewarded with a hereditary title, and you inherited it, and therefore you are my "better" because you have a title and I don't. And the older the title, the better it was, even though that means the less it had anything to do with you!
So when the Declaration of Independence says "all men are created equal", it's not talking about IQ or physical strength. It's not even talking about different economic outcomes. It's talking about social/political standing conferred by birth.
I'm not saying that you are wrong in your conclusions...