The article fails to mention Amazon, which does still have plenty of non-outsourced blue collar jobs. I doubt there is a lot of the kind of upward mobility at amazon for them that there was for the Kodak janitor in the 80s, though.
Amazon reimburses 95% of tuition and books for its hourly employees, even if they're studying in a field that isn't directly relevant to Amazon.
The training doesn't have to be in a traditional university, either. It does have to lead to a high-wage, in-demand job.
There are things that one can criticize Amazon for, certainly, but their support for the personal education and development of their employees seems to quite a bit better than the norm.
Anecdotally I know, I got my foot in the door at Amazon by temping and later being hired. Amazon is a great place to start as a temp IMO because they are always looking for talent and you will often be embedded directly with teams and be treated as a regular employee. I also know several former FC employees that moved HQ.
Similarly, Apple Store employees can work their way up to HQ.
Keep in mind, though, that Amazon is doing everything it can to automate most of those blue collar jobs (warehouse robots, delivery drones, etc.). That workforce has a very limited shelf life.
>Focus on core competence and outsource the rest. The approach has made companies more nimble and more productive, and delivered huge profits for shareholders. It has also fueled inequality and helps explain why many working-class Americans are struggling even in an ostensibly healthy economy.
That is the outsourced companies causing inequality. They are the ones paying people terribly, not the company contracting with the outsourcing companies.
This article wants to blame major companies for inequality while conveniently ignoring the existence of the outsourcing companies which are the ones setting the pay for these employees. Stop doing that, raise the minimum wage and benefits that outsourcing companies must pay their employees/contractors, and fix the bloody problem at its source.
I think in both cases, it's just the market. There is a demand for engineers which is more than for janitors, and with more limited supply. Everything else is just moving money from one pocket into another, it doesn't have economic significance.
"It's just the market" is such a lazy reply. Did entrepreneurs not like making money back then? Or did they realize that a healthy society was just as important as healthy companies?
It was definitely closer to the former than the latter. Things that are obviously profitable now were not hip or obvious, nor was the infrastructure to commoditize everything available.
I think this idea that it's okay to have most of the employees at a large plant working for smaller outsourcing companies (instead of, say, Apple or Kodak) wasn't acceptable. I wonder if there was some tangible benefit that was derived from having many full time workers that has either evaporated or has been overshadowed since the 70s.
There are probably some specific factors--like the rise in healthcare benefit costs. But, overall, there's just an increase in specialization throughout the economy. As you go back in time, you just generally had fewer services companies that were available to fill every need that was tangential to the main focus of a given company.
To give one example that goes back a little further, companies used to handle the whole payroll process themselves. Now they use ADP or whoever.
There's also been a lot of automation/self-service of mundane tasks. You don't really have the stereotypical "starting the mailroom" job any longer nor do you have the steno pool.
There were tax implications. Paying the top executives a gazillion dollars wasn’t attractive because that was also a gazillion dollars given to Uncle Sam.
https://news.ycombinator.com/item?id=15161755
Another change since then was the rise of the corporate raider. Used to be that you could run a public company without profit as the primary motive. Parable of the Mexican fisherman, and such. (https://bemorewithless.com/the-story-of-the-mexican-fisherma...) But now people like Carl Icahn (and Mitt Romney in his private sector days) actually hunt for companies that are not maximizing return to investors, and remake them into companies that do. Apple actually had to fend off Carl Icahn recently. (http://www.marketwatch.com/story/carl-icahns-2-billion-apple...)
No, it is just that demand for janitors and engineers have shifted.
You need fewer janitors now because modern chemicals allow cleaning same space quicker (and probably tools also changed a bit, while maybe in the U.S. in 1980s, modern ones have already been in place).
You need more engineers. And they impact work more because development and marketing (which also became a branch of engineering, see: growth hackers) is more important now than production.
You can always train enough janitors, not so easy with engineers.
Same thing about nearly all low-skilled workers. They are easy to train and their supply is nearly infinite, demand isn't, and demand for high-skilled is high plus they make so much profit you can actually afford paying them a ton of money, which wasn't possible back in 1980s.
It is that proverbial bifurcation of workforce. Outsourcing has nothing to do with it. It is just technological change. There is no way out of it (at least no way which won't cripple economic growth - which is already not so good).
Agree.
In a capitalist society, this is par for the course. If you try to build systems to remove this inequality, you have to move towards communism since you will then need far more complex control mechanisms.
Um we already have those, they're called _laws_, and strengthening them doesn't mean a slippery slide into communism (whether or not that itself would be a bad thing is another discussion entirely). But thank you for McCarthying this so quickly.
Um we already have those, they're called _laws_, and strengthening them doesn't mean a slippery slide into communism (whether or not that itself would be a bad thing is another discussion entirely). But thank you for McCarthying this so quickly.
Having a mimimum wage law is one thing, but going further than that and mandating how much who gets paid beyond what the market decides is venturing into the wild west of law making -- you never know what you're going to end up with.
You can hold multiple people accountable, but I'm pretty sure Google should be less accountable than the outsourcing companies.
If you want to hold major companies accountable for the outsourcing companies they hire, fine, make a regulatory push for that, but you have to fix the outsourcing companies first before you can seriously argue for that or you're just making major companies pay for the problems of outsourcing companies.
Would you seriously argue for taxing people for buying from animal-cruel farms without actually doing anything to those animal-cruel farms?
That's the problem. Outsourcing companies are not FIRST in line to be fixed according to this article.
Well, the major companies are the one pushing to pay less and less the outsourcing companies, aren't they?
I really want to know what BigCorp will chose the first between a company paying janitors above minimum wage and a company offering them to cut their cost on janitors by 30% (but janitors gets only enough to scrape by). My experience is that they will jump on the cheaper offer (so someone can get a bonus), and the janitors can go fuck themselves - and so can the quality of their work. It happens all the time, and not only with janitors.
Arguing that the fault rests (only) with the outsourcing companies is the same thing as arguing the fault of people getting low salaries rests (only) on those people. It may be technically true, but it seems pretty naive to me.
I think they're both equally culpable; the customer for making pricing a race to the bottom and the service provider for choosing to play said game.
The customer could choose to consider the treatment of the workers a priority in selecting service providers, and the service provider could choose to refuse to exploit their workers just to secure deals, but neither of them have any real incentive to do so. It's not illegal to shop primarily by price. It's not illegal to hire PT workers even when FT would be viable.
I do agree, though, that the problem is a lack of regulation; unfettered capitalism really does have a evil end game.
This problem happens when a leading company decides to use contractors to lower its cost. All other companies that are competing with it now have to do the same or they operate at a disadvantage. The workers then lose any leverage because they now can only pick between multiple contract jobs.
The regulations already exist. Companies aren't allowed to classify contractors if they do work similar to a fulltime employee or what would be considered full-time work. Like work long term at the company site. The outsourcing happens by finding and taking advantage of loopholes with contracts, firing contractors after 18 months and betting the costs to settle a lawsuit is cheaper than paying benefits to 10s of thousands.
That is the loophole. Technically, it is possible to hire an outsourced firm to do the work if it is 100% turnkey outsourced and done outside of Apple. You often see this type of outsourcing happen with legal and creative type work.
However, more often, the contractors are onsite and doing exactly what other Apple employees do and are managed by fulltime employees of Apple. In this case the law says those contractors should have been classified as employees of Apple not the contracting firm, even if their employment contract says otherwise. see Vizcaino v. Microsoft Corp
>Citing "the market" is yet another way of avoiding responsibility.
I didn't cite "the market" at all because I actually suggested regulation which is contrary to "the market" argument often thrown around.
But socially, no, I would blame the outsourcing companies way before I would blame major companies for hiring those outsourcing companies.
This is all very convenient because janitors and security guards have to be physically present. Jumping across sovereign borders is when a "market" argument works better because the US cannot tell China to treat Foxconn employees better with any real teeth.
you see, part of outsourcing is a sleight of hand where the worker is twice removed from the work giver. it kills the worker negotiating power. if you consider a janitor hired to a company that works for a megacorp, he's bargaining against the wall "this is what megacorp can pay, so there's no way we can raise your salary" - and works both way: megacorp cannot rate, engage and more importantly retain the individuals that are sent in to work there irregardless to their skill/merits, so everyone is fungible and a career is impossible.
That just means the worker is not as valuable to the company and easier to replace, so they have no incentive to "rate, engage and more importantly retain" the individuals. Why would a business want to pay the premiums (longer vacation, high pay) associated with long-tenure, non-essential personnel? More experience, institutional knowledge, etc. all make an employee more valuable. But how much of that do you need for janitorial duties?
I disagree. Large wealthy companies are working hard to directly employ as few people as possible. Part of what they gain from this is the ability to pretend that the companies they hire to perform this "non-core" work are entirely separate black boxes. It would be embarassing to Apple to be treating their employees this way so they hire an outsourcing firm to do it for them.
As large companies, like Apple, race to shuffle employees to these companies in order to save money, everyone gets hurt but Apple. The money gets locked away from the middle class and Apple pretends that they don't have any full time positions that lack advancement opportunities and decent pay.
But if the outsourcing companies were providing opportunities on their own, their employees could afford classes, living expenses and work on skills to eventually work at Apple.
Apple gets quality janitors and security guards while paying the outsourcing company more.
The outsourcing companies are the actual ones running the race to the bottom. Stop that, and Apple will have to reconsider (at which point, we get to argue all over again if their new solution is morally acceptable)
All of them would have to obey minimum pay regulation. If Apple knowingly hires a company violating that law, then absolutely go after them. If loopholes come from that regulation, then that has to be fixed too.
For someone who works on site at Apple in Cupertino, the minimum wage is not a liveable wage, even with four or eight to an apartment. We could try a per zip code minimum wage, that would even raise teachers' salaries, then we'd need a per zip code tax for public employees. Or some other solution. http://www.mercurynews.com/2017/04/22/in-costly-bay-area-eve...
1) Company contracting the outsourcing company can dictate what is paid to the contractors.
2) Company contracting the outsourcing company does not usually pay outsourcing company unmeasured rates where OSC then keeps large margin from contractors.
>Company contracting the outsourcing company can dictate what is paid to the contractors.
That should still have a floor through labor laws. If it doesn't, that too needs to change.
>Company contracting the outsourcing company does not usually pay outsourcing company unmeasured rates where OSC then keeps large margin from contractors.
Higher minimum takes from that margin. OSC can then choose to charge the client more or pay themselves less.
The issue that the article is highlighting isn't so much the low pay of janitorial staff (in fact it states that Ramos makes about the same that Evans did). The issue is that there's little or no possibility for upward mobility for Ramos as being part of an outsourced labor staff. I'm not sure if I unreservedly accept this premise; judging from where I work, at least, the outsourced staff have a little bit of a better opportunity to for entry level in-house employment simply by exposure to word of mouth.
As a resident of Rochester for the last 3 years post-grad, the wasted human talent here is staggering. There are engineers from Kodak that were bought out of their pensions who (anecdotally of course) get passed over for adjunct positions at RIT, because they either don't have the degree or RIT prefers younger adjuncts. Many haven't moved away because of the sense of family among former co-workers, but are whiling away their early retirement.
The two major research universities are propping up the city's advancement opportunities, but doing so with tuition increases and recruitment of full-price paying foreign students, which makes the place more vibrant, but has also alienated many.
The largest employer in town now is the University of Rochester Medical Center, which provides many of the middle income and higher income jobs but is also making a habit of buying up 'distressed' hospitals.
The collapse of Kodak and exodus of money and talent has cratered the city public school system, which has a 47.5% on-time graduation rate. The only shining spot in terms of education is an Arts school, with great links to the still world-class Eastman School of Music.
Rochester itself is also a great example of 'white flight' in the post-Kodak era, though it began long before that.
I recently spent some time in the Roc recently. It was an amazing tale of two cities. Some areas are incredibly beautiful and prosperous looking, but a few hundred yards away it feels like Detroit.
There's a lot of that in a lot of old manufacturing and port cities in the Northeast. There's a lot of demand for nice gentrified downtowns with nice restaurants, housing, etc. But my observation with a lot of these smaller cities is that much of the gentrification is in a fairly small area and much of the rest of the city is the rundown urban decay it's been for a long time.
This is the case all over the country. When people say things like "St. Louis has lost over half its population" all it really means is that the small city center lost those people to the suburbs. What any reasonable person would call "St. Louis" didn't actually lose 50% of its people.
This applies basically everywhere. And a failure to really understand it leads to all sorts of erroneous conclusions about the rust belt.
I'm not college educated, I've made a comfortable living as a coder. It took over ten years of self-teaching in my 20's while working a FT job but I knew this is what I wanted to do. So I agree with the statement but there's more than one way to become educated. Academia is just one way and possibly not the best way.
This doesn't work so well anymore. There has been an influx of millions of coders.
You can do it, but why? It's easier to just go through the college grinder and pay off your loan over the next decade. Plus you might meet a cofounder.
It I were starting out today, there's a good chance I'd go the college route too. Back then, it was tougher, I'd been accepted but couldn't afford it without working FT and doing college FT. In retrospect, I'd have gotten to where I wanted to be faster though it wouldn't have been the same journey. ;-)
Coding is a very particular case, though. You can't self-study your way to becoming a lawyer or a doctor.
And even in coding, more companies are slowly requiring formal education as a prerequisite for even applying for jobs. We know someone like you can be just as productive as someone from a great school, but that won't matter if you're cut from the selection process.
Agree on both points. It's ironic, my pay is the same or less today than it was 5 years ago and it was lower then, than it was during the dot com boom.
I would submit that you are not negotiating when you move jobs, are not moving jobs enough, or are sacrificing comp for other things you value if this is true. It is very normal for people to offer you a small bump over current salary to get you to move. Your goal is to at least double that bump, if not figure out how to get on another rung of the ladder entirely.
I say all of this because there has been a significant upward tick over the last 5 years. Roughly speaking new grads are now making the same as what people with 5 years of experience made 5 years ago.
When it comes to money, I would prefer if I could skip negotiating and probably need overall to work on my negotiating skills. I also happily work for less for remote positions so you got me down to a tee on those.
You sound underpaid. Have you considered going to work for one of the big 5 tech companies?
The interview process is intimidating, but many people would likely be able to get through it if they did a couple months of intensive interview prep beforehand.
Also, consider moving to the Bay Area, or another major city.
Oversight and mentorship doesn't exist for entry level self-taught doctors or lawyers. Everyone starting out would be learning the hard lessons the hard way, and for law and medicine, that means jail, injury, and deaths.
Well, that's true, but at the same time not quite. For example in some countries you won't get a job (we are talking about coding here, and by coding I mean software engineer) without diploma. Doesn't matter how good you are. Go get your papers first.
You can work remotely ofc. in this case or even try and change country (which is not always simple without diploma too).
But the simple knowledge of this fact is so scarce that it makes almost no difference. And since most schools don't care about coding (or, where I'm from for example, about anything not related to get the most students to pass the equivalent of SATs), this is not going to change soon.
I was so surprised when my father told me that back in the 80s, in a small city in the interior of Brazil, in a public school, he was taught BASIC as part of the school curriculum.
Over twenty years later, in a prestigious private high school in the capital city, coding was only mentioned once by a school director when shaming students for only using computers for "foolish tasks", while completely ignoring the fact his school didn't give a single coding class, not even as extra curriculum.
Programming should have the same importance status as maths in school, if not more.
In the US, K-12 jobs teaching are neither prestigious enough nor well-compensated enough to attract/retain people who know how to code, which is different that teaching to code but an educator must know high level concepts to teach effectively. Anyone proficient enough to teach code is either working or consulting in the private sector.
I do wish US K-12 teachers were better compensated.
The flip side here is if the large company goes belly up - like Kodak did - the "outsourced janitor" might still keep their position at the company they are working for - they will end up working at another customer location.
That would assume that the other customer location is currently underserved or not served at all.
Outsourcing is about reducing costs. It's not good or evil. But it depersonalizes decisions on which service to choose and narrows the decision making criteria down to cost. Costs for service jobs are driven by people. So, when a company is choosing their janitorial service and they choose the lowest cost service, that means the service that pays the lowest wages or that cuts the most corners will typically win the contact.
Depersonalizing the buying decision and commoditizing human labor aren't good or evil by themselves. But, turning people's welfare into a math problem certainly leaves us open to making decisions we wouldn't have made if we saw the consequences through a human lense instead of only an economic lense. At best, it causes suboptimal outcomes for an individual while maximizing the aggregate benefit.
We can fight against it all we want, but everytime we buy a t-shirt, an apple, or an iPhone, there's a supply chain behind it built on the lowest cost provider. We are all part of that process. I hope I'm not evil for buying a cheap t-shirt. But I know I enabled some shady behavior that made it $1 cheaper.
>> That would assume that the other customer location is currently underserved or not served at all.
sure. but it's a potential option as opposed to being let go flat out.
If Kodak went belly up before that "rags to riches" story of a janitor becoming an exec proceeded beyond the janitor stage - she'd be looking for another job elsewhere, whereas in contractor's case there's a chance of getting reassigned to another "project".
It's not as much about "depersonalizing" as it is about convenience of not having to deal with the domain that has nothing to do with core business.
The cost factor is also not linear - in terms of straight up cash figures sometimes it costs the same or more to outsource maintenance, security etc vs hiring your own.
Works both ways - car dealership for example isn't going to hire a web designer for their site full time.
Gail Evans worked as a janitor at Kodak in the 1980s. "She received more than four weeks of paid vacation per year, reimbursement of some tuition costs to go to college part time, and a bonus payment every March... A manager learned that Ms. Evans was taking computer classes while she was working as a janitor and asked her to teach some other employees how to use spreadsheet software to track inventory... Less than a decade later, Ms. Evans was chief technology officer of the whole company."
Agreed, he was in a bunch of bands and had classical piano training his entire life. He was recording on the side and happened to be working as a janitor at a music studio.
Trent is more similar to Good Will Hunting than this story.
This is why it's so upsetting that companies in Silicon Valley (Google, Facebook, Apple, all of them) hire cooks/janitors/bus drivers/etc from 3rd party companies and offer them none of the benefits their full employees get. Just doing that would be a huge pipeline, and would play no small part in addressing the diversity problem they all claim to be preoccupied with (but don't do much about).
Remember that this NY Times article is designed to push emotional buttons. Their entire story revolves around comparing Apple against Kodak. There aren't really any deeper studies or figures provided. You could as well compare a contractor who worked at Kodak with a masseuse at Google and reach the opposite conclusion.
Except I work at such one big company, and talk to its security guards, shuttle drivers, cafeteria cooks, every single day.
And what do they tell me?
That once this ends, they're headed to Whole Foods for another shift.
Or that they'll sleep in their car for a few hours tonight before heading to the next job, not seeing their kids.
Or that they're struggling to pay for their mom's medical bills and have no clue how they'll ever get out of it.
This NY Times article pushes buttons so well because it resonates deeply with what I, and many others, have been hearing every day since they've set foot in Silicon Valley.
Yes. Note I referred to early employees. Cooks and massueses got rich off Google in the days when there were only a few of them and the company was run by idealistic founders who weren't responsible to the stock market. Now there are hundreds or thousands of such people globally, and things went back to normal.
My point is that "janitor who became CTO" is not really a common story at any company, even at Kodak.
I am not a lawyer, but it's my understanding that companies need to treat contractors substantially different from full time employees or get in trouble for basically having full time employees that they don't pay employment taxes on.
So the choice is more like:
* keep cafeteria workers on the payroll
* hire a specialized company to run the cafeteria
...the middle ground would be to require all vendors provide minimum benefits of some sort (vacation, sick days, etc.). But that wouldn't make it feasible to offer a temp event worker a data maintenance role. That would basically be poaching another company's worker.
It's not even the point of the example and they address that in the article. They point is that the janitor at Kodak had opportunities to advance her career, whereas the janitor working at Apple has none because she doesn't even for the Apple.
But she's also not taking computer classes in her spare time, and work is approximately he same number of hours leaving approximately the same amount of spare time ... even if she were taking computer classes it would not be a reasonable comparison, because taking computer classes in the 1980s was a much more rare and advanced thing than taking them today. It'd have to be something more like quantum mechanics classes, or nanobiology classes, or, I don't even know.
It says that she has no paid vacation, so thats a chunk less spare time. My guess is that commuting to Apple's offices will be a large chunk as well. I doubt she can afford to stay in the same area as the high paid tech workers.
Then effectively the salary is higher than quoted for the 80's worker. And I know plenty of people in academia who don't take all of their vacation, and often work far longer hours than they are contracted for.
If you look for it, you could probably also cherrypick a modern contract janitor that learned how to code in her spare time and now works for Goosoftbook. Especially if you choose a decade-long time period.
Gail's story may be inspiring but it may also be unique, even in the 80s.
Devil's advocate: there is an upside here. Come economic downturns, companies can mitigate layoffs by choosing not to renew contracts. It means that those who planned for stability (full time employees) are more likely to get it, e.g., start a family, take out a mortgage, etc. Those expecting turbulence can avoid long-term commitments.
I'm failing to see how that's an upside at the wider economic level. If companies choose not to renew contracts, people are still getting laid off; they're just getting laid off from the contracted company instead of the company that terminated the contract. All you've done is shift layoffs onto people who, arguably, are the least able to deal with losing a job.
This story reminded me of something I've often wanted to know when people start talking about economic inequality metrics, namely, how many of those in poverty when entering the workforce will remain in poverty their whole life? To me the longitudinal information here is the most significant metric i.e. what does wealth movement look like for individuals over their lifetime. Virtually everyone in their teens and early twenties is in or near poverty, but what does that same individual look like at 30, 40, and 60?
Can any economists / sociologists in here point me to studies / research in this area?
But actually, I would go the opposite way and say we need to look at multigenerational inequality. Which is to say that our current inequality metrics might look really good even if you were bound to being only 1 quintile higher or lower than your grandparents, every individual would oscillate in a small range through their life but once accumulated it would show up in the data as lots of mobility. What I'd be really interested in seeing is how likely a family is to climb out of poverty over a few generations and then to stick there or how likely a rich family is to sink into poverty and stick there.
You're looking for research on what's called "socioeconomic mobility". The Atlantic has summed up some of this research [1]. Basically it's become harder for American workers to work their way up the income ladder over time.
I've heard from smarter people than me that your parents' level of economic attainment is the best predictor of your economic attainment. Everyone may be broke in their twenties, but some of those 20 somethings presumably got a leg up from being in a good (pre, elementary, secondary, post-secondary) school and can ask mom and pop for help on the down payment for a home, etc.
Suspect that's still the case, though the other trend of increasing inequality means that more and more at the bottom are slipping out of middle class, while a very select few at the top are headed toward cryoretirement in their ice palaces overlooking a scenic valley on some private jovian moon.
Score on IQ tests is a far better predictor of SES than parental SES. Someone in the 95th percentile for IQ will, on average, earn more than someone with parents in the 95th percentile of earnings.
IQ might be a better predictor, but the linked paper says it's not a far better one:
"The results demonstrate that intelligence is a powerful predictor of success but, on the whole, not an overwhelmingly better predictor than parental SES or grades."
That might just mean that intelligence is useful not only for gaining personal success, but also for raising offspring who will be successful. Is that a problem that society should try to correct?
TL;DR
In 1980 low income workers saw their incomes rise faster than high income workers, now the vast majority of income gains go to extremely high paid workers.
Economic mobility is fairy well measured, and has been decreasing for decades. The US tends to not rank terribly well, putting a bit of a damper on the whole "land of opportunity" thing
One of my pet peeves is when articles such as this use averages exclusively to talk about incomes. Averages are sensitive to outliers, and thus may obscure what's the typical condition. If you're going to pick one measure to talk about incomes, median may give a better picture of what's typical.
That bothers me on basically every stat on a news article. They just come up with a number and expect people to believe it. But they don't talk about how it was calculated so people can't confirm it themselves, and very often, if multiple "experts" are the ones calculating the stats, they just pick the biggest outlier to strum up more controversy.
I think articles like this usually do mention the stats a bit, but usually start out with an extreme story to hook the reader. It's a common storytelling technique and something I see often in journalism and pop-sci books.
This also helps explain the "skills shortage". Traditional means of building a skilled workforce are no longer available.
The loyalty disconnect can cut both ways. If I invest in training someone, they are likely to up and leave for a better offer. If you employ me, I can be made redundant whenever convenient.
It sounds like the real reason for inequality is that the pay for "janitorial work" has simply decreased. The article makes a point to say that the pay is the same, accounting for inflation, but it's disingenuous not to highlight total comp, which Ramos had significantly less of than Evans.
The reason for inequality is that people are not equal. The work they do produce is not equal in value. More people can do a janitor's job, and/or do without a janitor, so the value of a janitor's work is less. More supply, elastic demand, means lower price point.
Through technology, some people are able to produce much more than others, so inequality is inevitable unless there is a balancing force (aka taxation).
Exactly: they give you stuff, only to have the impression you have something and someone cares. Actually, nobody does not, the citizen is just a milk cow.
The United States have both of those implemented in exactly the wrong way: the minimum wage is livable nowhere, and there is still people without health insurance in the US today.
Minimum wage is hardly livable anywhere in the western world so that has nothing to do with US. Show me any country in Europe where living in minimum wage means anything else than poverty in all but name.
Indeed, the value of keeping toilets sanitary is far greater than that of creating the next web app.
"This work is essential to the health of the population, but because of something to do with marginal economics and supply and demand and weak labor laws and class power and reserve supply of labor, I don't have to pay a proper wage, or even treat them like human beings!"
Nature doesn't have a "proper" wage. The temporary moat of other countries being destroyed by ww2 and less efficient travel and lack of computers meant labor supply was constructed. The situation has now changed so there is more supply of labor (similar to when women came into the work force). You can't fight supply and demand, the people with lower quality of life (in developing countries) will work for less than the richer ones, so their product is cheaper, and in the marketplace people will buy cheaper products (as evident in our situation today).
I think it's useful to remember that the work of one webapp developer can positively affect the lives of millions of people. Tech yields a counterintuitive amount of leverage.
Diamonds are also more expensive than water. But of course water is more valuable than diamonds.
Price is not about total value provided to society but about the marginal value of one more diamond, 1 more gallon of water, 1 more janitor or 1 more programmer.
Your first paragraph, on supply and demand, is fairly accurate, but to say that "some people are able to produce much more than others" is oversimplifying.
Consider a fast food restaurant with one cleaner, two people at the tills, three people in the kitchen, and one manager. Remove any of them and the lines will become too long, the place will become unacceptably dirty, etc. However, none of the employees is "producing" more than any other.
Perhaps I shouldn't have used individuals, but in my opinion, it's easy to see that a team of engineers automating a factory produce, via their machines, much more than thousands of the factory workers who were doing rote work day after day.
The people that developed email and whatnot produced more than the people who deliver mail, etc.
Yes, but at some point people used to say "fuck this I'm not working 40 hours a week my whole life if I can't even buy a house and afford a few luxuries." And so that would restrict supply.
People don't do this anymore for various reasons, frankly it's been demonized in our society. Lots of companies (/most?) restrict supply to drive up costs (diamonds, agriculture, digital media, etc), they don't produce at maximum/flood the market. They restrict supply to maintain a healthy profit margin. And people call this good business, but what do we call workers who do the same?
I think their is a good argument to be made that our middle and lower classes have just been acting as bad business men and women and have been giving as much unrestricted supply as they've been asked for. It's bankrupting them, costing them their health, costing their children opportunities for good education and access to their parents bc they are working all the time. It's costing them the American Dream, if there ever was one.
I do believe it's time for people to unionize or something. Unions are a whole other argument, but we can make new ones with new rules to make them better. People have to realize their bosses view their "worth" more so as leverage than output. People can increase their output all they want (which they often have: more degrees, more work hours, etc), but without an increase in leverage they won't be paid that.
Further, this doesn't neccessarily mean anyone's boss is not paying them appropriately. It's possible the market at large needs to be adjusted to pay for these costs or more than likely a little of A and a little of B.
> the pay for "janitorial work" has simply decreased.
Author's point is not about decrease in pay but about the social changes that came about as a result of prioritizing the outsourcing of non-core-competency work to contractors, which increased competition and had the effect of reducing effective pay.
In other words, income inequality has increased as contract work has increased, and the reason why is because a large part of social mobility is due to networking and connections, which are far stronger at companies which prefer in-sourcing compared to companies which prefer out-sourcing, since out-sourcing naturally creates an "us vs. them" dynamic at companies which is difficult to overcome.
The implied conclusion is, if market forces are biased towards out-sourcing, then the government should incentivize in-sourcing as a means of combatting inequality.
That's the theory of the journalist, yes. The NYT does not actually show that though, they just state it/assume it.
If you read through the comments, one of them points out a perhaps less popular explanation - Ms Ramos apparently does not speak English. Large quantities of low skill immigration will inevitably make life tougher for people like her. But that would not be an explanation that'd be acceptable to the Times.
> That's the theory of the journalist, yes. The NYT does not actually show that though, they just state it/assume it.
Well what do you expect? Journalists write news articles, not peer-reviewed studies that obey the scientific method.
A lack of English skills would certainly contribute to social isolation within an American company, so if anything, it helps drive home the point that social isolation exacerbates income inequality. I don't think anybody is making the argument that Apple bears responsibility for giving Ms. Ramos English fluency, and it's part of the reason why there aren't easy solutions. But you can't even think about solving the problem until you can start to think about its root causes.
The underlying cause of this whole issue is the changes in tax policy instated in the Tax Reform Act of 1986, previously income was taxed at higher rates unless deductions were utilized which forced those earnings back into the economy creating jobs funding research, etc.. As it's become easier to retain more earnings there's little incentive not to optimize an entire corporation solely with the purpose of generating returns at the expense of all else. To resolve this USA should consider reverting back to the Internal Revenue Act of 1954. Under this rule set income over $400K/yr was taxed at 90% or it was reinvested in the economy. Do this and this inequality issue will sort itself out in the same time frame it took to do the damage.
No, more like we are going to tax you 90% on everything from that point on. 90% is insane, folks. We don't have the same economy or tax laws today that they had in the 50s. You can't ignore what's changed.
To invest in 2 hippies starting a personal computer company in 1976. To invest in 2 guys in starting a search engine in 1996. To invest in a kid in Harvard making a social network in 2004....
True, but also for multiple homes, fancy cars, world travel, etc.
When I worked at a hardware store we had a brochure we could order in a gold-plated Ducane grill for $4 million.
That recent graph showing the top 1% having a 6% wealth growth rate is wholly unsustainable for any society. So there's something to be said for trying to level it off.
What makes you think the government would be better at job creation through confiscating more capital than individuals who created the wealth redistributing it through investments and purchases? Every summer home or car bought puts people to work as well, its not like the money disappears.
I'm not sure that tasking the government with job creation is a good solution. There are many kinds of wealth redistribution that people are talking about these days and I'm only pointing out that it may be necessary. What fraction of wealth are the richest among us spending and investing rather than saving? Yes Bill Gates and Warren Buffett are saving millions of lives, and yes we have Facebook now. But what should we tell Marta Ramos? Enjoy the $0.50 raise after all that hard work!
If the wealth continues the trend to concentrate at the top then there will be an increasingly large and unhappy group of people who will elect increasingly non-mainstream politicians who promise to help them, eventually leading to who knows what kind of unpleasantries for all.
I should said: "Investing in things that help society." Arguably, the bit of money in banks that gets loaned out as mortgages and then repackaged and sold off as mortgage-backed securities which then get bet on with even more leverage as collateralized debt obligations is helping the financial industry middle-men who cash out on the fees a lot.
Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about.
What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.
People tend to invest in things with a high rate of return. That high rate signals it is doing things that people want done and are willing to pay for. I.e. it helps society.
> a way to provide capital to people who need it
That's exactly what banks do. My bank branch is plastered with posters trying to sell a loan to everyone who walks in.
> passively invested in banks and things like index funds
If you're arguing those are not productive investments, I don't think that's very defensible.
> how much is not really doing that much.
If you're arguing that rich people tend to invest in low performing investments, that doesn't make much pragmatic sense. People get rich by investing in highly performing investments, not dogs.
Have you seen The Big Short? It's on Netflix and is pretty good. The CDO manager in it claims that society must value what he does very much because he has an extraordinary net worth [1]. I'm trying to express the point expressed in that scene. You can get very rich and have high net worth while actively hurting most people. Things with high rates of return may be good investments but they may also be massive frauds, as we all learned in 2007.
Banks want people to take out loans because they collect fees and offload the risk via MBS. They give people loans who can't afford them and that's not good for anyone, but then they know they'll get bailed out again if something goes south. None of this is sustainable, healthy, or productive.
it's already happened; trump, al-right, etc.. there used to be all these middle class jobs that kept everyone occupied, now without that we have lots of anger and automatic weapons.
but that isn't going to produce broad based results. for every vacation home and extra car purchased there's millions being underutilized. the tax policy enacted in 1954 saw to it that those funds were put to good use or taxed aggressively.
Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs)
Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax.
Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm.
In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous.
I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.
Great, now rewind and re-run that history but with the Mike Marrkula, Andres Bectolsheim, and Peter Theil being taxed and 90 percent above 400k. How motivated would they have been to risk their capital knowing that 1)They have much less of it 2)What they do make will be taxed at 90 percent 3)Bonds are a safer bet. Further, in this thought experiment, assume that Perkins and Seqouia are much smaller, less successful firms with less money to invest because most wealthy individuals have made the rational choice that risk capital is not worth it.
One would hope that we could draw the appropriate logarithmic taxation curve to constrain risky investment without eliminating it outright. I personally do not see a massive problem with curtailing some of the power/amount of money flowing around in some of these entities; but don't see it as an all or nothing as you suggest.
I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio.
(I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
Im not completely dismissing your argument; I agree with you that something has to be done with unprecedented inequality. Also, Im not suggesting that is an all-or-nothing dichotomy, Im asking you to think of the investor behavioural consequences of that type of tax policy. We of course can never know what those investors would have done given those circumstances, but its important to try to understand what the possibly nonlinear effects would be.
Also, if you could, would you direct me to the sources of some of your readings of history so I can better understand the perspective you presented, especially regarding the 70s and 80s.
And what about all the other companies funded by the same people who funded Apple, Google, and Facebook, that never became profitable? I'm curious how much capital is spent on failures in addition to the companies that pan out.
We don't. But many good investments don't look good at first, and often it has taken a single person to go out on faith to put money into a high risk/high rate of return investment. If their capital gets taxed at a much higher rate, they will more likely be conservative with what they are allowed to keep and wont place risky bets on the future.
So you can sell PayPal one day for $200 million and have the capital to build a space ship company and the first viable fully electric car manufacturer.
I don't think so. I think most successful entrepreneurs continue to reinvest their profits. They may not do so at the scale of Musk individually, but collectively, the activity of millions of business owners across the U.S., reinvesting their profits and continuing to risk it, has a huge net effect on the economy.
avoid the taxes by taking the deductions, invest in new jobs and businesses with the possibility if those investments pan out of making even more money.
This is the correct answer, I don't know why you're being downvoted. This would cause people to either (a) leave the country or (b) work until they made their 395k and then stop working for the year.
It's actually quite terrifying that people would advocate for taking up to 90% of someone's income. We need to work on solving inequality but this simply isn't the answer.
Edit: It's also important to remember that taking more money away from the rich, and feeding it into an already broken and inefficient system (our government) does not equate to lifting people out of poverty.
And, due to deductions, literally no one paid that rate. Realized tax rate was lower, combined with a bunch of dead weight losses as people optimized for tax avoidance.
yes, very few paid the top rate. but that's the point, the excess income was being thrust back into the economy, driving innovation and creating jobs not just languishing in someone's bank account.
This is another variation on the "rich people hoard cash" theory, which is completely false. Rich people invest all of their money back into the economy. Even bank deposits are invested back into the economy (when the bank loans it out).
I suspect a lot of it has been invested in overseas locations, including manufacturing operations globally. It may be that the money did indeed "trickle down", but not into the US.
Yup. Investment flows to where the most returns are, and taxes loom large in such calculations. But that isn't the point here, which is it is invested, not stuffed in a mattress.
Reagan didn't get rid of all of the tax shelters. But the idea that tax havens (i.e. tax shelters) are relatively crummy investments remains.
The reason Apple, etc., invest a lot of their cash overseas is not because those are better investments, but because the US corporate taxes are so much higher those foreign investments become more attractive.
Level the taxes, and the money will be reinvested back in the US.
The media consists of people with journalism degrees, not economics. Such journalists commonly believe in the "cash hoard" theory.
To know what they are investing in, consult the Apple Annual Report, which says. Even if the balance sheet says "cash", what they mean is "bank deposits". Bank deposits get loaned out to others, and those others spend it.
Nobody borrows money in order to hoard a pile of currency.
Actually when I started worked for a bank, we got an initial talk on the financial system and how it works. It showed that most companies do reinvest most of the cash or pay it out as dividends, it was pointed out that the exception at the time was Microsoft who basally hoarded it. That was 12 years ago. Now Apple are the bigger player and seem to be doing exactly the same.
Buying a stock on the secondary stock market is not investing in the economy. Buy that logic, high-frequency traders are investing in the economy.
> If that were true, banks wouldn't need deposits
That doesn't follow from what I said. Banks are required by law to back their loans up with reserves. So when they don't have enough reserves, they borrow on the interbank lending market or from the central bank.
Yes, technically buying a stock makes you a part owner of that company. But if the stock is already on the secondary market, you're simply purchasing a piece of ownership from someone else that already exists. This is not an investment in the sense of directly enabling something in the real economy to happen that wouldn't have otherwise (eg. venture capital). Sure you're providing liquidity to a current shareholder, but that's a fairly marginal benefit, and selling your shares will involve taking an equivalent amount of liquidity. This is no more an "investment" in the economy than buying a second-hand home.
The original comment was implying that rich people contribute to the economy by investing their spare savings back into it. I'm not claiming that there's no benefit to buying secondary stocks and derivatives on them, just that this is not even remotely the same in terms of creating economic growth as actually investing in creating new business opportunities and such. It's kind of like saying that trust fund kids who don't work contribute to the economy by spending money. And often this "investment" in the stock market is the mere fueling of bubbles.
Right, it's so ridiculous that people act like suddenly there would be a dearth of people "willing" to work for $400k salaries. Like raising the tax rate would suddenly dry up the pool of people wanting to be millionaires. Gimme a break!
Tax rates are usually progressive (I think thats the word). So you get taxed the same as everyone else up until a certain point. Only one you are already making "silly money" do you get taxed at 90%
Well. After they've already taken in 400k they could continue to take in money at about 40k per year. If you want to know why people are willing to work for 40k a year, there are lots of people you could ask in our society.
Have you ever thought that while you're looking at 400K a year as excessive, there are millions of people like the janitors who think our $130K+ tech salaries should also be taxed more heavily and redistributed?
That's part of the problem. Janitors think we're part of the big wealthy one percent, when we're bringing home far more similar wages than the actually wealthy folks. The problem is that the truth differs so greatly from everyone's perception. And how can anybody expect to solve a problem when we can't identify the constituents properly?
The marginal utility of money decreases drastically as you climb, so someone who is already making 400k obviously isn't going to do double the work to make an additional $40k.
Why should people be incentivized to take home more than 400k/year? Why not reinvest that money in the business and have the executives take home only $150k/year?
- Work for MEGACORP and produce $400k/year of value
- Develop a new business which has a 30% chance of succeeding. If it succeeds, you estimate it will be worth $50M.
Suppose the marginal tax rate for income above $400k/year is 40%, and you want to maximize your expected earnings (say, to donate to a charity you think is particularly effective). Which option is rational?
Now suppose the marginal tax rate for income above $400k/year is 100%. Now no matter how high we change that $50M number to be, it's always better to just work for $MEGACORP, because you get a guaranteed paycheck.
This is known as a distortion, and is the true cost of taxes. I personally don't care too much where the wealth people creates goes, and I'd like to see less income inequality - but let's not kill the golden goose while we're at it. There are far less distortionary taxes than extremely high income tax rates.
Hypothetical scenarios are only valuable insofar as they're close to reality.
In real life, if I'm taking home $400k/year in salary it's because I'm creating $1 million/year in revenue. Also in real life, a start-up business that will be worth $50 million usually has more like a 1% chance of success, so it's expected value is actually just about 25% more than the proposed salaried job -- less than my value-per-year at my job, actually.
Finally, in real life, most people don't want to maximize expected income -- its buying power in terms of personal needs decreases logarithmically.
Tax law really has little effect once we use a less imaginative scenario.
If one can create $1 million/year in revenue for $BIGCORP it's completely plausible that they could create $5 million/year in expected value on some better, innovative idea of they own (or a startup's). The only problem is that the second option comes with a double-digit probability of failure. Extremely progressive tax systems artificially distort this decision towards complacency and mediocrity.
You mention people are risk averse (logarithmic utility of money). I posit that that is only true for non-altruists. An altruist prefers to save 10000 lives nearly exactly 10 times as much as they prefer to save 1000 lives. Given a secure enough financial base off of which the logarithmic personal rewards factor is a non-issue, this is the primary driver for plenty of people that I personally know.
>artificially distort this decision towards complacency and mediocrity.
You seem to be assuming that Starting a Business is always better, more of an achievement, more awesome, than not starting one. I see no reason for this to be true. Maximizing revenue tends to have more to do with building market power than with achieving anything at all.
You're also deliberately shifting the goalposts here. You started out by saying that progressive taxes were bad because they penalize making more money. Now you're saying they're bad because they incentivize complacency and mediocrity, which are life-achievement qualities rather than economic quantities.
It looks like your underlying belief is: "people who make lots of money are heroes, and we need to encourage more people to be heroes, irrespective of what's good for the rest of society."
>Given a secure enough financial base off of which the logarithmic personal rewards factor is a non-issue, this is the primary driver for plenty of people that I personally know.
To be frank, it's their primary excuse for what they really wanted to do, which was to make as much money as possible. After all, how many are giving away their extra money to the most efficient administrator of human-welfare programs around, the state?
See, people aren't advocating such high taxes on people making 400K a year, they're advocating it for people making 4 million+ a year.
This is a major misconception I see on both sides of the argument, (but definitely more of an issue on the "rah rah Laissez-faire crowd") the worry isn't really about the "1%" who are doctors and engineers who make ~$250K/year after working hard, the worry is really the people who make 20 million dollars a year with nowhere near a proportional value add.
true, the effectiveness of this scheme was slowly eroded beginning shortly after it was enacted. '86 was the knife blow that killed it for good with it's "revenue neutral" rebalancing of the "loopholes" and deductions available for reinvestment tax treatment.
The reinvestment tax treatments you mentioned were more conventionally known as "tax shelters". People structured their income around tax shelters. Tax shelters tended to be crummy investments that only made sense when considering the tax savings.
By eliminating the tax shelters and correspondingly lowering the tax rates, Reagan brought about much more efficient allocation of investment capital.
Interesting that you noted it started in 1970. Can you think of anything that happened in 1970 that would have started this death spiral of our purchasing power?
Perhaps say the severing of our money from gold maybe?
Look it's rather simple. You can wax and wane about tax policy until you are blue in the face. The answer lies in the currency, not taxation.
I give this example every single time these stories surface.
Take a pre-1965 quarter when our money still was constitutional and made with silver. 6.25 grams of silver in that quarter. That silver content has a melt value today, right now, of $3.37.
Items that silver quarter can buy today:
A gallon and a half of gas = .25 cents
1 gallon of milk = .25 cents
1 loaf of bread = .25 cents
The point illustrated is, the problem is your currency is worthless, it has been devalued by the banking cartel of the federal reserve to the point of almost complete worthlessness. And every year prices go up it's your currency losing more value, more purchasing power. It's not rocket science. You have been robbed by bankers. They own you. Washington and company learned their lesson after the continental dollar. Fiat currencies are fraud, and worthless. They always have been and always will be. Our dollar is no different. That's why the constitution has as the supreme law of the land that our currency must be backed by gold or silver. Which can't ever be valued at zero. Because it has intrinsic value. Fiat currency always throughout history, always, hits zero.
I see you have been down voted, yet no one has given an explanation as to why you are wrong. I was thinking the same thing. I would appreciate it if someone could explain to me why this line of thinking is wrong.
It happens every time. They can't dispute the facts I illustrated above. They just down vote without any refuting. It's hard to argue the grams of silver in pre 1965 quarters is not 6.25, it's hard to argue the current price of those 6.25 grams of silver, and it is, I suppose, theoretical you can show me bread or milk that costs more then 3.xx dollars. But those are the national averages.
So I just assume it's Wall Street vampires down voting or those who hear the word constitution and down vote because clearly that makes me wrong or insane.
I will take a shot at explaining the problem with a gold standard.
1. We want slight 1%-2% inflation to prevent hoarding from slowing the economy to a crawl. Why invest or buy something today when the cash stuffed in my mattress will buy something better in 6 months.
2. If you agree with the first statement, why tie the rate of growth of money to how fast you can dig a metal out of the ground? Let "experts" survey the economy and decide how much more money there should be this year as opposed to last year.
I am not saying I agree completely with either statement, but that is one argument against a gold tied currency.
Again, that is not disputing the facts I laid out. We can argue about the gold standard but that isn't what my argument was. I was pointing out that the currency is worthless because it's fiat. Also inflation is a hidden tax.
Foreign (to the US) oil, and limited gold. Dollarising petroluem sales in particular served the interests of much of the world: the US, because it kept oil affordable (dollar didn't deflate more), OPEC, because it kept oil affordable (their currencies didn't inflate more), gold, because there's only so much, other nations, because they could exchange for dollars via reserve currency markets.
The gold-backing was dead by 1970. Petro-dolarisation occurred in 1974. The UK all but went broke in 1979. The USSR did go broke in 1987-89, courtesy the US and Saudi Arabia (something Putin may well have in mind now).
Money is weird. And the gold standard and "end the Fed" nonsense is ... complete bullshit.
>And every year prices go up it's your currency losing more value, more purchasing power.
This is only true if wages don't go up to match it, and if they don't, then we should be asking why not. People should be insisting on raises at least in line with inflation, and if they're not able to get even that, then it suggests a power imbalance.
And besides, currency devaluation isn't some secret conspiracy, or even an inherent property of fiat currency, it's the explicit and stated aim of our monetary policy. Most economists seem to believe a constant low level of inflation is a good thing and so that's what we do. If you disagree, you should argue with that directly. And if you want a stable currency value, I would suggest monetary policy would be far more effective at achieving that than the gold standard.
>Why would a company voluntarily increase its personnel costs by the rate of inflation?
Because you have a society where not doing so would be rightly recognised as a defacto wage cut, and considered outrageous by your employees. This is generally the case in Europe, and I'm arguing that this not being the case in the US is exactly the problem.
Also FWIW, I don't think tech companies are remotely representative. It's an industry with high employee turnover, and where people are expected to argue for their own raises.
Nonetheless, I work in tech, and I got an inflation based salary bump last year, which was applied in addition to a performance based raise, and I'm expecting one this year as well. But then, I don't work in the US.
Because you unionized, because you pressured the state to maintain full-employment policies, because the welfare state helped you bargain harder against your exploiters...
You know, because you actually fought for your interests instead of accepting your lot as a constantly-devalued cost center.
Hey, dingaling, you really should bring that up to your employer. In about the same number of years in the same industry, I've gotten salary bumps to cover inflation in most years I've asked for one.
Before I moved to SV, I saw a lot of companies that gave COLAs. You might go easy on the insults, in addition to not generalizing from your personal observations to an entire country's economy.
A deflating currency is bad for the working class and for economic growth. It is good for the upper-middle classes, who can afford savings but not major capital investment after having paid off a house, but they're surrounded on both sides by a majority whose interests run in favor of moderate inflation (devaluation of debts) and heavy rates of reinvestment.
Not 100% sure that I understand your point about silver. Is it that you believe it has retained its buying power? (Setting aside that the silver in a pre-1964 quarter could only buy about 36 ounces of milk in 1970 given the $1.15/gal retail price then.)
Let's say that on Jan 1, 1970, you took your pre-1964 quarter and pulled out the 6.25 grams of silver in at the price of $12.37 a troy ounce. You'd get $2.48.
If you put that $2.48 in a money market earning just half the fed discount rate for the last 47 years, it'd be worth $7.99 today. The silver would be worth $3.37. (The currency would likely be a lot more that $7.99, because the difference between money market rates and fed discount rate historically hasn't been as high as the very conservative 50% markdown I used here.)
There are a lot of moving parts in an economy that affect cost of living. A lot of stuff has changed since 1970 beyond going off the gold standard. Massive productivity changes, energy and raw material price shocks, demographic changes, policies and laws changing behaviors all across the individual and business landscape. It's difficult to isolate one individual factor as the sole cause.
(sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)
Looking linear graph of an exponential process and seeing an apparent rapid increase at a certain point doesn't really prove anything. That's just what an exponential graph looks like.
If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to point to the end of the gold standard, this data doesn't really support that. There is a slight surge around 1970, but only relative to a general trend.
As I said, there was a surge around 1970, so yes, if you take a period that includes that surge, it will probably have a higher rate than one that does not.
OPEC oil crisis, US peak oil, associated political shifts in conjunction ith that. Gradual outsourcing of industrial productivity (high-paying factory jobs) from the US. Loss of bargaining leverage by labour.
I am a multimillionaire. Came here with a negative net worth, by way of skilled immigration. Born and raised in the USSR. Don't bother trying to convince me about the virtues of socialism. Unlike you, I actually lived it.
Sometimes the exact opposite of a profound error is also a profound error. We certainly have established that socialism can be implemented in a catastrophic fashion; it's harder to prove a negative (that nothing resembling socialism can work.) I share your skepticism, though.
There are always theoreticians who don't really know what they're talking about, but do offer their utterly worthless advice. I'm not talking about you, or anybody else on this thread in particular. Without sufficient pushback, sooner or later these people screw things up for everybody, including themselves, and the poor are hit the hardest by the fallout 100% of the time. When it becomes obvious that they screwed things up, you get people like me telling you just how fucked things can get if you head in that direction, de facto, because we've been there. When you don't have people like me, you head in that direction, because let's face it, most people think that if we just take all the wealth and spread it evenly everyone will be better off. That's not how the world works, however, but it takes decades to go through these cycles to find out for yourself. Greed is good, inequality in outcomes is good. What's bad is inequality in opportunity, and there's less of that here than in most other countries. If you were just born here, you already have the golden ticket. The trick is to not wipe your butt with it.
There is no point in trying to convince the masses of liberally-inspired, rich privileged people who have never had the courage to face and understand the arguments of the other side, or the masses of liberally-inspired poor people who rather than work to improve themselves see themselves as victims and see the others as the source of the solution to their problems.
Ironically, the lack of ability to blame someone else for one's misfortune was the only good thing about USSR style socialism. When everyone is poor, you can't blame the rich for anything.
> and there's less of that here than in most other countries.
I've seen evidence that the US is actually not doing that well on this scale, particularly measured against other wealthy democracies.
What's particularly painful for people is that there's less equality of opportunity here than there was 40 years ago. I do think we need to do something about this, though it's not entirely clear what.
Priority one: Federalize educational funding so that primary schools are all decently funded. Other countries do this as a matter of course. Obama didn't lift a finger, so far as I know, to get equal dollars to black and predominantly black classrooms in poor districts.
Socialism is a bit of an over-loaded word. Most people use it to speak about market economies in western Europe with heavily funded public health, wellness, and education programs which intend to promote democratic constitutional goals such as equal opportunity for citizens.
Planned economies such as the USSR clearly impinge on human liberty, tend to be undemocratic, and are usually very inefficient, and I think almost everybody would agree with you that they aren't a good alternative to the current U.S political and economic system.
>Planned economies such as the USSR clearly impinge on human liberty, tend to be undemocratic, and are usually very inefficient
I disagree that they impinge on human freedom, at least I don't think they do compared to capitalist economy. I see no reason why they should be undemocratic. And you'll find nobody in favour of a 5 year plan as the USSR had; there have been massive advances in economic planning methods, as elaborated by Cockshott et al.
I love the irony of saying it is "inefficient" especially when we compare it to how currently under capitalism firms compete by doing the same research, repeating the same mistakes, often extremely inefficiently, in the name of profit. This is one of the most inefficient things I have heard of.
The USSR planning model isn't a good alternative. But I think that some economic planning model, whatever it may be, should not be ruled out, especially as it can feature as part of lower-stage Communism.
It's hard to determine how much of something to produce in a planned economy. It's inefficient because the market is incredibly good at figuring this out through the price mechanism.
Lots of pre-1917 Russians weren't fond of socialism or any form of wealth redistribution. They have lost all their wealth and their lives as well.
Some levels of inequality are healthy and motivating, extreme social inequality with large groups of population feeling left behind by the social system is undermining stability and a recipe for revolution.
Not quite, the US isn't remotely socialist yet, and the thing Lenin did was try to force communism on society instead of wait for it to come "naturally" as a response to capitalism, which is what Marx predicted.
So this warming up to socialist ideas is pretty much in line with Marx' predictions and has little to do with the Soviet Union I think.
Is your implication that the US is socialist simply for having an income tax? If not, you're going to have to quit the snide remarks and actually explain your opinion...
No, it is the way it is set. It is a very long discussion, but the extremely simplified version should be: if there is a cost to run the state, split the cost equally to the voting citizens and ask them to pay. The state is not the owner (full or share) of the citizen to raise a percentage of the income as tax, one vote means one tax (in dollars) - that is equal rights and equal burden. The "rich people can afford to pay" is just the way to communism.
Anything else is not, exactly for the reason I described: equal rights and equal burden. Otherwise the state is just a way to implement Marxism: take from the ones who have an give to the ones who need. Robin Hood was a thief.
? Not sure if you're making a point or trying to be funny, but socialism is far from a Soviet (or even a Cold War) thing. European countries pioneered mandatory paid vacation and paid medical leave over a century ago, a fundamental workers' right which the US still does not give its citizens.
I always thought the people that left Europe for USA did it for a different life, not to get socialism and get back in line with the herd. But it seems that the people in California had afterthoughts about this and decided to go commie. Not kidding, Hacker News commenters are very much biased towards socialism - take it from a guy that was born and lived in a socialist country and had the chance to feel it the hard way, not dream about it.
I was also born and lived in a socialist country, not sure I get your point. If being "in the herd" means that janitors get vacation, medical leave, and don't have to work from 6am to 2am like the janitor in the article, it's an alright herd I'd say.
You know that an employer is calculating the overall cost per year and the overall productivity per year. If you want to work X months and get 12-X months of vacation, just tell the employer and you will get a reduced salary and paid vacation, so in the end you cover your total cost.
Medical leave? Buy an insurance that covers medical leave. Everything has a cost, who should cover it, the Holly Pope?
Big salary? Well that poor janitor earns 10 times a Chinese janitor in a big city and 50 times a Chinese janitor in rural areas. You janitor is extremely rich by comparison, why don't you pay some more tax to help the Chinese janitor? Or your moral fiber ends to your border?
Universal healthcare helped get me over there and it's one of the reasons I'll settle down there. I think all the socialized services are great. Excellent value for the taxes you pay.
Yes! This is another huge misconception about raising taxes: The American government is massively wasteful in spending! We get so little value for the taxes we pay! People don't want to contribute even more money to the wasteful spending, which I can totally understand, but it doesn't have to be that way! In Sweden for example, you get tremendous value for the taxes you pay. The tax rate is higher, but you really do get quite a deal in exchange. Americans are completely unfamiliar with this kind of benefit.
If you pay small taxes and you get great value, good for you. Other people pay much bigger taxes and get nothing in return. Tax based healthcare is robbery, richer people are not sicker and there is no justification to pay for services a percentage of your income. Otherwise you should pay for groceries a percentage of your income, for gas, for rent etc, so in the end everyone is equal in what they can buy. Better than socialist utopia, you can go directly to communism.
I pay a lot of taxes. It's worth it for me to live in a country with healthy and educated people and that's just the very short list. If you don't value those things, don't live there.
And where do you want me to go? On the Moon?
I live in a country where I have a decent salary by US standards, but due to taxation I am on the poverty line, also by US standards. Former east-European communist country, currently just socialist with taxation around 60-70% for all income, no matter how small or big. So, where do I need to go for a decent living?
That depends on what kind of work you do. All over the world the average worker is getting paid far less decade by decade if you account for inflation.
Is that really a problem with taxes? Or is that a problem of the ever expanding wealth gap? Assuming the salary for your job had kept up with inflation, and that you got a fair share of the productivity gains over the past few decades, you would be above the poverty line.
But let's say your taxes could be reduced to something like 40%. Obviously some public services would have to go away. I certainly wouldn't want that to be medical care or public education.
Maybe in your country there are problems with corruption and the taxes aren't be used very effectively? Again, that's not a tax problem, that's a corruption problem. If you were getting the benefit of those services, it would be less money out of your pocket and you would have more to spend.
> currently just socialist
I would also be careful with this category. There is no European country that is socialist. They are all capitalist, with private industry making up the bulk of the economy. There are a few social safety nets and services. But that's not socialism, is it?
Soviet Union lost Cold War due to being overspent to death in arms race by Reagan and his Star Wars programs. They had decided to drop the towel and re-group rather then reverse to pre-1956 economic levels.
However the neoliberalism, deregulation and privatization (good ideas in itself) started by Reagan-Thatcher-IMF swung the pendulum too far after 40 years.
No one is suggesting collectivization of farms, central planning, high defense spending at the expense of low consumption = Soviet style socialism/war communism. Rather something close to New Deal - Eisenhower era 'socialism' with stronger labour force participation, more state regulation and taking on new monopolies (Google?).
Taxes aren't the core issue. It's more fundamental than that. Imagine taxing bill gates at 95%. He's still thousands of times more wealthy than your average individual. That's not going to change much, other than that America is going to become highly avoided because of the tax pressures.
The real issue is that the fundamental structure of our economy aggregates wealth towards the top. Employees who add millions of dollars in value per year to a company get paid a fraction of that. Look at per-emoloyee profits for all of the major corporations. Our economy very heavily favors people who own capital over people who do work on the ground floor.
If you want to fix income inequality, you have to look at structures like the stock market, like corporate equity distribution, and pretty much everything we have in place in society that allows the rich to increase their wealth without actually working.
Increasing taxes is like taking aspirin to cure Ebola. Sure, you feel better, but it's not going to make you healthy.
The earth has finite resources. Wealth is a zero sum game. Even if you want to look at things like entertainment that can be reporduced cheaply, musicians and directors need fed, food is limited, therefore even films/music are limited.
Yes. If wealth were a zero-sum game, every choice would have to result in the same total amount of wealth in the world. Wealth could not be created or destroyed, only transferred. Any use of a resource would be equally as valuable as any other.
That's clearly not the case. The classic example is building a house alone in the woods, but let's consider art. With different choices, a person could use the same paint to make a good or a bad painting. The choices made while painting decide if it will be a mess or something beautiful. Even if it's never shown or sold to anyone else, the person who made a beautiful painting would be wealthier for it.
Much of what's seen as wealth production is instead liquidity production -- turning natural capital into financial currency. In the case of any production chain founded on fossil-fuel energy, the transformation requires a draw-down of natural capital worth many millions of times the market-price and wealth "created".
Activities founded on renewable or sustainable processes are less fraught, but there's still the accounting for potential disruption or reduction: soil loss (rougly 100x the rate of creation), sink-exhaustion (waste and pollution factors), biodiversity loss (rates of extinction > speciation), and the like.
There's little accounting for any of this within conventional economic theory. Ecological, biophysical, and thermoeconomics address parts. Steve Keen is starting to write mathematical descriptions of production factors in which the role of energy is taken into account.
Everything is finite when you have a fixed amount of information and mass in the universe. That doesn't mean the common economic definitions of wealth are useless. The act of creating capital such as a piece of art, a new algorithm, or a manufacturing tool all change the total amount of wealth in the world.
Information is also amost certainly bounded. In humans it's limited by the rate of transmissibility -- if what the next generation has to learn is greater than what the present generation can pass on, knowledge will be lost.
Given various inefficiencies of educational institutions, this is all but certain to be occurring as we speak. There is a notion of a "forgetting curve".
And, as you note, information can at best asymptotically achieve some maximum theoretical efficiency. It's not a limitless fount of potential.
The earth has finite resources. Let's go with that point for a moment. Do you think there were more resources available on planet earth 5000 years ago or today? The world population was several orders of magnitude less than today, natural resources had not yet been fully exploited, and yet, mankind was much, much poorer in terms of quality of life.
What happened in the meantime? We live in the most abundant age in history. Worldwide poverty is at an all-time low. Surely wealth is growing in absolute terms and it's not just the top 1% benefiting.
Inheritance tax was the original solution to this. Someone could be as rich as Croesus during their lifetime, but on their death returned the money from whence it came.
Their offspring could benefit from a generous endowment of a proportion of this wealth, say 10%-20%.
Inheritance taxes are always avoidable, and they could also have devastating consequences. Even if you could effectively prevent a single coin getting to the hands of your children, that would mean lavish expenditures, not investment.
Tax avoidance is a perennial problem, to be sure. There's always an "arms race" between the taxers and the avoiders, but that isn't a reason not to have taxes in the first place.
You're correct in that it's foolish to institute an uncollectable tax, but I don't think inheritance tax necessarily falls into that category any more than, say, capital gains taxes.
Is paying for your kids education inheritance? Are pre-paid company contracts for a lifetime inheritance? etc etc.
There are some definite difficulties in implementation. But even then, my argument is that it could be a really harmful tax if it could be applied at all.
The evidence is that allowing large inheritances is harmful to society at large. It allows for an accumulation of economic influence within too few hands, and the creation of an entrenched elite. The "Founding Fathers" of the US were particularly opposed to it for this reason.
One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
> One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
I wonder if we could think of other examples of how harming a minority of people can be good for society at large.
But regardless of the moral standpoint of the remark you said, you also have to account the harm it does to society to make people spend extra time hiding their wealth and spending it more frivolously.
My point is that there's no obvious harm implicit in denying people an inheritance. They did nothing to earn it. There's no inherent right to be bequeathed wealth; that this is evident is that it is nigh on impossible to sue one's parents (or their estate) for not willing their wealth to you (in the US; under Napoleonic law, there is a right to inherit).
Many people spend inherited wealth frivolously. Business acumen isn't known to be genetically determined, whereas political influence is certainly affected by wealth and pedigree, see George Bush the first and the second.
In the other direction though, there is inherent right (IMO). I have the right, in my pursuit of happiness, to make allocations of my lawfully earned money to my current needs, to my retirement savings, to my children's clothing and education, and other such pursuits and accounts as I see fit.
There is harm to the donor to abolishing inheritance. I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
Sure but if we're going to live in the land of inheritance then we need to toss the ideas that "anybody can make it" or "I earned this."
>I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
Why not? A man works hard to support himself but allowing four generations of free-riders seems like a pretty bad idea. It strikes me as a sort of neo-monarchism. In the past we had royalty blessed by god and passed through blood and now we have the economic elite blessed by capital and passed through blood.
I don't know how much time you've spent on family farms, but from what I've seen, I'd not describe them as "free-riders" on the land or on past generations.
Then they can earn the farm the same way their father or grandfather did. If they can't earn it why should they have it? That's what meritocracy means.
You've asserted several times in this thread that there are devastating consequences to the estate tax but never explain what those might be. Care to enlighten?
The idea of inheritance taxes are that once you are dead, you don't care about paying taxes. However, leaving wealth for your children is a huge economic incentive. As Friedman puts it: "People go to an irrational length to provide their kids a better life than they will ever get".
If you could effectively put 100% tax on inheritance(which you can't in practice), it means your utility of leaving wealth around becomes 0. Now you want to spend that wealth as much as possible, and it turns into consumption. You would sell and spend everything you have for lavish expenses, which means a reduction in capital investment, which means slower economic growth.
Yeah I'm totally okay with that, a certain point society has to serve its people and not just the abstract view of growth at all costs. Consumption is good for the economy and inheritance taxes are necessary to provide equality of opportunity.
I doubt hedonist consumption is what Keynes had in mind.
> inheritance taxes are necessary to provide equality of opportunity.
Lets take this to the extreme: lets say that your father could not provide you with anything but minimum substance until your coming of age (18?). Anything given to you by your parents would be taxed away. This means that you now cannot go to any college that is not provided to you by credit. But you have no assets and no income, so nobody will loan you any money. Plus, you don't have money for rent, so you need to work immediately to pay for your own place.
Maybe you feel sympathy for the millions of people that actually live that, but how is forcing everyone to go through that be better for society at large?
Or think what it would mean for the state to actually do that: what if you had to build any infrastructure built by a previous generation from scratch, because "its not fair the SF bridge is nicer than the Brookly bridge, its inherited".
The emotional answer I have against advocating inheritance tax is that the goal is not to be fair, its to be better. And certainly fair by destruction, by removing everything, is not better.
How would you change it short of overthrowing capitalism? Capitalism, almost by definition, "allows the rich to increase their wealth without actually working" (although of course less wealthy people can do the same).
Parent poster proposed a way to help workers by changing the incentives in the system to reinvest more into productivity/research, without throwing out the system that has made our society propsperous.
In the past there wasn't as much pressure on capitalism to be sustainable at a global level. This pressure has increased without anyone doing anything. Which means you just have to wait for one or two more 2008 level meltdowns.
Taxing capital itself, rent-generating assets, and inheritance.
Providing for a living working wage. Providing for labour unionisation or equivalent functions. Curtailing the capability of the wealthy to seek self-serving concessions from legislatures. Supporting a vibrant programme of public schools and works.
Wealth of Nations, Book I, Chapter VIII, generally. Smith doesn'tquite say "allow unions", but he makes all the arguments in favour:
As soon as land becomes private property, the landlord demands a share of almost all the produce which7 the labourer can either raise, or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon land....*
[I]n every part of Europe, twenty workmen serve under a master for one that is independent; and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another....The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.
It is not, however, difficult to foresee which of the two parties must ... have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer.
We rarely hear ... of the combinations of masters, though frequently of those of workmen. But whoever imagines ... that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of.
Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen ... But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen....
A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.
That the employers monopolize and combine and have advantages over the worker is established, but not that doing the same on the other side would be beneficial. He mentions in spirit on in parallel that any measure to try to reduce that power of monopolization would be either ineffectual or make it worse.
Within the Smithy naivete, one could argue that unionization would mean that by necessity, employers would be require to conspire to be able to deal with unions. Of course, I don't think he had the word for union, certainly not the concept we have today, but he clearly condemns how employers are also able to use force against the gathering of workers.
Yes, that people kill their own children, pretty gross. I wonder if that was accurate: how could he have gotten this kind of information back then?
But China is a very extreme case: in general, if you dont have enough money to support a family, you wouldnt have a family, and lower wages would affect the demographic growth of the lowest earning members of society.
The logical corollary for this is that you always will have people in the lowest earning spectrum, because if they earned more they would have more children, increase surplus and reduce wages. We don't have a reserve army concept yet at WoN, unfortunately.
(btw Marx seems to agree 100% with this concept of lowest earning spectrum/demographics)
The British East India Company as a thing by 1776 (its stock collapse, a few years earlier, is highly likely to have cloured Smith's thinking on joint stock companies generally).
In 1672, the English East India Company finally secured a trading post in Taiwan - ten years after the Dutch East India Company had been expelled from the island by the Chinese. The Company was soon engaged in direct and regular trade with the Chinese from that base and was permitted to make regular voyages to Amoy, Chusan and Canton. By the turn of the century, the Company's base for the China trade was transferred from Taiwan to its "factory" at Canton. With its Royal Charter, the Company was granted the privilege of monopoly of trade in the East Indies until 1833.
From 1700 onwards, most foreign traders were confined in Canton, where rigid restrictions were imposed through the practice of Co-hong, a guild of Chinese merchants, the sole recognized agency between foreign and Chinese merchants.
You can also find David Ricardo and Malthus in agreement on wages. Ricardo gives us the subsistence theory of wages (I associate this as the Iron Law of Wages though that may be incorrect ... ah, J.K. Galbraith, whom I've read, makes that attribution):
Ah, I mistook subsistence of Smith with Ricardo? (I finished Ricardo's book a month ago and WoN about 3 months ago, easy to mix up, particularly on Ricardo quoting WoN).
Nice exchange of messages! Glad to be able to talk about things written 250 years ago with random internet strangers.
I've yet to read Ricardo closely, though I'm somewhat familiar with his work. There's less of it, among other things (he died young and kept busy with other matters).
That said, on wages, I get the impression he's not all that far from Smith.
Only if you bring back 1954 tax deduction laws too. Most corporate compensation was in the form of generous expense accounts. People would write off cars, real estate, dining expenses and even travel as a perk. So on paper, income was lower but in reality, executives earned much, much more. The 1986 tax reform act changed all that.
The underlying cause of this whole issue is the changes in tax policy instated in the Tax Reform Act of 1986, previously income was taxed at higher rates unless deductions were utilized which forced those earnings back into the economy creating jobs funding research, etc.
But isn't that just a reflection (and after-effect) of a more fundamental, underlying cause -- that is, the extent to which low- (and medium-) skill labor itself has become devalued, in recent decades -- along with, of course, the very class of persons taking those jobs? Along with a host of other changes in attitudes (sharply) favoring the welfare of the high-skilled -- and above all, of the rentiers -- over the welfare of those who actually do the bulk of the work that keeps our civilization actually running?
Which is presumably what motivated the actual votes on the particular pieces of legislation you (quite validly) cite.
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Government was similar to this. Many of my mid to high level colleagues in IT about 5-10 years ago came up through the ranks from clerical jobs. My longtime director/mentor started as a tabulating machine operator in the 70s.
All of those types of people are pretty much gone into retirement now. We don't have that type of advancement because most of those entry tasks in both IT and business are farmed out to a permanent underclass -- a contract bodyshops with mostly South Asians on work visas.
It isnt just the cleaning staff. IT, especially startups, have a culture of pigeon-holing people even when they are on staff. It's a symptom over-specialization imho. People are hired according to extensive and exacting criteria. Once hired, managers find it difficult to think of the person as anything else.
Honestly, that is a large part of why i broke free and enlisted. I'm now in an organization that sees increasing skills and promotion as essential. If i fail at my job (pilot) i wont be fired but given a different role. Call it a throwback to the 60s if you want, but im less stressed now than i ever was as a consultant. (And forget everything you think you know about the military. The rcaf isnt anything like american movies.)
Entirely irrelevant to the content of the article, but is there a solution to the problematic interaction between sticky headers and full-page scrolling?
At least in Firefox, if you press Space or PageDown (to scroll down a "page"), on the linked article, you'll lose several lines of the text, as they're obscured by the header. Illustrating:
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Chrome isn't afflicted by this (on the linked article), due to the fact that its page scroll is slightly shorter than Firefox's (on a webpage without any sticky headers, Firefox gives you about 1.5 lines of context from the previous "page"/screen, when you page-scroll; Chrome gives you about 5). However, if the height of the sticky header were greater (as often is the case), Chrome would also be affected.
This is obviously in addition to the annoyance of the sticky header wasting vertical screen space, but the latter is just an aesthetic preference, while the former is broken functionality.
Yes, I know that on Firefox I can just use reader mode, but it seems sad that after almost 30 years of the development of the web, going back to a design that could easily have existed in the 90s, is an improvement.
Good point - in the race to offer superb benefits to its best employees, companies made it harder for themselves to directly hire low skill and low pay employees. After all you can't afford to offer free massages and laundry to the guys delivering groceries for you making $15/hr or the receptionist making $20/hr.
Janitors at Kodak in 1987 lived at a great time when there were jobs and the rent wasn't half of your monthly income. They likely bought their home long ago and are retired now, sitting on comfortable assets.
Janitors at Apple in 2017 can barely pay rents and they will never own their home, likely owned by the Kodak janitors from 1987.
Feel free to replace janitors with any other job title.
>> Ms. Ramos, the Apple janitor, lives down the road in San Jose. She
>> pays $2,300 monthly for a two-bedroom apartment where she and her
>> four children live. Before overtime and taxes, her $16.60 an hour
>> works out to $34,520 a year. Her rent alone is $27,600 a year,
>> leaving less than $600 a month once the rent is paid.
Assuming she's only losing 20% to taxes and other deductions, she can't even cover rent. How is she paying her rent? Is there another person or public assistance?
The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3]
We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your investment returns (which then gets taxed at 15% instead of 35% for ordinary income). If you don't spend all of that $2M, you'll continue to make more money just by having more money.
By taxing income instead of wealth, we're also essentially penalizing labor and rewarding wealth. We shouldn't penalize something that actually contributes to the economy and instead ask people who have more (not earn more necessarily) to contribute via taxes.
Inflation harms wage earners farrrr more than capital holders. Capital holders can put it into assets that rise with inflation. IMO it's one of the driving factors of inequality of the past few decades.
Those with capital / assets can leverage up, borrow more money, and then pay it back with lesser inflated dollars.
Unexpected inflation moves money from people with nominal assets to people with nominal debts. Basically the very rich(who hold most nominal assets like bonds) to everyone who has a mortgage.
Also the IMF's stance on inflation and inequality is moving from hyperinflation to sustainable inflation leads to reduced inequality but there aren't advantages to moving to a lower inflation than that.
Avoiding inflation due to printing more cash would look like not holding cash. Your proposal would tax people whose lives involve mostly currency, not other assets. I think it would actually have the opposite of the effect you intend.
You can do a wealth tax by targeting the big ticket items. Rather than invade everyone's home with tax collectors to guesstimate how much every couch cushion you have is worth, you can hit probably 98% of wealth by just taxing the calculated value of owned land and buildings (which is already being appraised for property taxes in most states) and stocks, bonds, and options.
So we already invade your privacy to appraise the former, and the later has to be be public because companies need to know who owns what shares and the trading platforms need to associate users to shares they own. Both can be used by government to provide ownership details.
You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already. That way private business executives cannot tax haven their own stuff under an LLC, and companies like Google / FB are punished for hoarding hundreds of billions in offshore accounts they have no intent to spend or bring back into the states.
Of course, this is all saying "government should do X" which is just for entertainment, pretty much. The US is in no condition to act in the will of the people at all right now anyway, so its all speculation - you would have to fix the broken democracy first.
> you can hit probably 98% of wealth by just taxing the calculated value of owned land and buildings (which is already being appraised for property taxes in most states)
Once you start targeting public market holdings, it would just create an even stronger incentive for companies to remain private. Soon enough you'd have secondary markets for high rollers dealing in shares of private entities, which would be completely inaccessible to the average Joe - and congratulations, you've increased inequality. In fact, this is already the situation in technology investments to a large extent. Companies remain private for longer to avoid post IPO regulations and restrictions, and the only guys who can invest are the insiders who get the opportunity through their network. The companies are only pumped to the public when the ascent in value has pretty much diminished (SNAP, anyone?).
> You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already.
I'm not familiar with this being a requirement for foreign, private companies. (Reading between the lines, I'd expect a marked increase in investments in foreign, private companies under such a taxation scheme.)
That is such a simplification of income tax though. For example a family of 4 making $50k/yr pays about $40 in federal income taxes. If that same family make $75k it goes up to about $2500. Both of those as a percentage of income are far below 15%. Hell, I made more than the SS max last year and my effective tax rate was below 15%. See Mike Pence as another example, guy made over $100k and had an effective rate of something like 12%.
Most wealthy people don't keep their wealth in currency. Profit generating entities keep on generating profit even with inflation - input prices go up but so do sale prices. Inflation had a bigger affect when it changes, rather than when it is staying steady. If anything a higher inflation rate would mostly hurt homeowners because prices would be less supported by cheaper money.
Taxation is both effective, and far less invasive to markets than many other solutions.(like minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs). So that's why it's brought up so often.
What are some solutions you're aware of that are equally effective and less invasive?
> Taxation ... minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs
None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.
All of these actions decrease efficiency, and none of them have a significant positive impact on poverty.
I just don't see the point of insisting we "do something!" when none of the similar "solutions" we've tried have made for any positive change, and all of them have measurably cost us in efficiency and growth. The "do something!" model of governance is cruel and deficient; if it would be better, all things considered, to do nothing, then do nothing!
Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality), mostly by truncating the bottom of the income curve with a floor. You can get rid of poverty pretty much by definition if you have sufficient income transfers so that everyone's income is above the povery line. E.g. if your national poverty line is $13k, if you guarantee $13k incomes, no more poverty, at least by that measure. Works a bit better in practice if you also have an integrated social worker system, so you can figure out e.g. if someone is homeless due to purely lack of income or mental health or other illness and direct them appropriately.
> Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality)
Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put on the economy.
Well before any of these programmes became so comprehensive, Norway, Denmark, and Sweden were very productive and comparatively equal.
I think we can agree "when you give poor people money to spend, they don't end up spending more money" is an extraordinary claim. And so should need an extraordinary amount of evidence to back it up. Can you point me in the right direction to some more information about how this could possibly be true?
Many of the comments up thread said redistribution doesn't work. Working is defined as reducing poverty levels which is literally measured by how much money they spend. And redistribution is literally giving poor people money.
I.e. giving poor people money doesn't end up with the poor spending more money.
> Taxation is both effective, and far less invasive to markets than many other solutions.
I don't really agree with this. Taxes are distortive and doesn't necesarily help inequality. It might even make it worse. But also, there is taxation as a progressive system of government funding, as there is taxation as in "You will never own more than X, because the government will seize it".
In terms of solutions, I'm not a professional economist, but as I read different authors and books, it really seems like we don't understand why we have inequality in the first place. Even Piketty's Capital feels more like explaining that its going on than why. So I'm jitterish about any solution that doesn't help resolve the core cause, for the which there doesn't seem to be consensus
The CEO's pays is a small but funny example about that: CEO's pays increased enormously after by a law thought to dimishing their returns, made their salaries public, and increased CEO's ambition and bargaining power. The very idea to dock their pay increased it.
But those are small bits at the macro-economic level.
They don't have to be. A "death tax" for example that takes 100% of a persons estate at death would be both simple, non distortive, and in terms of equality level the playing field every generation.
It's pretty hard to discuss such things without people getting emotional and defensive. I think people look at something like this and say "but that's not fair I earned all my money"[1]. They don't look at it and think about what the world would look like in such a scenario, how they might have lived differently, how they would instead spend their money before death (perhaps making the world a better place), or how they might have less concerns about needing to pass on money to their children because their children would be "just fine" in the society they created under this system.
[1] ignoring the whole subject about luck and what it means to earn something when two equivalent folks just have different dice rolls go their way, etc. Or especially in the context what it means to earn something when you just inherited it. (I have a bunch of friends who have inheritance coming their way and just totally expect it, they lead very different lives because of that than those I know who don't have that.)
It wouldn't actually work. Rich people end up finding loopholes to any tax scheme. Even if that loophole is expatriating.
It would have negative consequences besides that. Many, many people do things for "legacy". It's a powerful motivator. Taking away all wealth would eliminate something that encourages good long-term decision making.
It would hurt people who aren't the rich people. What would happen if Sam Walton's net worth was taxed when he died? Massive disruption to Walmart employees at a minimum. How would the net worth be calculated? Well, given his net worth, he'd be irresponsible not to have an army of lawyers and lobbyists making sure the number is as small as possible.
So, given the above, the idea isn't that simple.
Finally, there are ethical implications to that sort of policy. It implies that citizens earn at the pleasure of the government, not that the government rules by the consent of its citizens.
Yes, I look forward to being barred from sharing the wealth that I've accumulated with my children and other loved ones. Why should they have any advantage, right? After all, you probably think I didnt do anything myself, right?
Who are you to make that decision for someone?
And, frankly, you're delusional if you think an estate tax is non distortive. The entire meaning of wealth would change for the elderly.
One cannot treat wealth like a zero sum game. More importantly, we need to rid ourselves of this growing crabs in a bucket mentality, because we all suffer when we hold society's best back. Is it "fair" in the sense of absolute wealth? No, but people shouldn't be so focused on their neighbor's plate then theirs is full enough that they can spend hours complaining online about how much more money the 1% have. Perhaps we should redefine fair wealth distribution to rightfully consider merit, which is shockingly absent from the majority view here.
This thought experiment isn't about looking at your neighbors plate, it's about incentives for us as a society. I think the question to answer for yourself is whether you think everyone should start with a fair playing field or not and the implications such a tax would have on how you structure society to ensure that everyone gets the same shots at a good life.
There is substantially more value for all of us in allowing more resources to be distributed to those who are able to do more with them.
And your definition of "fair playing field" is skewed because, again, you treat economics as a zero sum game. You are making the classic mistake of conflating equality of outcome with equality of opportunity.
In any case, this class warfare inspired policy of exhaustively taxing wealth won't fix a mismanaged budget or a broken scholarly culture. You are simply punishing the people who seem to have benefited most in the context of the system while ignoring merit.
Further, it is absolutely absurd to suggest that modern people in poverty dont live "good" lives. They have refrigeration, air conditioning, entertainment, access to the internet, emergency healthcare, they live like kings once did. Once again this is a problem of looking at other peoples' lives and concluding that only in comparison you deserve more for simply existing.
Taxation will not fix what is fundamentally a cultural problem.
Aside: Look at how absurd the entire argument is! We dont question in absolute terms how our poor are living, we focus entirely on the fact that the wealth is distributed unevenly. Like children complaining that their classmates have extra candy. The whole mindset is petty.
> There is substantially more value for all of us in allowing more resources to be distributed to those who are able to do more with them.
Don't you think that inheritance is a pretty bad way of achieving that? After all, traits like intelligence (which probably dominates the ability to use resources efficiently) are only about 50% heritable.
When intelligence is literally the trait which enables development of science and technology, who in their right mind would not spend money on children of intelligent adultst with a 50% success rate? Dont you realize someone on the high end of the IQ curve would be exponentially more beneficial to society if given resources? How much have a couple hundred visionaries shaped our daily lives?
Why dont we spend more federal funds on gifted children? We watch the trainwreck that is our school system as we fail to match pupils in other countries at senior high school level. The issue is, again, not taxation, on the contrary, we are not spending enough where it counts because of the greed of the entitled.
I think you're reading a lot into the comment you're replying to that wasn't there. Sounds more like he's coming from a rawlsian perspective of what constitutes a just society.
>You are making the classic mistake of conflating equality of outcome with equality of opportunity.
Outcome and opportunity is a false dichotomy. But if we were to go along with it, isn't a tax on inherited wealth a great way to maintain equality of opportunity?
I think you are right about leaving something to our children. It's a very natural human (mammal!) instinct, but there are a lot of middle ground between don't leave anything and leave them an empire.
About merit, I think I know about merit. If you take the public transport at 5:30 in the morning you will see a lot of people that go to work for years for a ridiculous small pay and, that if they stopped doing that, society as we know would stop. That, I think, have a lot of merit.
On the other hand, in any standard corporation, you can find people with huge wages, with company car, that never pay a lunch because they put in the expenses account and that employ its time in political movements to try to go up in the ladder.
Of course, if you think that markets give everyone whatever they deserve, or you have not been in the public transport at 5:30, then, what I'm saying doesn't make any sense.
Markets are optimization processes, so, very powerful tools.
Leaving the metric to optimize to the optimization process doesn't look a good idea, the same way it's not a good idea to leave the thermostat to choose the temperature.
In my experience, the only people that think that the thermostat it's who should choose the temperature, it's the people that feels very comfortable with the current one and don't care about the comfort of the others in the house. Or, maybe, also the people that grew up in a house without thermostat and thinks, correctly, that anything is better.
Then you just donate the money to institutions your progeny would just happen to enjoy: your alma mater, the country club, private schools, etc. Segregation would still be maintained through astronomical real estate prices.
I'm not confident enough to make a definite prediction, but it seems plausible that it could make some forms of inequality worse. Attempts to level out education, for example, have resulted in the truly wealthy finding other outlets (private schools, expensive zip codes) to create the educational experience they want for their children.
In education we never actually integrated though. A few locations were integrated but only for a little while. It seems more like that the truly wealthy found those outlets regardless of what else was happening in education. It also seems strange to say: we shouldn't tax rich people because somehow, through a plausible method that I can't explain or predict, it will make rich people better off and poor people worse off.
I was referring to public schooling in general, not racial integration specifically. Integration among social classes is arguably getting worse now. You only go to school with the kids of bank vice presidents if you can afford to live in the same neighborhood.
The U.S. has a "unified" gift and inheritance tax. If you give away $5M while you're alive and die with an estate of $5M you (1) pay no tax on gifts while alive, and (2) your estate pays tax based on an estate size of $10M at the time of your death. There are a few wrinkles (e.g., (1) annual per-person exempt gifts of $14k/person, and (2) you do start paying tax on gifts while you're alive once total gifts pass a certain value), and gifting during lifetime has some advantages (e.g., getting growing assets out of your estate while they have a lower value), but that's generally the way it works. Gift tax and inheritance tax operate on a "unified" basis.
This strikes me as too facile to be particularly useful.
First, it's much easier to get a rough idea of how many people states have killed than markets, to be sure. But many wars are fought and nations are conquered (and, for that matter, created) for market-driven reasons: oil, tea, diamonds, slaves, to name a few egregious examples off the top of my head. Millions of people have died throughout history that would not have if states were not acting to protect, expand, or create markets.
Second, while it's probably harder to get a rough idea of how many people states have saved than markets have, the number is not inconsequential. I certainly wouldn't suggest states are forces for unrequited good--there's copious valid criticism of them across the political spectrum--but I would suggest that they're hardly forces for unrequited evil, either.
We first need to know that the current taxes are fully spent on the right things and that the "pork" spending is not actually larger than the amount needed to satisfy the needs expressed by the current movement.
"Non distortive" You can't imagine a way a tax like that would change people's behavior? People would give their money to their children before they die, or spend it all on themselves, and maybe some would work less because they were previously motivated by building up assets to give to their children.
I never understand why someone working less is considered a bad thing. If a person works less that leaves a vacuum for their services which will then be filled by another market actor.
If you think the economy is a zero-sum game then it's not a bad thing. If you think wealth can be created and that society benefits from a population with a high labor force participation (like Scandinavia for instance), then it's a bad thing.
Two arguments against a death tax: the inability to apply it, and the results of an effective one:
In Argentina, the state collects a heft tax on property transfers when the propietor dies. So basically all property is donated from parents to children in-life.
Poorer property owners that cant afford or dont know better, or people stricken with tragedy in an early death are likely the ones that pay the most of that tax.
Conclusion, 'death taxes' are paid by the poorer half and hence worsens inequality.
On results: lets say that I were to tell you that all the money in your bank account is going to be worth 0 tomorrow. Are you going to invest that money in long term capital growth? Are you going to donate it to the government?
I'd say the most reasonable reaction is drugs and hookers all the way!
The latter is definitely not great economic policy.
Actually forcing people to spend their money before death would be really good for the economy (despite you picking illegal activities for the negative connotation.)
And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
> Actually forcing people to spend their money before death would be really good for the economy (despite you picking illegal activities for the negative connotation.)
Well, this is were we clearly disagree. I am very certain that if i knew that i was going to die in 6 months, id be burning all my money into some kickass 6 months with "Burguers" and "Premium Tinder accounts".
Consumption vs Investment is a core battle between Keynesian and Chicago School economics, so it depends on which you subscribe.
> meritocracies.
I actually do wonder who argues in favor of meritocracies. Sure as hell not liberal-economics.
"Get what we deserve? I hope to god we don't get what we deserve" - Milton Friedman.
> And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
This just compromises the original concept of equality of opportunity: if you do that, anyone below 50k will be in an unfavourable position relatively. So what you did with that limit is imposing something on a group, intended to be a minority that wouldnt be able to repeal such rule. The fact that these rules end up like this has been extensively exposed by people like MF.
I think the concept of a meritocracy requires someone to decide what is meritocratic and all goes to hell from there.
Its like saying that you are going to base justice on "protecting good people and punishing bad people".
I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
>Its like saying that you are going to base justice on "protecting good people and punishing bad people".
That's exactly what our justice system is... Sometimes we fail at abstracting our morality to the courts but that's exactly what our goal is.
>I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
So your logic is "people usually use meritocracy as a knock against capitalism" and then establish your premise? "meritocracy is bad"? Doesn't make any sense. A perfectly meritocratic system doesn't exist and probably never will but systems which try to promote equality of opportunity are generally good. Our defense of "meritocracy" comes from the Rawlsian veil of ignorance. Behind it, it becomes obvious you would want to live in a society which provides a relatively equal chance for everybody and which, if you seize that chance, will reward you.
Sure, I should have stated my assumption: there will always be inequality in a capitalist economy.
But you can have varying levels of inequality and the extremes are probably not healthy. My suggestion above wouldn't create perfect equality, it just fixes the broken incentives we currently have that reward us for hoarding wealth and penalize us for earning it.
Those who can afford to save do, those who can't don't. There isn't someone out there making $50k/yr raising a family saying "if capital gains rates were just a little lower I would save so much of my paycheck". I on the other hand am going to put my money in the markets whether the capital gains rate is 15% or 30% because I have used up all my tax-advantaged account space and still have extra money.
It's not as simple as "those who can afford to save, do". There are also a huge number of people living well above their means, and the percentage of people with no savings is much, much higher than the percentage of people who don't make enough to save.
The F-150 is the best selling vehicle in the US, and they're certainly not all going to people in the construction industry.
And $50k/yr is more than enough to save money in most parts of the country. That's a good salary.
Taxes are what give fiat currencies their value. No taxes, no fiat currency. If you don't believe me, consider why the US dollar has value at your local store and the Monopoly dollar doesn't.
Thats a terrible to reason to have or increase taxes. If you eliminated paper currency altogether in one fell swoop, the next day you would have another one replace it, be it bitcoin, gold or cigarettes.
Something underlies the value of bitcoin (proof of work), gold (rarity, utility, beauty, portability), cigarettes (addiction). Think through what underlies the value of fiat currencies like the US dollar. I'm with the chartalists [0]/Modern Monetary Theorists [1], believing that a government's ability to tax is the anchor for the currency's value.
Have barely scanned these articles, but even if I agreed that tax collection is what gives currency most of their circulatory value, thats no reason to have taxes, let alone making them higher.
Something's got to circulate. There's not enough bitcoin+gold+barter-able commodities to go around, so fiat currency is necessary to the economy as it stands. If you agree that taxes give currency most of its circulatory value, you have to figure out what else would give it value if taxes were taken away.
there is more than enough bitcoin/gold/barterable commodities to go around.. they are divisible objects like any other. And any bank could run its own bank notes, as it was in the past.
Having taxes to have circulatory value sounds pretty dumb to me.
I don't follow your logic. Offshoring has benefits independent of taxation. Tax havens have value in proportion to taxes, independent of the other effects of taxation. How does an effect of taxes on currency value diminish either?
The reasons fiat currency has value are far more complicated than just "taxes". If that were true, people would only convert their money to dollars as needed to pay tax, but obviously that's not the case.
There is an inherent value to a currency system, and that value amplified by network effects. The government definitely anchors that network (through many mechanisms, not just taxation), but there's still a lot of inertia there regardless.
"If you don't believe me, consider why the US dollar has value at your local store and the Monopoly dollar doesn't."
Well, the primary reason is that US dollars are declared by government fiat (hence the term) to be "legal tender for all debts public and private". You can't legally refuse to take US dollars (in the United States, obviously ... other countries give their own currencies a similar status). That seems only tangentially related to whether the dollars come from taxes or printing presses.
Government accepting payment for public debts in legal tender... is taxes. They're the first market maker for a fiat currency. It's certainly possible to just run printing presses, but that typically leads to hyperinflation and the replacement of the currency.
Funny that comparison with the trees can be applied in a different way - you do need to cut high trees if you want to grow smaller trees in the same place.
This spring I cut very high pine because it shadowed my entire backyard and I want to grow more smaller trees on the perimeter.
There is unrest in the forest
There is trouble with the trees
For the maples want more sunlight
And the oaks ignore their pleas
The trouble with the maples
And they're quite convinced they're right
They say the oaks are just too lofty
And they grab up all the light
But the oaks can't help their feelings
If they like the way they're made
And they wonder why the maples
Can't be happy in their shade?
There is trouble in the forest
And the creatures all have fled
As the maples scream 'oppression!'
And the oaks, just shake their heads
So the maples formed a union
And demanded equal rights
'The oaks are just too greedy
We will make them give us light'
Now there's no more oak oppression
For they passed a noble law
And the trees are all kept equal
By hatchet, axe, and saw
Rather than tax wealth, tax spending: no taxes on your income, no taxes on anything until you spend it. That way people will have more money to invest in companies allowing the economy to grow and create wealth, and we kill the ludicrous idea that consumption creates wealth, rather than construction. It does have the issue that this hurts poor people, but that is easily solvable with a direct transfer of (electronic) cash.
Your argument hinges on the erroneous belief that more investment is always better. But in order to create value, investment capital needs sound investment opportunities with positive expected ROIs. If there is too much capital and not enough opportunities, supply and demand dynamics cause the ROIs to start to drop until investing becomes value destructive. That's when the market for investment starts to resemble a Ponzi scheme.
Capital gains tax in the US is lower than income from labor, but it is also worth considering the effects of inflation on the investments. Your 4% return is not really a 4% increase in wealth, you need to also take out the 1.7% your investment lost that year to inflation. In real terms, you wealth only increased 2.3%.
If you want to tax wealth gains as ordinary income there should be an acknowledgment of inflation. In practice you end up with roughly the same amount of money going to taxes and a much more complicated system. In this example it would raise the investment income tax revenue by 33%, not the 233% difference in tax rates. But the index fund 4% and the 1.7% inflation were pulled out of orifices and our predictive capabilities are so reflected.
Easier said than done -- not all wealth is liquid. What if someone has all their wealth in one or two real estate properties? Or a family heirloom gem collection which is worth a lot but which they refuse to sell (and otherwise are not wealthy)?
Easy, you do what is done with senior citizens who owe property taxes. The taxes accumulate without being paid and are collected when the property is transferred to an inheritor or buyer.
For the sake of completeness. Top capital gains rate is 20% + 3.8% medicare surcharge + state tax. In a high tax state like California, you're paying 37.1% on investment income, not 15%. Also, top federal rate is 39.6%, not 35%, plus state income tax, you can pay as high as a statutory rate of 52.9% in CA, or around 47% after deductions.
And more to your point, we already have a defacto wealth tax in the US because inflation is not deductible. If you hold a bond paying 2% per year, and inflation is also 2% per year, you pay tax on those gains even though you've made a post-tax loss in purchasing power. At 2% long term inflation, the defacto wealth tax works out to be the 2% multiplied by your capital gains rate, or from 0.47% to 0.74% for high earners depending on what state they live in.
Nit: That 52.9% number isn’t quite right because you get to deduct your CA income tax against your federal income tax. So in practice even if you made a billion dollars in California, you’d pay $133M to the state then get federally taxed 39.6% on the remaining $867M, giving you an effective tax rate of about 47%.
Wealth tax is a good idea that’s very hard to implement effectively. Many countries have tried it only to give up on it (Germany, Sweden). France has a comprehensive wealth tax but it raises less than 2% of total tax reciepts, suggesting it’s not doing much. It’s very difficult to prevent the wealthy from finding ways to hide wealth.
This is part of the reason some want to tax consumption more aggressively. "Wealth" that isn't used is really just a collection of expensive large numbers. Sooner or later, when that wealth is used, it can be taxed as consumption and/or real property.
Except it doesn't work that way because cost basis gets reset during inheritance which is a huge give away to the most wealthy families. It is also the reason for an Estate Tax.
Unless "use" includes stock purchases and political donations, you'll just hurt the poor even more. The problem with wealth concentration isn't buying houses and cars, it's buying power.
The real problem though isn't wealth inequality, it's income inequality. If someone has a billion dollars that's invested in various stocks, and never tries to withdraw that money, leave him alone. The day he decides to sell his investments and start buying private jets, that's the time to tax him on his income.
The argument against a wealth tax, is that it penalizes savers, and rewards spenders. Which is not what we want as a society. It's better for both the individual and for society if people invested their money into productive enterprises, instead of spending it on luxury goods.
If the goal is to provide a more egalitarian quality of life across society, this can be perfectly achieved through an income tax alone. Specifically, by treating capital gains the same way as salaries, and by increasing the marginal tax rates for high earners.
Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.
The original capital was. The returns are already taxed. Are you proposing that returns are taxed at some other different rate? At some point the market won't be attractive enough.
The returns to capital (capital gains specifically) are taxed at a much lower rate than income, and they're not taxed at all until they're realized, which means they can be timed to offset losses. Then the government is effectively handing out a subsidy to people with lots of capital, even more so than the lower tax rate.
"The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.
I most recently converted my investments into a house deposit. In effect, I propped up inflated house prices. It'll take a while before I have a significant investment position again.
Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.
> But by collectively enforcing mandatory taxes we can make government work.
It's arguable whether giving government more money results in government working better.
By some accounts government is a demonstration of waist and an exercise in excess.
Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".
> At some point the market won't be attractive enough.
We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.
That is an argument; I just don't think it is a particularly good one. In particular, I think it muddies the water a bit between various forms of things that are taxed as capital gains.
That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold.
And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains.
It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all.
It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work.
And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.
You can have a tax system by applying it to earned, applying it to accumulated, or by doing a little bit of both.
Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan.
Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends.
As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.
Could you please expand on why its necessarily better for the average Joe to invest money (without knowing beforehand whats gonna be a "productive enterprise" of course) instead of fuelling the economy directly by buying goods? (honest question)
This doesn't quite go to the substance of your question; but it is relevant. At this point the US debt is pretty staggering at both a personal and national level.
The 'average Joe' is, by the numbers, consuming more than they are producing. There are two ways this can be sustainable:
1) Transfer from economically productive to economically unproductive individuals
2) Net economic consumers become net economic producers. In practice, this would almost certainly look like spending less and investing more.
The argument of my grandparent seems to be that incentivising the _reverse_ of (2), ie net producers to become net consumers, is a terrible idea that will make the fundamentals of the problem worse. That argument is good as a matter of principle. It is particularly relevant in the current context of America.
Investment is what produces more wealth in the long run, and all investment is foregone consumption. If you buy less coffee but invest in a coffee maker, eventually, more coffee will be made in total, which is the real riches of a society.
Saving is paramount to growth in the classic economic model.
Not OP, but I have an idea of what they're getting at.
Another word for savings is "deferred consumption". If I earned 1000 dollars this month, and spent 700, I have 300 in savings, or, put another way, I deferred consuming 300 of those dollars.
Now, 300 in a checking account doesn't do anyone any good but me, but if I took half of that money and invested it w/the bank at a 7%/year interest rate, I'd be investing $150/month, and once I started getting that return back, I'd be getting $160.50 back.
What that does for the bank is gives it capitol to loan out to businesses.
If someone went to the bank and got a loan of $150, with a promise of paying it back at 9% in a year, they'd borrow that $150, pay the bank back $163.50 in a year, and the bank would pay me, the original creator of those funds, $160.50. They'd get a profit of $3.00, which is the difference between loaning that money out at 9%, and paying me back at 7%.
If the bank couldn't create money out of thin air, and doesn't fraudulently loan out customer's deposits, the only way to obtain a loan would be if someone else deferred consumption.
Obviously, banks can create money out of thin air (by loaning out funds on deposit), and when they do so, they don't have to give the money back with any interest, so they do. They can loan out $150 at 5% (cheaper than anyone else, perhaps!) and they can keep all of the profit, or $7.50. (more than twice the earlier profit of a non-fraudulent loan.)
I suspect OP subscribes to a more "savings-based economic growth" theory, in contrast to a "consumption-based economic growth" theory.
I obviously am an advocate of the savings-based approach vs. consumption-based approach.
That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.
The crash is an inevitable response to the boom, and any policy that wants to have booms without crashes is a logical fallacy.
I hope this helps a bit! I can gather some more sources if you're curious, but the basic gist is in accordance to the Austrian school of economics. Read more on that, and you'll encounter much better explanations than mine!
That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.
Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?
I'll accept that some of this is tax shenanigans to defer US repatriation... but only some of it.
Im no expert on Austrian school, but what little I read is that they have an organic view of economics, and that anything that deviates the natural flow will be corrected eventually. If the money is too cheap, it will eventually become really expensive to correct itself, and Apple might be preparing for that. Or it might be causing it.
To be fair, Austrian school of economics is more occultism than anything else in the field, while Chicago School Economics (Milton Friedman&co) have more accepted models and economic ideas. The 'neoliberal' model as far as I understand can't really explain corporate cash hoarding. The situation today is very unique: historically cheapness of money could easily provoke inflation, which would promptly push any cash hoarder to spend.
If the U.S. had a small spike in inflation the whole thing could change quickly.
"Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?"
I'm not an Austrian economist but I don't know why it's so far fetched that Apple is simply saving the money for the inevitable fire sale ...
Why buy Disney today when you can buy Disney and Ford tomorrow ?
Why buy Disney today when you can buy Disney and Ford tomorrow?
As a shareholder, because that money could be put to productive use today, rather than waiting for a future which may not come. To my mind, that's why the pressure for Apple to pay a dividend finally built up to the point that Apple now pays dividends.
"So, everyone spends money, no limits on it". Not true, there are limits (e.g. in the form of leverage ratio caps) and not everything borrowed is immediately injected back into the economy (that might bump inflation too much).
Imagine if banks couldn't 'print their own money', then businesses would depend on people investing to get funding and demand far outstrips supply. So we'd have economic contractions on a massive scale.
The parent comment alluded to this. They operate in a trust-based network with other banks. So when they add X to an account (e.g. a loan) and that person tries to spend it by transferring it to another account at another bank, the bank is effectively in debt with another bank. This inter-bank loaning system can run on this virtual cash mechanism as long as the person who borrowed X manages to pay it back over time.
You can probably guess this puts banks in a very privileged position. Hence the high requirements for being able to start a bank of your own, and the government regulation intended to control inflation and fraud.
First: wealth inequality is the result of persistent and pervasive income inequality.
Second: there are frequently individuals with very-highly-fluctuating incomes. Performing or creative individuals in particular -- actors, writers, filmmakers, musicians, athletes -- may have a few good, and many lean years. Taxing their good periods excessively would actually be counterproductive.
Taxing nonproductive wealth -- withheld or idle capital -- would put it to productive use. That's the fundamental principle of a land tax, as advocated by David Ricardo and Henry George. That concept fails to properly account for the withdrawal or degradation of natural capital, often at tremendous rates relative to the financial profit booked, and a case where natural capital is simply an off-books aspect of activities.
Ensuring that all citizens can meet the fundamental needs of life is crucial -- something Adam Smith, David Ricardo, Robert Malthus, Karl Marx, and John Stuart Mill each advocated for. "A man must live by his work" -- Smith.
Small nit, but I'm not sure I'd prefer one (or a few) investor(s) over a larger, decentralized group of investors. Those are two very different power dynamics.
A world with a few super-heavy investors may not be as effective as a world with a more distributed (democratic) investor base. Fewer investing eyeballs, more tunnel vision.
> The real problem though isn't wealth inequality, it's income inequality.
I disagree. Wealth provides financial security to an even greater degree than high current income. Wealth provides the means to move your family to a place where they will be safe and thrive. Wealth provides a means to start the next generation with a leg up, financially, socially, and academically. High current income can go away next year for most people and is often not portable to a new city or country. High current wealth is far more durable.
I don't think it's the billionaires that are the only "problem". Those with 50+ million USD also live a life essentially devoid of the concerns of financial catastrophe.
I see an incredible amount of logistical challenges in implementing an annual wealth tax (though some countries already do so), but far fewer philosophical problems, even though I am overwhelmingly likely to be one of those targeted by a wealth tax (low single digit millionaire household from 25 years of working, saving, and investing).
I think it good social policy to institute an additional amount of drag on wealth accumulation, preferably by directly taxing it (annually or upon transfer), rather than further penalizing productive income-generating activities that are already taxed at nearly 50%.
> Wealth provides financial security to an even greater degree than high current income.
Yes, but unless you're talking about a wealth tax in excess of 10%, this is not going to change. Someone with multiple millions of dollars in diversified investments will always be financially secure, unless we're considering drastic measures like a communist revolution.
Regarding all the benefits of wealth you mentioned, note how these benefits only arise when the investor liquidates his investment. Hence my point that instead of taxing wealth when it is being productively invested, tax the wealth at the point of liquidation instead.
I'm also in favor of high estate taxes, but that's an entirely different tangent.
I don't seek to eliminate wealth; that's a terrible policy IMO. Moderating its growth and concentration only slightly is far less disruptive or fraught with unintended/unknowable consequences.
An annual wealth tax of 10% would wipe out most wealth concentrations within 50 years. I think such a level is absurdly too high, though.
Looking at Switzerland as an example, I think 0.25% to maybe as much as 1% range is far more reasonable (roughly in range with their wealth taxation today) with a per-household exemption of $1MM or thereabouts [to prevent nuisance calculations over $10 in taxes].
> note how these benefits only arise when the investor liquidates his investment
"essentially devoid of the concerns of financial catastrophe" is a tremendous benefit that confers to the wealth holder without need of spending the wealth.
The 1.2% tax on assets is the 30% tax on financial returns. It's just that at some point the government was like: "math is hard, let's go shopping^w^w assume the average return in 4%".
You might be interested in an essay I wrote in 2009 which mentions a wealth tax (perhaps with the government insuring and protecting declared wealth):
"Basic income from a millionaire's perspective?"
http://www.pdfernhout.net/basic-income-from-a-millionaires-p...
We can of course quibble about the details... Mostly just trying to shift the way of thinking and talking about a UBI...
Thanks for the relevant blog post link. My gut feel is that 6% wealth tax destroys retirement savings and that anything over about 2% in fact does so. (I'm planning on a 3.5% withdrawal rate in retirement, so a 2% additional wealth tax increases by >50% the amount of money I need to squirrel away for retirement. $24K in UBI replaces $685K of that savings need, though almost surely brings along inflation with it and I'm projecting to need a substantial multiple of $1MM to retire.)
I also think that UBI in its first version needs to be more like $600/mo/adult. It's going to be austere for sure, but a figure much higher is not supportable (and so DoA when proposed).
Consider, for example, that we do exactly the opposite by providing tax shelters for retirement savings, and that this is the only way grandparents get to retire.
Yes, but 25-70 basis points of wealth tax is order of magnitude the same as mutual fund expenses. (I don't say this lightly, as I believe seizing of wealth to be a serious matter, worthy of careful contemplation before implementing such a plan.) I believe a modest wealth tax like this would have a subtle drag on wealth accumulation which is beneficial to society.
Am I understanding -- you're saying it's better for money to sit in an investment account, than spend it on goods/services locally -- thus applying it to local economies? Money doesn't do anyone but the holder any good sitting in an offshore account and even then it's really not doing them any good... do they really need it if it's not being used for something important/worthwhile..literally just collecting dust (and dividends?)....
The real fuel of the economy is money being spent on Apple products, walmart, amazon, --hell even yachts/airplanes (somebody has to build those)..
To fight income inequality, I think we need to tax at the point of investment.. --if you buy anything you're taxed on it..this includes investments/stocks/bonds/etc... just flat consumption taxes... give a UBI to offset the poorer folks...
But have a mandatory flat tax...do away w/ the IRS/income tax. If you're not a U.S. citizen and not getting UBI sorry--but you're sales tax will not be subsidized by UBI--and if you're here illegally/unpapered -- you're now a tax payer congrats we can stop trying to deport everyone since now we make more tax money off of them!
Chicken or the egg? It seems equally intuitive that investment drives the economy. Investment gives companies capital, capital to spend on employees and services or products from other companies (which in turn spend it on employees or other companies). In this way, money makes it way into the pockets of consumers who then spend it on products and services, and the endless cycle of economic activity continues.
But I'm not an economist and am somewhat skeptical of macro-economics in general, which seems a bit like reading tea leaves.
Even if you if you don't buy into supply side economics, I think "Money doesn't do anyone but the holder any good sitting in an offshore account" is somewhat misleading. Savers and investors, through loans and capital, certainly help someone.
It seems equally intuitive that investment drives the economy.
The economic principle you're looking for is "velocity of money". If you think of a GDP in terms of a multiplier in how often/fast money circulates, then you can analyze whether investment or spending is more important.
The second economic principle to look into after that is "marginal propensity to consume".
The vast majority of money people invest doesn't go into giving companies capital, though.
It goes into people selling pieces of companies to each other. The very first time the share was bought, the company got some capital, and the vast majority of money people invest is not going into initial purchases of shares.
By "park" you mean "invest" in (hopefully) productive participants in the economy. It arguably makes sense to seize wealth that's being invested in ways that are harmful to society and divert it into investments that are good for society, but imposing taxes based simply on the quantity of wealth won't accomplish that.
Taxing wealth is a deeply invasive bureaucratic nightmare. Having individuals be legally required to produce a balance sheet of all their assets for the government every year seems quite problematic. This would get into issues of having people be required to re-establish the fair price of all their collectables, etc. It's also a deeply dangerous attack on retirement. Instead of being taxed on the gains from your wealth, being taxed on the wealth itself requires much larger returns to live off the income from an investment. I think it might make sense to have a higher inheritance tax with fewer loopholes to resolve the issues of intergenerational wealth. It's probably very important to protect the mechanisms of retirement.
This is basically the point of the estate tax: people are already producing a balance sheet of all the wealth for the purpose of distrusting it to the heirs. So tax the wealth when the estate changes hands and all the accounting is going to be done anyway.
Not once per year. The ongoing balance sheet is highly problematic. Any assets that don't need to be updated would represent giant loopholes and potentially areas where bubbles would be inflated as capital moves into assets that grow whose growth isn't adequately accounted for.
My parents are going through updating their will. They have a collector car. It might be worth $50K, probably worth $70K, maybe worth $90K. They have a house. Might be worth $350K, probably $450K, maybe $500K.
Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.
But how do you make a wealth tax fair if there is no need to prepare a reasonably accurate balance sheet? If it's a yearly tax the loopholes allowed without an accurate balance sheet are so extraordinary that it's reasonable to assume they will cause more problems than the tax fixes.
(I'm agreeing with you, by the way.) My response above was addressing/objecting to a claim that accurate balance sheets are already being prepared upon death. There are huge practical issues with valuing illiquid assets.
Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles.
That doesn't make a wealth tax entirely unworkable, though, in my estimation.
I think if a loophole exists for a collectible asset class wealth will accumulate there as part of tax planning. This can easily lead to bubbles and unfairness through asymmetric tax avoidance. I think it does pose deep foundational challenges for a wealth tax. Tracking income is far easier and many of the most common abuses defer tax rather than permanently avoid it. Under reporting of a hard to track quantity would result in less taxes permanently in the new system and measures to avoid it would represent a new level of reporting to government that many would find deeply invasive. Given all these flaws are the benefits large enough?
The problems with income and consumption based taxes include:
* Double taxation (which side is taxed, both?)
* Inequality / Regressive (generic taxes target the poor/middle)
* 'sitting on capitol' isn't taxed
A good fresh start is probably necessary.
* Taxes exist to fund the public good.
* Taxes should target undesired (by the community) behavior
* Incentives should target desired behavior
* You are what you measure and how you react (punish/reward)
With the above in mind, I am entirely for two types of taxes.
Income: A maximum income target and a 'minimum' income target. These two numbers would be plugged in to a single non-linear formula that applies to all. The more someone makes, the more they're taxed (they would always take home more, but for every dollar over they'd take home less of that dollar). B.I.G. could be built in to this formula as a third number (mostly raising the floor); but to me the minimum number already sounds like it is this number.
Wealth: Some savings is a good idea. Having a year or two of runway (disaster preparedness). Saving to move in to a house. Investing* in active things (stocks/bonds/etc) for retirement. Owning your own means of production / transportation / housing (within reason).
Wealth is more static, when wealth suddenly shows up it should be taxed as income. When it's held over time it should be taxed at a much lower rate, but still taxed (every period, IE year). Society should agree on a divisor that is fair, and how much different types of wealth are discounted. 'wealth' (divided down) would thus be figured in to the total tax liability on the compound curve I described in the income section.
I completely agree, but for totally different reasons.
If a major function of government is to protect our property (land, savings, boats, cars, etc...), then it could be said the more property we have the more we benefit from government protection and the more we should pay.
Another function of government is to facilitate trade. For this service, ALL transactions should be taxed (including payroll).
If you look at the totality of this, the actual tax rates would be nominal for every "normal" individual, thus it wouldn't necessarily be regressive. We're talking about a 1% tax rate on property and ALL transactions.
To me this makes sense on so many levels. It captures money from everyone participating in the system and it captures it relative to the person's level of benefit from the system.
The hardest part would be tracking. However, if the tax is nominal and the punishment for cheating is high, then it seems like it wouldn't need outrageously intrusive controls.
Transaction taxes drive vertical integration (as this reduces the number of bites at the apple along the supply chain). I don't think that's always a bad thing, but it does violate a principle of fairness that I hold, which is that substance matters over form.
If Starbucks owns coffee plantations, roasters, logistics, stores, the cup of coffee you get might be untaxed prior to you paying for it. If a competing coffee company performs the exact same steps, except uses third party farmers, logistics, roasters, and rents their storefront, that cup of coffee was taxed 5+ times before you bought it.
I don't see the societal benefit to encourage vertical aggregation like that.
I get what you're saying, but profit creates the same motivation for vertical integration.
If there are two layers in my coffee bean acquisition I'm losing the profit made at every layer, so of course I would want to own those layers and capture that profit before we even add a 1% tax.
But vertical integration comes at a risk, which is why only the biggest players will attempt it.
Now, add a 1% transaction to those two layers. You're now losing 2.01%. But at each layer you're already losing 15% net profit made by your supplier. I'm not sure you would change your perspective on vertical integration for 2% when you're already leaving 15-20% on the table.
Agreed in large part, though it still incents high hurdles for new upstarts to compete with successful incumbents.
I wonder if we wouldn't see a shift in grocery store form with the substance remaining as today.
Rather than buying a bottle of Coke from Star Market, you might be buying a consigned bottle of Coke, with Star Market serving only as the marketplace (avoiding Star buying the bottle from Coke), and where Coke is paid directly by you as part of the transaction. Grocers operate on a terribly thin net margin as it is. They would have a lot of incentive to avoid additional transactions in the supply chain (and there's some societal benefit to keeping grocery prices low).
I'm not so much arguing against [though I do oppose a transaction tax] as I am brainstorming how the implementation of such a tax would create different behaviors in the market to compensate or avoid the tax.
Taxing wealth may be counter-productive. The way our economy should work is that you get rewarded for the wealth you generate. If you cannot store the value for the things you've done, there would be no incentive to produce.
A janitor working as a contractor may not have the chances the people in Kodak had back in the day. But at least he/she still gets to work a shift, gets paid for overtime. There is nothing stopping that person from pursuing their passion and create wealth. The reward of the wealth may be monetary or not.
On the other hand, let's think about the "privileged" workers. The more you get paid, the less life you have. In our current state of capitalism, if the employer pays you a lot, he/she wants to own you and use you until nothing of you is left. The current system doesn't care about long term, it's all about the short term. The people who break are replaced, and because people break, the workload gets heavier. But there is an unlimited demand of new workers fresh out of school willing to work under the same conditions. The work starts in the morning at 9 am, you can't be late, but you can't leave until the work is done. You go home, sleep for a few hours and start again. Sometimes you work on weekends and you definitely take a laptop to your holiday (if you have one).
If you work this hard, generate wealth and you know that if you stop working, all that you've endured would be for nothing, that would be inhumane.
Interesting... I'm developer at a comparably tiny company, I get paid slightly less than her per hour but a larger salary overall, and my rent is less than half of hers (and it's not considered cheap around here).
I know i'm not paid top notch but all I read here is it's hard to be a janitor in expensive places.
[EDIT]
Maybe this is not a fair comparison, I'm not paid hourly, and all I have revealed here is that I work rather a lot of hours. She does 44ish hour weeks, and to be fair as a cleaner you are unlikely to physically be able to work more (consistently).
The ratio of pay to rent is ridiculous though, (that is a fair comparison) my rent is way under half hers. If housing is that expensive in that area then janitors should be paid more...
Fantastic article, we've truly been seeing a bifurcation of the workforce, and the development of a plutonomy. The interests of capital and labor are inherently opposed because the incentive of the employer is to reduce costs, and capital has been winning out.
I think there's a false tendency to blame Apple for this predicament. It's not Apple's responsibility to provide for the welfare of our country's citizens, it's our responsibility - and it's only through our government that we can really change things. No vacation, benefits, and 80% of one's paycheck going to rent is our government's responsibility to fix, not Apple's.
The most obvious policy here would be some sort of universal basic income. This would naturally prop up wages for the low-paying jobs like janitor that nobody wants to do.
Having to work under those precarious conditions for such lousy pay (relative to cost of living) and no prospects for advancement must be a downright miserable experience, the literal definition of wage slavery. 6pm-2am shift means she probably never even sees her kids during the week. All for a meager $600/month in disposable income after rent is paid (which when you're a contractor without vacation and benefits isn't much). And she'd never be allowed to complain about it because she'd be told that she should be grateful to have a job, there are people in Africa starving, she should've studied harder in school, and she shouldn't have had kids. What a world we live in.
Many oppose universal basic income on ideological grounds, but enough with this ideologically-driven bullshit that ignores the unnecessary suffering of the wage slaves at the bottom. Nobody in a first world country should have to live a lowly life like that janitor.
Do you know the history of Speenhamland? The empirical results of that experiment in a basic income was that it acted as a subsidy to employers, enabling them to pay below subsistence wages that were made up for by the government-funded UBI. There's a parallel to how food stamps and other support enable large corporations today to pay less in wages, as the difference will be made up through taxpayer funding. I don't want to ignore suffering, but I suspect something like a jobs guarantee would achieve the same ends in a more equitable fashion.
So if I understand correctly, the Speenhamland System was a wage supplement system, not a UBI system. That is, if people stopped working, they stopped getting the extra money. This means that employers are free to slash wages and let the supplement make up the difference.
With UBI, people get the money regardless, so employers have to compete with what people can get without working. If you only offer them a meagre income boost for a gruelling work week, you're going to struggle to attract people.
With UBI, the employer now can pay (wage-UBI) for every employee, shifting the wage burden off the employer and onto the state by a factor of UBI x population. With a jobs guarantee, an 'employer of last resort', the government sets the floor on wages through hiring, giving everyone who wants a job but can't find one in the open market at whatever base wage parallels UBI. The government only has to pay for base wage x unemployed rather than UBI x population. This also yields labor for the government for 'New Deal' type projects, and employers now have to do better than the base wage/job conditions to hire, raising the velocity of money. More importantly, everyone has the dignity of a job if they want it as well as the money needed for basic needs.
Are there guarantees that UBI will always be comparable to a living wage?
This is counteracted by the fact that employees now have the option of walking away from their jobs, and thus employers would have to raise wages to draw them in. Wages might rise in the type of jobs that nobody actually wants to do (eg. janitor), though wages may very well decrease in the jobs that everybody wants.
UBI and government job programs aren't mutually exclusive. I do think the government should create more jobs for the public good, especially in scientific research and development. But either way, I think a UBI is necessary so that people have the option of working for themselves rather than being forced to answer to someone else. UBI is like the libertarian approach, while government jobs are the more authoritarian approach. I think both should coexist.
I guess there's no guarantee that UBI would be a living wage. Regardless, I think we need a UBI. Money is one's claim on society's resources, and since we're all shareholders in this economy, we should receive a citizen's dividend, even if that amount isn't that much (eg. Alaska's Permanent Fund)
> This is counteracted by the fact that employees now have the option of walking away from their jobs
I don't see how either a UBI or a job guarantee limits employees from walking away from their jobs. The presence of a job, or an income, hasn't stopped many people from starting their own thing.
> But either way, I think a UBI is necessary so that people have the option of working for themselves rather than being forced to answer to someone else.
The option to work for yourself isn't taken away by a jobs guarantee. I can see how the presence of a UBI would permit people to do things no one would pay for otherwise. As idyllic as I really do think that sounds, I suspect that examples of people doing things no one would pay for would be used over time by UBI opponents to drive down the value of the UBI to below a living wage.
UBI doesn't limit employees from walking away from their jobs, it enables them to.
> The option to work for yourself isn't taken away by a jobs guarantee.
Obviously. Job guarantee programs however still don't allow you to truly walk away from your job unless you're able to financially support yourself, whereas a UBI does.
A UBI that's actually enough to replace a job has the benefits you describe, at the cost of UBI times the population. A UBI that's not enough to replace a job doesn't have the benefits you describe, has the negatives I describe, and costs almost as much.
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[ 3.1 ms ] story [ 477 ms ] threadThe training doesn't have to be in a traditional university, either. It does have to lead to a high-wage, in-demand job.
There are things that one can criticize Amazon for, certainly, but their support for the personal education and development of their employees seems to quite a bit better than the norm.
http://amazondelivers.jobs/about/benefits/
Similarly, Apple Store employees can work their way up to HQ.
That is the outsourced companies causing inequality. They are the ones paying people terribly, not the company contracting with the outsourcing companies.
This article wants to blame major companies for inequality while conveniently ignoring the existence of the outsourcing companies which are the ones setting the pay for these employees. Stop doing that, raise the minimum wage and benefits that outsourcing companies must pay their employees/contractors, and fix the bloody problem at its source.
To give one example that goes back a little further, companies used to handle the whole payroll process themselves. Now they use ADP or whoever.
There's also been a lot of automation/self-service of mundane tasks. You don't really have the stereotypical "starting the mailroom" job any longer nor do you have the steno pool.
Another change since then was the rise of the corporate raider. Used to be that you could run a public company without profit as the primary motive. Parable of the Mexican fisherman, and such. (https://bemorewithless.com/the-story-of-the-mexican-fisherma...) But now people like Carl Icahn (and Mitt Romney in his private sector days) actually hunt for companies that are not maximizing return to investors, and remake them into companies that do. Apple actually had to fend off Carl Icahn recently. (http://www.marketwatch.com/story/carl-icahns-2-billion-apple...)
You need fewer janitors now because modern chemicals allow cleaning same space quicker (and probably tools also changed a bit, while maybe in the U.S. in 1980s, modern ones have already been in place).
You need more engineers. And they impact work more because development and marketing (which also became a branch of engineering, see: growth hackers) is more important now than production.
You can always train enough janitors, not so easy with engineers.
Same thing about nearly all low-skilled workers. They are easy to train and their supply is nearly infinite, demand isn't, and demand for high-skilled is high plus they make so much profit you can actually afford paying them a ton of money, which wasn't possible back in 1980s.
It is that proverbial bifurcation of workforce. Outsourcing has nothing to do with it. It is just technological change. There is no way out of it (at least no way which won't cripple economic growth - which is already not so good).
If you want to hold major companies accountable for the outsourcing companies they hire, fine, make a regulatory push for that, but you have to fix the outsourcing companies first before you can seriously argue for that or you're just making major companies pay for the problems of outsourcing companies.
Would you seriously argue for taxing people for buying from animal-cruel farms without actually doing anything to those animal-cruel farms?
That's the problem. Outsourcing companies are not FIRST in line to be fixed according to this article.
I really want to know what BigCorp will chose the first between a company paying janitors above minimum wage and a company offering them to cut their cost on janitors by 30% (but janitors gets only enough to scrape by). My experience is that they will jump on the cheaper offer (so someone can get a bonus), and the janitors can go fuck themselves - and so can the quality of their work. It happens all the time, and not only with janitors.
Arguing that the fault rests (only) with the outsourcing companies is the same thing as arguing the fault of people getting low salaries rests (only) on those people. It may be technically true, but it seems pretty naive to me.
The customer could choose to consider the treatment of the workers a priority in selecting service providers, and the service provider could choose to refuse to exploit their workers just to secure deals, but neither of them have any real incentive to do so. It's not illegal to shop primarily by price. It's not illegal to hire PT workers even when FT would be viable.
I do agree, though, that the problem is a lack of regulation; unfettered capitalism really does have a evil end game.
Those workers should be full time workers for the cleaning firm, but it doesn't mean that they are full time workers for Apple.
However, more often, the contractors are onsite and doing exactly what other Apple employees do and are managed by fulltime employees of Apple. In this case the law says those contractors should have been classified as employees of Apple not the contracting firm, even if their employment contract says otherwise. see Vizcaino v. Microsoft Corp
I didn't cite "the market" at all because I actually suggested regulation which is contrary to "the market" argument often thrown around.
But socially, no, I would blame the outsourcing companies way before I would blame major companies for hiring those outsourcing companies.
This is all very convenient because janitors and security guards have to be physically present. Jumping across sovereign borders is when a "market" argument works better because the US cannot tell China to treat Foxconn employees better with any real teeth.
If they had no janitors the productivity for other workers would be 0 (think of the smell), so I would argue janitors are essential personnel.
As large companies, like Apple, race to shuffle employees to these companies in order to save money, everyone gets hurt but Apple. The money gets locked away from the middle class and Apple pretends that they don't have any full time positions that lack advancement opportunities and decent pay.
Apple gets quality janitors and security guards while paying the outsourcing company more.
The outsourcing companies are the actual ones running the race to the bottom. Stop that, and Apple will have to reconsider (at which point, we get to argue all over again if their new solution is morally acceptable)
I suspect Apple will then go and find another contracting company.
Generally speaking, outsourced staff make around 15-20% of the billing rate.
That should still have a floor through labor laws. If it doesn't, that too needs to change.
>Company contracting the outsourcing company does not usually pay outsourcing company unmeasured rates where OSC then keeps large margin from contractors.
Higher minimum takes from that margin. OSC can then choose to charge the client more or pay themselves less.
The two major research universities are propping up the city's advancement opportunities, but doing so with tuition increases and recruitment of full-price paying foreign students, which makes the place more vibrant, but has also alienated many.
The largest employer in town now is the University of Rochester Medical Center, which provides many of the middle income and higher income jobs but is also making a habit of buying up 'distressed' hospitals.
The collapse of Kodak and exodus of money and talent has cratered the city public school system, which has a 47.5% on-time graduation rate. The only shining spot in terms of education is an Arts school, with great links to the still world-class Eastman School of Music.
Rochester itself is also a great example of 'white flight' in the post-Kodak era, though it began long before that.
This applies basically everywhere. And a failure to really understand it leads to all sorts of erroneous conclusions about the rust belt.
I'm not college educated, I've made a comfortable living as a coder. It took over ten years of self-teaching in my 20's while working a FT job but I knew this is what I wanted to do. So I agree with the statement but there's more than one way to become educated. Academia is just one way and possibly not the best way.
You can do it, but why? It's easier to just go through the college grinder and pay off your loan over the next decade. Plus you might meet a cofounder.
And even in coding, more companies are slowly requiring formal education as a prerequisite for even applying for jobs. We know someone like you can be just as productive as someone from a great school, but that won't matter if you're cut from the selection process.
I say all of this because there has been a significant upward tick over the last 5 years. Roughly speaking new grads are now making the same as what people with 5 years of experience made 5 years ago.
The interview process is intimidating, but many people would likely be able to get through it if they did a couple months of intensive interview prep beforehand.
Also, consider moving to the Bay Area, or another major city.
That's because the law doesn't allow it.
See "Competition & Monopoly In Medical Care" by Frech, pg. 54 for a detailed discussion.
You can work remotely ofc. in this case or even try and change country (which is not always simple without diploma too).
I was so surprised when my father told me that back in the 80s, in a small city in the interior of Brazil, in a public school, he was taught BASIC as part of the school curriculum.
Over twenty years later, in a prestigious private high school in the capital city, coding was only mentioned once by a school director when shaming students for only using computers for "foolish tasks", while completely ignoring the fact his school didn't give a single coding class, not even as extra curriculum.
Programming should have the same importance status as maths in school, if not more.
It amazes me that it isn't the case, I assumed most High Schools if not grade schools were teaching some programming by now.
I do wish US K-12 teachers were better compensated.
EDIT: readability.
Outsourcing is about reducing costs. It's not good or evil. But it depersonalizes decisions on which service to choose and narrows the decision making criteria down to cost. Costs for service jobs are driven by people. So, when a company is choosing their janitorial service and they choose the lowest cost service, that means the service that pays the lowest wages or that cuts the most corners will typically win the contact.
Depersonalizing the buying decision and commoditizing human labor aren't good or evil by themselves. But, turning people's welfare into a math problem certainly leaves us open to making decisions we wouldn't have made if we saw the consequences through a human lense instead of only an economic lense. At best, it causes suboptimal outcomes for an individual while maximizing the aggregate benefit.
We can fight against it all we want, but everytime we buy a t-shirt, an apple, or an iPhone, there's a supply chain behind it built on the lowest cost provider. We are all part of that process. I hope I'm not evil for buying a cheap t-shirt. But I know I enabled some shady behavior that made it $1 cheaper.
sure. but it's a potential option as opposed to being let go flat out.
If Kodak went belly up before that "rags to riches" story of a janitor becoming an exec proceeded beyond the janitor stage - she'd be looking for another job elsewhere, whereas in contractor's case there's a chance of getting reassigned to another "project".
It's not as much about "depersonalizing" as it is about convenience of not having to deal with the domain that has nothing to do with core business. The cost factor is also not linear - in terms of straight up cash figures sometimes it costs the same or more to outsource maintenance, security etc vs hiring your own.
Works both ways - car dealership for example isn't going to hire a web designer for their site full time.
Trent is more similar to Good Will Hunting than this story.
http://www.nytimes.com/2007/11/12/technology/12google.html?m...
Remember that this NY Times article is designed to push emotional buttons. Their entire story revolves around comparing Apple against Kodak. There aren't really any deeper studies or figures provided. You could as well compare a contractor who worked at Kodak with a masseuse at Google and reach the opposite conclusion.
And what do they tell me?
That once this ends, they're headed to Whole Foods for another shift. Or that they'll sleep in their car for a few hours tonight before heading to the next job, not seeing their kids. Or that they're struggling to pay for their mom's medical bills and have no clue how they'll ever get out of it.
This NY Times article pushes buttons so well because it resonates deeply with what I, and many others, have been hearing every day since they've set foot in Silicon Valley.
My point is that "janitor who became CTO" is not really a common story at any company, even at Kodak.
So the choice is more like:
* keep cafeteria workers on the payroll
* hire a specialized company to run the cafeteria
...the middle ground would be to require all vendors provide minimum benefits of some sort (vacation, sick days, etc.). But that wouldn't make it feasible to offer a temp event worker a data maintenance role. That would basically be poaching another company's worker.
How can somebody have the mind to take classes when they haven't had a holiday in years? Or when they work from 6p.m. to 2a.m.?
How is this different from anyone else who works full time? In fact, a random college course would be more likely to be before 6pm than after?
Gail's story may be inspiring but it may also be unique, even in the 80s.
https://news.ycombinator.com/newsguidelines.html
So was she partly responsible for Kodak missing the boat on digital cameras?
Can any economists / sociologists in here point me to studies / research in this area?
But actually, I would go the opposite way and say we need to look at multigenerational inequality. Which is to say that our current inequality metrics might look really good even if you were bound to being only 1 quintile higher or lower than your grandparents, every individual would oscillate in a small range through their life but once accumulated it would show up in the data as lots of mobility. What I'd be really interested in seeing is how likely a family is to climb out of poverty over a few generations and then to stick there or how likely a rich family is to sink into poverty and stick there.
[1] https://www.theatlantic.com/business/archive/2016/07/social-...
Suspect that's still the case, though the other trend of increasing inequality means that more and more at the bottom are slipping out of middle class, while a very select few at the top are headed toward cryoretirement in their ice palaces overlooking a scenic valley on some private jovian moon.
See: http://www.emilkirkegaard.dk/en/wp-content/uploads/Intellige...
"The results demonstrate that intelligence is a powerful predictor of success but, on the whole, not an overwhelmingly better predictor than parental SES or grades."
I've read that marital status of you biological parents and the marital statuses of the parents in your neighborhood are also great predictors.
https://www.nytimes.com/interactive/2017/08/07/opinion/leonh...
TL;DR In 1980 low income workers saw their incomes rise faster than high income workers, now the vast majority of income gains go to extremely high paid workers.
Through technology, some people are able to produce much more than others, so inequality is inevitable unless there is a balancing force (aka taxation).
All the things every country in the world does except one.
Because it currently has 2 of those (minimum wage and a health insurance mandate) at the federal level.
"This work is essential to the health of the population, but because of something to do with marginal economics and supply and demand and weak labor laws and class power and reserve supply of labor, I don't have to pay a proper wage, or even treat them like human beings!"
Price is not about total value provided to society but about the marginal value of one more diamond, 1 more gallon of water, 1 more janitor or 1 more programmer.
https://en.wikipedia.org/wiki/Paradox_of_value
Consider a fast food restaurant with one cleaner, two people at the tills, three people in the kitchen, and one manager. Remove any of them and the lines will become too long, the place will become unacceptably dirty, etc. However, none of the employees is "producing" more than any other.
The people that developed email and whatnot produced more than the people who deliver mail, etc.
People don't do this anymore for various reasons, frankly it's been demonized in our society. Lots of companies (/most?) restrict supply to drive up costs (diamonds, agriculture, digital media, etc), they don't produce at maximum/flood the market. They restrict supply to maintain a healthy profit margin. And people call this good business, but what do we call workers who do the same?
I think their is a good argument to be made that our middle and lower classes have just been acting as bad business men and women and have been giving as much unrestricted supply as they've been asked for. It's bankrupting them, costing them their health, costing their children opportunities for good education and access to their parents bc they are working all the time. It's costing them the American Dream, if there ever was one.
I do believe it's time for people to unionize or something. Unions are a whole other argument, but we can make new ones with new rules to make them better. People have to realize their bosses view their "worth" more so as leverage than output. People can increase their output all they want (which they often have: more degrees, more work hours, etc), but without an increase in leverage they won't be paid that.
Further, this doesn't neccessarily mean anyone's boss is not paying them appropriately. It's possible the market at large needs to be adjusted to pay for these costs or more than likely a little of A and a little of B.
Author's point is not about decrease in pay but about the social changes that came about as a result of prioritizing the outsourcing of non-core-competency work to contractors, which increased competition and had the effect of reducing effective pay.
In other words, income inequality has increased as contract work has increased, and the reason why is because a large part of social mobility is due to networking and connections, which are far stronger at companies which prefer in-sourcing compared to companies which prefer out-sourcing, since out-sourcing naturally creates an "us vs. them" dynamic at companies which is difficult to overcome.
The implied conclusion is, if market forces are biased towards out-sourcing, then the government should incentivize in-sourcing as a means of combatting inequality.
If you read through the comments, one of them points out a perhaps less popular explanation - Ms Ramos apparently does not speak English. Large quantities of low skill immigration will inevitably make life tougher for people like her. But that would not be an explanation that'd be acceptable to the Times.
Well what do you expect? Journalists write news articles, not peer-reviewed studies that obey the scientific method.
A lack of English skills would certainly contribute to social isolation within an American company, so if anything, it helps drive home the point that social isolation exacerbates income inequality. I don't think anybody is making the argument that Apple bears responsibility for giving Ms. Ramos English fluency, and it's part of the reason why there aren't easy solutions. But you can't even think about solving the problem until you can start to think about its root causes.
In other words, nothing like that.
Why? Why is that the magic number that is insane??
When I worked at a hardware store we had a brochure we could order in a gold-plated Ducane grill for $4 million.
That recent graph showing the top 1% having a 6% wealth growth rate is wholly unsustainable for any society. So there's something to be said for trying to level it off.
If the wealth continues the trend to concentrate at the top then there will be an increasingly large and unhappy group of people who will elect increasingly non-mainstream politicians who promise to help them, eventually leading to who knows what kind of unpleasantries for all.
100%. Nobody has a Scrooge McDuck cash vault. Bank deposits are also spent, in the form of depositor's money being loaned out by the bank.
Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about.
What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.
People tend to invest in things with a high rate of return. That high rate signals it is doing things that people want done and are willing to pay for. I.e. it helps society.
> a way to provide capital to people who need it
That's exactly what banks do. My bank branch is plastered with posters trying to sell a loan to everyone who walks in.
> passively invested in banks and things like index funds
If you're arguing those are not productive investments, I don't think that's very defensible.
> how much is not really doing that much.
If you're arguing that rich people tend to invest in low performing investments, that doesn't make much pragmatic sense. People get rich by investing in highly performing investments, not dogs.
Banks want people to take out loans because they collect fees and offload the risk via MBS. They give people loans who can't afford them and that's not good for anyone, but then they know they'll get bailed out again if something goes south. None of this is sustainable, healthy, or productive.
[1] https://youtu.be/A25EUhZGBws?t=331
That's not a good argument for raising taxes, though.
Apple got initial funding of only 250k, and that was split between equity and loan, very feasible even with a 400k yearly cap. (And I'd also note that 10% of "any money over that" still adds up given some of the salaries paid to top execs)
Secondly, Google's initial funding was only 100k in 98` dollars. The significant 25m round was from kleiner perkins and sequoia, and I certainly imagine that corporate funds for investment would not be held to the same limits as personal income tax.
Finally, facebook was bootstrapped out of their own pocket until they got a 500k invesmtent from thiel in 04 $'s. Once again the "big" investment a year later came from a firm.
In all of these cases the initial seed/bootstrapping money would come FAR under the 400k limit expressed, adjusted for inflation, and that assumes people wouldn't both save over multiple years, or that we wouldn't see more reliance on companies rather than individuals in early stage investment if the tax code shifted such that it was more advantageous.
I defend this largely because in my own readings of history I've attributed a large amount of the current economic state to events of the late 70's and 80s, the tax code changes being a major one of them, and I think your points unfairly detract from the validity of reintroducing such tax structures.
I'd note however that my original point was to emphasize the smallness of most of the initial investments. One does not need to be a billion dollar entity to have enough diversification in high risk investments to make it a worthwhile component of your portfolio.
(I'd also defend America's ingenuity prior to the advent of VC; we were a pioneer in the sciences and technology long before venture capital was a thing. This is an entirely separate discussion about the viability of various forms of tech. growth stimulus that I'm neither qualified nor desirous to have, but I mention it to suggest that if we've found success in other systems before, there may be reason to experiment further when we observe a clearly deleterious trend in the current state.)
The point is incentives. People doing work and providing value is a good thing that we don't want to discourage.
There is zero point in doing extra work if it will be taxed at 90%. People would just work for half a year, then take the rest off.
It's actually quite terrifying that people would advocate for taking up to 90% of someone's income. We need to work on solving inequality but this simply isn't the answer.
Edit: It's also important to remember that taking more money away from the rich, and feeding it into an already broken and inefficient system (our government) does not equate to lifting people out of poverty.
Interestingly, the top U.S. tax rate from 1951–1963 was >90%, and it was >50% during the half-century from 1932–1986 – https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...
This is another variation on the "rich people hoard cash" theory, which is completely false. Rich people invest all of their money back into the economy. Even bank deposits are invested back into the economy (when the bank loans it out).
Scrooge McDuck cash vaults do not exist.
So, they do circulate through the broader economy. There's no silo of cash sitting somewhere paying dividends.
http://www.investopedia.com/terms/t/tips.asp
"investing" != "giving it out". "growing economy" != "less inequality".
The reason Apple, etc., invest a lot of their cash overseas is not because those are better investments, but because the US corporate taxes are so much higher those foreign investments become more attractive.
Level the taxes, and the money will be reinvested back in the US.
To know what they are investing in, consult the Apple Annual Report, which says. Even if the balance sheet says "cash", what they mean is "bank deposits". Bank deposits get loaned out to others, and those others spend it.
Nobody borrows money in order to hoard a pile of currency.
Of course it is. What do you think those funds invest in? Piles of cash?
> Bank lending is driven by demand, not deposits.
If that were true, banks wouldn't need deposits and certainly wouldn't offer free checking. They're not charities.
> If that were true, banks wouldn't need deposits
That doesn't follow from what I said. Banks are required by law to back their loans up with reserves. So when they don't have enough reserves, they borrow on the interbank lending market or from the central bank.
http://www.bankofengland.co.uk/publications/Documents/quarte...
HF traders don't hold for long, so why are they equivalent?
Of course it is. Buying a piece of a company is investing in it.
> Buy that logic, high-frequency traders are investing in the economy.
And they are - even if they hold a particular stock for a millisecond. The aggregate invested across the market is what matters.
It's a bit like calculus. All those infinitesimal bits add up to real amounts.
> That doesn't follow from what I said.
Maybe you can explain why banks offer free checking.
The original comment was implying that rich people contribute to the economy by investing their spare savings back into it. I'm not claiming that there's no benefit to buying secondary stocks and derivatives on them, just that this is not even remotely the same in terms of creating economic growth as actually investing in creating new business opportunities and such. It's kind of like saying that trust fund kids who don't work contribute to the economy by spending money. And often this "investment" in the stock market is the mere fueling of bubbles.
Money in bank accounts is loaned to others and "thrust back" into the economy.
Money in other investments (stocks, bonds) also funds economic activity.
Your argument only makes sense if the wealthy are hoarding cash under their mattresses, which is not what they do.
I would be quite happy to earn more, and then 400K a year, as you say, even if he was taxed at 90%.
- Work for MEGACORP and produce $400k/year of value
- Develop a new business which has a 30% chance of succeeding. If it succeeds, you estimate it will be worth $50M.
Suppose the marginal tax rate for income above $400k/year is 40%, and you want to maximize your expected earnings (say, to donate to a charity you think is particularly effective). Which option is rational?
Now suppose the marginal tax rate for income above $400k/year is 100%. Now no matter how high we change that $50M number to be, it's always better to just work for $MEGACORP, because you get a guaranteed paycheck.
This is known as a distortion, and is the true cost of taxes. I personally don't care too much where the wealth people creates goes, and I'd like to see less income inequality - but let's not kill the golden goose while we're at it. There are far less distortionary taxes than extremely high income tax rates.
In real life, if I'm taking home $400k/year in salary it's because I'm creating $1 million/year in revenue. Also in real life, a start-up business that will be worth $50 million usually has more like a 1% chance of success, so it's expected value is actually just about 25% more than the proposed salaried job -- less than my value-per-year at my job, actually.
Finally, in real life, most people don't want to maximize expected income -- its buying power in terms of personal needs decreases logarithmically.
Tax law really has little effect once we use a less imaginative scenario.
You mention people are risk averse (logarithmic utility of money). I posit that that is only true for non-altruists. An altruist prefers to save 10000 lives nearly exactly 10 times as much as they prefer to save 1000 lives. Given a secure enough financial base off of which the logarithmic personal rewards factor is a non-issue, this is the primary driver for plenty of people that I personally know.
You seem to be assuming that Starting a Business is always better, more of an achievement, more awesome, than not starting one. I see no reason for this to be true. Maximizing revenue tends to have more to do with building market power than with achieving anything at all.
You're also deliberately shifting the goalposts here. You started out by saying that progressive taxes were bad because they penalize making more money. Now you're saying they're bad because they incentivize complacency and mediocrity, which are life-achievement qualities rather than economic quantities.
It looks like your underlying belief is: "people who make lots of money are heroes, and we need to encourage more people to be heroes, irrespective of what's good for the rest of society."
>Given a secure enough financial base off of which the logarithmic personal rewards factor is a non-issue, this is the primary driver for plenty of people that I personally know.
To be frank, it's their primary excuse for what they really wanted to do, which was to make as much money as possible. After all, how many are giving away their extra money to the most efficient administrator of human-welfare programs around, the state?
This is a major misconception I see on both sides of the argument, (but definitely more of an issue on the "rah rah Laissez-faire crowd") the worry isn't really about the "1%" who are doctors and engineers who make ~$250K/year after working hard, the worry is really the people who make 20 million dollars a year with nowhere near a proportional value add.
By eliminating the tax shelters and correspondingly lowering the tax rates, Reagan brought about much more efficient allocation of investment capital.
Perhaps say the severing of our money from gold maybe?
Look it's rather simple. You can wax and wane about tax policy until you are blue in the face. The answer lies in the currency, not taxation.
I give this example every single time these stories surface.
Take a pre-1965 quarter when our money still was constitutional and made with silver. 6.25 grams of silver in that quarter. That silver content has a melt value today, right now, of $3.37.
Items that silver quarter can buy today:
A gallon and a half of gas = .25 cents
1 gallon of milk = .25 cents
1 loaf of bread = .25 cents
The point illustrated is, the problem is your currency is worthless, it has been devalued by the banking cartel of the federal reserve to the point of almost complete worthlessness. And every year prices go up it's your currency losing more value, more purchasing power. It's not rocket science. You have been robbed by bankers. They own you. Washington and company learned their lesson after the continental dollar. Fiat currencies are fraud, and worthless. They always have been and always will be. Our dollar is no different. That's why the constitution has as the supreme law of the land that our currency must be backed by gold or silver. Which can't ever be valued at zero. Because it has intrinsic value. Fiat currency always throughout history, always, hits zero.
So I just assume it's Wall Street vampires down voting or those who hear the word constitution and down vote because clearly that makes me wrong or insane.
1. We want slight 1%-2% inflation to prevent hoarding from slowing the economy to a crawl. Why invest or buy something today when the cash stuffed in my mattress will buy something better in 6 months.
2. If you agree with the first statement, why tie the rate of growth of money to how fast you can dig a metal out of the ground? Let "experts" survey the economy and decide how much more money there should be this year as opposed to last year.
I am not saying I agree completely with either statement, but that is one argument against a gold tied currency.
The gold-backing was dead by 1970. Petro-dolarisation occurred in 1974. The UK all but went broke in 1979. The USSR did go broke in 1987-89, courtesy the US and Saudi Arabia (something Putin may well have in mind now).
Money is weird. And the gold standard and "end the Fed" nonsense is ... complete bullshit.
This is only true if wages don't go up to match it, and if they don't, then we should be asking why not. People should be insisting on raises at least in line with inflation, and if they're not able to get even that, then it suggests a power imbalance.
And besides, currency devaluation isn't some secret conspiracy, or even an inherent property of fiat currency, it's the explicit and stated aim of our monetary policy. Most economists seem to believe a constant low level of inflation is a good thing and so that's what we do. If you disagree, you should argue with that directly. And if you want a stable currency value, I would suggest monetary policy would be far more effective at achieving that than the gold standard.
To be blunt, that really is SV cuckoo-land thinking.
In 22 years of employment, 18 in IT with Fortune 100s, I have never had a job in which that was possible.
Why would a company voluntarily increase its personnel costs by the rate of inflation?
Because you have a society where not doing so would be rightly recognised as a defacto wage cut, and considered outrageous by your employees. This is generally the case in Europe, and I'm arguing that this not being the case in the US is exactly the problem.
Also FWIW, I don't think tech companies are remotely representative. It's an industry with high employee turnover, and where people are expected to argue for their own raises.
Nonetheless, I work in tech, and I got an inflation based salary bump last year, which was applied in addition to a performance based raise, and I'm expecting one this year as well. But then, I don't work in the US.
You know, because you actually fought for your interests instead of accepting your lot as a constantly-devalued cost center.
Let's say that on Jan 1, 1970, you took your pre-1964 quarter and pulled out the 6.25 grams of silver in at the price of $12.37 a troy ounce. You'd get $2.48.
If you put that $2.48 in a money market earning just half the fed discount rate for the last 47 years, it'd be worth $7.99 today. The silver would be worth $3.37. (The currency would likely be a lot more that $7.99, because the difference between money market rates and fed discount rate historically hasn't been as high as the very conservative 50% markdown I used here.)
There are a lot of moving parts in an economy that affect cost of living. A lot of stuff has changed since 1970 beyond going off the gold standard. Massive productivity changes, energy and raw material price shocks, demographic changes, policies and laws changing behaviors all across the individual and business landscape. It's difficult to isolate one individual factor as the sole cause.
- slavery
- the civil war
- the industrial revolution
- two world wars
- huge growth in population and in the economy, which makes it inherently less volatile
- a bunch of other important events that would obviously affect currency prices
(sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)
If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to point to the end of the gold standard, this data doesn't really support that. There is a slight surge around 1970, but only relative to a general trend.
And when I look at the average rate of inflation from 1970 to 2017, it is 4.01% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+20...
Both of them are exponential growths, but with quite different rates.
As I said, there was a surge around 1970, so yes, if you take a period that includes that surge, it will probably have a higher rate than one that does not.
Here is an interesting point:
http://stuartschneiderman.blogspot.com/2016/11/the-problem-w...
Agreed.
> and there's less of that here than in most other countries.
I've seen evidence that the US is actually not doing that well on this scale, particularly measured against other wealthy democracies.
What's particularly painful for people is that there's less equality of opportunity here than there was 40 years ago. I do think we need to do something about this, though it's not entirely clear what.
Planned economies such as the USSR clearly impinge on human liberty, tend to be undemocratic, and are usually very inefficient, and I think almost everybody would agree with you that they aren't a good alternative to the current U.S political and economic system.
I disagree that they impinge on human freedom, at least I don't think they do compared to capitalist economy. I see no reason why they should be undemocratic. And you'll find nobody in favour of a 5 year plan as the USSR had; there have been massive advances in economic planning methods, as elaborated by Cockshott et al.
I love the irony of saying it is "inefficient" especially when we compare it to how currently under capitalism firms compete by doing the same research, repeating the same mistakes, often extremely inefficiently, in the name of profit. This is one of the most inefficient things I have heard of.
The USSR planning model isn't a good alternative. But I think that some economic planning model, whatever it may be, should not be ruled out, especially as it can feature as part of lower-stage Communism.
Some levels of inequality are healthy and motivating, extreme social inequality with large groups of population feeling left behind by the social system is undermining stability and a recipe for revolution.
Or, I'd modify that to say they eat the upper middle class, because the truly rich just bolt at the first sign of trouble.
So this warming up to socialist ideas is pretty much in line with Marx' predictions and has little to do with the Soviet Union I think.
What you are writing here is an assertion, not an argument. You don't present evidence, or hint at why what you propose would be a good idea.
Can you explain what good effects the system you are proposing would have?
Anything else is not, exactly for the reason I described: equal rights and equal burden. Otherwise the state is just a way to implement Marxism: take from the ones who have an give to the ones who need. Robin Hood was a thief.
Is that really a problem with taxes? Or is that a problem of the ever expanding wealth gap? Assuming the salary for your job had kept up with inflation, and that you got a fair share of the productivity gains over the past few decades, you would be above the poverty line.
But let's say your taxes could be reduced to something like 40%. Obviously some public services would have to go away. I certainly wouldn't want that to be medical care or public education.
Maybe in your country there are problems with corruption and the taxes aren't be used very effectively? Again, that's not a tax problem, that's a corruption problem. If you were getting the benefit of those services, it would be less money out of your pocket and you would have more to spend.
> currently just socialist
I would also be careful with this category. There is no European country that is socialist. They are all capitalist, with private industry making up the bulk of the economy. There are a few social safety nets and services. But that's not socialism, is it?
However the neoliberalism, deregulation and privatization (good ideas in itself) started by Reagan-Thatcher-IMF swung the pendulum too far after 40 years.
No one is suggesting collectivization of farms, central planning, high defense spending at the expense of low consumption = Soviet style socialism/war communism. Rather something close to New Deal - Eisenhower era 'socialism' with stronger labour force participation, more state regulation and taking on new monopolies (Google?).
The real issue is that the fundamental structure of our economy aggregates wealth towards the top. Employees who add millions of dollars in value per year to a company get paid a fraction of that. Look at per-emoloyee profits for all of the major corporations. Our economy very heavily favors people who own capital over people who do work on the ground floor.
If you want to fix income inequality, you have to look at structures like the stock market, like corporate equity distribution, and pretty much everything we have in place in society that allows the rich to increase their wealth without actually working.
Increasing taxes is like taking aspirin to cure Ebola. Sure, you feel better, but it's not going to make you healthy.
The earth has finite resources. Wealth is a zero sum game. Even if you want to look at things like entertainment that can be reporduced cheaply, musicians and directors need fed, food is limited, therefore even films/music are limited.
That's clearly not the case. The classic example is building a house alone in the woods, but let's consider art. With different choices, a person could use the same paint to make a good or a bad painting. The choices made while painting decide if it will be a mess or something beautiful. Even if it's never shown or sold to anyone else, the person who made a beautiful painting would be wealthier for it.
Much of what's seen as wealth production is instead liquidity production -- turning natural capital into financial currency. In the case of any production chain founded on fossil-fuel energy, the transformation requires a draw-down of natural capital worth many millions of times the market-price and wealth "created".
Activities founded on renewable or sustainable processes are less fraught, but there's still the accounting for potential disruption or reduction: soil loss (rougly 100x the rate of creation), sink-exhaustion (waste and pollution factors), biodiversity loss (rates of extinction > speciation), and the like.
There's little accounting for any of this within conventional economic theory. Ecological, biophysical, and thermoeconomics address parts. Steve Keen is starting to write mathematical descriptions of production factors in which the role of energy is taken into account.
Given various inefficiencies of educational institutions, this is all but certain to be occurring as we speak. There is a notion of a "forgetting curve".
And, as you note, information can at best asymptotically achieve some maximum theoretical efficiency. It's not a limitless fount of potential.
What happened in the meantime? We live in the most abundant age in history. Worldwide poverty is at an all-time low. Surely wealth is growing in absolute terms and it's not just the top 1% benefiting.
Their offspring could benefit from a generous endowment of a proportion of this wealth, say 10%-20%.
Edit: and no sneaking about with Trusts, either.
A tax on people that eat their brocoli would be highly impractical!
There are some definite difficulties in implementation. But even then, my argument is that it could be a really harmful tax if it could be applied at all.
One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
> One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
I wonder if we could think of other examples of how harming a minority of people can be good for society at large. But regardless of the moral standpoint of the remark you said, you also have to account the harm it does to society to make people spend extra time hiding their wealth and spending it more frivolously.
Many people spend inherited wealth frivolously. Business acumen isn't known to be genetically determined, whereas political influence is certainly affected by wealth and pedigree, see George Bush the first and the second.
There is harm to the donor to abolishing inheritance. I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
>I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
Why not? A man works hard to support himself but allowing four generations of free-riders seems like a pretty bad idea. It strikes me as a sort of neo-monarchism. In the past we had royalty blessed by god and passed through blood and now we have the economic elite blessed by capital and passed through blood.
If you could effectively put 100% tax on inheritance(which you can't in practice), it means your utility of leaving wealth around becomes 0. Now you want to spend that wealth as much as possible, and it turns into consumption. You would sell and spend everything you have for lavish expenses, which means a reduction in capital investment, which means slower economic growth.
https://www.youtube.com/watch?v=MRpEV2tmYz4
I doubt hedonist consumption is what Keynes had in mind.
> inheritance taxes are necessary to provide equality of opportunity.
Lets take this to the extreme: lets say that your father could not provide you with anything but minimum substance until your coming of age (18?). Anything given to you by your parents would be taxed away. This means that you now cannot go to any college that is not provided to you by credit. But you have no assets and no income, so nobody will loan you any money. Plus, you don't have money for rent, so you need to work immediately to pay for your own place.
Maybe you feel sympathy for the millions of people that actually live that, but how is forcing everyone to go through that be better for society at large?
Or think what it would mean for the state to actually do that: what if you had to build any infrastructure built by a previous generation from scratch, because "its not fair the SF bridge is nicer than the Brookly bridge, its inherited".
The emotional answer I have against advocating inheritance tax is that the goal is not to be fair, its to be better. And certainly fair by destruction, by removing everything, is not better.
Parent poster proposed a way to help workers by changing the incentives in the system to reinvest more into productivity/research, without throwing out the system that has made our society propsperous.
Providing for a living working wage. Providing for labour unionisation or equivalent functions. Curtailing the capability of the wealthy to seek self-serving concessions from legislatures. Supporting a vibrant programme of public schools and works.
Pretty much Adam Smith's prescription in 1776.
Also by classical economics, you cant afford to give less than living wage because then you would kill the people that work for it.
As soon as land becomes private property, the landlord demands a share of almost all the produce which7 the labourer can either raise, or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon land....*
[I]n every part of Europe, twenty workmen serve under a master for one that is independent; and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another....The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.
It is not, however, difficult to foresee which of the two parties must ... have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer.
We rarely hear ... of the combinations of masters, though frequently of those of workmen. But whoever imagines ... that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of.
Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen ... But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters upon these occasions are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combinations of servants, labourers, and journeymen....
A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.
https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_...
That the employers monopolize and combine and have advantages over the worker is established, but not that doing the same on the other side would be beneficial. He mentions in spirit on in parallel that any measure to try to reduce that power of monopolization would be either ineffectual or make it worse.
Within the Smithy naivete, one could argue that unionization would mean that by necessity, employers would be require to conspire to be able to deal with unions. Of course, I don't think he had the word for union, certainly not the concept we have today, but he clearly condemns how employers are also able to use force against the gathering of workers.
But he explains the advantage, the unfairness of circumstance, of law, of practice, and of effect.
Elsewhere he's far more direct in challenging economic power.
And if you read the followers of Smith, particularly Mill, that endorsement is far clearer still.
So long as there's a surplus population, employers will not want for labour.
But China is a very extreme case: in general, if you dont have enough money to support a family, you wouldnt have a family, and lower wages would affect the demographic growth of the lowest earning members of society. The logical corollary for this is that you always will have people in the lowest earning spectrum, because if they earned more they would have more children, increase surplus and reduce wages. We don't have a reserve army concept yet at WoN, unfortunately.
(btw Marx seems to agree 100% with this concept of lowest earning spectrum/demographics)
In 1672, the English East India Company finally secured a trading post in Taiwan - ten years after the Dutch East India Company had been expelled from the island by the Chinese. The Company was soon engaged in direct and regular trade with the Chinese from that base and was permitted to make regular voyages to Amoy, Chusan and Canton. By the turn of the century, the Company's base for the China trade was transferred from Taiwan to its "factory" at Canton. With its Royal Charter, the Company was granted the privilege of monopoly of trade in the East Indies until 1833.
From 1700 onwards, most foreign traders were confined in Canton, where rigid restrictions were imposed through the practice of Co-hong, a guild of Chinese merchants, the sole recognized agency between foreign and Chinese merchants.
http://www.bl.uk/reshelp/findhelpregion/asia/china/guidesour...
You can also find David Ricardo and Malthus in agreement on wages. Ricardo gives us the subsistence theory of wages (I associate this as the Iron Law of Wages though that may be incorrect ... ah, J.K. Galbraith, whom I've read, makes that attribution):
https://en.m.wikipedia.org/wiki/Iron_law_of_wages
Nice exchange of messages! Glad to be able to talk about things written 250 years ago with random internet strangers.
That said, on wages, I get the impression he's not all that far from Smith.
And likewise, appreciate the discussion.
But isn't that just a reflection (and after-effect) of a more fundamental, underlying cause -- that is, the extent to which low- (and medium-) skill labor itself has become devalued, in recent decades -- along with, of course, the very class of persons taking those jobs? Along with a host of other changes in attitudes (sharply) favoring the welfare of the high-skilled -- and above all, of the rentiers -- over the welfare of those who actually do the bulk of the work that keeps our civilization actually running?
Which is presumably what motivated the actual votes on the particular pieces of legislation you (quite validly) cite.
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Thank you.
All of those types of people are pretty much gone into retirement now. We don't have that type of advancement because most of those entry tasks in both IT and business are farmed out to a permanent underclass -- a contract bodyshops with mostly South Asians on work visas.
Honestly, that is a large part of why i broke free and enlisted. I'm now in an organization that sees increasing skills and promotion as essential. If i fail at my job (pilot) i wont be fired but given a different role. Call it a throwback to the 60s if you want, but im less stressed now than i ever was as a consultant. (And forget everything you think you know about the military. The rcaf isnt anything like american movies.)
At least in Firefox, if you press Space or PageDown (to scroll down a "page"), on the linked article, you'll lose several lines of the text, as they're obscured by the header. Illustrating:
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Chrome isn't afflicted by this (on the linked article), due to the fact that its page scroll is slightly shorter than Firefox's (on a webpage without any sticky headers, Firefox gives you about 1.5 lines of context from the previous "page"/screen, when you page-scroll; Chrome gives you about 5). However, if the height of the sticky header were greater (as often is the case), Chrome would also be affected.
This is obviously in addition to the annoyance of the sticky header wasting vertical screen space, but the latter is just an aesthetic preference, while the former is broken functionality.
Yes, I know that on Firefox I can just use reader mode, but it seems sad that after almost 30 years of the development of the web, going back to a design that could easily have existed in the 90s, is an improvement.
Janitors at Apple in 2017 can barely pay rents and they will never own their home, likely owned by the Kodak janitors from 1987.
Feel free to replace janitors with any other job title.
>> pays $2,300 monthly for a two-bedroom apartment where she and her
>> four children live. Before overtime and taxes, her $16.60 an hour
>> works out to $34,520 a year. Her rent alone is $27,600 a year,
>> leaving less than $600 a month once the rent is paid.
Assuming she's only losing 20% to taxes and other deductions, she can't even cover rent. How is she paying her rent? Is there another person or public assistance?
The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3]
We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your investment returns (which then gets taxed at 15% instead of 35% for ordinary income). If you don't spend all of that $2M, you'll continue to make more money just by having more money.
By taxing income instead of wealth, we're also essentially penalizing labor and rewarding wealth. We shouldn't penalize something that actually contributes to the economy and instead ask people who have more (not earn more necessarily) to contribute via taxes.
1. http://www.nytimes.com/2012/11/19/opinion/to-reduce-inequali...
2.http://www.businessinsider.com/the-critical-difference-betwe...
3. https://www.forbes.com/sites/robertlenzner/2011/11/20/the-to...
What about just printing money? Not ideal obviously, but there'd be no way to avoid the inflation "tax".
Those with capital / assets can leverage up, borrow more money, and then pay it back with lesser inflated dollars.
Also the IMF's stance on inflation and inequality is moving from hyperinflation to sustainable inflation leads to reduced inequality but there aren't advantages to moving to a lower inflation than that.
So we already invade your privacy to appraise the former, and the later has to be be public because companies need to know who owns what shares and the trading platforms need to associate users to shares they own. Both can be used by government to provide ownership details.
You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already. That way private business executives cannot tax haven their own stuff under an LLC, and companies like Google / FB are punished for hoarding hundreds of billions in offshore accounts they have no intent to spend or bring back into the states.
Of course, this is all saying "government should do X" which is just for entertainment, pretty much. The US is in no condition to act in the will of the people at all right now anyway, so its all speculation - you would have to fix the broken democracy first.
Henry George proposed this in the 1800's [0]
[0] https://en.wikipedia.org/wiki/Georgism
I'm not familiar with this being a requirement for foreign, private companies. (Reading between the lines, I'd expect a marked increase in investments in foreign, private companies under such a taxation scheme.)
Buying property?
What are some solutions you're aware of that are equally effective and less invasive?
None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.
All of these actions decrease efficiency, and none of them have a significant positive impact on poverty.
I just don't see the point of insisting we "do something!" when none of the similar "solutions" we've tried have made for any positive change, and all of them have measurably cost us in efficiency and growth. The "do something!" model of governance is cruel and deficient; if it would be better, all things considered, to do nothing, then do nothing!
Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put on the economy.
Well before any of these programmes became so comprehensive, Norway, Denmark, and Sweden were very productive and comparatively equal.
I.e. giving poor people money doesn't end up with the poor spending more money.
I don't really agree with this. Taxes are distortive and doesn't necesarily help inequality. It might even make it worse. But also, there is taxation as a progressive system of government funding, as there is taxation as in "You will never own more than X, because the government will seize it".
In terms of solutions, I'm not a professional economist, but as I read different authors and books, it really seems like we don't understand why we have inequality in the first place. Even Piketty's Capital feels more like explaining that its going on than why. So I'm jitterish about any solution that doesn't help resolve the core cause, for the which there doesn't seem to be consensus
The CEO's pays is a small but funny example about that: CEO's pays increased enormously after by a law thought to dimishing their returns, made their salaries public, and increased CEO's ambition and bargaining power. The very idea to dock their pay increased it.
But those are small bits at the macro-economic level.
Care to explain?
[1] ignoring the whole subject about luck and what it means to earn something when two equivalent folks just have different dice rolls go their way, etc. Or especially in the context what it means to earn something when you just inherited it. (I have a bunch of friends who have inheritance coming their way and just totally expect it, they lead very different lives because of that than those I know who don't have that.)
It would have negative consequences besides that. Many, many people do things for "legacy". It's a powerful motivator. Taking away all wealth would eliminate something that encourages good long-term decision making.
It would hurt people who aren't the rich people. What would happen if Sam Walton's net worth was taxed when he died? Massive disruption to Walmart employees at a minimum. How would the net worth be calculated? Well, given his net worth, he'd be irresponsible not to have an army of lawyers and lobbyists making sure the number is as small as possible.
So, given the above, the idea isn't that simple.
Finally, there are ethical implications to that sort of policy. It implies that citizens earn at the pleasure of the government, not that the government rules by the consent of its citizens.
Who are you to make that decision for someone?
And, frankly, you're delusional if you think an estate tax is non distortive. The entire meaning of wealth would change for the elderly.
One cannot treat wealth like a zero sum game. More importantly, we need to rid ourselves of this growing crabs in a bucket mentality, because we all suffer when we hold society's best back. Is it "fair" in the sense of absolute wealth? No, but people shouldn't be so focused on their neighbor's plate then theirs is full enough that they can spend hours complaining online about how much more money the 1% have. Perhaps we should redefine fair wealth distribution to rightfully consider merit, which is shockingly absent from the majority view here.
And your definition of "fair playing field" is skewed because, again, you treat economics as a zero sum game. You are making the classic mistake of conflating equality of outcome with equality of opportunity.
In any case, this class warfare inspired policy of exhaustively taxing wealth won't fix a mismanaged budget or a broken scholarly culture. You are simply punishing the people who seem to have benefited most in the context of the system while ignoring merit.
Further, it is absolutely absurd to suggest that modern people in poverty dont live "good" lives. They have refrigeration, air conditioning, entertainment, access to the internet, emergency healthcare, they live like kings once did. Once again this is a problem of looking at other peoples' lives and concluding that only in comparison you deserve more for simply existing.
Taxation will not fix what is fundamentally a cultural problem.
Aside: Look at how absurd the entire argument is! We dont question in absolute terms how our poor are living, we focus entirely on the fact that the wealth is distributed unevenly. Like children complaining that their classmates have extra candy. The whole mindset is petty.
Don't you think that inheritance is a pretty bad way of achieving that? After all, traits like intelligence (which probably dominates the ability to use resources efficiently) are only about 50% heritable.
Why dont we spend more federal funds on gifted children? We watch the trainwreck that is our school system as we fail to match pupils in other countries at senior high school level. The issue is, again, not taxation, on the contrary, we are not spending enough where it counts because of the greed of the entitled.
Outcome and opportunity is a false dichotomy. But if we were to go along with it, isn't a tax on inherited wealth a great way to maintain equality of opportunity?
About merit, I think I know about merit. If you take the public transport at 5:30 in the morning you will see a lot of people that go to work for years for a ridiculous small pay and, that if they stopped doing that, society as we know would stop. That, I think, have a lot of merit.
On the other hand, in any standard corporation, you can find people with huge wages, with company car, that never pay a lunch because they put in the expenses account and that employ its time in political movements to try to go up in the ladder.
Of course, if you think that markets give everyone whatever they deserve, or you have not been in the public transport at 5:30, then, what I'm saying doesn't make any sense.
Leaving the metric to optimize to the optimization process doesn't look a good idea, the same way it's not a good idea to leave the thermostat to choose the temperature.
In my experience, the only people that think that the thermostat it's who should choose the temperature, it's the people that feels very comfortable with the current one and don't care about the comfort of the others in the house. Or, maybe, also the people that grew up in a house without thermostat and thinks, correctly, that anything is better.
First, it's much easier to get a rough idea of how many people states have killed than markets, to be sure. But many wars are fought and nations are conquered (and, for that matter, created) for market-driven reasons: oil, tea, diamonds, slaves, to name a few egregious examples off the top of my head. Millions of people have died throughout history that would not have if states were not acting to protect, expand, or create markets.
Second, while it's probably harder to get a rough idea of how many people states have saved than markets have, the number is not inconsequential. I certainly wouldn't suggest states are forces for unrequited good--there's copious valid criticism of them across the political spectrum--but I would suggest that they're hardly forces for unrequited evil, either.
In Argentina, the state collects a heft tax on property transfers when the propietor dies. So basically all property is donated from parents to children in-life.
Poorer property owners that cant afford or dont know better, or people stricken with tragedy in an early death are likely the ones that pay the most of that tax.
Conclusion, 'death taxes' are paid by the poorer half and hence worsens inequality.
On results: lets say that I were to tell you that all the money in your bank account is going to be worth 0 tomorrow. Are you going to invest that money in long term capital growth? Are you going to donate it to the government? I'd say the most reasonable reaction is drugs and hookers all the way!
The latter is definitely not great economic policy.
And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
Inherited wealth is anathema to meritocracies.
Well, this is were we clearly disagree. I am very certain that if i knew that i was going to die in 6 months, id be burning all my money into some kickass 6 months with "Burguers" and "Premium Tinder accounts". Consumption vs Investment is a core battle between Keynesian and Chicago School economics, so it depends on which you subscribe.
> meritocracies.
I actually do wonder who argues in favor of meritocracies. Sure as hell not liberal-economics.
"Get what we deserve? I hope to god we don't get what we deserve" - Milton Friedman.
> And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.
This just compromises the original concept of equality of opportunity: if you do that, anyone below 50k will be in an unfavourable position relatively. So what you did with that limit is imposing something on a group, intended to be a minority that wouldnt be able to repeal such rule. The fact that these rules end up like this has been extensively exposed by people like MF.
Its like saying that you are going to base justice on "protecting good people and punishing bad people".
I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
That's exactly what our justice system is... Sometimes we fail at abstracting our morality to the courts but that's exactly what our goal is.
>I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.
So your logic is "people usually use meritocracy as a knock against capitalism" and then establish your premise? "meritocracy is bad"? Doesn't make any sense. A perfectly meritocratic system doesn't exist and probably never will but systems which try to promote equality of opportunity are generally good. Our defense of "meritocracy" comes from the Rawlsian veil of ignorance. Behind it, it becomes obvious you would want to live in a society which provides a relatively equal chance for everybody and which, if you seize that chance, will reward you.
But you can have varying levels of inequality and the extremes are probably not healthy. My suggestion above wouldn't create perfect equality, it just fixes the broken incentives we currently have that reward us for hoarding wealth and penalize us for earning it.
The F-150 is the best selling vehicle in the US, and they're certainly not all going to people in the construction industry.
And $50k/yr is more than enough to save money in most parts of the country. That's a good salary.
What economy doesn't have inequality?
[0] https://en.wikipedia.org/wiki/Chartalism [1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory
Having taxes to have circulatory value sounds pretty dumb to me.
There is an inherent value to a currency system, and that value amplified by network effects. The government definitely anchors that network (through many mechanisms, not just taxation), but there's still a lot of inertia there regardless.
What other (governmental) mechanisms do you view as anchoring the currency?
Well, the primary reason is that US dollars are declared by government fiat (hence the term) to be "legal tender for all debts public and private". You can't legally refuse to take US dollars (in the United States, obviously ... other countries give their own currencies a similar status). That seems only tangentially related to whether the dollars come from taxes or printing presses.
Government accepting payment for public debts in legal tender... is taxes. They're the first market maker for a fiat currency. It's certainly possible to just run printing presses, but that typically leads to hyperinflation and the replacement of the currency.
This spring I cut very high pine because it shadowed my entire backyard and I want to grow more smaller trees on the perimeter.
If you want to tax wealth gains as ordinary income there should be an acknowledgment of inflation. In practice you end up with roughly the same amount of money going to taxes and a much more complicated system. In this example it would raise the investment income tax revenue by 33%, not the 233% difference in tax rates. But the index fund 4% and the 1.7% inflation were pulled out of orifices and our predictive capabilities are so reflected.
And more to your point, we already have a defacto wealth tax in the US because inflation is not deductible. If you hold a bond paying 2% per year, and inflation is also 2% per year, you pay tax on those gains even though you've made a post-tax loss in purchasing power. At 2% long term inflation, the defacto wealth tax works out to be the 2% multiplied by your capital gains rate, or from 0.47% to 0.74% for high earners depending on what state they live in.
We have actual wealth taxes, too, in the form of property taxes.
The argument against a wealth tax, is that it penalizes savers, and rewards spenders. Which is not what we want as a society. It's better for both the individual and for society if people invested their money into productive enterprises, instead of spending it on luxury goods.
If the goal is to provide a more egalitarian quality of life across society, this can be perfectly achieved through an income tax alone. Specifically, by treating capital gains the same way as salaries, and by increasing the marginal tax rates for high earners.
Sure, that is a reductionist argument but so was yours.
The real argument against taxing wealth is that it isn't really feasible; you'd just encourage banking in other countries or buying up a lot of land.
I also agree that capital gains being taxed at a lower rate is insane and makes sense only when you realize that's how politicians tend to get wealth.
Inherited wealth is another matter.
Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.
"The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.
Is there a limit you see in taxes?
Do you have investments yourself? Maybe you donated all of your investments to the government after realizing how little you were being taxed?
Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.
It's arguable whether giving government more money results in government working better.
By some accounts government is a demonstration of waist and an exercise in excess.
Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".
We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.
https://taxfoundation.org/why-capital-gains-are-taxed-lower-...
That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold.
And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains.
It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all.
It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work.
And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.
Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan.
Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends.
As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.
The 'average Joe' is, by the numbers, consuming more than they are producing. There are two ways this can be sustainable:
1) Transfer from economically productive to economically unproductive individuals
2) Net economic consumers become net economic producers. In practice, this would almost certainly look like spending less and investing more.
The argument of my grandparent seems to be that incentivising the _reverse_ of (2), ie net producers to become net consumers, is a terrible idea that will make the fundamentals of the problem worse. That argument is good as a matter of principle. It is particularly relevant in the current context of America.
Saving is paramount to growth in the classic economic model.
Another word for savings is "deferred consumption". If I earned 1000 dollars this month, and spent 700, I have 300 in savings, or, put another way, I deferred consuming 300 of those dollars.
Now, 300 in a checking account doesn't do anyone any good but me, but if I took half of that money and invested it w/the bank at a 7%/year interest rate, I'd be investing $150/month, and once I started getting that return back, I'd be getting $160.50 back.
What that does for the bank is gives it capitol to loan out to businesses.
If someone went to the bank and got a loan of $150, with a promise of paying it back at 9% in a year, they'd borrow that $150, pay the bank back $163.50 in a year, and the bank would pay me, the original creator of those funds, $160.50. They'd get a profit of $3.00, which is the difference between loaning that money out at 9%, and paying me back at 7%.
If the bank couldn't create money out of thin air, and doesn't fraudulently loan out customer's deposits, the only way to obtain a loan would be if someone else deferred consumption.
Obviously, banks can create money out of thin air (by loaning out funds on deposit), and when they do so, they don't have to give the money back with any interest, so they do. They can loan out $150 at 5% (cheaper than anyone else, perhaps!) and they can keep all of the profit, or $7.50. (more than twice the earlier profit of a non-fraudulent loan.)
I suspect OP subscribes to a more "savings-based economic growth" theory, in contrast to a "consumption-based economic growth" theory.
I obviously am an advocate of the savings-based approach vs. consumption-based approach.
That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.
The crash is an inevitable response to the boom, and any policy that wants to have booms without crashes is a logical fallacy.
I hope this helps a bit! I can gather some more sources if you're curious, but the basic gist is in accordance to the Austrian school of economics. Read more on that, and you'll encounter much better explanations than mine!
:wave:
Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?
I'll accept that some of this is tax shenanigans to defer US repatriation... but only some of it.
(Still an honest question. I've never understood this about the Austrian school.)
To be fair, Austrian school of economics is more occultism than anything else in the field, while Chicago School Economics (Milton Friedman&co) have more accepted models and economic ideas. The 'neoliberal' model as far as I understand can't really explain corporate cash hoarding. The situation today is very unique: historically cheapness of money could easily provoke inflation, which would promptly push any cash hoarder to spend.
If the U.S. had a small spike in inflation the whole thing could change quickly.
I'm not an Austrian economist but I don't know why it's so far fetched that Apple is simply saving the money for the inevitable fire sale ...
Why buy Disney today when you can buy Disney and Ford tomorrow ?
As a shareholder, because that money could be put to productive use today, rather than waiting for a future which may not come. To my mind, that's why the pressure for Apple to pay a dividend finally built up to the point that Apple now pays dividends.
Imagine if banks couldn't 'print their own money', then businesses would depend on people investing to get funding and demand far outstrips supply. So we'd have economic contractions on a massive scale.
You can probably guess this puts banks in a very privileged position. Hence the high requirements for being able to start a bank of your own, and the government regulation intended to control inflation and fraud.
First: wealth inequality is the result of persistent and pervasive income inequality.
Second: there are frequently individuals with very-highly-fluctuating incomes. Performing or creative individuals in particular -- actors, writers, filmmakers, musicians, athletes -- may have a few good, and many lean years. Taxing their good periods excessively would actually be counterproductive.
Taxing nonproductive wealth -- withheld or idle capital -- would put it to productive use. That's the fundamental principle of a land tax, as advocated by David Ricardo and Henry George. That concept fails to properly account for the withdrawal or degradation of natural capital, often at tremendous rates relative to the financial profit booked, and a case where natural capital is simply an off-books aspect of activities.
Ensuring that all citizens can meet the fundamental needs of life is crucial -- something Adam Smith, David Ricardo, Robert Malthus, Karl Marx, and John Stuart Mill each advocated for. "A man must live by his work" -- Smith.
"it's not what you earn it's what you keep" - someone on the internet
A world with a few super-heavy investors may not be as effective as a world with a more distributed (democratic) investor base. Fewer investing eyeballs, more tunnel vision.
I disagree. Wealth provides financial security to an even greater degree than high current income. Wealth provides the means to move your family to a place where they will be safe and thrive. Wealth provides a means to start the next generation with a leg up, financially, socially, and academically. High current income can go away next year for most people and is often not portable to a new city or country. High current wealth is far more durable.
I don't think it's the billionaires that are the only "problem". Those with 50+ million USD also live a life essentially devoid of the concerns of financial catastrophe.
I see an incredible amount of logistical challenges in implementing an annual wealth tax (though some countries already do so), but far fewer philosophical problems, even though I am overwhelmingly likely to be one of those targeted by a wealth tax (low single digit millionaire household from 25 years of working, saving, and investing).
I think it good social policy to institute an additional amount of drag on wealth accumulation, preferably by directly taxing it (annually or upon transfer), rather than further penalizing productive income-generating activities that are already taxed at nearly 50%.
Yes, but unless you're talking about a wealth tax in excess of 10%, this is not going to change. Someone with multiple millions of dollars in diversified investments will always be financially secure, unless we're considering drastic measures like a communist revolution.
Regarding all the benefits of wealth you mentioned, note how these benefits only arise when the investor liquidates his investment. Hence my point that instead of taxing wealth when it is being productively invested, tax the wealth at the point of liquidation instead.
I'm also in favor of high estate taxes, but that's an entirely different tangent.
An annual wealth tax of 10% would wipe out most wealth concentrations within 50 years. I think such a level is absurdly too high, though.
Looking at Switzerland as an example, I think 0.25% to maybe as much as 1% range is far more reasonable (roughly in range with their wealth taxation today) with a per-household exemption of $1MM or thereabouts [to prevent nuisance calculations over $10 in taxes].
> note how these benefits only arise when the investor liquidates his investment
"essentially devoid of the concerns of financial catastrophe" is a tremendous benefit that confers to the wealth holder without need of spending the wealth.
We can of course quibble about the details... Mostly just trying to shift the way of thinking and talking about a UBI...
I also think that UBI in its first version needs to be more like $600/mo/adult. It's going to be austere for sure, but a figure much higher is not supportable (and so DoA when proposed).
The real fuel of the economy is money being spent on Apple products, walmart, amazon, --hell even yachts/airplanes (somebody has to build those)..
To fight income inequality, I think we need to tax at the point of investment.. --if you buy anything you're taxed on it..this includes investments/stocks/bonds/etc... just flat consumption taxes... give a UBI to offset the poorer folks...
But have a mandatory flat tax...do away w/ the IRS/income tax. If you're not a U.S. citizen and not getting UBI sorry--but you're sales tax will not be subsidized by UBI--and if you're here illegally/unpapered -- you're now a tax payer congrats we can stop trying to deport everyone since now we make more tax money off of them!
But I'm not an economist and am somewhat skeptical of macro-economics in general, which seems a bit like reading tea leaves.
Even if you if you don't buy into supply side economics, I think "Money doesn't do anyone but the holder any good sitting in an offshore account" is somewhat misleading. Savers and investors, through loans and capital, certainly help someone.
The economic principle you're looking for is "velocity of money". If you think of a GDP in terms of a multiplier in how often/fast money circulates, then you can analyze whether investment or spending is more important.
The second economic principle to look into after that is "marginal propensity to consume".
The vast majority of money people invest doesn't go into giving companies capital, though.
It goes into people selling pieces of companies to each other. The very first time the share was bought, the company got some capital, and the vast majority of money people invest is not going into initial purchases of shares.
Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.
Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles.
That doesn't make a wealth tax entirely unworkable, though, in my estimation.
Income: A maximum income target and a 'minimum' income target. These two numbers would be plugged in to a single non-linear formula that applies to all. The more someone makes, the more they're taxed (they would always take home more, but for every dollar over they'd take home less of that dollar). B.I.G. could be built in to this formula as a third number (mostly raising the floor); but to me the minimum number already sounds like it is this number.
Wealth: Some savings is a good idea. Having a year or two of runway (disaster preparedness). Saving to move in to a house. Investing* in active things (stocks/bonds/etc) for retirement. Owning your own means of production / transportation / housing (within reason).
Wealth is more static, when wealth suddenly shows up it should be taxed as income. When it's held over time it should be taxed at a much lower rate, but still taxed (every period, IE year). Society should agree on a divisor that is fair, and how much different types of wealth are discounted. 'wealth' (divided down) would thus be figured in to the total tax liability on the compound curve I described in the income section.
If a major function of government is to protect our property (land, savings, boats, cars, etc...), then it could be said the more property we have the more we benefit from government protection and the more we should pay.
Another function of government is to facilitate trade. For this service, ALL transactions should be taxed (including payroll).
If you look at the totality of this, the actual tax rates would be nominal for every "normal" individual, thus it wouldn't necessarily be regressive. We're talking about a 1% tax rate on property and ALL transactions.
To me this makes sense on so many levels. It captures money from everyone participating in the system and it captures it relative to the person's level of benefit from the system.
The hardest part would be tracking. However, if the tax is nominal and the punishment for cheating is high, then it seems like it wouldn't need outrageously intrusive controls.
If Starbucks owns coffee plantations, roasters, logistics, stores, the cup of coffee you get might be untaxed prior to you paying for it. If a competing coffee company performs the exact same steps, except uses third party farmers, logistics, roasters, and rents their storefront, that cup of coffee was taxed 5+ times before you bought it.
I don't see the societal benefit to encourage vertical aggregation like that.
If there are two layers in my coffee bean acquisition I'm losing the profit made at every layer, so of course I would want to own those layers and capture that profit before we even add a 1% tax.
But vertical integration comes at a risk, which is why only the biggest players will attempt it.
Now, add a 1% transaction to those two layers. You're now losing 2.01%. But at each layer you're already losing 15% net profit made by your supplier. I'm not sure you would change your perspective on vertical integration for 2% when you're already leaving 15-20% on the table.
I wonder if we wouldn't see a shift in grocery store form with the substance remaining as today.
Rather than buying a bottle of Coke from Star Market, you might be buying a consigned bottle of Coke, with Star Market serving only as the marketplace (avoiding Star buying the bottle from Coke), and where Coke is paid directly by you as part of the transaction. Grocers operate on a terribly thin net margin as it is. They would have a lot of incentive to avoid additional transactions in the supply chain (and there's some societal benefit to keeping grocery prices low).
I'm not so much arguing against [though I do oppose a transaction tax] as I am brainstorming how the implementation of such a tax would create different behaviors in the market to compensate or avoid the tax.
https://www.vanityfair.com/news/2017/09/the-obscure-economis...
A janitor working as a contractor may not have the chances the people in Kodak had back in the day. But at least he/she still gets to work a shift, gets paid for overtime. There is nothing stopping that person from pursuing their passion and create wealth. The reward of the wealth may be monetary or not.
On the other hand, let's think about the "privileged" workers. The more you get paid, the less life you have. In our current state of capitalism, if the employer pays you a lot, he/she wants to own you and use you until nothing of you is left. The current system doesn't care about long term, it's all about the short term. The people who break are replaced, and because people break, the workload gets heavier. But there is an unlimited demand of new workers fresh out of school willing to work under the same conditions. The work starts in the morning at 9 am, you can't be late, but you can't leave until the work is done. You go home, sleep for a few hours and start again. Sometimes you work on weekends and you definitely take a laptop to your holiday (if you have one).
If you work this hard, generate wealth and you know that if you stop working, all that you've endured would be for nothing, that would be inhumane.
That would be commendable had the company done well, but perhaps having a janitor CTO contributed to their downfall...?
Interesting... I'm developer at a comparably tiny company, I get paid slightly less than her per hour but a larger salary overall, and my rent is less than half of hers (and it's not considered cheap around here).
I know i'm not paid top notch but all I read here is it's hard to be a janitor in expensive places.
[EDIT]
Maybe this is not a fair comparison, I'm not paid hourly, and all I have revealed here is that I work rather a lot of hours. She does 44ish hour weeks, and to be fair as a cleaner you are unlikely to physically be able to work more (consistently).
The ratio of pay to rent is ridiculous though, (that is a fair comparison) my rent is way under half hers. If housing is that expensive in that area then janitors should be paid more...
I think there's a false tendency to blame Apple for this predicament. It's not Apple's responsibility to provide for the welfare of our country's citizens, it's our responsibility - and it's only through our government that we can really change things. No vacation, benefits, and 80% of one's paycheck going to rent is our government's responsibility to fix, not Apple's.
The most obvious policy here would be some sort of universal basic income. This would naturally prop up wages for the low-paying jobs like janitor that nobody wants to do.
Having to work under those precarious conditions for such lousy pay (relative to cost of living) and no prospects for advancement must be a downright miserable experience, the literal definition of wage slavery. 6pm-2am shift means she probably never even sees her kids during the week. All for a meager $600/month in disposable income after rent is paid (which when you're a contractor without vacation and benefits isn't much). And she'd never be allowed to complain about it because she'd be told that she should be grateful to have a job, there are people in Africa starving, she should've studied harder in school, and she shouldn't have had kids. What a world we live in.
Many oppose universal basic income on ideological grounds, but enough with this ideologically-driven bullshit that ignores the unnecessary suffering of the wage slaves at the bottom. Nobody in a first world country should have to live a lowly life like that janitor.
[0] https://en.wikipedia.org/wiki/Speenhamland_system
With UBI, people get the money regardless, so employers have to compete with what people can get without working. If you only offer them a meagre income boost for a gruelling work week, you're going to struggle to attract people.
Are there guarantees that UBI will always be comparable to a living wage?
UBI and government job programs aren't mutually exclusive. I do think the government should create more jobs for the public good, especially in scientific research and development. But either way, I think a UBI is necessary so that people have the option of working for themselves rather than being forced to answer to someone else. UBI is like the libertarian approach, while government jobs are the more authoritarian approach. I think both should coexist.
I guess there's no guarantee that UBI would be a living wage. Regardless, I think we need a UBI. Money is one's claim on society's resources, and since we're all shareholders in this economy, we should receive a citizen's dividend, even if that amount isn't that much (eg. Alaska's Permanent Fund)
I don't see how either a UBI or a job guarantee limits employees from walking away from their jobs. The presence of a job, or an income, hasn't stopped many people from starting their own thing.
> But either way, I think a UBI is necessary so that people have the option of working for themselves rather than being forced to answer to someone else.
The option to work for yourself isn't taken away by a jobs guarantee. I can see how the presence of a UBI would permit people to do things no one would pay for otherwise. As idyllic as I really do think that sounds, I suspect that examples of people doing things no one would pay for would be used over time by UBI opponents to drive down the value of the UBI to below a living wage.
> The option to work for yourself isn't taken away by a jobs guarantee.
Obviously. Job guarantee programs however still don't allow you to truly walk away from your job unless you're able to financially support yourself, whereas a UBI does.
A UBI that's actually enough to replace a job has the benefits you describe, at the cost of UBI times the population. A UBI that's not enough to replace a job doesn't have the benefits you describe, has the negatives I describe, and costs almost as much.