This could a bit tangential to Sam's core point, but there is a lot of value that can be added to society that ends up reducing GDP (especially true when we talk about things governments should be doing), so I am not sure aligning everyone to maximize that singular metric is necessarily the best thing one could do.
More directly relevant to the core point is the short-term/long-term question: as also evident in the stock market, it is not clear that the companies controlled by shareholders are better focused on the long term than the ones where founders have majority control.
Can someone actually explain what Sam wants to do here? I've read the post 4 times and I still can't see an y sort of plan, numbers, etc to actually critique,
Which is odd because he specifically ask you to give feedback but never follows through on presenting the actual idea.
He does motivate why he thinks a share of the GDP is so he gets the why, but never actually gets into the what, and how.
I mean the GDP isn't just something you can siphon off money from and give it to someone as it's not a thing that anyone owns.
So if you want to give out a portion of the GDP, I think what he really means is pay a universal income that is locked to GDP growth, but he never really says this.
The difference between this and standard UBI proposals is that standard UBI gives everybody a certain fixed amount of money, whereas this gives everybody a certain percentage of GDP.
On the nose. Reads like he picked up a copy of Lakoff's "Don't think of an elephant!"and is attempting to apply framing theory. Great job sans the lack of details–though that in itself is probably intentional.
It's useful to try out different metaphors and see what sticks.
If you want to brand basic income in a way for conservatives, advocate for a Negative Income Tax (Friedman's idea) as an alternative to welfare bureaucracy.
Basic income isn't like Negative Income Tax at all. The core idea of BI is that no matter how much money you make you always get the BI, it's "basic".
NIT is just moving the progressive tax system into negative values, which means you subsidize the poor but once you make enough money you won't get subsidized.
Take the NIT situation, with a set of people i=1,..,N paying some amount X_i (maybe negative) of taxes. Now give all of them the same basic income BI, while changing the taxes paid [received if negative] by each of them to Y_i=X_i+BI. Do yo see the equivalence?
Yes, of course the rich are going to end up paying for BI no matter what. At some point the government is just taking $1000 out of your wallet and handing it back as BI, depending on your income.
But this is explicitly what the proponents of BI want. It's as much about the optics as who pays for it. I.e. the idea is to create a program that draws its political support from everyone getting paid a check, similar to how Roosevelt enacted social security to include all citizens, even those who were millionaires and had no need for it.
Which is what sets it apart from Negative Income Tax.
So it’s not like it at all, but it’s the same and it’s just that it looks different. Ok then. I can see why talking about receiving money is more popular than talking about taxes.
I'm not an advocate for BI but I think I've given you an accurate summary of what BI proponents would say about a NIT. E.g. listen to this Econtalk episode[1] where the host / guest have a debate on this exact topic.
Your argument that BI would be revenue neutral for some taxpayers and therefore we should just use NIT to avoid the sillyness of the government taking $1 from you just to give $1 right back to you isn't wrong, but it's missing what BI proponents are trying to achieve.
It's mainly about achieving roughly the same ends with different optics, and the comparison to Social Security is often brought up. Enacting any system like this is going to be politically difficult, and BI proponents believe that "everyone gets the same" is an easier sell than "this is another subsidy for the poor".
It's a bit more than just optics: there even is an economic advantage to guaranteed short term loans. If you know the government hands you a check April 16 every year, even if that money goes back into your taxes the next April 15, you still have a year to make that money work for you, however you see fit. It forces that money to circulate, and that can be useful to economic activity.
> Basic income isn't like Negative Income Tax at all.
UBI is identical to NIT. The names are different framings of the concept, but the policy is identical and widely recognized as such, which is why the experiments frequently referred to tests of UBI are also the ones characterized as tests of NIT.
> NIT is just moving the progressive tax system into negative values
“Progressive” refers to marginal rates, which remain non-negative in NIT; NIT just has a flat personal refundable credit (which is equivalent to a flag annual payment) included. Which is exactly what a UBI is, except the payment in some forms of UBI is outside of the tax system, but that implementation detail is irrelevant: whether it's called a tax credit or a non-tax payment is still the same thing.
But I'd like to elaborate a bit here. UBI is not identical to NIT because the difference is marketing, not math. Most of the electorate's basis for evaluating a given policy is not to perform a mathematical comparison of two systems and checking whether they yield the same results. How something is done is as important in politics as what gets done.
Which is why, as I've pointed out, BI isn't like NIT at all. The difference is how the idea is going to get sold to the public, not what each taxpayer is going to end up contributing to the system as a function of their income.
> UBI is not identical to NIT because the difference is marketing, not math.
But it's not even there, as proponents of both have stated that they are equivalent, and alternate names for the same thing, and they are marketed with the same arguments, and are widely acknowledged by their proponents to be names of the same thing. That is, the marketing isn't different, it's the same, both in content and on that the marketing itself recognized the equivalence.
There are UBI plans that are definitely not equivalent to NIT plans. Some UBI plans require UBI to be taxable income for them to work. In that way they become more like guaranteed short-term (year long) loans for upper middle class/rich tax brackets. There's no similar proposal from the NIT side.
> Some UBI plans require UBI to be taxable income for them to work
That's still equivalent to an NIT (specifically, it's equivalent to adding the kind of refundable credit that creates an NIT, and reducing the standard deduction by the size of the credit, which may result in a negative standard deduction.)
The proponents of both have, in the words of a paper on the subject[1] agreed that "the two achieve the same distributive outcome through an appropriate tax-benefit system, [but] are fundamentally different from economic and ethical points of view".
Consider trying to introduce a universal health care system. You might say why do we need a system that subsidizes Jeff Bezos's health care? He can damn well pay for it himself, he might even agree since it's going to cost him less in terms of his tax contributions.
That's the equivalent of trying to sell NIT. Right out of the gate you have to not say "this is for everyone" but "it's just for the poor, but don't worry because...". That's what I mean by the marketing being different.
Of course with UBI the benefit is literally fungible, it's money. So it's really not like universal health care, but in the minds of a lot of people it is. They find it easier to accept the state providing a service if it's provided to them as well, even though it's a net cost center for them.
While I agree with what you said, the counter-argument is that we do already pay taxes for the services that we use. You could argue that those taxes are too low because they don't capture the "gestalt" of civilization. But if you pursue that argument, then all humans, not just US citizens, should have equity since all humans contribute to the gestalt of civilization.
> Can someone actually explain what Sam wants to do here? I've read the post 4 times and I still can't see an y sort of plan
Run for office perhaps. In other words, if you can't discern a plan, maybe the post is more about Sam than it is about a plan.
(NOTE: I do think he has a plan here, just very back of the envelope. I think he's mulling over ways to incrementally roll out UBI, which if you think UBI is a good idea, figuring out an incrementalist approach is hugely crucial, important work. I don't think UBI is a good idea, but I do think this post is about a real thought and not just Sam posing or something. I have faith that there's real intellectual sincerity here.)
I think it would be an annual bonus for some Americans, and an annual tax increase for others. As someone who, I suspect, would be in the second group, I feel like we do enough of this kind of thing already.
And as someone who, I suspect, would be in the second group as well, I feel like we do the tax increase part way too much, but we don't do the annual bonus part nearly enough.
That's because any policy which gives free money unilaterally to 320 million people is going to be incredibly expensive. 14,000 * 320 million = 4,480,000,000,000...$4.5 trillion. Just...no. This is more than the Federal government takes in every year currently ($3.27 trillion).
Alaska does this [1]. The only problem with the idea is that some things aren't considered GDP while they grow the pie - open source and volunteering being good examples.
This is why research grants and outright government spending is a good tool in the toolbox. People are still paying for it through taxes, but because of the indirect nature we can judge the problem a bit more on its merits ("of course we want cancer research to happen and be funded")
Universal basic income. He wants to (numbers _entirely fabricated here_) tax 20% of US GDP and then give that money evenly to all adults, therefore giving every adult American an equal share of 20% of the GDP (which would be about $14,000 per year per adult).
It's an abstraction. You can tax people/things at a rate that causes a number of dollars equal to 20% of the GDP to end up in the state coffers (which brings up its whole own class of issues - what, exactly, do you tax to get that money? Income? Wealth? Stocks? Vanity license plates?).
Yeah and what adverse impact is it going to have on economic growth when incentives are taken away from long term investments and towards short term consumption that would be stimulated by welfare payments to the general population? What adverse impact would it have on the economy 1, 5, 10 years out? The U.S. economic engine is a wonderfully effective thing and among the best modern marvels. Taking 20% of that arbitrarily and twisting it into something else could have deep consequences.
Of course you can tax GDP, every country in the world already does it. Surprisingly few people seem to be aware that GDP is the same thing as GDI, the sum of all income earned in a country in a year, the vast majority of which is already taxed.
About 60% of all US income (GDI) is compensation for labor (salaries, wages, benefits), 40% compensation for capital (dividends, interest, rents). Both parts are already taxed, at varying rates. The total amount of taxation is about 33% of GDI, while total spending is about 36% (the deficits is filled by borrowing).
Since the entire article looks like a big tax and transfer proposal, it's pretty bizarre to omit almost all basic government accounting, except for a throwaway footnote. The analogy with joint-stock companies or Homestead acts are neither here nor there. The government owned a lot of American land back then. It doesn't not own a large share of of current American corporations, nor many laborers. So the way to pay any significant "citizen's dividend" is boring old taxes.
He proposes a soft version of Socialism [1]. You can own a company but you will have to pay additional 20% income tax or 20% VAT (I am not sure how to gather in taxes 20% of GDP).
[1] https://en.wikipedia.org/wiki/Socialism "There are many varieties of socialism and there is no single definition encapsulating all of them, though social ownership is the common element shared by its various forms"
One possible implementation would be to build an index tracking fund that tracks a significant portion of the US economy, and pays dividends to all citizens.
It seems like it would be difficult to lock an entitlement program to GDP without encountering funding gaps at some point, though I suppose a funding gap hasn't stopped the Social Security program from continuing to pay out.
This is remarkably short of specifics, justification, or data for such a massive undertaking. Sam, you'll make a fine politician. The lack of rigor doesn't bother you, though?
Context: Y Combinator has funded an experiment in Basic Income, which basically gives everyone in (a city, a country, ...) a guaranteed income independent of labour/capital. A (Universal) Basic Income should let people focus on art/science/... if they want, and ensure that everyone continues to have an acceptable live as automation makes more and more jobs obsolete.
This appears to be the same idea, but in capitalist language (Americans as stockholders in the US.)
I'm a little unclear how this would work in practice. What is the financial instrument and is it equity in the government or equity in all the companies in the US?
I see no reason why companies would do it and no incentive to take a part of the government (is the US government going to pay a dividend?), I'm not certain everyone having a share they couldn't trade would be worth it. I think the ability to trade state monopolies was tried in Russia, how is that looking?
Finally isn't the stated aim of YC to create companies that are monopolies and use network effects to entrench their positions, accumulating wealth into a few hands?
If you think of the population as the government (a democracy, in other words) then our gross domestic product is our collective revenue. How we allocate that revenue to different accounts -- yours, mine, roads, military, etc. -- is just accounting.
Meta question: if this essay about "American Equity" is another way of proposing "universal basic income", why is there circumlocution around UBI?
Possibilities are "UBI" has been poisoned with negative connotations can you can't talk about it anymore. That's possible but it seems like the overwhelming sentiment on HN and reddit is massive support for it.
As far as I can tell, "UBI" doesn't have negative connotations such as the phrase "welfare queens". UBI is already widely understood. What's the motivation for the neologism "American equity"? (My guess is it's a UBI-indexed-to-GDP.)
For one thing, it allows the branding to focus around Altman’s specific idea instead of the wide variety of UBI ideas. I think it would make a program more defensible if it had a new name, so that the proponents of that program only have that program’s ideas to defend and not the giant flank of every UBI implementation ever proposed, all lumped together by a common name.
The book I linked to is a couple hundred pages long, explores moral and practical issues, and has almost 20 pages of notes and citations. Far from attempting to "kill the discussion", which is in fact what your blithe comment is attempting, it explores the topic of inequality in a uniquely deep way.
It is a provocative claim that I think the book succeeds in showing to be true.
It is a worthwhile book and, even if you disagree with it, I think you'll find it intellectually stimulating. If you think you'll read it, I'll happily buy you a copy, just PM me.
Sure, equal is unfair. But that's not what people who are concerned about rising inequality are asking for. They mostly want inequality to stop from rising. So what's the point of showing that equal is unfair?
He could start with his companies giving out a much larger share of equity to their employees. I always find it fascinating when VCs advocate for things like UBI or this American Equity plan while at the same time being a major contributor to income equality. They could do a lot right now bit instead they make some vague proposals while keeping their money.
This is generally what I see as a better solution to a UBI; the silicon valley/start-up model of giving employees equity in the company and a wage. Just extend this to every hire (not just engineers) and at all stages of the company (not just start-ups).
A UBI is just a round about way of distributing the wealth generated by automation when the real fix should be having broader societal ownership of those productive assets.
YC is a competitive accelerator that gives you a small seed investment in exchange for a few things, but mostly for the expert advice. On this topic, the advice to companies is to be generous with equity. What else should be done?
My usual objection to basic income applies: Basic income in some form already exists in most European countries. It's just a not-that-big parametric change to our current systems plus a change in mentality and social perception of welfare.
Suggesting that we should implement basic income of x euros is roughly equivalent to suggesting that we should increase the welfare unemployed people get today. If it was politically / economically feasible, we would already have it by now.
I don't know about the rest of Europe, but in my corner you lose that income if you start getting a paycheck, which is a problem because it discourages work. UBI means you still get paid even when working.
Because the impact of any one individual on the economy is so small, and because people can't be "fired" from the US like they can from a company, the free rider problem could be real. This could end up just being an added cost to the country that doesn't actually increase productivity or incentives in a meaningfully different way that other forms of putting more money into people's pockets (lower taxes, universal basic income, etc)
I think it is awesome though that influential people are putting forth creative ideas on how to make our country better. We need this
Look at Oklahoma if you want to see the US version of a petro state. If we're going to do the petro state thing anyways, might was well run an interesting social experiment instead of just enriching a few huge corporations while shuttering our schools.
> for citizens will make US a weird version of Petro-State without Petroleum
The US has a technology sector that is as much, if not more, productive than a resource extraction industry. Why not use that sector to raise quality of life for citizens?
People already have a share in the GDP. That's what it is, the total domestic product, the sum of all the little parts. The problem is not that people don't have share in it (and this goes for every country, not just for the USA), but that they have a disproportionate share in it.
Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale. That will have a lot more effect than some fiction where you get to do a bunch of make-believe bookkeeping.
Of course in the current political climate this will not happen, in fact the reverse will happen, tax cuts for the rich at the expense of the poor and the middle class.
This idea is basically UBI couched in capitalist terms. If every American gets a share of GDP, and GDP is concentrated, then that means that either 1) the share of GDP that each person gets is tiny and inconsequential (see: GOP-style tax cuts) or else 2) you need progressive taxation.
Another difference, aside from wording/marketing, is that the UBI is implemented as a progressive redistribution of future wealth generation as opposed to a tax on existing wealth ("as the economy grows...")
> This idea is basically UBI couched in capitalist terms
"Universal Basic Income" is already a radically capitalist idea. It's often discussed using terminology borrowed from Marxism and socialism, but it couldn't be any more capitalist of a construct. We're just not used to hearing it discussed with that language.
Could you clarify what you mean? a UBI seems like pretty straight forward wealth re-distribution which I generally don't see described in most capitalist philosophies.
Everyone gets $10k. Obviously not everyone is going to pay $10k in taxes otherwise the system would be pointless and we could instead just eliminate taxes altogether. Those at the bottom would benefit, those at the top would pay more in taxes, and somewhere between is a break even point.
Each act of homesteading is an act of force against everyone else, who previously enjoyed free access to that land/resource. A UBI is a payment for the lost access.
While I don't disagree with this, I don't think that Georgism can justify a large enough payment to have the effects that people expect of UBI. The value of land (meaning all natural resources in their natural state) is ultimately pretty low compared to all the other value in the world. Per wikipedia, all US land is worth less than two times GDP.
It’s fundamentally Capitalist because its intent is to prevent workers from abandoning the authoritarian hierarchy of modern day corporate structures (which have served many quite poorly) and moving towards worker ownership through unions or other means. It’s paying off the poor and disenfranchised to prevent revolt against Capitalist ordering principles.
There's only a limited amount of stuff at any one time. Rarity and usage can make its worth different than other things. So it makes sense to track these things. Ideally, recycling allows recoup of most or all the material, which returning should provide the credits back.
It really then matters how much credits people get and thus how much resources and where. But then again, socialism and communism never talked about personal effects - but instead it talked of the machinery to create.
What the UBI enables is a migration that everyone gets the spoils of the machines of creation. The Story of Manna by Marshall Brain discusses more of how this might be possible.
This would address one (but not all) of my fundamental complaints about UBI though: What do you do when due to some disaster, you must pull back your UBI payments? Consider significant war losses, for instance. In this case the answer is that GDP would go down and so would the payment. (Though maybe we can't tie it to GDP per se, since in a war situation you can't afford to see your GDP rise due to forced construction and then also have to pay your populace more.)
That said, it addresses it structurally, but I still think the result would still be a disastrous political explosion if that ever did happen. UBI seems to be fundamentally predicated on the idea that growth and improvement are inevitable, the only possible way that things will develop going into the future, including any structural or societal changes that may develop as a result of UBI or GDP-sharing itself, and therefore there's no need to ask who starts swinging from trees the first time that UBI or GDP-sharing has to be cut back, and what disastrous decisions will be made on the basis of not wanting to be the one swinging from trees.
That's not even remotely a sensible argument, since we didn't have UBI then.
You are either not arguing in anything remotely resembling good faith or are not tall enough for this ride. You may have the reply to this unopposed; I'm done here.
UBI is usually proposed as a replacement for welfare, so you’d have one or the other. The potential for running out of money one day did not prevent us from having welfare so it shouldn’t exclude the possibility of UBI.
The ad hominem shot is surprising, given the straightforwardness of my position. I don’t understand why you are cross. Ah well.
If the situation lasts long enough, the standard of living falls.
Money exists to move goods around. If all the money is in one place, goods cannot move.
Money is not limited. It is an information measure of, variously, debts, or bidding rights to production. What it can bid on is limited, and how currency-denominated asset valuations change as money supply and circulation do, can also change.
But the problem in the case of a national disaster isn't that money cannot be produced. It's that those who would rely on money to address immediate needs (water, food, shelter, medical care, transport) have no bidding rights (currency, credit, grants) to transact purchases. You're balancing the interests of those outside the disaster zone (assuming there is an outside) with those in it. (Though this generally is the case.)
If the disaster is big enough, and rescue or infrastructure needs sufficiently high, those may affect national accounts and economic activity for a time, but it would take an absolutely massive shock for the impairment of raw productive capacity alone to impact the economy. Far more likely that buying power is lacking amongst a segment of the population.
well like many other attempts to inject more government control into our lives; usually to "get back" at someone who is "unfairly benefiting/abusing/etc/etc"; those with the proposal wrap it up in a grand egalitarian wording and market only the promises that sound good but are too good to be true. to sell it they sneak in seemingly related facts that are not debatable.
the one common response they all have when their plans are revealed for what they are and comparisons made to what others have done is always the same , we will do it right this time.
it is easy to prey on the greed of anyone by simply remaking it into the person having their stuff taken as being the real greedy one.
> Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale. That will have a lot more effect than some fiction where you get to do a bunch of make-believe bookkeeping.
Or go a step further do what nobody has the balls to do: tax wealth
That's what all these schemes are really trying to do, albeit in roundabout and inefficient ways. Taxing wealth has it's own complexities (unrealized gains and non-cash assets are the big ones) but it'd be saner than a negative tax (i.e. entitlement) calculated off GDP.
Just to clarify, nobody in the US is doing this, but it's not unheard of elsewhere. For example, Norway has a wealth tax of about 0.85% and there are some other examples at https://en.wikipedia.org/wiki/Wealth_tax#Current_examples .
Right. The bank owns 100% of the property. The "owner" is underwater. And the owner pays property tax. So "wealth" taxation is perfectly fine for that situation.
The drawback of taxing wealth is that it distorts markets, it discourages saving.
EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow:
> It's encouraging people to make their money be productive instead of stashing it under a mattress.
When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is encouraged by the interest.
> Everything distorts markets. The question is how to distort markets into providing the best outcome.
Indeed. And saving/investing is important! It's not a coincidence that the industrial revolution happened in a country with a secure established rule of law such that people could make investments without worrying about losing them at the whim of a dictator.
> In the long run, every dollar of wealth gets spent.
Not necessarily.
"Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors." [1]
Also, the top 1 percent owns 90 percent of wealth in the US [2].
"First, economic inequality has worsened significantly in the United States and some other countries. The richest 1 percent in the United States now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own as much wealth as the bottom half of humanity.
The situation might be tolerable if a rising tide were lifting all boats. But it’s lifting mostly the yachts. In 2010, 93 percent of the additional income created in America went to the top 1 percent."
> As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
I agree that a consumption tax can be combined with other policy to prevent the regressive nature of a consumption tax alone. This requires wealth be taxed in various forms (ownership of investments, land, etc).
Those dollars are going to get spent eventually; you just haven't waited long enough.
But the foreign assets issue is a peculiarly US problem, resulting from the US being almost unique in the world in the extent to which it imposes taxes on income earned in other countries. (The other such country is Eritrea, and the US voted in favour of a UN security council resolution condemning the Eritrean tax regime.)
> Those dollars are going to get spent eventually; you just haven't waited long enough.
I'm unwilling to wait until the end of civilization while citizens of the richest country in the world go hungry [1], go without shelter [2], and die due to not being able to put $50 together for their insulin [3].
Nobody has a Scrooge McDuck cash vault, not Apple, Microsoft, nor anyone else. It's all invested - even money in a checking account isn't actually there, it's loaned out to someone who spends it.
> the top 1 percent owns 90 percent of wealth in the US
Not to be a dick, but the above cited sources and you made assertions without anything pointing to anything to back them up. What reason do any of us have to put any stock in what you've written?
I don't think a citation is necessary. Just the roads in this country represent enormous wealth, and they're all owned by the government. Throw in the national parks, the national forests, all the government owned land (the government owns most of Alaska). Next, all the military bases and hardware, airplanes, ships, support structure. The infrastructure, NASA, buildings, waterways, riparian rights, and, let's not forget, all the money the government collects and spends every year.
As for how banks work, pretty much any book on how the banking business works will tell you that. Or you could watch that old movie "It's a Wonderful Life" where they give an accurate description at the end how banks work. And frankly, it's just common sense. Why would banks offer free checking? They're not charities. They need the money so they can turn around and loan it out. It's fundamentally how banking works.
I've never heard of a Scrooge McDuck cash vault outside of a comic book. Have you? (There is Fort Knox, but that's the feds, and it's not cash.)
More importantly, it happened in a country which forced people off their land at gunpoint, into urban poverty, where they provided a huge supply of cheap, fungible, and utterly disposable factory labor.
But that would run counter to the neo-liberal narrative... After all, the rule of law serves to protect investments, not the peasant forced off his land.
Where was the rule of law to protect said peasants? Perhaps the rule of law isn't actually necessary for industrialization - as long as capital is protected, everything is all well and good. Unless you're a peasant.
Urbanization was certainly important in the development of industrialization, in that urbanization is essential for all forms of specialization; but I would dispute the notion that having a large supply of cheap labour was important. To the contrary, since industrialization is the process whereby capital is invested in order to increase worker productivity, it is less useful where there is a cheap workforce, not more useful.
I agree that the rule of law didn't protect peasants who were forced off their hereditary lands. You'll note that it wasn't the peasants who led the industrial revolution.
Remember also that at the time, breach of employment contract by the employer was a civil matter the employee would have to pursue out of his or her own pocket. Breach by the employee was a criminal matter (see the Master and Servant acts, which essentially perpetuated feudal norms into the industrial age). It was also illegal for workers to "combine" -- band together to say that either all of them would get a higher wage, or none of them would work -- and organizing such a "combination" was also a criminal offense.
Like several major sectors of the US economy at the time (and later), Britain's "revolution" was utterly dependent on coerced labor, viciously enforced by the power of the government. But some people still like to think of those times as the good old days of "laissez-faire" and government "staying out of the market".
Now, you can argue that this was a "rule of law", just a brutally repressive one which systematically granted special rights to certain classes of people, but then you're on much shakier ground.
South America, unlike England, did not have captive colonial markets, that it could sell its mass-manufactured goods to. South America was the captive colonial market.
Perhaps that kind of distortion is a good thing. Perhaps the market isn’t an all-seeing all-knowingly omnipotent entity independent of the humans that created and participate in it.
IOW you should explain why “market distortions” are inherently a bad thing.
There are plenty of analogous policies in America. For example, universities are required to spend 10% (or some other percent?) of their total endowment each year in order to keep their tax-free status. This is why Harvard & Co. need to continue fundraising each year despite their massive endowments - they're massively discouraged from just 'saving' as well.
Everything distorts markets. The question is how to distort markets into providing the best outcome.
Other non-profit entities (such as private foundations) are required to spend a certain fraction of their money each year or pay taxes. Universities are exempted from that requirement.
from [0]: "Harvard targets an annual endowment payout rate of 5.0 to 5.5 percent of market value. The University's actual payout rate has fluctuated over the past 10 years, from a low of 4.2 percent in fiscal year 2006 to a high of 6.1 percent in fiscal year 2010."
The rich aren't stashing most of their money under a mattress. Gates, Bezos, etc are worth billions, but that wealth is almost all based off of the stock prices in the companies they own percentagess of.
Tax the ownership interest in equities, just as we have property taxes for land ownership.
We could also take the route of the Federal Reserve purchasing up equities (The Bank Of Japan does this [1]), issuing deposit accounts to citizens directly (trivial for the Federal Reserve to support this [disclaimer: I work in the financial services industry, and feel qualified to make this statement]), and providing UBI to those accounts using the Federal Reserve as an intermediary/conduit (lookout Blackrock and Vanguard! there's a new index fund manager on the block!).
Voilà, Citizen's Dividend.
EDIT: The Federal Reserve operates independently of the US government, and does not require Congressional or Presidential approval to perform this "monetary policy". [2]
"Although an instrument of the U.S. Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."
> Are you proposing their equity also be taxed "at rest"? How would that work?
Same way property is taxed. A taxing authority sends you a bill (based on duration of ownership), with the tax rate set by legislation. In this case, the custodian of your equity would send you your bill, with a copy sent to the IRS. I don't believe who accepts the payment needs to be defined at this time (although sending payments directly to the IRS or through your custodian are both trivial matters).
> It's encouraging people to make their money be productive instead of stashing it under a mattress. That doesn't sound like a bad thing to me.
It is, because storing money under a mattress is equivalent of investing in money itself. As OP said too, it is like you lent your money to all the other investors in the economy (because you taking that money out of the economy reduces the prices of capital goods, which means they can now acquire it for cheaper). This results in wealth creation, which you benefit from when you take the money out from under the mattress.
This of course, can only work as an active investment strategy if you have a fixed or predictable money supply. For an inflationary currency such as any fiat currency, you will just get screwed.
This works great for cryptocurrencies for instance, people keep talking about how nobody has any incentive to invest in Bitcoin projects if just holding it will make it go up. Well, when bitcoin holders hold bitcoin, bitcoin economy still grows, and the purchasing power of their bitcoin goes up.
The fallacy here is that there is a pure form of market that isn't inherently distorted by the man-made rules required bring it into existence at all against wilderness of nature's 'rules' of the wild.
Discouraging savings is actually the point. We should tax money that sits idle and provides tax benefits to money invested.
If you can build wealth around being active rather than just reaping the benefit of interest of interests then that should be encouraged rather than just grabbing and keeping.
Only in the most inefficient way possible. The 'problem' is banks are limited in what they can do with this money which ends up creating investment bubbles and other market distortions which hurt the economy overall. If you slowly transitioned banks so they could not invest this money over say 100 years the net result would not be harmful.
In the end money is not actual wealth, it's simply a representation of wealth. Anything that turns money into more money needs an intermediary where some cash flow is generated. And those intermediary's are often harmful see in excess like pay day loans.
>>The 'problem' is banks are limited in what they can do with this money which ends up creating investment bubbles and other market distortions which hurt the economy overall. If you slowly transitioned banks so they could not invest this money over say 100 years the net result would not be harmful.
Um, no. The type of investing you suggest includes the risk of losing the money. This doesn't work with commercial banks because they are insured by the federal government, i.e. the taxpayer. When people put money in the bank they expect it to stay safe. That's why the concept of a bank exists in the first place. If there was the risk of it evaporating due to bad investments, that would basically be more of "privatized gains, socialized losses."
I think you misunderstood my comment. Banks are currently allowed to loan out a percentage of their deposits IE: they need to keep say 10% cash on hand and can loan say 90%.
I am saying if your raise that percentage to 11% cash on hand not much changes. Then next year that becomes 12% cash on hand... until banks can no longer lend money.
At no point in this process is physical wealth destroyed only shifting how loans are created.
If the reserve requirement is 10%, the banks actually loan 990%. That is not a typo.
Of the deposit account, they keep 10% in the vault/Fed, and loan out 90%. Of that 90%, they keep 10% in the vault (9%), and re-loan 90% of it (81%). Of that 81%, they keep 10% in the vault (8.1%) and re-loan 90% of it (72.9%). Sum the series, and the effect on the money supply from loans and the reserve requirement is to divide the vault cash by the reserve requirement to get the bank account totals.
Raise the requirement from 10% to 11% and the circulating money supply drops from 10 x vault cash to 9.1 x vault cash. Raise it again to 12% and that drops to 8.3 x vault cash. To keep things steady, you have to print extra money for the express purpose of putting it into reserves.
The de jure impact of the reserve requirement on the money supply isn't "not much"; it's actually huge. But that is only down to the point where it goes below the de facto requirement imposed by normal bank operations. You drop the requirement to 0%, and banks will still keep cash on hand to cover their own needs. It is certainly possible to raise it all the way to 100% (or even higher, by requiring that banks freeze some of their own cash when accepting a deposit). But that would have to be done very slowly and cautiously.
In theory that's correct, but in practice banks re-sell loans all the time by packaging them as bonds. So total outstanding home loans has been decoupled from that equation.
Further, the velocity of money is important which reduce the multiplier in practice.
However, if your taking this seriously yes you need a curve which is why I said 100 years, but only listed 90 years worth of changes.
No, you can still make a loan by buying a bond etc.
I simply feel banks have conflicting goals as they need to be 'good at' customer service and making loans. This creates a lot of poor incentives and economic distortions.
The difference is people fronting money for loans would need to take on real risks without FDIC protection or have safe deposits but need to pay for bank services.
Ok, so we don’t let banks loan money. I guess they may still take deposits but if they are not going to pay any interest people will keep accounts as low as possible.
On the other hand, all the financing needs will be covered by other means. These “non-banks” will have to obtain capital as equity and debt, maybe even loans from other non-banks, but certainly not as deposits.
What was the problem that we where trying to fix anyway?
> What was the problem that we where trying to fix anyway?
Risk of financial collapse. Banks are risky because they have a lot of leverage, people more directly loaning money may take a 20% hit after a housing collapse, but that's not such a big deal.
The banks that collapsed during the last crisis are not the kind of banks that take deposits and give out loans. They were the kind of non-banking businesses that you talk about.
And one of the reasons for the crisis was “shadow banking”, because many home loans were not really given by banks (some were directly created by other institutions, some were first created by banks but then packaged and sold). The subprime crisis would not have happened, at least to the same extent, if loans had been kept in the balance sheets of banks.
You are right, I was thinking of large (systemic) failures and actually I had completely forgotten about WaMu. Clearly forbidding the banking business (as in savings and loans) would prevent bank failures. But I´m not sure the alternative businesses that would fill the void would be much better.
I suspect, but can't prove companies that need to demonstrate comptitence in lending to gain access to capital would be better at making loans than companies who gain capital by doing other things and then suddenly have access to a lot of capital and need to find a use for it.
Consider tech companies like Apple/Google/Microsoft have access to vast amounts of Capital yet does not really effectively use it for much.
I don't see why this is a blanket terrible idea - a ban on loans with interest, which are the only sort of loans that are economically rational for the lender, is a moral principle of one of the world's most popular religions (Islam) and used to be a moral principle of another (Christianity) until it was corrupted by capitalism in its lands. So we must at least concede that the idea of a world where loans are forbidden is well within the Overton window.
A world where people don't need loans seems like a pretty good world, honestly. I've been fortunate enough that my parents were able to finance my college education out of their savings, and I rent my apartment because I don't want a big mortgage, and my life is I think better compared to people I know with student loans and mortgages. A world where everyone has the same access to resources that I had is a worthy goal, and if we can fund that by banning loans, seems fine.
Wait, why are interest-free loans the only kind of economically rational loans? Commercial debt contracts include interest, and are executed exclusively between sophisticated buyers and sellers of debt.
I think I put too many negatives in that sentence. I am claiming that interest-bearing loans are the only economically rational ones (because otherwise you're taking on nonzero risk for definitely zero reward), and interest-free loans used to be widely acknowledged as the only morally justifiable ones.
There is a whole industry of sharia-compliant finance to work around the ban on loans. The solution for the christian dislike for money-lending back on those days was for non-christians to do it. A world where people don’t need loans might be nice, but not all the people can use your parents’ money (and depending on what you want to do and how rich is your family, even you might need additional financing).
You would force people to consume? There's diminishing returns to that. At some point there are fewer worthwhile things to spend on and you start creating an system of make-work with the attendant environmental destruction and resource exhaustion. Free markets are neutral on these questions, it's policy that distorts social preference away from conservation and towards unsustainable growth that exacerbate the situation we're in now.
Thanks to fiat money there's no money sitting idle: if you stuff your paper bills under a mattress, the central bank is just gonna print more money (temporarily) to reach its eg inflation targets. (And if you take your money out from under your mattress, they will print less money for a while.)
Frankly,the trickle-down economics is not working.Plain and simple. Giving the rich lower tax and expecting them to invest the money back to the economy has been proved not to be working.
And we know now that the ultra-rich folks tend to take the money,windfall from lower tax, and hide it in Virgin-Island, Panama,Cayman Island and other offshore tax havens.
It's a relatively well known fact that eg it doesn't really matter too much whether officially the employer or the employee is required to pay the employees income tax---the money comes out of the same pot.
Similar things happen for other taxes. Eg VAT in European countries seems to be paid for by the shops, but it wouldn't make a difference (apart from convenience in collection) if you'd levied it directly on the shoppers.
Any discussions about 'trickle-down economics' is incomplete without tax-incidence.
"Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'"
The economy does not care whether you put your money in a bank or under your mattress. The central bank will influence interest rates in response to your actions. What matters is the amount of money that's actually chasing goods and services.
If the central bank wants banks to have more reserves for loans, it buys assets from banks in exchange for newly created reserves. Money markets are a command economy.
You are right about monetary offset, if the central bank is well-run. (Which eg the Fed wasn't during the last recession.)
Of course, someone still has to decide whether to consume now or invest. Or whether to invest in economically efficient ways, or in ways that are only economically efficient because of weird tax arrangements (but are actually less productive).
Inflation is not deductible, so the US (and most other countries) have defacto wealth taxes to the tune of INFLATION RATE * CAPITAL GAINS TAX RATE, or roughly 0.48% annually to high earners in the USA.
Without a doubt, a global wealth tax would significantly improve the quality of life for every human on this planet; even those with the large amounts of wealth being taxed.
I'd be fine with a wealth tax on a national level with restrictions on offshoring cash, but I don't want to steal wealth from everyone in the west to distribute it globally. You'd also have a very difficult time getting nations like China to agree to something like this.
Edit: sorry, wasn't aware of the exact definition of this. Having everyone pass this sort of thing is a great idea imo.
A global wealth tax does not distribute the tax globally. It just means that every nation collects a wealth tax. This is to prevent a race to the bottom which would penalize the first countries that enacted a wealth tax.
Only if the tax revenues are spent wisely. In the US, some 42% - 57% of the tax base goes to defense spending [1]. It's extremely arguable if that is a good way to spend such a large quantity of tax dollars. One could argue "we should elect representatives who make better spending decisions," however the defense lobby makes sure to get involved with all lawmakers. Once again it comes back to campaign finance reform as the necessary first step to straighten out the political system.
It's actually a tax on wealth transfer, and it has far more favorable terms than tranferring wealth above gift limits while still living. In some sense, the entire estate process is a massive loophole that allows wealth transfer without realizing any income, but a fairly understandable one given the nature of family relationships.
We do tax wealth in a very limited way in the form of real estate property taxes. Though I would note that it hits the middle class and poor more disproportionately than the extremely wealthy. And I'd note that the tax cuts in front of congress propose making that scheme land even harder on the middle class by eliminating or curtailing the state/local tax (including property tax) exemptions from federal taxes.
Capital gains tax + inflation is a wealth tax. Each year you have to grow your money by inflation for it to maintain buying power. 2% inflation * 20% top rate LTCG tax means the wealthy pay a deferred 0.4% wealth tax yearly.
That's sort of true, but I'm not sure if that the inflation effects are truly a "tax on wealth". Inflation is a tax on everybody, holding a wide range of assets in that sense. Also because it's driven by inflation, those proceeds to the government are also just growth of proceeds needed to buffer against inflation in the goods that government purchases.
Edit: Thinking about it a bit more. Inflation would also tend to drive up the numerical profits of companies, which will tend to buffer a stock price for example. So I'm not sure how this inflation independently contributes much of a specific tax on the wealth.
Wage data seems to say that it's growth does not match the amount that corporate valuations nor their profits. Nor does it match the growth of costs for longer term societal needs such as healthcare nor education... On the other hand large accumulations of wealth have had no such growth problems - let alone vs inflation.
So yes salaries go up, but not in concert with people's costs nor with the value that is generated by people's labor.
The question was if inflation can be considered a tax on wealthy and unwealthy alike, not how do real wages evolve compared to corporate valuations or whatever. In reality inflation is not even a tax on wealth, at most it is a tax on cash and financial assets (loans, bonds, etc.) and for the latter only inasmuch as the inflation exceeds the expectations.
What he says is that high inflation makes posible for real wages to adjust (without cutting nominal wages) when such an adjustment is required. The price of labor fluctuates as the price of everything else, including capital, and when there is unemployment (lower demand of labor) wages would need to go down but they are “sticky”. These are cyclical adjustments.
And that mechanism doesn't work, unless their salaries don't keep up with inflation. Notably, this relationship is asymmetric, since there is no corresponding way to increase labor wages without giving a pay raise.
Inheritance tax also taxes wealth, but it does so rarely and again the rich tend to find ways to avoid this.
The problem with many "wealth" taxes is that they end up missing the top 1% and hurting the people who are building a business.
Eg inheritance tax does a fantastic job of just screwing over family businesses that on paper are worth say $7mm+ because on paper the kids who inherit the business now owe taxes on maybe $2mm (I think the first $5mm is tax free w/ inheritance), but selling any of the business to pay the taxes would often destroy the business.
And I'm not talking about massive businesses like Walmart - I mean businesses like a large-ish family farm where just the land, equipment, animals, etc are all worth $7mm+ on paper, even if the farm doesn't produce massive profits.
I think the effect on small businesses and farms are vastly overblown. In 2013, 20 small businesses and farms were affected. The idea that estate tax affects family businesses is mostly a stalking horse for extremely wealthy who just want to save themselves money and whose descendants would still receive plenty of money even with an inheritance tax.
It's not a matter of balls, it's a matter of understanding that the most important part of tax policy is compliance, that is actually collecting the taxes.
Even our current methods of evaluating quantities and distribution of wealth are vague estimates, and that's without people incentivized by taxation to hide or minimize it.
A wealth tax that turns into anything but a buildings-and-cars tax is a fantasy from an enforcement perspective, and significant property taxes have issues of their own.
There is basically no tax advantage for startups in being based in Delaware -- you end up registering as a "foreign corporation" and paying in-state taxes whenever you're actually located. Delaware is chosen because of the body of corporate law and efficient secretary of state.
There are multiple levels of tax avoidance / money hiding being discussed here. You are responding to someone talking about the worst level, which was documented in the Panama Papers and the Paradise Papers. It involves rich individuals who hide money in banks in the Seychelles, Cayman Islands, etc.
Very different from tax avoidance schemes that companies use to pay lower taxes by incorporating in low tax jurisdictions or funneling the money through multiple countries.
From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it.
From the perspective of the tax code as an incentive system, taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade tariffs: they disincentivize exactly the things that help the economy the most.)
Economists are usually more in favor of a land-value tax, because it punishes people for something that doesn't build GDP (investing their wealth into property and then sitting on it as it appreciates), and encourages them to instead do things that do build GDP (like investing their wealth into companies.) A land-value tax is still essentially a luxury tax, but it doesn't have the same problem of unilaterally discouraging GDP creation that taxing wealth does.
> From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it.
Why? As a total layman, wouldn't it be incredibly inefficient? If we tax the wealth of, say, the top 100 richest Americans, wouldn't that cause some pretty terrible downsides? If we force them to sell their holdings, wouldn't that ripple through the economy?
Take Jeff Bezos--if you forced him to sell a significant portion of his stock, wouldn't that depress the Amazon stock price, which affects a significant number of other individuals and businesses?
It takes some special sort of entitlement to believe that despite stealing most of their money, then asked to work and make up for the remainder of the population, they will continue to work after a while and contribute to your economy.
If you are not aware of what happens in situations like this, I would like to take you to pre-1990s India. Some of the most brightest, brilliant, hard working and industrious people used to leave the country and never to return the moment they attained working age.
The people and money from whom you can take the wealth to fund your socialist schemes shrinks every year. To a point you will have a country full of entitled people, who think they were born with rights to free stuff. And will always be angry at people capable of working who don't spend away their life to make it happen for them.
Let me add to the tirade. Somewhere on the web I saw: Taxing income, is like 9 wolves and 1 lamb deciding what's for dinner.
Quote (by probably Winston Churchill )- Any man who is not a socialist at age 20 has no heart. Any man who is still a socialist at age 30 has no brain.
Eru - did you notice the sarcasm ? We I got what i was looking for - many down votes! Anyway you do seem to have some objective thinking going on with your views on Georgism - I checked some of your posts. Keep it up!
> taxing wealth is probably the single most efficient way to do it.
It's not taxing wealth so much as taxing the mechanisms that create undue inequality that would work: yes, I'm talking about taxing rental income. The number one driver preventing people from building savings is draining their income through rent.
Pardon me but the solution you claim is already in place, well understood and totally ineffective.
Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in.
Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles.
That being said, I agree that the pressure of rent is unbearable and growing for most of the population. The rebalance historically happened with wars. Properties ain't worth much when people die and buildings are bombed.
"Pardon me" but rental income is deductible more than it is taxable; everything to do with owning a property and generating "investment income" from it is incentivized to be deductible; it's a great and super fast way to make lots of money.
I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The solution I outline would work... if the goal is to empower people with "equity" as Sam's article suggests he wants to.
If we remove deductions on rental income, wouldn't that just cause property owners to charge higher rent? If so, then yes, that would of course generate more tax revenue, but at the expense of the renters.
Property owners generally charge as much rent as they can. Only in places where it is easy to build new apartments is there floor on rents. In that case the floor is a combination of constructions costs, interest rates, and the rate of return to investors of other opportunities in the area. So in a place where building is hard, the rents would probably not rise, but in a place with lots of land and easy zoning, the rents probably would.
It can't increase rent. Rent are capped by what tenants can pay, they are specifically set to "as much as the tenants can afford" because everyone needs a roof. Taxing the landlord doesn't give more moneys to the tenant.
However, what could happen is that the rental income after tax is lower and not enough anymore to cover the mortgage or the maintenance costs, then the property has to be sold.
When that property is sold, from whom will the displaced tenant now rent? Market rents are set by supply and demand, just like most goods.
More supply of rental property? Rents go down so that landlords aren't stuck with vacancies. More demand for rental property? Rents go up so landlords can maximize their profits.
Of course it would, either directly or via a reduced supply of profitable rental properties (and the resultant shift in supply-demand equilibrium).
There may be an offsetting overall reduction in the value of all real property, but it seems like reducing or eliminating these deductions[0] would be harmful to renters, not helpful.
[0] - Deductions like this, by the way, are available to all sorts of other profit seeking businesses for the equipment and supplies they use in the conduct of their business and I see no reason why a house should be different from a factory machine or laptop computer or airliner nor a minor repair to a house be different from a pad of paper or other consumable with regards to whether ordinary and necessary business expenses ought to be deductible against gross revenue when computing profit.
"Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles."
Real estate is a great investment for the risk averse (probably the best one too). Housing usually grows at the same rate as inflation if not a bit more and people will always need it. It doesnt drop 10% overnight unlike stocks. What other investments did you have in mind that you would recommend over real estate? (in the same risk spectrum)
You can tell that to the people in Houston who lost their home overnight. Home ownership is not risk free. ;)
I am not familiar with the entirety of the US territory. If you look at properties outside of the major cities, they should be relatively stable, renters have no jobs to sustain ever increasing rent. In the far country side, properties should be deflating because de industrialization.
Agreed that it is great for a diversified portfolio. Especially the primary home, it's self sustaining because you'd have to pay rent anyway. A second home is safe, it can host your child now or yourself after retirement, then it's lower returns.
There are a lot of index funds with various risk profiles. There is no general strategy. It depends on your personal situation, how much there is, where your live, and you family.
Now, that might sound stupid. If you own your home and have some savings, you can basically retire. There aren't much expenses outside of the rent.
I think becoming wealthy is incentive enough to become wealthy. No one is going to stop trying to be wealthy just because they might get taxed for that wealth. If anything, they will just try to hide it in another state. But the argument that a wealth tax would remove any incentive to become wealthy is not very strong.
Right, it only becomes a problem if you tax wealth so much that the net value of the next dollar is lower than the effort required to obtain it. At a certain level of wealth, where one is effectively paying others to invest their money for them, and they're earning off interest, that effort is basically 0.
If a lottery ticket's prices goes up, and the purse goes down and/or the odds get longer, you'll be less inclined to buy a ticket.
It's the same with work. If hard work is less likely to pay off, or if you'll have to work harder, or both, you'll be less likely to work harder. Some people will work harder anyways, and many will be discouraged.
Marginal effects matter. This is why dynamic analysis is important.
And the marginal effects of having 100M in the bank over 10M in the bank over 1M over 100K are all still huge for any feasible tax scheme I could imagine.
What does your world look like where you'd be too taxed to bother wanting to be financially independent?
That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m.
What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard?
What if I told you it cost $1500/month for a small studio apartment with no furnishings or anything else?
Both are true, both are real, both require different amounts of money in order to achieve financial independence.
I realise now that I haven't actually answered your question:
> What does your world look like where you'd be too taxed to bother wanting to be financially independent?
Rewriting that to be "What does your world look like where you'd be too taxed to bother generating more wealth?"
There comes a point of diminishing returns. If you work a 40 hour week already and make a decent living at 40-50%, and now get told that anything above that will get taxed at 75%, unless you're going to somehow generate more than double, you're going to spend that time doing more productive things (like spending it with your family).
Arguably, that's a net-positive for society as a whole, but may be a net-negative for the economy/GDP of the country you reside in.
There's a header of "American" on this very post, and it's specifically talking about the US, so I'm starting there.
The biggest potential cost of someone in the US, with employer-tied healthcare, seems like medical. You could hit the unlucky jackpot and have a seven-figure+ medical bill over the course of a few years or life. So let's set "able to handle that for yourself and your family" as the baseline for being considered independent, since that's probably bigger risk than, say, "owning but then losing a multimillion-dollar-home to a flood" or somesuch.
But I also don't think this term is generally understood as poorly as you suggest.
--------
Responding to context complaints aside, you're still talking income tax, not wealth tax. My question was what this hypothetical negative-use wealth tax looks like, since the further-upthread post had suggested taxing wealth instead of using income as one of (several) proxies.
But also, my hours have not increased with my compensation in the manner you suggest. I know that every additional dollar loses 40% or whatever of it, I still would rather have it than not have it. 5%, probably wouldn't care, but would I still want more autonomy and responsibility at work for the sake of more feeling in control? Maybe. Maybe not. There are both financial and non-financial sides there, but if income was the sole basis for choosing our roles, we'd be in a very different-looking world.
So that's why I'm skeptical that a wealth tax would make me give up having big dreams—the personal safety net and toys are still incredibly appealing.
All fair points, but even within the US, $5m goes as far in some states as $50m does in some cities. Besides that, one person's "personal safety net and toys" is another person's "not enough", is another person's "greed".
Meanwhile, you're getting taxed on the estate you're trying to build as you build it.
Twice.
Every year.
As someone who's currently attempting to build his own personal empire, I'm incredibly glad I don't have a wealth tax to contend with. It's hard enough as it is, without knowing that if I start to draw close, it'll get harder and harder as I go. I might not have started trying if it didn't seem possible in the first place. Then again, I might have done it anyway. Where's a quantum theorist when you need one?
Good point, I was making an assumption that this was a wholesale replacement scenario for income and other taxes.
My only other quibble is that I haven't seen healthcare costs or insurance premiums scale to that 10x factor like housing prices do rural-vs-urban, otherwise I'd personally be perfectly happy with moving and retiring early. Get the right cancer or nasty chronic condition and you're gonna be out some serious bucks.
It seems it would have the effect of magnifying down markets. (Down 30% in the market? Pay us another 1.2%, please, selling shares if you must; we don't care.)
Over the course of your life, the government will get more of your wealth that you (or those you designate) will. (At 5% CAGR, the government is ahead by year 54. At 3% CAGR, they're ahead at year 56. At 8%, year 52.)
That's assuming you stop earning, but of course most people will not stop earning. Also, the typical way this works is that the wealth tax gets added to your income, so if you end up not paying income tax by definition you don't pay wealth tax.
Example: Say I'm worth 1M credits today and my wealth tax is 10K (1%), that means my income gets another 10K added to it. Real income is 50K, + 10K so I pay tax as if I earned 60K. 40% of that works out to 24K worth of taxes.
In a bad year I'd earn maybe 10K, add that 10K (I'm still worth that 1M), and that year would pay 40% of 20K, which works out to about 8K.
Progressive tax scales can further improve the situation in years with low income.
The markets don't have much to do with this, it's a fictive income, not what you actually made.
For young people just starting out in life, medical expenses are their lowest.
Always always consider the young.
Europe's fertility rates are a disaster (and post-2008 American fertility rates too were disastrous). In particular they are a disaster because so much of their economies depend on the tax base growing, which means that productivity growth has to be even higher than it would have to have been with a higher fertility rate. The causes of this surely include making the burdens unbearable on the young who might want to start families. Beating up the young because they have good health, is an unspeakable insanity.
> If you work a 40 hour week already and make a decent living at 40-50%, and now get told that anything above that will get taxed at 75%, unless you're going to somehow generate more than double, you're going to spend that time doing more productive things (like spending it with your family).
Hold up -
1. Why is this about working more hours, instead of working harder / more effectively? There are 168 hours in a week; even if you don't sleep, you cannot maximize your income beyond about 4x just by working more. I am currently making about 15x the lowest hourly rate I ever worked for, and I'm still fairly early in my career and feel like there's a lot of room for my salary to increase as I become more skilled.
2. I'm reading the discussion was about a tax on wealth, not a tax on income (dwealth/dt). If you're making a decent living and want to make more money so you can spend it on things that are not investments (consumer goods like video games, services like vacation travel/hotels, charity, raising more children, sending them to college), a tax on wealth will not affect you, because your wealth stays right where it is. And doing all that is net-positive for the economy.
'majormajor is clearly talking about wealth in the sense of static assets, not change in assets over time: I'm worried about having a single medical emergency, not having one every year. Make enough for your (static) safety net, then stop making more money.
Sure, and if I insisted on working exactly 40 hours I probably would not have gotten the raises or opportunities I got. But I am personally nowhere close to the amount of income we're talking about here, let alone wealth, and I've sort of maxed out my ability to be productive. Do we think that at the margin that a wealth tax would kick in - which is specifically not most people - the number of hours worked is relevant?
Suppose you tax all holdings at the top 1% of wealth by 1%/year, which is significant but not enough to wipe you out - after 50 years that leaves you with 60% of your original savings, assuming you weren't investing it.
That yields as a minimum $97T in tax revenue per year ($8.4M * 1.16M * 1%), and almost certainly significantly more because there-s a short tail of people with much more than $8.4M net worth. But if you split even this much among the 5% of households with "very low food security", that's $16,800/year. That's a lot of food.
(An actual scheme would have some sort of progressive tax, also, not a discontinuity at a certain dollar value)
Out of curiosity, where did you have in mind for the $5 luxury hotel, room, board, and high-speed internet? That sounds like a place many of us might like to put on the docket for later.
I don't buy lottery tickets as it is. Many people in marginal financial positions do, and lots of tickets at that. Now suppose that ticket prices went up by a factor of 10 and purses down by a factor of ten, and odds lengthened some. Why would anyone in a marginal financial situation not then reduce their total number of tickets bought?! Of course they would!
Now to answer your question, consider say, a prospective engineering student. They could go to school and come out with $150k or more in debt. But if their post-tax income potential goes down (especially initially), thus their ability to pay off that debt goes down, thus making it more crushing than it already would be, why on Earth would they even consider bothering to go to school then?! Of course a lot of potential students would find something else to do! It's utterly obvious. Painfully obvious. So right there you'll have a decrease in the number of people pursuing certain careers -- hard work being avoided.
Even beyond the economic effect on students, there is just a basic personal calculus as well. You might choose to live with a lower income and more free time to enjoy as you wish (if with fewer luxuries than you might like) than work harder and harder for less and less reward. You only have so many prime years for enjoying the one life you have. Everything is a trade-off. You might work harder now if it means you'll be better able to enjoy some free time later, but if working harder will make little difference to your ability to enjoy free time in the future, why work harder?
And beyond that, we know what low incentives did to would-be hard workers' desire to work hard in the U.S.S.R. and such places. Spoilers: they certainly didn't work harder when they didn't have guns to their heads incentivizing them.
By the way, the same sorts who say that increasing income taxes (or otherwise putting a ceiling on incomes) wouldn't have an effect on how hard people work... also tend to argue that higher tobacco taxes will reduce tobacco use. We all know about the prodigious powers of doublethink in some quarters, but don't think for a minute that everyone accepts doublethink, let alone masters it. And sure, you yourself didn't just make that argument, but I bet you do when it comes to topics where that argument is convenient. I, on the other hand, accept that punitive/confiscatory taxes only serve to reduce the amount of activity being taxed regardless of whether it is an activity I appreciate. If you ever find yourself making that argument, please recognize it and choose consistency.
A lottery ticket is just about the worst example you could use to prove the connection between risk and motivation. It has a low chance of paying off, yet people still buy them all the time.
>>Some people will work harder anyways, and many will be discouraged.
Some people will work harder, by moving to a different country, where the tax laws are saner and don't punish hard working prime movers for the very value they provide.
"If a lottery ticket's prices goes up, and the purse goes down and/or the odds get longer, you'll be less inclined to buy a ticket"
Has this effect been shown in the real world? That implies more interest in the odds than their target market demonstrates any interest in (hence the term, "for the math-impaired").
I'm fairly certain that the opposite held true in reality. When the multi state lottery association decreased the is of winning the Powerball last year,sales went up a lot because of the lure of the $1B payouts.
> From the perspective of the tax code as an incentive system, taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen!
I think this is false in practice, especially with a progressive wealth tax.
Most people don't want money, they want the things money can buy... long, healthy, and generally happier lives. People that keep striving past that point are people that seek to change the world, folks like Gates or Musk. A progressive wealth tax starting at $10M wouldn't really change the incentives at play.
Money and power (and the accompanying freedom they bestow upon the holder) have always been their own reward. Even in Communist systems, money was just replaced by "party capital" -- even if you were poor on paper, your power will lead to your children having more power.
Multiple incentives to be wealthy -- or worse, feedback loops to ensure the children of the wealthy maintain their advantage -- are just redundant.
taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen!
Citation? I know it feels correct, but is it actually correct in practice? Is there any evidence that the rare person who generates enormous wealth was motivated substantially by wealth (and not a drive to build something substantial or change the world)?
At least in the case of Gates, I suspect he would have built Microsoft even with slightly more onerous (to the wealthy) tax policy.
Since a couple years back, we have a 1% tax on wealth in Colombia, which applies to anyone who has above approx. 330,000 USD in assets
I don't think it has disincentivated anybody from becoming less wealthy and/or working less. It just incentivizes tax evasion, but even that is not significant.
On the other hand, a large number of social programs have been built around this new tax. Anybody in the country could get cancer and would get free decent healthcare.
It’s a big country, so it really depends a lot on which city you live in and and what you consider a normal house. It ranges from $20,000 USD for a rural house near a small town to $150,000 for a 2-3 bedroom apartment in Bogota which is the capital.
> taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy
If we're talking about how people feel about their tax system, I think we need to talk about how a huge portion of the US misunderstands "tax brackets", and seems to think that paying more taxes when they're "bumped to a higher tax bracket" is a thing, and that there's some strategy in avoiding getting paid marginally more than some threshold. (Since tax brackets apply to marginal income, this is incorrect; you're still taxed at the lower rate for your income up to the threshold.)
This is almost certainly causing people to behave in ways that are economically irrational for themselves far more than any tax on large wealth (let's say, for the purpose of argument, $100M or more) would be. Yet there is no campaign to fix people's understanding of tax brackets so that more people feel incentivized to make more money.
If we're talking about an actual rational response to the tax system, I would much rather have $102M in the bank and get taxed on half my savings over $100M than have $99M in the bank and get taxed on half my savings over $100M.
> and thereby causes fewer GDP-building things to happen!
Why does a tax on wealth cause fewer GDP-building things to happen? The rational thing to do given a tax on wealth is to spend your extra wealth on services you're interested in, donate it to charities you support, etc., all of which seems like it increases GDP more than investing it for yourself would: it produces additional revenue for organizations, which produces jobs, which grows the economy.
I'd believe this argument for a tax on income, since it disincentivizes people from making more money, which means they're not spending that money because they didn't make it, and also they're voluntarily refusing to do profitable work they otherwise would have done. (I don't think I agree with the argument, but at least I understand how it works.)
> I would much rather have $102M in the bank and get taxed on half my savings over $100M than have $99M in the bank and get taxed on half my savings over $100M.
This is the best distillation of how marginal tax rates works I have ever read.
There still are taxes that don't work like this (usually in the form of benefits that cut off at a certain income range) so unfortunately we still have messed up stuff. The feeling isn't completely unfounded
> Why does a tax on wealth cause fewer GDP-building things to happen? The rational thing to do given a tax on wealth is to spend your extra wealth on services you're interested in, donate it to charities you support, etc.
Another rational thing to do is to create vehicles that store but temporarily impair the market value of that wealth as computed for wealth tax purposes. Put it into a private company and offer minority, non-controlling stakes in that private company to all comers and act surprised when only family members take you up on the offer. It's a minority stake without control rights; it's going to be worth less than the net asset value. Store the wealth there until you're ready to use it, then have the company directors make a distribution, or leave the transfer in place to your heirs, who will receive a controlling interest when their shares (that maybe they bought) are reunited with the shares that you will them upon death. Or invest in something illiquid and very hard to accurately value.
Technically, all of those things create GDP activity for lawyers and accountants as well, but it's hardly good public policy, IMO. (I'm not opposed to a reasonable wealth tax, say 0.25% annually on sums 10M-50M USD and 0.5% annually on sums above that. I don't think it's a tax without lossy consequences though.)
> I think we need to talk about how a huge portion of the US misunderstands "tax brackets"
I know engineers that are guilty of the misunderstanding you describe. How does anyone graduate from a university in the United States without at some point having been exposed to the idea of marginal taxation?
Taxing land value is even better: not only does it not punish any economic activity, so doesn't have any dead weight cost; it actively encourages better land use, and thus might even benefit the economy.
Also land is hard to hide, and relatively easy to value. So it's really hard to evade the tax. If you are going to tax wealth, and want that to include assets like equity in private companies, you are going to have to value those assets.
As I've suggested here: http://www.pdfernhout.net/basic-income-from-a-millionaires-p...
"For example, imagine a basic income for everyone was supported by a 6% tax on all wealth that is based on monopoly scarcity. So, this would be an annual tax on real estate equity, bank accounts, cash and gold hoards, copyrights and patents, and so on -- basically anything that requires the government to defend it as a monopoly against someone else taking it in a way that leaves you with less. Anything undeclared would not be subject to legal process for recovery if stolen. It would seem only fair in a sense to support the government with a percentage of what you have, in proportion to the amount you have. (One might also propose a progressive tax on that, like higher rates on large total amounts, but let's just assume it is a flat tax.) Essentially, this could be seen as a protective tax on wealth. If millionaires don't declare wealth, the wealth can be taken by anyone, even by the government. :-) If wealth is declared, it is defensible in a criminal suit, and further, maybe the government might even insure it against theft (maybe even other things like fire or accident or war or natural disaster). Recovery of stolen property would then be a function of the government as a revenue source, after it had reimbursed the person who lost it."
But he starts from a different angle: he's interested in economic efficiency. So he wants a system that moves economic goods into the hands of people who value it most (and compensate the previous owner fairly at market prices).
He proposes a system where people declare the value of their various possessions with two incentives for accuracy:
- You have to sell to any comer at the declared price. Thus guarding against overvaluation.
- You have to pay a small percentage of the declared annual price as an annual fee, thus guarding against undervaluation.
That concern about economically efficient allocation is mostly interesting for monopoly goods and rights, because anything else we can just produce more off.
In Georgism it's customary to name these after their most typical representative Land (sometimes with the capital L to emphasis the generalisation). It's not much of a stretch to include eg things like licences for magnetic spectrum.
I'd be wary about mixing things like insurance against theft in here. (It might be possible to give a unified system, but I am not sure it is. Look at http://www.daviddfriedman.com/Academic/Course_Pages/legal_sy... for some source of interesting ideas about legal systems.) My wariness comes mostly from the fact that insurance that pays the declared value encourages people to overdeclare. Better let the market sort that out. (However paying the taxes for a specific declared value for years on end is a pretty good argument to convincing any court or insurance arbiter that you really valued something at that price.)
In the system I sketched above, Hanson described some scenarios were some entrepreneurs might be on the lookout for undervalued properties, buy them, and then just try to resell them to the original owner (or someone else).
As a special case, that scheme is especially lucrative if you are looking to buy a eg a house in a specific area anyway and don't care too much about which one; then the risk of not being able to sell the property you just bought on is not a problem: you just keep it.
I'd be more wary of using such a system of wealth taxation for eg cash. If you have a working central bank with an inflation or nominal GDP target, an individual holding cash even under their mattress is essentially free for society: the central bank just prints more money to make up for the portion you are holding out of circulation. And once you bring it back into circulation, they just print less money for a while. So for society it's great if people are holding cash: they did something for the rest of society to get their hands on the cash, but didn't get anything in return (yet). Very nice of them.
The 'you have to sell at the declared value' requirement is somewhat similar to your idea: if you don't declare eg your house, it means you implicitly declare it to be worth 0. Someone stealing something worth 0 f...
Massive inequality is among the things we really shouldn't want.
Massive rent-seeking, enclosures, network effects, and benefiting by public infrastructure and institutions, without paying back full costs, or by imposing dislocations on other economic sectors, as well.
Aviation accounts for 6% of transportation fuel use. For a small portion of passenger and minuscule fraction of cargo movement.
The details will be difficult: how do you assess wealth with any semblance of accuracy, especially in the face of an increased incentive to hide it? I'd love to hear anybody's clever ideas to tax wealth in a way that catches cheaters. The biggest issue is what you do with wealth held overseas.
But even if the cost of catching cheaters is many billions of dollars of enforcement apparatus, it seems worth it. Of course, you create a new problem: avoiding corruption in a large enforcement apparatus chasing after people with the resources to easily bribe them. (But this problem is not unique to wealth taxes, and I don't think bribing the IRS is actually much of a problem—people just bribe Congress.)
There's another problem: wealth taxes would probably need a constitutional amendment in the U.S. From Article I, Section 2:
"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..."
There's already an amendment to clarify that federal income taxes are OK. But wealth taxes will need their own amendment.
Conceptually, though, I totally agree: if the problem is unequal wealth, just redistribute the wealth directly to move toward a less catastrophe-prone distribution.
> Or go a step further do what nobody has the balls to do: tax wealth
Heard of this before. Have there been any attempts of that before and how did it fare?
It would seem to be as soon as wealth is taxed, wealth will morph or change shape to avoid being taxed. We'd end up with some new arcane tax scheme where wealth is held in a tropical island nation and the owner of the wealth gets a stipend or I don't know, rents all their possessions from that entity.
I'm persuaded that wealth taxes and maximum income are the appropriate solution: after X million per year, you don't get more money, and after you and your family heap up Y million of _fluidly defined_ assets, you get taxed on what you hold/control/manage-via-tax-shelter.
Obliterate the tax shelters, obliterate the tax havens, bring the money back home under threat of criminal law.
I'm not saying you can't be a fat cat. But at a certain point (fluid and blurry, but distinctly present), it's just morbid obesity that is squishing other citizens.
How can you implement such a practice when our politicians and leaders are fat cats (or aspiring fat cats)? Only vote for people below a certain wealth line?
Everybody tends to put that certain point above where they are at. I realize, as limited to a US discussion, it is easy to say Bezos and Gates are rich, I am not. But if this was expanded, simply as a thought experiment, to the entire world would you be fine classified as a "fat cat"?
Assuming (perhaps incorrectly) you are in the US, you are also reading Hacker News, so you are probably the top 1% of the worlds wealthiest. Again, just a thought experiment, but would you be fine with your government saying that as a 1 percenter in world wealth you can no longer earn anymore, you have hit that certain point, are a fat cat and can grow no more wealth, under threat of criminal law?
> But no matter how wealthy someone is, they can always point to the more-rich and say those people are the problem and should be taxed, not themselves.
This is obviously untrue. There isn't an infinite number of people wealthier than Gates or the Waltons or the Rothschilds. At some point there is no one further up the economic ladder in whatever location you're talking about.
Sure, but it's literally untrue for only one person in the world, or let's say a handful of people if you want to restrict by geography (although it seems the richer you are, the easier it is to shift wealth around).
That argument is relatively vacuous on its face, because that is moral flattening (along with intentionally misunderstanding the problem), and promotes inaction.
Well France is the most famous example, but several other European countries (e.g. Spain and Switzerland in my experience) do too, as well as some in South America.
Hmm just checked the Wikipedia and it says that Donald Trump proposed it for the US as well.
The problem literally is that many people don't have an adequate share of the GDP.
The footnote proposes to tax capital the same as labor.
An interesting thing about Bill Gates is what a tiny sliver of GDP he managed to capture over almost 40 years. Something like $0.1 trillion out of several hundred trillion dollars.
A single person capturing a few ten-thousandths of a percent in a country of over three hundred million people seems like a pretty large sliver to me, relatively speaking.
Caveats: GDP is no way to calculate wealth, and comparing the total GDP to any one person's wealth is pretty useless.
Let's say the total GDP over the last 40 years was 300 trillion dollars. Also, let's say Bill Gates's wealth is 100 billion dollars (for ease of calculation).
100B / 300T = 0.003 = .3% of 40 years of GDP
Let's say that the average population of the US during that 40 year period was 170M[0].
170M * 40 years = 6.8B person-years of work (PYoW).
Bill gates contributed 40 PYoW to the GDP, which is 0.000000059% of the GDP.
However, he captured .3% of the GDP as current wealth (not including wealth spent during that 40 years)
That means his wealth capture is 5 million times the "average".
You are just beating on the fact that I based the comparison on the total rather than the mean GDP available to an individual.
But that was the point of my post, to compare the captured wealth to consumption. People always talk about how the wealthy are screwing the rest of us over and everything would be great if they weren't taking so much, but it turns out that consumption is also a huge portion of the economy. Total wealth in the US is on the order of $100 trillion (this includes all housing and so on). Consumption of several trillion dollars a year adds up to that pretty quick and seizing it all and turning it into circuses isn't going to go very far.
Which isn't to say I am against programs that result in wealth transfer, it just pays to try to look at things clearly.
Feel free to explain how Something like $0.1 trillion out of several hundred trillion dollars. is not a comparison of Bill Gate's wealth to total GDP over the period he captured it.
I mean, I didn't painstakingly lay out my meaning, but there you go.
Mostly agree, though I'd quibble (as did Simon Kuznets) that GDP is a poor metric for national income. The entire field of national income accounting is rather fraught.
Going back to Adam Smith, "Wealth is the annual produce and labour of the nation". Elsewhere he argues that "the sole use of money is to circulate consumable goods". As a man not given to short sentences, I recommend paying attention when he uses them.
>Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale.
I don't understand why this is something people believe needs "solved". Did you build Microsoft?
Did bill gates build Microsoft? He had a larger part than probably anyone, but he wouldn't even be remembered if he ran it on his own. The reason people think it's something to be solved is because for some reason our society attaches all the reasons for success, and the associated benefits, to a handful of people for enterprises that are a group endeavor
Than any one person through the lens of an authoritarian hierarchy that’s structured to reinforce the necessity of top-down rule.
In reality, all the laborers at Microsoft built it into what it is today. And it (like most companies) are at a scale of complexity that is far beyond the fiction that workers are acting out CEO’s “visions.”
It's true there's nothing perfect under the sun. But I think the financial judgement of MSFT vs some guy's hobby project is pretty sound, and in general price signals work pretty well as a message to producers.
I agree. However, fatal errors within the money system (i.e. climate change, cyclical poverty) must be addressed, which is what this whole thread is about.
I thought it was pretty obvious I was being sarcastic. Anyone who thinks their todo app is as important as a multi billion dollar company employing about 125,000 people has serious mental issues.
It offends my sense of fairness to see the disparity between the very small number of very, very rich and the very large number of very, very poor.
It offends my sense of "people should enjoy freedom" to see so, so many people who are very much not free because of the economic system that offers them no way out of poverty.
(And I don't believe that poor people are all choosing poverty. I've been poor, and no one wakes up to that and says "this is what I choose.")
And it offends my sense of language when people use phrases like "build Microsoft" as though it was a doghouse that someone assembled in an afternoon and sold for the cost of materials plus $50 profit. Gates no more "built" microsoft than George Washington built America, or whatever. Lots of people were involved, and even if they were compensated well, maybe they weren't compensated fairly. Profits being the unpaid wages of the working class and all...
Because a growing share of Americans are beginning to feel trapped by poverty and when masses of people feel trapped instability often follows.
Everyone, from the CEO to the custodian has an interest in people feeling there is some truth to "The American Dream." Which is not that you might get rich but that you can at least get ahead.
Yes. I purchased several of their products, thereby increasing the capitalization of Microsoft.
I expect you intended the answer to be "No," implying that Bill Gates (and a few others) built Microsoft. However, that rests on a specific understanding of ownership and causality that not everyone shares.
Would Bill Gates have worked so hard (presumably) if he didn't have that specific understanding of ownership and casuality? Isn't that type of motivation and incentive necessary, to grind through the obstacles?
A lot of people work very hard without even the remotest possibility of getting rich. Scientists or aid workers would be an example. Money is not the only motivator for people.
I expect this is intended to be a rhetorical question, but there's a lot of hidden premises here.
First, it assumes that Bill Gates did in fact work hard. Please define exactly what you mean by "work" and "hard", since I'm not sure there's an obvious thing that he could have done more of, even if he were so inclined.
Second, it assumes there exists some direct relationship between Bill Gates's personal work ethic and Microsoft's outsized success. Maybe all Microsoft needed was a good idea at the right time and would have succeeded about equally well with any minimally competent execution. Maybe they would have done even better had Bill Gates founded the company and then retired at 30.
Finally, it assumes that Bill Gates work ethic had some direct relationship with his financial compensation level. It is quite possible that he would have been more than happy to still give his best possible effort in return for being, say, a mere hundred millionaire. Moreover, plenty of people do hard work for all sorts of other reasons, from duty to boredom to artistic vision. Why do we assume that Bill Gates's internal motivation is predominantly financial in the first place?
None of those premises appear obviously and indisputably true to me. Maybe they are, but it'd be nice to see the case actually made (and made about real humans in the real world, not about perfectly rational actors in an idealized market).
People like Gates don't get rich because they work hard (though most of them do). They get rich because they're willing to risk what they have build something more.
Gates could have sold out to IBM or Apple or whoever and retired as a multimillionaire without taking the chance Microsoft would end up like Wang or Altair or hundreds of other companies.
According to this [1], it was never an official CERN project, but rather a side project of his.
“Had the technology been proprietary, and in my total control, it would probably not have taken off. You can’t propose that something be a universal space and at the same time keep control of it.”
But you did not do so out of the goodness your heart. They provided a product which provided enough utility to justify the cost. Producing such a product is where the value is created, not in the purchase of said product.
But the purchase provided capital, which enabled further production. Banks don't lend money out of the goodness of their hearts, either.
And, really, have you never bought something in small part because you liked the seller? That's the sentiment behind the exhortation to "buy local" or to buy Girl Scout cookies or from a local school's fundraiser. I suppose you could say a purchase is a contribution to the extent that the price exceeds the cost of production.
Consider the way Kickstarter projects describe their "backers". On the "Why Kickstarter?" page they say backers are "helping to create something new". Yet, one could easily consider Kickstarter simply a website for pre-orders, no different from buying in any other method.
The line between a buyer and a backer/builder isn't so clear.
> The line between a buyer and a backer/builder isn't so clear.
It is pretty clear, if you are funding someone'e kickstart project then you did help them build it but if you pay for a product which was built using the creator's(or some other investor's) money then you did not build it.
Some Kickstarter projects are posted after the product is essentially built and just needs some finishing details. The line gets fuzzy there.
It's even more fuzzy when you consider beta customers for a software company. Heck, how about when I contribute information to Google Maps? Or give feedback and make feature requests for my accounting software?
Currently, most [EDIT: many] people's share of the GDP is (mostly) their income from labor. Y Combinator / Sam Altman worries that increasing automation will make many people's job obsolete; merely lowering taxes on the salary of a McDonald's worker won't help if said worker will soon be unemployable.
(Whether this will actually happen is a separate topic; but there's a reason why Sam Altman doesn't just propose your tax-the-rich scheme.)
> Currently, most people's share of the GDP is (mostly) their income from labor
"Most"? According to [1] only around 50% of the US citizens do get a paycheck (155 of 322 mio). The others probably mostly are kids, senior people and housewives, but they make up a significant portion.
And whence the money for the share? Taxes. So this is just a UBI.
This, like all UBI proposals, seems like a way to dress up a massive tax hike: "but you'll be getting your share of GDP!". The only way to get me to like a UBI is to have UBI replace absolutely all (and I do mean all) welfare programs so that we can just haggle at every election over one headline UBI number + necessary taxes. And the initial UBI and tax rates would have to be no more burdensome than the current total of welfare it would replace, and preferably significantly less burdensome than that. Many UBI proponents, of course, would not mind this because they'll aim to ratchet up the UBI and taxes for it in a way that becomes culturally irreversible -- and that's a reason to be against UBI.
And incidentally, all instances of "soak the rich" in American history have actually been "soak those who aren't rich but have high incomes". The truly wealthy have no income as such -- instead they have capital. And why don't we just tax capital? Well, because every time it's been tried anywhere it's been a disaster for the overall economy: capital (and wealthy people) flees.
Bragging that you are ready for downvotes is like wearing a codpiece to the beach.
Anyway, talk of UBI in the US is pretty silly when you look at how many people would rather not have the government do things like help people access health care.
There are wealth taxes in Switzerland, Norway, France, and the Netherlands, amongst others in Europe.
They've been repealed in countries like Sweden and Austria, not because they were disasters, but because exceedingly wealthy people have a lot of influence. That's the only story.
As such your claim that no such taxes exist is wrong; and your claim that they've been a disaster is also fallacious.
p.s. your "ready for downvotes" nonsense is such immature nonsense. You said an untrue thing that HN audiences wish were true, and then pretended you're being brave. You're a joke.
Not informed enough to comment on the others, but the wealth tax in France had a massive backlash and likely impacted their economy for the worse. The mistrust of the French Government due to this is affecting their bid to replace London as the financial capital of Europe. People are very, very wary of moving there.
Can you show us a comparison of GDP growth rates, before and after wealth taxes were promulgated (and, where it happened, repealed)? Also, please, a comparison of GDP history between countries that have and lack wealth taxes.
Near as I can tell Europe has lagged way behind the U.S. in economic growth since the 1980s. I remember back in the 90s when catching up to the U.S. was stated goal of the incipient EU. How did that go? How does that relate to overall tax rates, public spending as a proportion of GDP? Are fertility rates artificially lowered by a high tax burden? Are they improved by the welfare state? Or is something else the matter with Europe?
I think "disaster" is an appropriate adjective for wealth taxes.
You state a total falsehood (that there are no wealth taxes), and a second falsehood that is, admittedly, subjective, (claiming that they were a disaster).
I point out that you were completely wrong about the objective claim you made, and you ignore that but demand evidence that I prove you were wrong about the other one, too? No way dude, you already proved that you're not here for an honest debate.
I think "disaster" is an appropriate adjective for your integrity.
Also, this is why the fantastically wealthy tend to be for increasing the income taxes: they pay none of that, but they pay those incomes, the growth of which they hope is restrained by higher marginal taxes.
The economist wrote an article on this recently discussing how the United States raises a lot of money from rich citizens compared to other countries, but redistributes relatively little of this money to poorer citizens: https://www.economist.com/news/united-states/21731642-how-am...
This article cherry-picks a lot and makes quite a few distorted comparisons. To prove the rates on rich citizens are high, they show the rate on low-income citizens in America is lower than other countries, and that the tax curves upward in the US. They use this to argue that the government could spend money differently, but if you look at the numbers in detail you might see tax burden being roughly 20% higher on the poor and roughly 30% higher on the rich in some countries with huge social services. You might also see that 20% being negligible for that poor single mom given that she spends more than that on healthcare that's instead state provided, but not going bankrupt because of broken underfunded healthcare provided by the 30% for the rich might be important for her. Or having public transit so she doesn't have to own and maintain a car on a low income job, etc. Even just using the percentage of income coming from which demographics while ignoring the services provided creates a lot of skew because for instance higher taxes on the poor replacing an insurance mandate with services might end up with the poor spending less total money for better healthcare.
I think your idea means well but might not be in touch with the rampant abuse of subsidies given to those who qualify to receive them. Google (or similar) "ebt card abuse" and it's shameless and appalling. I'd conjecture that the aversion to the idea of being able to "lift up those" so needy is itself just skepticism at the ability to do so, given the rampant fraud. That's totally a sad conjecture to make, I must say.
What are you talking about? I suppose there's technically wiggle room because you said "raise" taxes on the rich (implying that regardless of whatever rich people pay now it should be more). But it's an absolute fiction that rich people don't pay taxes. The top income tax rate is about 43%, and the new GOP tax bill doesn't change that.
Did you know the richest 2.7% of all earners pay > 50% of all receipts collected by the government(1)?
Or that -- when asked explicitly whether the rich should pay more -- most (3/4) people, like you, say "yes", but when asked what the tax rate should be for top earners, precisely 3/4 of respondents said it should be 30% or below(2). Again, the top rate is 43% right now.
> Or that -- when asked explicitly whether the rich should pay more -- most (3/4) people, like you, say "yes", but when asked what the tax rate should be for top earners, precisely 3/4 of respondents said it should be 30% or below(2). Again, it's 43% right now.
That's comparing a question people likely answered with a total effective income tax rate with the current nominal marginal income tax rate.
Not sure what evidence you're basing that off of. An alternative explanation would be people calling for taxes on the rich to be "raised" aren't really sure what they currently are.
It's literally what the question asks. It asks what rate high earners should pay: “should pay” is effective not nominal, because it asks what should be actually paid; “high-earners”, without limitation to some subset of their income, is total, not marginal.
Of course, this is reinforced by the fact that people don't even generally understand marginal tax rates all that well, but that's secondary.
No, the question asking about specific rates is talking about what the top marginal income tax rate should be (I can't see the actual question, but it's clear that's what thehill.com, who commissioned the poll, is referring to when discussing it).
You could argue that when people say the rich should pay "more", they're talking about effective rates, but a lower marginal income tax rate would be a funny way to raise top earners' effective tax rates.
>>Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale.
The only thing you will end up achieving is stop the next Microsoft from happening, not the next Bill Gates from happening. The next Bill Gates will happen else where.
He's proposing UBI but with a better name. But, before we go with that approach, let's just create wealth out of thin air. It really is possible. Just take all the land in CA that is locked up and undevelop-able and give it to the people. Those people can then sell it to developers and earn a huge amount of money. Now, I know, the way I've laid it out, has a lot of problems to overcome: mostly logistical and political. but the core idea of using unused land is quite sound, here in CA, where we deny ourselves the use of land. Most of the cost of housing is due to the cost of land, which need not be expensive in rural areas where unused land is found in every direction you look.
Presumably they're referring to lands held in public trust, like National and State Parks, National Forests, BLM land, and National Monuments.
I question the sense in developing large stretches of arid wastelands (among other biomes) that feature beautiful, unique and delicate ecologies.
No, it makes far more sense to appropriate all existing developed land and rebuild as extreme density. The original owners can inhabit the top floor of each new building.
We could even graduate the heights of each new building according to existing property values, ensuring the continuity of our arbitrary class system. The taller the building you inhabit and the further up it, the more remarkable you must obviously be as a person.
My modest proposal maintains these unique landscapes held in public trust for future generations while ensuring that the wealthy can continue to look down on the rest of us.
> I think that every adult US citizen should get an annual share of the US GDP.
> I believe that a new social contract like what I’m suggesting here—where we agree to a floor and no ceiling
So like...basic income but with limited downside and unlimited upside all the while ignoring income inequality? And Who decides on the payment based on "social contracts"?
A better thing to do would be to campaign the SEC to remove the accredited investor regulation so that we can choose what we want to invest in, instead of forcing us all into this America bucket while the rich and connected get first pick on every opportunity.
I'm tired of sitting back and seeing companies that I liked but couldn't invest in become > 500m market cap successes. If I spent 4 years at one of these companies I could get _common_ stock, but I can't spend 1k to buy some preferred stock.
The whole startup system is rigged. People are going to start realizing it.
Enough do that you can build a solid portfolio of startups. https://wefunder.com/ (YC W2013) has many to choose from, and they make the mechanics of investing easy (it is a substantial amount of work if you invest directly).
This would have more of a case if the average American were already maxing out on equities allowed by the SEC (and in more than just retirement accounts).
It also seems to give much more credence to luck than statistical evidence (Random Walk) that diverse passive investments outperform active investments, especially when accounting for costs.
American Equity already exists is the US Dollar currency, the problem is that the Government is always issuing new stock certificates thereby diluting the value of stockholders.
I don't think this is quite right. Currency is not equity. It does not confer ownership rights, nor command any dividends. It's really more like company scrip that can be used in the company store, that is, the portion of the economy under USG jurisdiction.
I think this is the only model that makes sense in the end game where robots replace human labor.
Imagine we lived in a world where labor was unimportant because machines did most things better than humans could. These machines would still required time and natural resources (space, energy and matter) to produce goods and services.
For most people, "working" in this world would consist of going online, buying or trading an amount of energy, buying raw materials or spent matter that is ready to be recycled and pressing a "Start" button. Machines would produce some new goods or services.
Some people may also work on designing new better machines that produce finer goods. This would be mostly creative work as the technical part would mostly be automated. The machines could be specialized for maximum efficiency and quality.
People wouldn't have to go out to work. Machine owners could watch webcam feeds of their machines working in an industrial park somewhere. The finished goods, spent matter (trash) and the machines themselves, would be picked up and delivered by self driving delivery robots.
To get some variety, people would trade the production of different machines and they would trade excess spent matter. They would also trade the machine designs and the land or space to host the machines. The machines would sometimes have to be replaced when worn out or obsolete.
Now assume total energy production was constrained globally to a more or less fixed rate based on what could reasonably be captured from the sun. People would own shares in energy production capacity.
There could be a level of inequality in this society. This depends on how much governments would allow ownership of things to be concentrated, especially ownership of energy, useful space and natural resources.
A good way to prevent too high inequality would be for everyone to be shareholders in global production. Every day, shareholder would receive a dividend, an amount of energy/matter to be spent. They could use it in machines to produce stuff or services, trade it or maybe store it in a battery.
This is better than UBI because it aligns production incentives with consumption incentives and make the system naturally sustainable. If people vote for policies that are inefficient and reduce production, they will simply get a smaller dividend. I'm not making a value judgment either. What people collectively want might not always be a larger dividend. But at least the trade-off will be more explicit and sustainable.
People need a variety of goods from society, like security, healthcare, education, a way to settle disputes via law as opposed to might; etc. American inequality is not just about money or shares. Racial segregation is enforced by the unique system of local taxes funding local schools an erecting barriers for poor people to both move in and access good education. This was intentionally and purposefully set up as a means of segregation - i.e. deny black people from entering white communities and access the same social goods.
One basic suggestion is to pool all public education dollars at a larger unit, and distribute across all schools in a given state equitably. Eventually all public schools in a given state will have similar quality, and more importantly, the upper middle classes will now put their considerable resources and energy to improving the whole state system instead of their idyllic town, lifting up the standards across the whole state.
Of course people will be upset about their property values - in fact, that's when you begin to see the true proportions of American social division: People have equity built up in segregation. They bought in to the system.
Many countries have roughly comparable public schools across groups of a couple million people. It is not tiny districts with massive disparities across one another.
Another idea is national health care - the US Government already pays for most of the actual costs: Veterans, active-duty military, Children in need, the poor, and the majority of elderly Americans. These constitute most of the actual costs. The government also pays indirectly through healthcare benefits provided to roughly 1/3rd of America employed via various levels of government (state, fed, local) and government-run entities (like subways, school etc.).
So - the gov pays for the sick people, whereas the healthy working age people pay into insurance. So the costs come out of gov, but the $ goes to private.
We also have massive inefficiency maintaining bureaucracies in hospitals, government, and insurance companies to do billing. Europeans are shocked at just how much of the healthcare $ is spent on this staff, that is more than half of all staff. You can fire every single person doing reimbursements and billing if you had a nationalized healthcare system. You can also remove perverse incentives to docs, who make money by treating you unnecessarily. When Doc has college bills to pay for little junior, you're GETTING that stent, need it or not.
I think question of transferring and/or borrowing against your future basic income (which Sam mentions) is a big one. Note of course that the only practical way to not allow it would be to shield all of the basic income from debt collectors and bankruptcy.
Without rules like that, then all of the safety net programs we have will still need to exist, because people could end up with a net income far below the basic income otherwise.
> if we don’t take a radical step toward a fair, inclusive system, we will not be the leading country in the world for much longer. This would harm all Americans more than most realize.
It would help most of the other 96% of humans, though. Nationalism is fucking disgusting.
On the other hand, China's implementation of socialism has taken it from a third world country to the most powerful nation in the world in a little under 40 years.
It's pretty convenient for you to call a communist a communist only when he fails, but then take credit when he succeeds. I still see a nation with no liberty, controlled by a central planner to a very large extent. It may not conform perfectly to Marx's vision, but it sure as hell doesn't conform to Adam Smith's, either.
This is very different from socialism you're referring to. It's just an increase in the amount of money that goes to welfare. A minor parametric change branded as something new.
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[ 4.0 ms ] story [ 262 ms ] threadMore directly relevant to the core point is the short-term/long-term question: as also evident in the stock market, it is not clear that the companies controlled by shareholders are better focused on the long term than the ones where founders have majority control.
Which is odd because he specifically ask you to give feedback but never follows through on presenting the actual idea.
He does motivate why he thinks a share of the GDP is so he gets the why, but never actually gets into the what, and how.
I mean the GDP isn't just something you can siphon off money from and give it to someone as it's not a thing that anyone owns.
So if you want to give out a portion of the GDP, I think what he really means is pay a universal income that is locked to GDP growth, but he never really says this.
It's useful to try out different metaphors and see what sticks.
NIT is just moving the progressive tax system into negative values, which means you subsidize the poor but once you make enough money you won't get subsidized.
But this is explicitly what the proponents of BI want. It's as much about the optics as who pays for it. I.e. the idea is to create a program that draws its political support from everyone getting paid a check, similar to how Roosevelt enacted social security to include all citizens, even those who were millionaires and had no need for it.
Which is what sets it apart from Negative Income Tax.
Your argument that BI would be revenue neutral for some taxpayers and therefore we should just use NIT to avoid the sillyness of the government taking $1 from you just to give $1 right back to you isn't wrong, but it's missing what BI proponents are trying to achieve.
It's mainly about achieving roughly the same ends with different optics, and the comparison to Social Security is often brought up. Enacting any system like this is going to be politically difficult, and BI proponents believe that "everyone gets the same" is an easier sell than "this is another subsidy for the poor".
1. http://www.econtalk.org/archives/2017/01/michael_munger_3.ht...
UBI is identical to NIT. The names are different framings of the concept, but the policy is identical and widely recognized as such, which is why the experiments frequently referred to tests of UBI are also the ones characterized as tests of NIT.
> NIT is just moving the progressive tax system into negative values
“Progressive” refers to marginal rates, which remain non-negative in NIT; NIT just has a flat personal refundable credit (which is equivalent to a flag annual payment) included. Which is exactly what a UBI is, except the payment in some forms of UBI is outside of the tax system, but that implementation detail is irrelevant: whether it's called a tax credit or a non-tax payment is still the same thing.
But I'd like to elaborate a bit here. UBI is not identical to NIT because the difference is marketing, not math. Most of the electorate's basis for evaluating a given policy is not to perform a mathematical comparison of two systems and checking whether they yield the same results. How something is done is as important in politics as what gets done.
Which is why, as I've pointed out, BI isn't like NIT at all. The difference is how the idea is going to get sold to the public, not what each taxpayer is going to end up contributing to the system as a function of their income.
But it's not even there, as proponents of both have stated that they are equivalent, and alternate names for the same thing, and they are marketed with the same arguments, and are widely acknowledged by their proponents to be names of the same thing. That is, the marketing isn't different, it's the same, both in content and on that the marketing itself recognized the equivalence.
That's still equivalent to an NIT (specifically, it's equivalent to adding the kind of refundable credit that creates an NIT, and reducing the standard deduction by the size of the credit, which may result in a negative standard deduction.)
Consider trying to introduce a universal health care system. You might say why do we need a system that subsidizes Jeff Bezos's health care? He can damn well pay for it himself, he might even agree since it's going to cost him less in terms of his tax contributions.
That's the equivalent of trying to sell NIT. Right out of the gate you have to not say "this is for everyone" but "it's just for the poor, but don't worry because...". That's what I mean by the marketing being different.
Of course with UBI the benefit is literally fungible, it's money. So it's really not like universal health care, but in the minds of a lot of people it is. They find it easier to accept the state providing a service if it's provided to them as well, even though it's a net cost center for them.
Humans.
1. https://mpra.ub.uni-muenchen.de/2052/1/MPRA_paper_2052.pdf
Run for office perhaps. In other words, if you can't discern a plan, maybe the post is more about Sam than it is about a plan.
(NOTE: I do think he has a plan here, just very back of the envelope. I think he's mulling over ways to incrementally roll out UBI, which if you think UBI is a good idea, figuring out an incrementalist approach is hugely crucial, important work. I don't think UBI is a good idea, but I do think this post is about a real thought and not just Sam posing or something. I have faith that there's real intellectual sincerity here.)
Alaska does this [1]. The only problem with the idea is that some things aren't considered GDP while they grow the pie - open source and volunteering being good examples.
[1] https://en.wikipedia.org/wiki/Alaska_Permanent_Fund
This is why research grants and outright government spending is a good tool in the toolbox. People are still paying for it through taxes, but because of the indirect nature we can judge the problem a bit more on its merits ("of course we want cancer research to happen and be funded")
About 60% of all US income (GDI) is compensation for labor (salaries, wages, benefits), 40% compensation for capital (dividends, interest, rents). Both parts are already taxed, at varying rates. The total amount of taxation is about 33% of GDI, while total spending is about 36% (the deficits is filled by borrowing).
Since the entire article looks like a big tax and transfer proposal, it's pretty bizarre to omit almost all basic government accounting, except for a throwaway footnote. The analogy with joint-stock companies or Homestead acts are neither here nor there. The government owned a lot of American land back then. It doesn't not own a large share of of current American corporations, nor many laborers. So the way to pay any significant "citizen's dividend" is boring old taxes.
A much better discussion with concrete numbers and speculation on incentive effects can be found here: https://arstechnica.com/civis/viewtopic.php?f=24&t=1286141&s...
[1] https://en.wikipedia.org/wiki/Socialism "There are many varieties of socialism and there is no single definition encapsulating all of them, though social ownership is the common element shared by its various forms"
and Matt Bruenig here: https://peoplespolicyproject.org/2017/08/17/index-funds-are-...
It seems like it would be difficult to lock an entitlement program to GDP without encountering funding gaps at some point, though I suppose a funding gap hasn't stopped the Social Security program from continuing to pay out.
This appears to be the same idea, but in capitalist language (Americans as stockholders in the US.)
I see no reason why companies would do it and no incentive to take a part of the government (is the US government going to pay a dividend?), I'm not certain everyone having a share they couldn't trade would be worth it. I think the ability to trade state monopolies was tried in Russia, how is that looking?
Finally isn't the stated aim of YC to create companies that are monopolies and use network effects to entrench their positions, accumulating wealth into a few hands?
First, the US government would have to turn a profit...
Possibilities are "UBI" has been poisoned with negative connotations can you can't talk about it anymore. That's possible but it seems like the overwhelming sentiment on HN and reddit is massive support for it.
As far as I can tell, "UBI" doesn't have negative connotations such as the phrase "welfare queens". UBI is already widely understood. What's the motivation for the neologism "American equity"? (My guess is it's a UBI-indexed-to-GDP.)
Equal Is Unfair: America's Misguided Fight Against Income Inequality
https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequ...
The book I linked to is a couple hundred pages long, explores moral and practical issues, and has almost 20 pages of notes and citations. Far from attempting to "kill the discussion", which is in fact what your blithe comment is attempting, it explores the topic of inequality in a uniquely deep way.
It is a worthwhile book and, even if you disagree with it, I think you'll find it intellectually stimulating. If you think you'll read it, I'll happily buy you a copy, just PM me.
If that's possible, that's probably the right thing to do; if the company is failing, who cares about diluted stock? 0.0075% of $0 is still $0.
A UBI is just a round about way of distributing the wealth generated by automation when the real fix should be having broader societal ownership of those productive assets.
(at least compared to other VCs, you may still disagree with his absolute numbers)
My usual objection to basic income applies: Basic income in some form already exists in most European countries. It's just a not-that-big parametric change to our current systems plus a change in mentality and social perception of welfare.
Suggesting that we should implement basic income of x euros is roughly equivalent to suggesting that we should increase the welfare unemployed people get today. If it was politically / economically feasible, we would already have it by now.
I think it is awesome though that influential people are putting forth creative ideas on how to make our country better. We need this
The US has a technology sector that is as much, if not more, productive than a resource extraction industry. Why not use that sector to raise quality of life for citizens?
Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale. That will have a lot more effect than some fiction where you get to do a bunch of make-believe bookkeeping.
Of course in the current political climate this will not happen, in fact the reverse will happen, tax cuts for the rich at the expense of the poor and the middle class.
Another difference, aside from wording/marketing, is that the UBI is implemented as a progressive redistribution of future wealth generation as opposed to a tax on existing wealth ("as the economy grows...")
"Universal Basic Income" is already a radically capitalist idea. It's often discussed using terminology borrowed from Marxism and socialism, but it couldn't be any more capitalist of a construct. We're just not used to hearing it discussed with that language.
Everyone gets $10k. Obviously not everyone is going to pay $10k in taxes otherwise the system would be pointless and we could instead just eliminate taxes altogether. Those at the bottom would benefit, those at the top would pay more in taxes, and somewhere between is a break even point.
There's only a limited amount of stuff at any one time. Rarity and usage can make its worth different than other things. So it makes sense to track these things. Ideally, recycling allows recoup of most or all the material, which returning should provide the credits back.
It really then matters how much credits people get and thus how much resources and where. But then again, socialism and communism never talked about personal effects - but instead it talked of the machinery to create.
What the UBI enables is a migration that everyone gets the spoils of the machines of creation. The Story of Manna by Marshall Brain discusses more of how this might be possible.
That said, it addresses it structurally, but I still think the result would still be a disastrous political explosion if that ever did happen. UBI seems to be fundamentally predicated on the idea that growth and improvement are inevitable, the only possible way that things will develop going into the future, including any structural or societal changes that may develop as a result of UBI or GDP-sharing itself, and therefore there's no need to ask who starts swinging from trees the first time that UBI or GDP-sharing has to be cut back, and what disastrous decisions will be made on the basis of not wanting to be the one swinging from trees.
You are either not arguing in anything remotely resembling good faith or are not tall enough for this ride. You may have the reply to this unopposed; I'm done here.
The ad hominem shot is surprising, given the straightforwardness of my position. I don’t understand why you are cross. Ah well.
If the situation lasts long enough, the standard of living falls.
Money exists to move goods around. If all the money is in one place, goods cannot move.
Money is not limited. It is an information measure of, variously, debts, or bidding rights to production. What it can bid on is limited, and how currency-denominated asset valuations change as money supply and circulation do, can also change.
But the problem in the case of a national disaster isn't that money cannot be produced. It's that those who would rely on money to address immediate needs (water, food, shelter, medical care, transport) have no bidding rights (currency, credit, grants) to transact purchases. You're balancing the interests of those outside the disaster zone (assuming there is an outside) with those in it. (Though this generally is the case.)
If the disaster is big enough, and rescue or infrastructure needs sufficiently high, those may affect national accounts and economic activity for a time, but it would take an absolutely massive shock for the impairment of raw productive capacity alone to impact the economy. Far more likely that buying power is lacking amongst a segment of the population.
And for that, money is precisely the cure.
the one common response they all have when their plans are revealed for what they are and comparisons made to what others have done is always the same , we will do it right this time.
it is easy to prey on the greed of anyone by simply remaking it into the person having their stuff taken as being the real greedy one.
Or go a step further do what nobody has the balls to do: tax wealth
That's what all these schemes are really trying to do, albeit in roundabout and inefficient ways. Taxing wealth has it's own complexities (unrealized gains and non-cash assets are the big ones) but it'd be saner than a negative tax (i.e. entitlement) calculated off GDP.
Just to clarify, nobody in the US is doing this, but it's not unheard of elsewhere. For example, Norway has a wealth tax of about 0.85% and there are some other examples at https://en.wikipedia.org/wiki/Wealth_tax#Current_examples .
EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow:
> It's encouraging people to make their money be productive instead of stashing it under a mattress.
When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is encouraged by the interest.
> Everything distorts markets. The question is how to distort markets into providing the best outcome.
Neutral tax (https://en.wikipedia.org/wiki/Optimal_tax) doesn't. But of course, market distortion is not the only or primary factor in policy decision-making.
Much better to tax consumption.
As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
Not necessarily.
"Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors." [1]
Also, the top 1 percent owns 90 percent of wealth in the US [2].
"First, economic inequality has worsened significantly in the United States and some other countries. The richest 1 percent in the United States now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own as much wealth as the bottom half of humanity.
The situation might be tolerable if a rising tide were lifting all boats. But it’s lifting mostly the yachts. In 2010, 93 percent of the additional income created in America went to the top 1 percent."
> As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
I agree that a consumption tax can be combined with other policy to prevent the regressive nature of a consumption tax alone. This requires wealth be taxed in various forms (ownership of investments, land, etc).
[1] https://www.usatoday.com/story/money/markets/2016/05/20/thir...
[2] https://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-...
But the foreign assets issue is a peculiarly US problem, resulting from the US being almost unique in the world in the extent to which it imposes taxes on income earned in other countries. (The other such country is Eritrea, and the US voted in favour of a UN security council resolution condemning the Eritrean tax regime.)
I'm unwilling to wait until the end of civilization while citizens of the richest country in the world go hungry [1], go without shelter [2], and die due to not being able to put $50 together for their insulin [3].
[1] https://www.worldhunger.org/hunger-in-america-2016-united-st...
[2] https://en.wikipedia.org/wiki/Homelessness_in_the_United_Sta...
[3] https://tonic.vice.com/en_us/article/ezwwze/the-high-price-o...
Nobody has a Scrooge McDuck cash vault, not Apple, Microsoft, nor anyone else. It's all invested - even money in a checking account isn't actually there, it's loaned out to someone who spends it.
> the top 1 percent owns 90 percent of wealth in the US
No, the government owns/controls most of it.
Here's even more: http://business.time.com/2013/02/05/the-federal-governments-...
As for how banks work, pretty much any book on how the banking business works will tell you that. Or you could watch that old movie "It's a Wonderful Life" where they give an accurate description at the end how banks work. And frankly, it's just common sense. Why would banks offer free checking? They're not charities. They need the money so they can turn around and loan it out. It's fundamentally how banking works.
I've never heard of a Scrooge McDuck cash vault outside of a comic book. Have you? (There is Fort Knox, but that's the feds, and it's not cash.)
https://money.howstuffworks.com/personal-finance/banking/ban...
But that would run counter to the neo-liberal narrative... After all, the rule of law serves to protect investments, not the peasant forced off his land.
Where was the rule of law to protect said peasants? Perhaps the rule of law isn't actually necessary for industrialization - as long as capital is protected, everything is all well and good. Unless you're a peasant.
[1] https://en.wikipedia.org/wiki/Inclosure_Acts
I agree that the rule of law didn't protect peasants who were forced off their hereditary lands. You'll note that it wasn't the peasants who led the industrial revolution.
Like several major sectors of the US economy at the time (and later), Britain's "revolution" was utterly dependent on coerced labor, viciously enforced by the power of the government. But some people still like to think of those times as the good old days of "laissez-faire" and government "staying out of the market".
Now, you can argue that this was a "rule of law", just a brutally repressive one which systematically granted special rights to certain classes of people, but then you're on much shakier ground.
IOW you should explain why “market distortions” are inherently a bad thing.
Everything distorts markets. The question is how to distort markets into providing the best outcome.
from [0]: "Harvard targets an annual endowment payout rate of 5.0 to 5.5 percent of market value. The University's actual payout rate has fluctuated over the past 10 years, from a low of 4.2 percent in fiscal year 2006 to a high of 6.1 percent in fiscal year 2010."
[0] https://www.harvard.edu/about-harvard/harvard-glance/endowme...
[1] https://www.irs.gov/charities-non-profits/private-foundation...
We could also take the route of the Federal Reserve purchasing up equities (The Bank Of Japan does this [1]), issuing deposit accounts to citizens directly (trivial for the Federal Reserve to support this [disclaimer: I work in the financial services industry, and feel qualified to make this statement]), and providing UBI to those accounts using the Federal Reserve as an intermediary/conduit (lookout Blackrock and Vanguard! there's a new index fund manager on the block!).
Voilà, Citizen's Dividend.
EDIT: The Federal Reserve operates independently of the US government, and does not require Congressional or Presidential approval to perform this "monetary policy". [2]
"Although an instrument of the U.S. Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."
[1] https://www.bloomberg.com/news/articles/2017-07-18/boj-s-etf...
[2] https://en.wikipedia.org/wiki/Federal_Reserve_System
Are you proposing their equity also be taxed "at rest"? How would that work?
Same way property is taxed. A taxing authority sends you a bill (based on duration of ownership), with the tax rate set by legislation. In this case, the custodian of your equity would send you your bill, with a copy sent to the IRS. I don't believe who accepts the payment needs to be defined at this time (although sending payments directly to the IRS or through your custodian are both trivial matters).
When you have trillions you just need a bigger mattress, like Ireland, for instance.
It is, because storing money under a mattress is equivalent of investing in money itself. As OP said too, it is like you lent your money to all the other investors in the economy (because you taking that money out of the economy reduces the prices of capital goods, which means they can now acquire it for cheaper). This results in wealth creation, which you benefit from when you take the money out from under the mattress.
This of course, can only work as an active investment strategy if you have a fixed or predictable money supply. For an inflationary currency such as any fiat currency, you will just get screwed.
This works great for cryptocurrencies for instance, people keep talking about how nobody has any incentive to invest in Bitcoin projects if just holding it will make it go up. Well, when bitcoin holders hold bitcoin, bitcoin economy still grows, and the purchasing power of their bitcoin goes up.
If you can build wealth around being active rather than just reaping the benefit of interest of interests then that should be encouraged rather than just grabbing and keeping.
Only in the most inefficient way possible. The 'problem' is banks are limited in what they can do with this money which ends up creating investment bubbles and other market distortions which hurt the economy overall. If you slowly transitioned banks so they could not invest this money over say 100 years the net result would not be harmful.
In the end money is not actual wealth, it's simply a representation of wealth. Anything that turns money into more money needs an intermediary where some cash flow is generated. And those intermediary's are often harmful see in excess like pay day loans.
Um, no. The type of investing you suggest includes the risk of losing the money. This doesn't work with commercial banks because they are insured by the federal government, i.e. the taxpayer. When people put money in the bank they expect it to stay safe. That's why the concept of a bank exists in the first place. If there was the risk of it evaporating due to bad investments, that would basically be more of "privatized gains, socialized losses."
I am saying if your raise that percentage to 11% cash on hand not much changes. Then next year that becomes 12% cash on hand... until banks can no longer lend money.
At no point in this process is physical wealth destroyed only shifting how loans are created.
Of the deposit account, they keep 10% in the vault/Fed, and loan out 90%. Of that 90%, they keep 10% in the vault (9%), and re-loan 90% of it (81%). Of that 81%, they keep 10% in the vault (8.1%) and re-loan 90% of it (72.9%). Sum the series, and the effect on the money supply from loans and the reserve requirement is to divide the vault cash by the reserve requirement to get the bank account totals.
Raise the requirement from 10% to 11% and the circulating money supply drops from 10 x vault cash to 9.1 x vault cash. Raise it again to 12% and that drops to 8.3 x vault cash. To keep things steady, you have to print extra money for the express purpose of putting it into reserves.
The de jure impact of the reserve requirement on the money supply isn't "not much"; it's actually huge. But that is only down to the point where it goes below the de facto requirement imposed by normal bank operations. You drop the requirement to 0%, and banks will still keep cash on hand to cover their own needs. It is certainly possible to raise it all the way to 100% (or even higher, by requiring that banks freeze some of their own cash when accepting a deposit). But that would have to be done very slowly and cautiously.
Further, the velocity of money is important which reduce the multiplier in practice.
However, if your taking this seriously yes you need a curve which is why I said 100 years, but only listed 90 years worth of changes.
I simply feel banks have conflicting goals as they need to be 'good at' customer service and making loans. This creates a lot of poor incentives and economic distortions.
The difference is people fronting money for loans would need to take on real risks without FDIC protection or have safe deposits but need to pay for bank services.
Often the capital for many bank issued credit cards does not come from depositors at all.
On the other hand, all the financing needs will be covered by other means. These “non-banks” will have to obtain capital as equity and debt, maybe even loans from other non-banks, but certainly not as deposits.
What was the problem that we where trying to fix anyway?
Risk of financial collapse. Banks are risky because they have a lot of leverage, people more directly loaning money may take a 20% hit after a housing collapse, but that's not such a big deal.
And one of the reasons for the crisis was “shadow banking”, because many home loans were not really given by banks (some were directly created by other institutions, some were first created by banks but then packaged and sold). The subprime crisis would not have happened, at least to the same extent, if loans had been kept in the balance sheets of banks.
Including the United States' largest savings and loan association, until its collapse in 2008: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
I suspect, but can't prove companies that need to demonstrate comptitence in lending to gain access to capital would be better at making loans than companies who gain capital by doing other things and then suddenly have access to a lot of capital and need to find a use for it.
Consider tech companies like Apple/Google/Microsoft have access to vast amounts of Capital yet does not really effectively use it for much.
A world where people don't need loans seems like a pretty good world, honestly. I've been fortunate enough that my parents were able to finance my college education out of their savings, and I rent my apartment because I don't want a big mortgage, and my life is I think better compared to people I know with student loans and mortgages. A world where everyone has the same access to resources that I had is a worthy goal, and if we can fund that by banning loans, seems fine.
(I asked another question here but decided I'm having a hard time reading or composing standard written English today so, some other time!)
They would still make money if they kept them it would just be less beneficial than it is now. No long term capital gains as an example.
People with little money consume everything they have already, they have no choice, no retirements no nothing.
>> You would force people to consume?
That's a complete misreading of the comment
And we know now that the ultra-rich folks tend to take the money,windfall from lower tax, and hide it in Virgin-Island, Panama,Cayman Island and other offshore tax havens.
It's a relatively well known fact that eg it doesn't really matter too much whether officially the employer or the employee is required to pay the employees income tax---the money comes out of the same pot.
Similar things happen for other taxes. Eg VAT in European countries seems to be paid for by the shops, but it wouldn't make a difference (apart from convenience in collection) if you'd levied it directly on the shoppers.
Any discussions about 'trickle-down economics' is incomplete without tax-incidence.
https://en.wikipedia.org/wiki/Trickle-down_economics#Critici...
"Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'"
It feels more honest that way.
Taxing wealth encourages investment because you have to turn a yearly return in excess of the wealth tax to not have your wealth shrink.
The incentives to be wealthy will never disappear. Taxing wealth just makes it harder and makes sure that those who are wealthy work for it.
If the central bank wants banks to have more reserves for loans, it buys assets from banks in exchange for newly created reserves. Money markets are a command economy.
Of course, someone still has to decide whether to consume now or invest. Or whether to invest in economically efficient ways, or in ways that are only economically efficient because of weird tax arrangements (but are actually less productive).
Edit: sorry, wasn't aware of the exact definition of this. Having everyone pass this sort of thing is a great idea imo.
Edit: Thinking about it a bit more. Inflation would also tend to drive up the numerical profits of companies, which will tend to buffer a stock price for example. So I'm not sure how this inflation independently contributes much of a specific tax on the wealth.
So yes salaries go up, but not in concert with people's costs nor with the value that is generated by people's labor.
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
It's right there in plain English: Inflation exists as a policy to screw "workers" out of the value of their wages.
Workers is a nicer way to say lower classes. It doesn't include investors, financial sector, etc, who strongly benefit from inflation.
Investments in real estate, equities, commodities etc all increase in notional value to factor in the devalued currency.
The problem with many "wealth" taxes is that they end up missing the top 1% and hurting the people who are building a business.
Eg inheritance tax does a fantastic job of just screwing over family businesses that on paper are worth say $7mm+ because on paper the kids who inherit the business now owe taxes on maybe $2mm (I think the first $5mm is tax free w/ inheritance), but selling any of the business to pay the taxes would often destroy the business.
And I'm not talking about massive businesses like Walmart - I mean businesses like a large-ish family farm where just the land, equipment, animals, etc are all worth $7mm+ on paper, even if the farm doesn't produce massive profits.
https://americansfortaxfairness.org/tax-fairness-briefing-bo...
Even our current methods of evaluating quantities and distribution of wealth are vague estimates, and that's without people incentivized by taxation to hide or minimize it.
A wealth tax that turns into anything but a buildings-and-cars tax is a fantasy from an enforcement perspective, and significant property taxes have issues of their own.
>Knock Knock Its the United States
With huge boats, with guns, gunboats.
>Open your banks' records, stop having them be closed
and theres not much they can do about.
So they sign a treaty making sure their banks' records are not closed.
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Inspired by this, both historically and in delivery https://youtu.be/Mh5LY4Mz15o?t=4m46s
Is it not a thing for startups to be based out of Delaware for a tax advantage? Would the ships even have to leave the harbor to do this?
And I was under the impression that startups use Delaware because it has a boatload of case law that favors investors.
Very different from tax avoidance schemes that companies use to pay lower taxes by incorporating in low tax jurisdictions or funneling the money through multiple countries.
From the perspective of the tax code as an incentive system, taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade tariffs: they disincentivize exactly the things that help the economy the most.)
Economists are usually more in favor of a land-value tax, because it punishes people for something that doesn't build GDP (investing their wealth into property and then sitting on it as it appreciates), and encourages them to instead do things that do build GDP (like investing their wealth into companies.) A land-value tax is still essentially a luxury tax, but it doesn't have the same problem of unilaterally discouraging GDP creation that taxing wealth does.
Why? As a total layman, wouldn't it be incredibly inefficient? If we tax the wealth of, say, the top 100 richest Americans, wouldn't that cause some pretty terrible downsides? If we force them to sell their holdings, wouldn't that ripple through the economy?
Take Jeff Bezos--if you forced him to sell a significant portion of his stock, wouldn't that depress the Amazon stock price, which affects a significant number of other individuals and businesses?
If you are not aware of what happens in situations like this, I would like to take you to pre-1990s India. Some of the most brightest, brilliant, hard working and industrious people used to leave the country and never to return the moment they attained working age.
The people and money from whom you can take the wealth to fund your socialist schemes shrinks every year. To a point you will have a country full of entitled people, who think they were born with rights to free stuff. And will always be angry at people capable of working who don't spend away their life to make it happen for them.
Quote (by probably Winston Churchill )- Any man who is not a socialist at age 20 has no heart. Any man who is still a socialist at age 30 has no brain.
Please upvote.
(And I can understand the temptation of sarcasm, but it seldom feels as good to the reader as it did to the writer.)
Georgism would be great. I hope Singapore would show the world how to do it.
It's not taxing wealth so much as taxing the mechanisms that create undue inequality that would work: yes, I'm talking about taxing rental income. The number one driver preventing people from building savings is draining their income through rent.
The solution is sort of obvious, but hated by people who love the AirBnB model: https://news.ycombinator.com/item?id=14493769
Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in.
Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles.
That being said, I agree that the pressure of rent is unbearable and growing for most of the population. The rebalance historically happened with wars. Properties ain't worth much when people die and buildings are bombed.
I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The solution I outline would work... if the goal is to empower people with "equity" as Sam's article suggests he wants to.
However, what could happen is that the rental income after tax is lower and not enough anymore to cover the mortgage or the maintenance costs, then the property has to be sold.
More supply of rental property? Rents go down so that landlords aren't stuck with vacancies. More demand for rental property? Rents go up so landlords can maximize their profits.
FYI: Selling a property doesn't take it off the market. It's just owned by a new owner, who's gonna either live in or rent it just like before.
There may be an offsetting overall reduction in the value of all real property, but it seems like reducing or eliminating these deductions[0] would be harmful to renters, not helpful.
[0] - Deductions like this, by the way, are available to all sorts of other profit seeking businesses for the equipment and supplies they use in the conduct of their business and I see no reason why a house should be different from a factory machine or laptop computer or airliner nor a minor repair to a house be different from a pad of paper or other consumable with regards to whether ordinary and necessary business expenses ought to be deductible against gross revenue when computing profit.
Real estate is a great investment for the risk averse (probably the best one too). Housing usually grows at the same rate as inflation if not a bit more and people will always need it. It doesnt drop 10% overnight unlike stocks. What other investments did you have in mind that you would recommend over real estate? (in the same risk spectrum)
You can tell that to the people in Houston who lost their home overnight. Home ownership is not risk free. ;)
I am not familiar with the entirety of the US territory. If you look at properties outside of the major cities, they should be relatively stable, renters have no jobs to sustain ever increasing rent. In the far country side, properties should be deflating because de industrialization.
Agreed that it is great for a diversified portfolio. Especially the primary home, it's self sustaining because you'd have to pay rent anyway. A second home is safe, it can host your child now or yourself after retirement, then it's lower returns.
There are a lot of index funds with various risk profiles. There is no general strategy. It depends on your personal situation, how much there is, where your live, and you family.
Now, that might sound stupid. If you own your home and have some savings, you can basically retire. There aren't much expenses outside of the rent.
And yet how many Houston like situations have happened overnight? Or over the years?
Real estate is easily one of the best savings vehicles you can have.
It's the same with work. If hard work is less likely to pay off, or if you'll have to work harder, or both, you'll be less likely to work harder. Some people will work harder anyways, and many will be discouraged.
Marginal effects matter. This is why dynamic analysis is important.
What does your world look like where you'd be too taxed to bother wanting to be financially independent?
That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m.
What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard?
What if I told you it cost $1500/month for a small studio apartment with no furnishings or anything else?
Both are true, both are real, both require different amounts of money in order to achieve financial independence.
I realise now that I haven't actually answered your question:
> What does your world look like where you'd be too taxed to bother wanting to be financially independent?
Rewriting that to be "What does your world look like where you'd be too taxed to bother generating more wealth?"
There comes a point of diminishing returns. If you work a 40 hour week already and make a decent living at 40-50%, and now get told that anything above that will get taxed at 75%, unless you're going to somehow generate more than double, you're going to spend that time doing more productive things (like spending it with your family).
Arguably, that's a net-positive for society as a whole, but may be a net-negative for the economy/GDP of the country you reside in.
The biggest potential cost of someone in the US, with employer-tied healthcare, seems like medical. You could hit the unlucky jackpot and have a seven-figure+ medical bill over the course of a few years or life. So let's set "able to handle that for yourself and your family" as the baseline for being considered independent, since that's probably bigger risk than, say, "owning but then losing a multimillion-dollar-home to a flood" or somesuch.
But I also don't think this term is generally understood as poorly as you suggest.
--------
Responding to context complaints aside, you're still talking income tax, not wealth tax. My question was what this hypothetical negative-use wealth tax looks like, since the further-upthread post had suggested taxing wealth instead of using income as one of (several) proxies.
But also, my hours have not increased with my compensation in the manner you suggest. I know that every additional dollar loses 40% or whatever of it, I still would rather have it than not have it. 5%, probably wouldn't care, but would I still want more autonomy and responsibility at work for the sake of more feeling in control? Maybe. Maybe not. There are both financial and non-financial sides there, but if income was the sole basis for choosing our roles, we'd be in a very different-looking world.
So that's why I'm skeptical that a wealth tax would make me give up having big dreams—the personal safety net and toys are still incredibly appealing.
Meanwhile, you're getting taxed on the estate you're trying to build as you build it.
Twice.
Every year.
As someone who's currently attempting to build his own personal empire, I'm incredibly glad I don't have a wealth tax to contend with. It's hard enough as it is, without knowing that if I start to draw close, it'll get harder and harder as I go. I might not have started trying if it didn't seem possible in the first place. Then again, I might have done it anyway. Where's a quantum theorist when you need one?
My only other quibble is that I haven't seen healthcare costs or insurance premiums scale to that 10x factor like housing prices do rural-vs-urban, otherwise I'd personally be perfectly happy with moving and retiring early. Get the right cancer or nasty chronic condition and you're gonna be out some serious bucks.
Over the course of your life, the government will get more of your wealth that you (or those you designate) will. (At 5% CAGR, the government is ahead by year 54. At 3% CAGR, they're ahead at year 56. At 8%, year 52.)
Example: Say I'm worth 1M credits today and my wealth tax is 10K (1%), that means my income gets another 10K added to it. Real income is 50K, + 10K so I pay tax as if I earned 60K. 40% of that works out to 24K worth of taxes.
In a bad year I'd earn maybe 10K, add that 10K (I'm still worth that 1M), and that year would pay 40% of 20K, which works out to about 8K.
Progressive tax scales can further improve the situation in years with low income.
The markets don't have much to do with this, it's a fictive income, not what you actually made.
Always always consider the young.
Europe's fertility rates are a disaster (and post-2008 American fertility rates too were disastrous). In particular they are a disaster because so much of their economies depend on the tax base growing, which means that productivity growth has to be even higher than it would have to have been with a higher fertility rate. The causes of this surely include making the burdens unbearable on the young who might want to start families. Beating up the young because they have good health, is an unspeakable insanity.
Hold up -
1. Why is this about working more hours, instead of working harder / more effectively? There are 168 hours in a week; even if you don't sleep, you cannot maximize your income beyond about 4x just by working more. I am currently making about 15x the lowest hourly rate I ever worked for, and I'm still fairly early in my career and feel like there's a lot of room for my salary to increase as I become more skilled.
2. I'm reading the discussion was about a tax on wealth, not a tax on income (dwealth/dt). If you're making a decent living and want to make more money so you can spend it on things that are not investments (consumer goods like video games, services like vacation travel/hotels, charity, raising more children, sending them to college), a tax on wealth will not affect you, because your wealth stays right where it is. And doing all that is net-positive for the economy.
'majormajor is clearly talking about wealth in the sense of static assets, not change in assets over time: I'm worried about having a single medical emergency, not having one every year. Make enough for your (static) safety net, then stop making more money.
Because they are tightly linked for most people.
I've managed to increase my income ~5x from what it was when I started but to do that I have had to put in 2 hours/day of side study.
The 99th percentile ("top 1%") of wealth by household seems to have been be $8.4M in 2007, according to https://economix.blogs.nytimes.com/2012/01/17/measuring-the-..., the most recent calculation I could find from a quick Google before heading to work - I'd love to see these calculations done with the raw data at https://www.federalreserve.gov/econres/scfindex.htm . From the summary on that page, they surveyed some 116 million households in 2007.
Suppose you tax all holdings at the top 1% of wealth by 1%/year, which is significant but not enough to wipe you out - after 50 years that leaves you with 60% of your original savings, assuming you weren't investing it.
That yields as a minimum $97T in tax revenue per year ($8.4M * 1.16M * 1%), and almost certainly significantly more because there-s a short tail of people with much more than $8.4M net worth. But if you split even this much among the 5% of households with "very low food security", that's $16,800/year. That's a lot of food.
(An actual scheme would have some sort of progressive tax, also, not a discontinuity at a certain dollar value)
Total US GDP for 2016 was ~$18T.
It seems a bit unrealistic to me to think we can get 5x GDP in tax revenue each year.
So what is the catch?
I'm still interested in doing or seeing an analysis with the full Fed dataset.
Now to answer your question, consider say, a prospective engineering student. They could go to school and come out with $150k or more in debt. But if their post-tax income potential goes down (especially initially), thus their ability to pay off that debt goes down, thus making it more crushing than it already would be, why on Earth would they even consider bothering to go to school then?! Of course a lot of potential students would find something else to do! It's utterly obvious. Painfully obvious. So right there you'll have a decrease in the number of people pursuing certain careers -- hard work being avoided.
Even beyond the economic effect on students, there is just a basic personal calculus as well. You might choose to live with a lower income and more free time to enjoy as you wish (if with fewer luxuries than you might like) than work harder and harder for less and less reward. You only have so many prime years for enjoying the one life you have. Everything is a trade-off. You might work harder now if it means you'll be better able to enjoy some free time later, but if working harder will make little difference to your ability to enjoy free time in the future, why work harder?
And beyond that, we know what low incentives did to would-be hard workers' desire to work hard in the U.S.S.R. and such places. Spoilers: they certainly didn't work harder when they didn't have guns to their heads incentivizing them.
By the way, the same sorts who say that increasing income taxes (or otherwise putting a ceiling on incomes) wouldn't have an effect on how hard people work... also tend to argue that higher tobacco taxes will reduce tobacco use. We all know about the prodigious powers of doublethink in some quarters, but don't think for a minute that everyone accepts doublethink, let alone masters it. And sure, you yourself didn't just make that argument, but I bet you do when it comes to topics where that argument is convenient. I, on the other hand, accept that punitive/confiscatory taxes only serve to reduce the amount of activity being taxed regardless of whether it is an activity I appreciate. If you ever find yourself making that argument, please recognize it and choose consistency.
(I mean, I think this is obviously silly, but it seems to hold up by exactly the same argument.)
Some people will work harder, by moving to a different country, where the tax laws are saner and don't punish hard working prime movers for the very value they provide.
Has this effect been shown in the real world? That implies more interest in the odds than their target market demonstrates any interest in (hence the term, "for the math-impaired").
I think this is false in practice, especially with a progressive wealth tax.
Most people don't want money, they want the things money can buy... long, healthy, and generally happier lives. People that keep striving past that point are people that seek to change the world, folks like Gates or Musk. A progressive wealth tax starting at $10M wouldn't really change the incentives at play.
Multiple incentives to be wealthy -- or worse, feedback loops to ensure the children of the wealthy maintain their advantage -- are just redundant.
Citation? I know it feels correct, but is it actually correct in practice? Is there any evidence that the rare person who generates enormous wealth was motivated substantially by wealth (and not a drive to build something substantial or change the world)?
At least in the case of Gates, I suspect he would have built Microsoft even with slightly more onerous (to the wealthy) tax policy.
I don't think it has disincentivated anybody from becoming less wealthy and/or working less. It just incentivizes tax evasion, but even that is not significant.
On the other hand, a large number of social programs have been built around this new tax. Anybody in the country could get cancer and would get free decent healthcare.
If we're talking about how people feel about their tax system, I think we need to talk about how a huge portion of the US misunderstands "tax brackets", and seems to think that paying more taxes when they're "bumped to a higher tax bracket" is a thing, and that there's some strategy in avoiding getting paid marginally more than some threshold. (Since tax brackets apply to marginal income, this is incorrect; you're still taxed at the lower rate for your income up to the threshold.)
This is almost certainly causing people to behave in ways that are economically irrational for themselves far more than any tax on large wealth (let's say, for the purpose of argument, $100M or more) would be. Yet there is no campaign to fix people's understanding of tax brackets so that more people feel incentivized to make more money.
If we're talking about an actual rational response to the tax system, I would much rather have $102M in the bank and get taxed on half my savings over $100M than have $99M in the bank and get taxed on half my savings over $100M.
> and thereby causes fewer GDP-building things to happen!
Why does a tax on wealth cause fewer GDP-building things to happen? The rational thing to do given a tax on wealth is to spend your extra wealth on services you're interested in, donate it to charities you support, etc., all of which seems like it increases GDP more than investing it for yourself would: it produces additional revenue for organizations, which produces jobs, which grows the economy.
I'd believe this argument for a tax on income, since it disincentivizes people from making more money, which means they're not spending that money because they didn't make it, and also they're voluntarily refusing to do profitable work they otherwise would have done. (I don't think I agree with the argument, but at least I understand how it works.)
This is the best distillation of how marginal tax rates works I have ever read.
There still are taxes that don't work like this (usually in the form of benefits that cut off at a certain income range) so unfortunately we still have messed up stuff. The feeling isn't completely unfounded
Another rational thing to do is to create vehicles that store but temporarily impair the market value of that wealth as computed for wealth tax purposes. Put it into a private company and offer minority, non-controlling stakes in that private company to all comers and act surprised when only family members take you up on the offer. It's a minority stake without control rights; it's going to be worth less than the net asset value. Store the wealth there until you're ready to use it, then have the company directors make a distribution, or leave the transfer in place to your heirs, who will receive a controlling interest when their shares (that maybe they bought) are reunited with the shares that you will them upon death. Or invest in something illiquid and very hard to accurately value.
Technically, all of those things create GDP activity for lawyers and accountants as well, but it's hardly good public policy, IMO. (I'm not opposed to a reasonable wealth tax, say 0.25% annually on sums 10M-50M USD and 0.5% annually on sums above that. I don't think it's a tax without lossy consequences though.)
I know engineers that are guilty of the misunderstanding you describe. How does anyone graduate from a university in the United States without at some point having been exposed to the idea of marginal taxation?
Also land is hard to hide, and relatively easy to value. So it's really hard to evade the tax. If you are going to tax wealth, and want that to include assets like equity in private companies, you are going to have to value those assets.
But he starts from a different angle: he's interested in economic efficiency. So he wants a system that moves economic goods into the hands of people who value it most (and compensate the previous owner fairly at market prices).
He proposes a system where people declare the value of their various possessions with two incentives for accuracy:
- You have to sell to any comer at the declared price. Thus guarding against overvaluation. - You have to pay a small percentage of the declared annual price as an annual fee, thus guarding against undervaluation.
That concern about economically efficient allocation is mostly interesting for monopoly goods and rights, because anything else we can just produce more off.
In Georgism it's customary to name these after their most typical representative Land (sometimes with the capital L to emphasis the generalisation). It's not much of a stretch to include eg things like licences for magnetic spectrum.
I'd be wary about mixing things like insurance against theft in here. (It might be possible to give a unified system, but I am not sure it is. Look at http://www.daviddfriedman.com/Academic/Course_Pages/legal_sy... for some source of interesting ideas about legal systems.) My wariness comes mostly from the fact that insurance that pays the declared value encourages people to overdeclare. Better let the market sort that out. (However paying the taxes for a specific declared value for years on end is a pretty good argument to convincing any court or insurance arbiter that you really valued something at that price.)
In the system I sketched above, Hanson described some scenarios were some entrepreneurs might be on the lookout for undervalued properties, buy them, and then just try to resell them to the original owner (or someone else).
As a special case, that scheme is especially lucrative if you are looking to buy a eg a house in a specific area anyway and don't care too much about which one; then the risk of not being able to sell the property you just bought on is not a problem: you just keep it.
I'd be more wary of using such a system of wealth taxation for eg cash. If you have a working central bank with an inflation or nominal GDP target, an individual holding cash even under their mattress is essentially free for society: the central bank just prints more money to make up for the portion you are holding out of circulation. And once you bring it back into circulation, they just print less money for a while. So for society it's great if people are holding cash: they did something for the rest of society to get their hands on the cash, but didn't get anything in return (yet). Very nice of them.
(Even better would be a free banking system, where essentially the same nominal gdp stabilization happens automatically because of market forces. George Selgin has some good stuff on that, see eg https://www.alt-m.org/2017/09/14/did-free-banking-stabilize-... or https://mises.org/library/less-zero-case-falling-price-level... )
The 'you have to sell at the declared value' requirement is somewhat similar to your idea: if you don't declare eg your house, it means you implicitly declare it to be worth 0. Someone stealing something worth 0 f...
Massive rent-seeking, enclosures, network effects, and benefiting by public infrastructure and institutions, without paying back full costs, or by imposing dislocations on other economic sectors, as well.
Aviation accounts for 6% of transportation fuel use. For a small portion of passenger and minuscule fraction of cargo movement.
The details will be difficult: how do you assess wealth with any semblance of accuracy, especially in the face of an increased incentive to hide it? I'd love to hear anybody's clever ideas to tax wealth in a way that catches cheaters. The biggest issue is what you do with wealth held overseas.
But even if the cost of catching cheaters is many billions of dollars of enforcement apparatus, it seems worth it. Of course, you create a new problem: avoiding corruption in a large enforcement apparatus chasing after people with the resources to easily bribe them. (But this problem is not unique to wealth taxes, and I don't think bribing the IRS is actually much of a problem—people just bribe Congress.)
There's another problem: wealth taxes would probably need a constitutional amendment in the U.S. From Article I, Section 2:
"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..."
There's already an amendment to clarify that federal income taxes are OK. But wealth taxes will need their own amendment.
Conceptually, though, I totally agree: if the problem is unequal wealth, just redistribute the wealth directly to move toward a less catastrophe-prone distribution.
Heard of this before. Have there been any attempts of that before and how did it fare?
It would seem to be as soon as wealth is taxed, wealth will morph or change shape to avoid being taxed. We'd end up with some new arcane tax scheme where wealth is held in a tropical island nation and the owner of the wealth gets a stipend or I don't know, rents all their possessions from that entity.
Obliterate the tax shelters, obliterate the tax havens, bring the money back home under threat of criminal law.
I'm not saying you can't be a fat cat. But at a certain point (fluid and blurry, but distinctly present), it's just morbid obesity that is squishing other citizens.
Elections matter.
Assuming (perhaps incorrectly) you are in the US, you are also reading Hacker News, so you are probably the top 1% of the worlds wealthiest. Again, just a thought experiment, but would you be fine with your government saying that as a 1 percenter in world wealth you can no longer earn anymore, you have hit that certain point, are a fat cat and can grow no more wealth, under threat of criminal law?
Media has done a good job of raising awareness of the problems of wealth disparity, and a lot of people nod along.
But no matter how wealthy someone is, they can always point to the more-rich and say those people are the problem and should be taxed, not themselves.
This is obviously untrue. There isn't an infinite number of people wealthier than Gates or the Waltons or the Rothschilds. At some point there is no one further up the economic ladder in whatever location you're talking about.
"Nobody?" Other countries manage it.
Hmm just checked the Wikipedia and it says that Donald Trump proposed it for the US as well.
The footnote proposes to tax capital the same as labor.
An interesting thing about Bill Gates is what a tiny sliver of GDP he managed to capture over almost 40 years. Something like $0.1 trillion out of several hundred trillion dollars.
I'm not strongly tied to the language I used, I just find the comparison interesting.
Let's say the total GDP over the last 40 years was 300 trillion dollars. Also, let's say Bill Gates's wealth is 100 billion dollars (for ease of calculation).
100B / 300T = 0.003 = .3% of 40 years of GDP
Let's say that the average population of the US during that 40 year period was 170M[0].
170M * 40 years = 6.8B person-years of work (PYoW).
Bill gates contributed 40 PYoW to the GDP, which is 0.000000059% of the GDP.
However, he captured .3% of the GDP as current wealth (not including wealth spent during that 40 years)
That means his wealth capture is 5 million times the "average".
That 'tiny sliver' is anything but.
[0] - https://fred.stlouisfed.org/series/LFWA64TTUSM647S
But that was the point of my post, to compare the captured wealth to consumption. People always talk about how the wealthy are screwing the rest of us over and everything would be great if they weren't taking so much, but it turns out that consumption is also a huge portion of the economy. Total wealth in the US is on the order of $100 trillion (this includes all housing and so on). Consumption of several trillion dollars a year adds up to that pretty quick and seizing it all and turning it into circuses isn't going to go very far.
Which isn't to say I am against programs that result in wealth transfer, it just pays to try to look at things clearly.
I addressed the comment you made, not the comment you didn't make.
I mean, I didn't painstakingly lay out my meaning, but there you go.
GDP is the national income.
Going back to Adam Smith, "Wealth is the annual produce and labour of the nation". Elsewhere he argues that "the sole use of money is to circulate consumable goods". As a man not given to short sentences, I recommend paying attention when he uses them.
https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_II...
Defining, and measuring, and allocating wealth has been a bit of a conundrum for the past 240+ years. And a while before by some reports.
I don't understand why this is something people believe needs "solved". Did you build Microsoft?
In reality, all the laborers at Microsoft built it into what it is today. And it (like most companies) are at a scale of complexity that is far beyond the fiction that workers are acting out CEO’s “visions.”
It offends my sense of "people should enjoy freedom" to see so, so many people who are very much not free because of the economic system that offers them no way out of poverty.
(And I don't believe that poor people are all choosing poverty. I've been poor, and no one wakes up to that and says "this is what I choose.")
And it offends my sense of language when people use phrases like "build Microsoft" as though it was a doghouse that someone assembled in an afternoon and sold for the cost of materials plus $50 profit. Gates no more "built" microsoft than George Washington built America, or whatever. Lots of people were involved, and even if they were compensated well, maybe they weren't compensated fairly. Profits being the unpaid wages of the working class and all...
Everyone, from the CEO to the custodian has an interest in people feeling there is some truth to "The American Dream." Which is not that you might get rich but that you can at least get ahead.
Yes. I purchased several of their products, thereby increasing the capitalization of Microsoft.
I expect you intended the answer to be "No," implying that Bill Gates (and a few others) built Microsoft. However, that rests on a specific understanding of ownership and causality that not everyone shares.
First, it assumes that Bill Gates did in fact work hard. Please define exactly what you mean by "work" and "hard", since I'm not sure there's an obvious thing that he could have done more of, even if he were so inclined.
Second, it assumes there exists some direct relationship between Bill Gates's personal work ethic and Microsoft's outsized success. Maybe all Microsoft needed was a good idea at the right time and would have succeeded about equally well with any minimally competent execution. Maybe they would have done even better had Bill Gates founded the company and then retired at 30.
Finally, it assumes that Bill Gates work ethic had some direct relationship with his financial compensation level. It is quite possible that he would have been more than happy to still give his best possible effort in return for being, say, a mere hundred millionaire. Moreover, plenty of people do hard work for all sorts of other reasons, from duty to boredom to artistic vision. Why do we assume that Bill Gates's internal motivation is predominantly financial in the first place?
None of those premises appear obviously and indisputably true to me. Maybe they are, but it'd be nice to see the case actually made (and made about real humans in the real world, not about perfectly rational actors in an idealized market).
Gates could have sold out to IBM or Apple or whoever and retired as a multimillionaire without taking the chance Microsoft would end up like Wang or Altair or hundreds of other companies.
“Had the technology been proprietary, and in my total control, it would probably not have taken off. You can’t propose that something be a universal space and at the same time keep control of it.”
[1]https://webfoundation.org/about/vision/history-of-the-web/
The guy who sells tables and chairs is likely to make more money than the guy who sells nails and hammers.
And, really, have you never bought something in small part because you liked the seller? That's the sentiment behind the exhortation to "buy local" or to buy Girl Scout cookies or from a local school's fundraiser. I suppose you could say a purchase is a contribution to the extent that the price exceeds the cost of production.
Which is "no". Buying and building are two different things. So I guess you were right about what I intended.
Consider the way Kickstarter projects describe their "backers". On the "Why Kickstarter?" page they say backers are "helping to create something new". Yet, one could easily consider Kickstarter simply a website for pre-orders, no different from buying in any other method.
The line between a buyer and a backer/builder isn't so clear.
It is pretty clear, if you are funding someone'e kickstart project then you did help them build it but if you pay for a product which was built using the creator's(or some other investor's) money then you did not build it.
It's even more fuzzy when you consider beta customers for a software company. Heck, how about when I contribute information to Google Maps? Or give feedback and make feature requests for my accounting software?
(Whether this will actually happen is a separate topic; but there's a reason why Sam Altman doesn't just propose your tax-the-rich scheme.)
"Most"? According to [1] only around 50% of the US citizens do get a paycheck (155 of 322 mio). The others probably mostly are kids, senior people and housewives, but they make up a significant portion.
[1] https://data.bls.gov/timeseries/LNS12000000
And whence the money for the share? Taxes. So this is just a UBI.
This, like all UBI proposals, seems like a way to dress up a massive tax hike: "but you'll be getting your share of GDP!". The only way to get me to like a UBI is to have UBI replace absolutely all (and I do mean all) welfare programs so that we can just haggle at every election over one headline UBI number + necessary taxes. And the initial UBI and tax rates would have to be no more burdensome than the current total of welfare it would replace, and preferably significantly less burdensome than that. Many UBI proponents, of course, would not mind this because they'll aim to ratchet up the UBI and taxes for it in a way that becomes culturally irreversible -- and that's a reason to be against UBI.
And incidentally, all instances of "soak the rich" in American history have actually been "soak those who aren't rich but have high incomes". The truly wealthy have no income as such -- instead they have capital. And why don't we just tax capital? Well, because every time it's been tried anywhere it's been a disaster for the overall economy: capital (and wealthy people) flees.
I'm ready for the downvotes, by the way.
Anyway, talk of UBI in the US is pretty silly when you look at how many people would rather not have the government do things like help people access health care.
They've been repealed in countries like Sweden and Austria, not because they were disasters, but because exceedingly wealthy people have a lot of influence. That's the only story.
As such your claim that no such taxes exist is wrong; and your claim that they've been a disaster is also fallacious.
p.s. your "ready for downvotes" nonsense is such immature nonsense. You said an untrue thing that HN audiences wish were true, and then pretended you're being brave. You're a joke.
Near as I can tell Europe has lagged way behind the U.S. in economic growth since the 1980s. I remember back in the 90s when catching up to the U.S. was stated goal of the incipient EU. How did that go? How does that relate to overall tax rates, public spending as a proportion of GDP? Are fertility rates artificially lowered by a high tax burden? Are they improved by the welfare state? Or is something else the matter with Europe?
I think "disaster" is an appropriate adjective for wealth taxes.
You state a total falsehood (that there are no wealth taxes), and a second falsehood that is, admittedly, subjective, (claiming that they were a disaster).
I point out that you were completely wrong about the objective claim you made, and you ignore that but demand evidence that I prove you were wrong about the other one, too? No way dude, you already proved that you're not here for an honest debate.
I think "disaster" is an appropriate adjective for your integrity.
I already showed that you were completely lying about wealth taxes not existing anymore. Only a fool would trust a proven liar like you.
Two hours before saying that, you said:
> ...every time it's been tried anywhere it's been a disaster for the overall economy: capital (and wealthy people) flees.
Trust capitalism, but not capitalists.
Did you know the richest 2.7% of all earners pay > 50% of all receipts collected by the government(1)?
Or that -- when asked explicitly whether the rich should pay more -- most (3/4) people, like you, say "yes", but when asked what the tax rate should be for top earners, precisely 3/4 of respondents said it should be 30% or below(2). Again, the top rate is 43% right now.
(1) http://www.pewresearch.org/fact-tank/2016/04/13/high-income-...
(2) http://www.themoneyillusion.com/?p=15005
That's comparing a question people likely answered with a total effective income tax rate with the current nominal marginal income tax rate.
Of course, this is reinforced by the fact that people don't even generally understand marginal tax rates all that well, but that's secondary.
You could argue that when people say the rich should pay "more", they're talking about effective rates, but a lower marginal income tax rate would be a funny way to raise top earners' effective tax rates.
Yeah but the value of that share doesn't increase when GDP goes up. That's the difference.
> raise your taxes on the rich and lift up those that are at the lowest end
I believe that is what Sam is suggesting. With the caveat the amount of tax collected is again tied to GDP.
> Of course in the current political climate this will not happen
Which is why he is proposing a potentially more palatable variation.
Be more constructive and less defeatist please.
The only thing you will end up achieving is stop the next Microsoft from happening, not the next Bill Gates from happening. The next Bill Gates will happen else where.
I question the sense in developing large stretches of arid wastelands (among other biomes) that feature beautiful, unique and delicate ecologies.
No, it makes far more sense to appropriate all existing developed land and rebuild as extreme density. The original owners can inhabit the top floor of each new building.
We could even graduate the heights of each new building according to existing property values, ensuring the continuity of our arbitrary class system. The taller the building you inhabit and the further up it, the more remarkable you must obviously be as a person.
My modest proposal maintains these unique landscapes held in public trust for future generations while ensuring that the wealthy can continue to look down on the rest of us.
Win-win!
> I believe that a new social contract like what I’m suggesting here—where we agree to a floor and no ceiling
So like...basic income but with limited downside and unlimited upside all the while ignoring income inequality? And Who decides on the payment based on "social contracts"?
I'm tired of sitting back and seeing companies that I liked but couldn't invest in become > 500m market cap successes. If I spent 4 years at one of these companies I could get _common_ stock, but I can't spend 1k to buy some preferred stock.
The whole startup system is rigged. People are going to start realizing it.
It also seems to give much more credence to luck than statistical evidence (Random Walk) that diverse passive investments outperform active investments, especially when accounting for costs.
Imagine we lived in a world where labor was unimportant because machines did most things better than humans could. These machines would still required time and natural resources (space, energy and matter) to produce goods and services.
For most people, "working" in this world would consist of going online, buying or trading an amount of energy, buying raw materials or spent matter that is ready to be recycled and pressing a "Start" button. Machines would produce some new goods or services.
Some people may also work on designing new better machines that produce finer goods. This would be mostly creative work as the technical part would mostly be automated. The machines could be specialized for maximum efficiency and quality.
People wouldn't have to go out to work. Machine owners could watch webcam feeds of their machines working in an industrial park somewhere. The finished goods, spent matter (trash) and the machines themselves, would be picked up and delivered by self driving delivery robots.
To get some variety, people would trade the production of different machines and they would trade excess spent matter. They would also trade the machine designs and the land or space to host the machines. The machines would sometimes have to be replaced when worn out or obsolete.
Now assume total energy production was constrained globally to a more or less fixed rate based on what could reasonably be captured from the sun. People would own shares in energy production capacity.
There could be a level of inequality in this society. This depends on how much governments would allow ownership of things to be concentrated, especially ownership of energy, useful space and natural resources.
A good way to prevent too high inequality would be for everyone to be shareholders in global production. Every day, shareholder would receive a dividend, an amount of energy/matter to be spent. They could use it in machines to produce stuff or services, trade it or maybe store it in a battery.
This is better than UBI because it aligns production incentives with consumption incentives and make the system naturally sustainable. If people vote for policies that are inefficient and reduce production, they will simply get a smaller dividend. I'm not making a value judgment either. What people collectively want might not always be a larger dividend. But at least the trade-off will be more explicit and sustainable.
+1
One basic suggestion is to pool all public education dollars at a larger unit, and distribute across all schools in a given state equitably. Eventually all public schools in a given state will have similar quality, and more importantly, the upper middle classes will now put their considerable resources and energy to improving the whole state system instead of their idyllic town, lifting up the standards across the whole state.
Of course people will be upset about their property values - in fact, that's when you begin to see the true proportions of American social division: People have equity built up in segregation. They bought in to the system.
Many countries have roughly comparable public schools across groups of a couple million people. It is not tiny districts with massive disparities across one another.
Another idea is national health care - the US Government already pays for most of the actual costs: Veterans, active-duty military, Children in need, the poor, and the majority of elderly Americans. These constitute most of the actual costs. The government also pays indirectly through healthcare benefits provided to roughly 1/3rd of America employed via various levels of government (state, fed, local) and government-run entities (like subways, school etc.).
So - the gov pays for the sick people, whereas the healthy working age people pay into insurance. So the costs come out of gov, but the $ goes to private.
We also have massive inefficiency maintaining bureaucracies in hospitals, government, and insurance companies to do billing. Europeans are shocked at just how much of the healthcare $ is spent on this staff, that is more than half of all staff. You can fire every single person doing reimbursements and billing if you had a nationalized healthcare system. You can also remove perverse incentives to docs, who make money by treating you unnecessarily. When Doc has college bills to pay for little junior, you're GETTING that stent, need it or not.
Without rules like that, then all of the safety net programs we have will still need to exist, because people could end up with a net income far below the basic income otherwise.
It would help most of the other 96% of humans, though. Nationalism is fucking disgusting.
100M people died of socialism in the 20th century. Can we just STOP with this madness please?