If this millionaire is not creating jobs, are they not free to pay more taxes than the government sets as minimum to pay?
Go ahead, donate it, make it more useful. Don't let the minimum stop you.
I suppose they prefer the government decide where it should be spent. Why not donate to the gov program they prefer themselves? Or Donate to the efficient programs, or donate to the one with ornery staff, if you like. No one will stop them.
If pay more in taxes then you end up paying less. If nothing else the government needs to borrow less money and thus pay less interest. Right now every year on average American taxpayer pays an extra ~3,000$ in taxes covering interest.
Changing the tax code is about who plays, it has ~zero impact on how much the government spends.
This particular straw man argument comes up every time taxes are discussed.
Obviously the marginal effect of one person paying more in taxes is close to zero. There's no hypocrisy in advocating the group pay more collectively without unilaterally taking it upon oneself first.
It begins with _I’m a millionaire..._ Not we’re millionaires... or Millionaires should pay more... because otherwise they’d be imposing their personalpreferences and beliefs upon others whom they don’t represent.
I try to impose my personal preferences and beliefs on others whenever I vote. I see nothing wrong with this. I also believe that people in my income bracket should pay more in taxes. I'm not going to voluntarily pay more whilst others don't. It's an aspect of the free rider problem. I'll continue to vote for higher taxes and continue to take advantage of the stupid tax system we have. Perhaps this makes me a hypocrite. So what? The belief that taxes should be higher for people like me is true/false independent of my hypocrisy.
There absolutely is. The individual is not advocating that the group pay more collectively. He is advocating that others be forced to pay more.
There is a clear distinction.
If this individual was advocating for people in his position to pay more, he could simply start a campaign for like-minded millionaires to pay more, and perhaps build some infrastructure to support this voluntary donation to the government.
Did you actually read my whole comment, or did you quote that out of context intentionally?
He is not campaigning for like-minded millionaires to pay more voluntarily, he is campaigning for them to force other millionaires to pay more through the tax code.
You can clearly see that’s what I meant if you hadn’t just quoted out of context, so I question whether your comment is in good faith.
> You can clearly see that’s what I meant if you hadn’t just quoted out of context, so I question whether your comment is in good faith.
Take a chill pill. It's not clear that's what you meant, I think many people will agree. It's the internet after all. That doesn't mean we have to be accusing each other of bad faith immediately.
So why didn’t you include the second half of the sentence which reads: “and perhaps build some infrastructure to support this voluntary donation to the government.”?
That makes it abundantly clear that I was talking about a voluntary scheme because that is plainly stated, and it seems like you saw the sentence because you chose to quote the first half. The first paragraph also makes that same distinction.
If you had quoted the full sentence instead of the partial one, your comment would simply be false.
I didn’t accuse you of bad faith but I did raise the question, and this is why.
The second half of the sentence can sound quite sarcastic. Depends on how you read it. Like I said, it's the internet. I'll admit I didn't think too much about what you might have meant.
Think about it, why would the government need anyone's help to collect money? And in what sense would it be voluntary? The taxpayers are either forced to by law or by social pressure to pay.
Ok - i’ll accept that you didn’t think about what I meant when you replied rather than acting in bad faith.
It seems odd to me that you don’t seem to make a distinction between government power and social pressure.
A key principle of the legal systems of the US and tbe UK and many other western democracies is limit the use of force to the government precisely so that confirming to social pressure is voluntary and not forced. Forcing people to do things is reserved to the government.
I realize this is not the case in many regressive regimes or weaker states, but the author is writing for a British publication about the US tax code.
> build some infrastructure to support this voluntary donation to the government.
He is not asking for infrastructure to support voluntary donation tobthe government. That would be stupid and ineffective. He is asking for the government to change its tax structure to tax people like him more.
> How do you know if it would be stupid and ineffective?
Because you can already pay more taxes than required in many places, and (almost) nobody does so.
> Perhaps he’s representative of rich people who want to pay more tax.
He is representative — he doesn't pay more than is required. He is proposing that the government require people like him to pay more taxes, which would mean that low income people pay less.
> Because you can already pay more taxes than required, and nobody does so.
There are lots of things people can do but don’t until a social movement encourages them to do so. Charities for example don’t receive donations until someone makes a case for why they should.
Also, I’m not sure why you think that raising taxes on one group automatically results in other groups being taxed less. That isn’t typically how it works.
> Also, I’m not sure why you think that raising taxes on one group automatically results in other groups being taxed less. That isn’t typically how it works.
That is exactly how it works. The state has the same expenses and must fund them somehow. Reducing taxes for one group doesn't magically make those expenses go away. When one group pays less, other groups pay more. Similarly, when one group pays more, others pay less. The state doesn't magically have more expenses.
Nope. I recommend you spend some time researching this. Tax has never worked the way you describe.
When states take in more tax than their expenses, they run a surplus. When they take in less, they run a deficit. Usually when they run a surplus, they find ways to spend it after not too long.
Raising taxes on any particular group or activity has no direct effect on the other tax rates.
> When states take in more tax than their expenses, they run a surplus. When they take in less, they run a deficit. Usually when they run a surplus, they find ways to spend it after not too long.
Those ways to spend it typically help the poor, so taxing the rich more helps the poor. The money doesn't magically disappear.
It was absolutely correct. The state can increase its expenses, but it doesn't happen automatically when the tax code changes. The main point is that when one group pays more, other groups benefit more.
What I said is absolutely correct. When the money is wasted on the military, the poor still benefit more than if the money hadn't been taken from the rich and spent on the military.
For the same reason why there is environmental regulation not just individual ethical choices of companies; Game theory. If those that make the "right" choices bear the burden of those that make the "wrong" choices then this cost will accumulate and produce a power difference.
I don't think "I have too much money, take it away" is the right way to look at it. It's more about "the government needs $X to do what we tasked it with doing, isn't it unfair that I pay a smaller share than you"
In the meantime, I need as much of the money that _I earned_ as the gov't will deign to let me keep. Why? None of your damn business, that's why. I earned it, let me save or spend it as I please, without even more of gov't sticky-fingers rooting around in my damn pie.
So, when a poor person complains that the taxes on the rich are too low, they can be criticised for being a jealous loser, and when a rich person does it, they are a hypocrite?
Who exactly is allowed to advocate for higher taxes on the rich?
I think there is a role for government, but the last thing I want is to give the federal government more money. They have enough in tax receipts to take care of infrastructure, feeding people, providing health care to those who can’t afford it etc.
Why would anyone suggest giving the federal government more money? The states in general do more in general to actually help everyday Americans.
Arizona has a line item on your tax return for the "I didn't pay enough" tax. You can elect to pay any amount you'd like over your legal tax burden. Predictably, it's raised a few thousand dollars and hasn't made any significant dent in the state's revenues.
> Why would anyone suggest giving the federal government more money?
so government can directly employ people who don't currently have jobs. this will create a money multiplier effect as those workers go out and spend their new paychecks, which puts more cash in the hands of other workers in the economy, who then spend some of it, and so on and so on. in this way, GDP grows.
that's an answer. i'm not sure it's a great answer, but it's an answer i've heard an awful lot.
another answer is so the federal government can build large infrastructure projects (like an interstate highway system or Hoover dam), the theory being that this will pay off richly for society and the economy later on.
Again, the government has more than enough money to invest in infrastructure. How much money does the federal government spend on the military that doesn’t go into helping the people who actually serve/have served and lines the pocket of the private military industrial complex? How much is it spending on being “tough on crime” and the “war on drugs”?
Why shouldn’t we make it easier for private industry to compete -for instance by not making the US the only industrialized country where your insurance is tied to your company?
Why not increase the earned income tax credit and make it easier to be distributed during the year. That would encourage work and it was something that was historically supported by both Republican and Democratic administrations.
The way things are going lately, I have a lot more trust in private industry than the federal government.
I'm not really sure why job creation is the appropriate moral metric. At the end of the day people who get wealthy generally are 'leveraging' (to be polite) the work of others. i.e. They are taking the profit from the work of others. If you can do something which is directly wealth creating without employing anyone then arguably you are more entitled to the money you earn. Ceteris paribus.
Not an argument that can be settled here, but the moral argument for job creators has to be that it is not a near zero sum game (i.e. it is not the case that if you don't create jobs then someone else will) and that they are systemically important. That is if we remove (magically/without shock) some of the current crop of job creators we would end up with an economic depression and as such they are an important societal good.
In 2010 in Denmark there was an initiative done for people wanting to pay more in taxes - people who claimed in the public debate, that they really wanted to pay more.
The tax department opened up a bank account, that people could pay in extra taxes for, if they wanted. If you felt like you should pay more, you could.
Two years later, the initiative was shut down - having accumulated about 15000USD (fifteen THOUSAND) - in a country with 5.5M inhabitants.
A lot of people want OTHERS to pay more in taxes and some people SAY they should pay more in taxes to score some cheap karma-points. Almost nobody ACTUALLY want to pay more in taxes.
I don't believe I am able to pay enough to make a difference.
I believe that if all people of my income paid more, we could make a difference.
I support all people of my income, including me, paying more taxes and opposed me alone paying more taxes.
The evidence you've provided does not provide significant support to your conclusion.
Here's what WOULD support your conclusion: If given the choice between someone who would increase taxes for people of my income or keeping them the same/lower (ceteris paribus), I voted for the latter. If I'm voting for the former, that straight up contradicts your position.
You don't want to pay more in taxes -- you don't believe it would make a difference, despite knowing how numbers work, and knowing that it literally would. I suspect you mean that the marginal difference for the government doesn't justify the loss for you.
That's fair, but it's exactly GP's point: you don't want to pay more taxes, because you don't care when there's no reward for you personally; instead, you want millions of people to pay more taxes for your benefit.
It's actually very difficult to understand because it seems nonsensical on the face of it. If people paying more taxes is a net good, then certainly any amount of additional taxes collected would be a net good.
Are you suggesting that there's a magic threshold that needs to be crossed where individual contributions amount to more than the sum of their parts? If so, what is it, and why does it exist? And why does that threshold always seem to be conveniently too high for people who claim they want to contribute more?
Since we're on HN, I'll give you an example of a pretty successful startup built on those "magic thresholds": Kickstarter.
Yes, of course having more money scales the ROI superlinearly. Lots of projects can't be done at all without a minimum investment. Others just have economies of scale (e.g. dilution of fixed overhead).
And considering that the government usually does stuff on very large scales, it's not strange that a single taxpayer's contribution is too small to be meaningful. Just creating a government program probably takes more than what I pay yearly.
Paying more personal taxes voluntarily is a net loss to me personally. Everyone in my income band paying more tax is the same absolute loss in income, but the net loss is substantially reduced due to the additional governmental funds, perhaps even becoming a net gain.
That's fair, but it's exactly GP's point: you don't want to pay more taxes, because you don't care when there's no reward for you personally; instead, you want millions of people to pay more taxes for your benefit.
No, I'd say they want millions of people to pay more taxes (including themselves) for everyone's benefit. The comparison is between an account that a few people can contribute to and not make a significant difference, vs everyone agreeing to raise tax rates and therefore have more common wealth.
Society benefits from taxes being spent on amenities, healthcare, education, police, when less taxes are spent everyone benefits less.
> You don't want to pay more in taxes -- you don't believe it would make a difference, despite knowing how numbers work, and knowing that it literally would. I suspect you mean that the marginal difference for the government doesn't justify the loss for you.
That's exactly how numbers work. Marginal increase of income from a single taxpayer is worthless to the government in isolation, and has zero impact for anyone. Hell, it's probably of strictly negative value if someone has to create a special account and procedures just for you.
Consider this as an illustrative example: if you were to suddenly start paying 2x the taxes you used to, literally nothing the government provides would change for you, or for anyone else for that matter. But if the entire country suddenly started paying 2x the taxes, you could expect much increased quantity and quality of public services.
Just like many private enterprises, government services too tend to have a lot of fixed costs, low marginal costs, and non-uniform access patterns.
I think this partly comes down to what country you live in - If I lived in a Scandinavian country where it seems like people get pretty good value for their tax dollars I would be ok with paying a higher tax rate. If I lived in the USA where tax dollars are wasted on wars in the Middle East and building useless walls I would want to pay as little as possible.
>I don't believe I am able to pay enough to make a difference.
I donate money and goods to a couple, carefully selected, charities every year. Having volunteered for them on a couple of occasions, I can definitely tell you my relatively modest help DID make a big difference to at least a few families.
I am not forcing anyone else to be charitable, yet there are many people who give (much more than I do).
There are two problems with your thinking:
- the return on our taxes paid in the USA is very, very low - we pay only a bit less in taxes then people in Europe, yet the infrastructure is crumbling, there are lots of desolate/mentally ill people in the streets, etc.
- you seem to want to FORCE people to pay more tax for your noble causes. Guess what - not everyone will agree with you what they are. That's why taxes should be limited to defense, law enforcement, public infrastructure, standardization, etc.
I think my wife and I should pay more in taxes. I also feel that I shouldn't die on my sword and voluntarily pay more in taxes whilst others in my income bracket don't. There is nothing contradictory in this. But suppose you think it is hypocritical of me to think tax rates should be higher for people like me while not voluntarily paying more in taxes. At most you can conclude that I'm a hypocrite.
My hypocrisy does not detract from the veracity of the belief that taxes should be higher for people like me. That belief is correct/true/valid or wrong independent of my hypocrisy.
That's bad reasoning. Every dollar you give helps people. What other people do doesn't affect that. So, yes, hypocrisy. You just don't want to pay more.
OK. I'm a hypocrite. I do vote for higher taxes on myself and others. So I guess the last sentence you wrote isn't entirely correct.
You do realize that people do seemingly contradictory things, right? And sometimes have overtly contradictory beliefs relative to their actions. As Saint Paul referenced; the thorn in his side.
My beliefs versus my actions in this instance is an aspect of the free rider problem. Look it up.
I'm aware of the free rider problem. I'm willing to bet, by the way, that the author of the article does pay a lot more in taxes than he thinks. People often speak as if effective tax rate were the net amount. That's something to think about in the context of free riders.
If you are aware of the free rider problem then you oughtn't be unaware that people can believe that something should be done but won't do it if they aren't forced to.
Why give it through a middle man (government) if you can donate it directly to the hungry mouths? It’s not like there’s a 2:1 match on your taxes. At best it flows through 1:1 and that’s at best.
I choose to live in a society and I want to live in a society that maintains a certain level of humanity. To run this enterprise that we call society requires a government (I do not at all agree with anarchism). That government requires money to run. Hence the need for taxes and right now taxes in the U.S. are low relative to the last 50 years.
I don't know anyone who is hungry so I can't directly give food to the hungry. One can seek out an organization to provides food for the hungry. I believe that the organization best suited to do this government. Besides, there is more to the proper running of a society than just feeding hungry people.
We need roads, sewers, clean water, a legal system, police, teachers, etc. The umbrella organization that we give money to in order to provide these things is the government.
> One can seek out an organization to provides food for the hungry. I believe that the organization best suited to do this government.
Empirically speaking, government is one of the least suited and efficient organizations to do this [1].
“[Government] income redistribution agencies are estimated to absorb about two-thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three-quarters of each dollar. Using government data, Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split.
“In contrast, administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients. Charity Navigator, www.charitynavigator.org the newest of several private sector organizations that rate charities by various criteria and supply that information to the public on their web sites, found that, as of 2004, 70 percent of charities they rated spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent. The median administrative expense among all charities in their sample was only 10.3 percent.”
Widespread undernourishment and hunger was not defeated by charity. It was defeated by government. Widespread access to clean water was not accomplished by charity. It was accomplished by government. Widespread access to education was not accomplished by charity. It was accomplished by government. Widespread access to medical care for poor children was not accomplished by charity. It was accomplished by government.
Thus it is safe to say that government is much more efficient at accomplishing these goals than charity. Charity is much more efficient at the margins. It’s great for the fringe cases once the majority of the problem has been addressed.
I think it's possible for an additional tax dollar to help people, for sure. But it seems unreasonable to assume that a positive tax revenue delta will manifest in useful or well-managed social programs. Additional money in the public coffers is a necessary precondition for expanded social programs of value, but there are still problems of management, possibilities that the money will be spent on unjustified wars, etc.
Every dollar you pay can potentially help people. I don't disagree. BUT: you're blatantly ignoring the massive amounts of money that are being wasted by government (and I'm not talking about good universal healthcare and decent pensions here)
It's all great in theory, but every single developed country wastes billions in taxpayers money every year on all sorts of irrelevant things. Politician pet projects. Projects going massively wrong and overrunning in cost at inflated prices. Inefficiencies. Etc..
I'd rather donate a healthy amount of money to a nonprofit of my choice (and yes, take the tax deduction for doing that -- can donate almost twice as much!). Those charities generally will be able to allocate said resources much more efficiently.
What a ridiculous argument. "You say you support US fighting in Syria, but you haven't personally intervened by purchasing a gun and plane ticket!"
"I want to pay more taxes" is obviously a stand-in for "tax rates should be higher", not because we love taxes, but because they help us achieve national priorities. Individual action doesn't do that, which is precisely why they're national priorities.
The only reason you don't pay more in taxes is because you don't like the feels of not keeping up with the Joneses?
Okay, but I don't regard you as an sort of moral actor for that: you intentionally don't do something you readily admit would make the situation better, out of your emotional needs, while politicking to force everyone to do the thing you're not actually willing to do yourself.
So no, I simply don't believe you: I don't think you believe you should pay higher taxes, I think you believe other people in your income bracket should, to run society the way you envision. If somehow that didn't apply to you, but applied to every one, well that would be just fine wouldn't it?
I originally didn't agree with GP, but the posts like yours trying to refute it are actually bringing me around to that position -- because they're deeply morally compromised, full of special pleading, and so on.
...you're not actually willing to do solely by yourself.
As I said, what does it matter if I'm a hypocrite? My belief that taxes should be higher for people like me is true or false independent of my hypocrisy. The question of taxation levels should not be determined or influenced by the level of my own personal hypocrisy.
I don't think you believe you should pay higher taxes, I think you believe other people in your income bracket should,..
You inserted other. This is wrong. I believe all people in my income bracket should pay more in taxes. This includes me. I do believe that government should tax me more. I'm also not going to donate more to the government if it isn't forced. Free rider problem and all that.
There's no special pleading in my position and I don't claim that my position on taxation levels is some sort of moral action on my part. All I've said is the following 2 things:
1. Taxes should higher for people in my income bracket.
2. I'm not going donate more to the government than what is required.
Make of this what you will. I'm a hypocrite. But I still think taxes should be higher for people in my income bracket and this obviously includes myself.
The problem is not that you're a hypocrite, it's that you're an inconsistent hypocrite. If paying more taxes is a net good for society, any additional amount of taxes should be better for society. You're not living by the principles you claim to believe in.
So what if I’m an inconsistent hypocrite? By the way, isn’t the essence of hypocrisy inconsistency?
I still believe tax rates are too low for people in my income bracket. Also one should ponder that the marginal effect of donations to the government by me are neglible but when done on the scale of millions of people they end up not being negligible. I don’t think me paying an extra $x thousand will actually help anyone. I do think that millions of people paying $x thousands more will. In this case, size matters.
Your logic is bad or it’s your math. Suppose I pay an extra $1,000 in income taxes via a donation. This amount will not help anyone or improve the fiscal situation of the United States government. However, several million people paying another thousand dollars in taxes can/will.
Replace the word other in your comment with everyong in the tax bracket I’m in and you’ll see that your conclusion is wrong. Consider this analogy. Me pooping in the local lake isn’t going to adversely affect the lake’s ecology. A million people doing so will.
> Suppose I pay an extra $1,000 in income taxes via a donation. This amount will not help anyone or improve the fiscal situation of the United States government.
It sounds like you think government waste implies $1000 is meaningless. Certainly $1000 in some private folks' pockets will materially help them.
> Suppose I pay an extra $1,000 in income taxes via a donation. This amount will not help anyone or improve the fiscal situation of the United States government.
We're talking about marginal returns here, i.e. whether or not the author should donate that extra $1,000 to the government. Donating that extra $1,000 when other people don't will help just as much, if not more, as when other people do.
It means the marginal effect of the first $1,000 would be greater than or equal to the marginal effect of the last $1,000. It does not mean that the aggregate benefit of multiple $1,000 donations would be less than just a single $1,000 donation.
You are consistently confusing marginal effect and aggregate effect in your posts. You are consistently misunderstanding that there is a huge difference in effectiveness in everyone in a tax bracket having increased taxes versus a single person paying the increase in taxes. There’s big difference in me wanting to pay $1,000 more in taxes versus wanting everyone in my tax bracket to pay $1,000 more in taxes.
I know you are talking about marginal effects but you should be talking about aggregate effects. You make the claim that a $1,000 donation might be more useful than many millions of $1,000 donations. This is clearly false. It’s true that the marginal effect of the first $1,000 donation is greater but you can’t conclude from this that the aggregate effect is greater. Mentioning diminishing returns is irrelevant when everyone you are responding to is pointing out that a single person voluntarily donating extra taxes is not worthwhile but at the same time think increasing taxes on everyone in a given bracket (due to scale) is worthwhile.
Your emphasis on marginal vs. aggregate is why you are wrong and why your statements are wrong.
Perhaps willing your estate to the state would be a way to resolve this hypocrisy? While you are alive you don't put yourself at a disadvantage and can act as an investment manager for your future donation to the government. Once you die, you will no longer have anything to lose by donating everything you have left to the government. Obviously if you have heirs it becomes a bit more complicated.
Having thought about this a bit more, the idea of "not being taxed enough" is not necessarily about raising revenue for the government. They don't need to take your money to tax you, they can just print money and tax everyone with inflation. The point of taxing the "rich" more is to level the playing field. It is prevent power from concentrating in people who are not democratically accountable. So in that case, donating your estate will not achieve that goal.
I don’t think my position is hypocritical and even if it is I’m not looking for a way to resolve it. I believe taxes should be higher for people in my income bracket. I also will not be donating to the government. I have not problem with this state of affairs. Others seem to have a problem with it though.
Whether or not taxes should be raised is independent of whatever level of hypocrisy I possess.
> A lot of people want OTHERS to pay more in taxes
If "a lot of people" is simply the 99.9%, and "Others" are the super rich 0.1%... I'm pretty sure the 99.9% would massively benefit... and the "others" would probably still be extremely rich.
> Almost nobody ACTUALLY want to pay more in taxes.
That's a silly conclusion.
I'll gladly vote for a policy measure that benefits a group of people at the expense of a group of people among which I find myself.
But I won't vote for a policy measure that benefits a group of people at the expense of just myself and nobody else. In that case, I would prefer a straight up donation of my own choosing. As such, this Danish bank account would see no money from me.
I don’t want to pay more taxes. I want myself and those in my peer group to pay more taxes. Your referenced experiment proved little other than that a few of the Dutch don’t understand game theory (or are just really philanthropic).
There is a line every year in Canadian income tax forms that lets you contribute to paying down the national debt. Not sure how much they collect; you don't get a tax benefit from it.
Both you and apparently Denmark don't understand how basic collective action problems work. The point is that individual action is often insufficient, while coordinated action isn't. It's entirely consistent to want a coordinated rule that hurts you individually but not want to take the corresponding individual action. Hell, there's even situations in which it would be rational for _every_ party to want a rule constricting their individual actions without it being rational to take that action individually (ie with no guarantee that the rest of the group isn't defecting).
If you're familiar with the prisoner's dilemma, which is a toy, two-party example, there's a massive difference between coordinating cooperation and unilaterally taking the cooperate action.
Yes, and that marginal revenue from a single taxpayer isn't enough to do anything of consequence. It's too simple-minded a model to treat government capabilities as a function of revenue as continuous. This is exacerbated by the fact that voluntary donations would be a highly volatile revenue source, correlated with economic growth in ways that are much more complicated than an income tax covering the entire population in a well-defined way does. That uncertainty around revenue is costly, further reducing the utility of the marginal revenue.
For an overly reductive example: a rich person could support higher taxes (including his own) to be raised to a level that could feasibly fund a social safety net on par with a UBI. If he were to unilaterally provide his portion of higher tax revenues, the government wouldn't instantly implement a minuscule, partial increase in the safety net. OTOH, a consistent tax regime based around a consistently higher revenue base is a fiscal environment in which we could move further towards this person's preferred policies.
(Note that I'm making no endorsement or rejection of the specific policy described above, just using it as an example to point out how nonsensical the complaint in this thread is).
I'm not saying it is irrational for the author to advocate raising taxes for everyone, including themselves. I'm saying that if the author really thought donating that extra $X to the government (when other people do) was such a good idea, they would be donating it right now even if other people don't. The reason is that the marginal benefit to the government of the author handing them an extra $X when other people do the same is no higher than when they don't.
Unless, of course, the author plans to dodge the tax themselves once taxes are raised for everyone.
The prisoner's dilemma is not a valid comparison because donating when the other person doesn't yields an equal or higher marginal return as donating when the other person does. In the prisoner's dilemma it's the other way around: cooperating when the other person defects results in a lower marginal return than when the other person cooperates.
I'm saying that if the author really thought donating that extra $X to the government (when other people do) was such a good idea, they would be donating it right now even if other people don't.
This is an aspect of human behavior. Sometimes people won’t do something if they aren’t forced to even if they think its a good idea. This is why the free rider problem exists. Your conclusion ignores facts surrounding human psychology. People don’t see a $1,000 donation to the government as being helpful if it’s just them doing it. They can see it being beneficial if millions of people do it. Hence an individual is unlikely to make a voluntary donation to the government whilst supporting increased taxation for everyone in their income bracket.
I quoted and if/then type statement you made. That statement’s conclusion does not follow from that statement’s premise. I clearly did not agree with that statement and gave reasons for why it is obviously false.
> if the author really thought donating that extra $X to the government (when other people do) was such a good idea, they would be donating it right now
Which part are you disputing? Your comments about human psychology merely support the fact that the author doesn't really think it's a good idea, and that there are psychological factors other than rationality and honesty at play.
By that logic, everyone wants the tax rate to be 0%, and the penalty for murder to be a stern talking to. If you think you should go to prison for murder, you're free to do so!
> The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars.
And what is being “demanded”? Products and services that are the result of investments made earlier in time. Consumer demand is the inherent PAYOFF of successful investment. Consumers demand more, faster, cheaper, better. None of that comes without investment first.
This guy sees investment as leeching off the productive economy. Probably because he has only ever been on the “money-shuffling” side of things, rather than standing in the shoes of a business owner who needs to raise capital to create something new.
That capital comes from either loans or equity, both of which require 1) substantial sums of latent savings in the economy, and 2) money-shufflers to find allocation opportunities (capital does not yet, alas, allocate itself).
Investment is the LAST thing we should tax. Consumption (especially of positional and rivalrous goods) is the first.
That’s one way of looking at it. Here’s another way.
Consumption is what drives the economy, not investment. You can invest all you want in a giant rubber duck factory, if nobody wants to buy giant rubber ducks your investment will be worthless. Investors either gamble where demand will occur or create it artificially through marketing, but in neither of those circumstances is consumption the direct result of investment.
The last thing you should tax is consumption, since it is the fuel for all other economic activity. Less consumption, less everything else. Also, taxing consumption tends to be a regressive tax policy in practice, which leads to economic inequality and reduced quality of life.
IMHO what should be taxed is income in all forms, whether out of labor or out of investment, since that’s the most fair. Consumption should not be taxed. Additionally tax rates should be progressive since there are many engines of inequality in the economy and we need a bit of counterbalance to that.
Mind you, taxing consumption is also the only way that we can avoid a runaway environmental disaster. 3% growth year over year is not sustainable in perpetuity.
We need to figure out how to transition to a steady state, or a shrinking economy.
Even if everyone wants to have rubber ducks in their lives, if everyone is hunting-gathering (thus no saving or investment) there won't be a way to finance the factory.
> Consumption is what drives the economy, not investment.
That's true, but it's missing the point. Investment allows people to fund projects that drive up consumption. It may not be "as important" as labor, but it still helps the economy. If the capital gains tax is too high, rent seekers will just find a safer alternative to way to park their money that is even less economically productive, like renting out real estate.
I’m not convinced investment ever drives up consumption, except for the investment in marketing. I see investment tailing consumption mostly, with investors preferring safe bets on goods and services that already have a market. Anyway, it’s just two ways of looking at the same economic relationship. In practice it’s more a sort of ouroboros.
I’ve also never been convinced by the “big money will flee if we tax it more” argument. Nobody has ever tried leaving no ground to flee to by leveling the taxation system so there’s no loopholes. The only way to flee would be to leave the country entirely, but as long as it remains profitable to stay (taxes do not exceed profits) it would be foolish to do so.
The author almost certainly pays way more tax than I do. He probably pays a much lower tax rate (I'll assume 20% long-term capital gains), but because he's a millionaire and I'm a middle-class wage-earner, his 20% is vastly more than my 40%. And while he may not create jobs directly, he almost certainly spends a lot more than I do, and is thus responsible for indirectly creating far more jobs than I, and that's without even accounting for the jobs created indirectly by his investments.
This assumes that he's just paying capital gains. I'm sure much of his income is from dividends or other ordinary income, which is taxed much higher than the average person.
> ... the jobs created indirectly by his investments.
but i think this is one of the key issues of the article. the author claims that investment does not create jobs.
also, in absolute dollar terms the author may spend more than you, but in percentage-of-income terms he's spending less. and I think maybe that percentage difference is another key point the author makes, given how much wealth is tied up in the hands of the rich.
I mean, I think the author believes that wealthy people pouring almost all of their money into various investments -- as opposed to middle class and poor people spending all or almost all of their money on goods and services -- is not a very strong way to create domestic jobs.
IMHO, this is not a complete accounting of the situation. I mean, US people are spending -- we're spending big time. but where are all the jobs? the US has this giant trade deficit. a helluva a lot of jobs are in overseas manufacturing. so, we can force billionaires to spend all of their income every year on goods and services -- but how many domestic jobs is that going to create if what they buy is expensive Euromade yachts and New Zealand real estate?
it's almost like we need more than just tax policy, it's like we need some kind of domestic industrial policy
The problem is that every normal person is just a temporarily embarrassed millionaire, so they don't want to raise taxes on themselves in the future. This is not more evident elsewhere than here on HN, where everyone is a possible startup billionaire.
That's actually not quite as incorrect as we might intuit; we talk about the top 1% and earnings quintiles and such as though they're static fixtures, but mobility in and out of those positions is actually pretty robust.
> It turns out that 12% of the population will find themselves in the top 1% of the income distribution for at least one year. What’s more, 39% of Americans will spend a year in the top 5% of the income distribution, 56% will find themselves in the top 10%, and a whopping 73% will spend a year in the top 20% of the income distribution.
The reverse side of that phenomenon applies, as well - a significant portion of the population will find themselves in the _bottom_ part of the distribution at some point in their lifetimes, as well.
I'm sick and tired of hearing this refrain. It assumes people have no internal values and just vote for things based on how it will personally benefit them, which is not true.
People can and do vote for things that give no benefits to them if it aligns with their concept of fairness. In this case, if you believe a person deserves to keep as much of their income as possible, you will vote for lower taxes, because it feels right.
The most fundamental one is this: capital is mobile, people are not.
If you increase taxes on capital, it will flow to a lower-tax jurisdiction relatively quickly. A decent legal system and financial infrastructure is necessary, but the hurdles aren't as great.
But if you increase taxes on salaries, people will be hesistant to leave for personal reasons (e.g. friends, family), cultural reasons, security reasons etc.
As such, tax competition between jurisdictions on capital is much more fierce than it is on labour. This is typically why you see lower taxes on capital.
The other reason is that labour tends to be viewed by part of the voter base as a normal tax, and capital as a double tax. i.e., if you earn $100k a year and save much of it after taxes, you now have capital to invest. And getting that capital taxed again is sometimes viewed as even less popular, a sort of tax ontop of tax, particularly as these wealthy people are more mobile and can more easily choose a lower tax jurisdiction.
As for the notion that his capital doesn't create jobs, I don't know if that is true. Fact is that if people like him withdrew their capital from the market, rather than invest it, you'd see many financially-constricted companies that would bin their expansion plans, cancel their investments in R&D, withdraw from new products and markets etc, and on the whole, generate far fewer jobs. It's essentially what the credit crisis looked like. The notion investments like his aren't creating jobs seems erroneous.
That doesn't mean I'm a fan of low capital taxes, by the way. But tax reform is incredibly complex because it requires essentially all countries around the world to work together, to give up some control over an important component of sovereignty (taxation), to restrict tax competition somewhat. There's been a lot of decent work in that regard already by the way in the past few years, with the worst aggressive tax planning and tax havens being dealt with (e.g. BEPS), which allows countries to implement more sensible taxes on capital without worry of their tax base shifting abroad.
People are not that mobile yet! A lot of people now wish to be more mobile and Upwork "thinks" half the existing jobs are being remote in 15 years. Though they have a huge incentive to be massively biased.
Wasn't always so, even in my short lifetime, so I guess it's a nice sound bite. Capital controls were a normal, and expected, thing between countries.
The US of A started throwing its weight around to break down Bretton Woods got us to now. (Oversimplified for brevity)
Go back to pre WW1 and people were fully mobile with few countries having border controls or passport/visa requirements but most having capital controls.
So he’s denying the effect that a company can raise more capital if it has stronger demand for its shares. And he’s denying the incentive of stock for employee compensation, which consequently creates jobs just like cash.
So I’m going to file this under “rich guy doesn’t understand the system that made him rich”. I also worked on Wall Street, and it doesn’t automatically imbue you with an understanding of all things economic. You have to explicitly study to gain expertise.
You have to invest that money somewhere and the place with the best infrastructure to get what you need built matters more than the taxes you may pay on the profit.
While your logic seems sound, I feel like the last 10-20 years have involved simply not investing it.
I have no particular explanation nor suggestion based off of that, but I know I've read a lot of articles about companies simply sitting in large bankrolls.
> But tax reform is incredibly complex because it requires essentially all countries around the world to work together, to give up some control over an important component of sovereignty (taxation), to restrict tax competition somewhat.
Not a single country in such a consortium would permit industry-level collusion among private enterprises to similarly inflate prices. If it's disgusting if the airlines do it, it is disgusting if the West does it.
The central point is that investment income is treated differently tax-wise than working-at-a-job income. If you have a large enough kitty you can live off investment income.
I wonder how a higher tax rate for investment income would change the pools of money available to startups? Would more of it flow to other asset classes, like tax-free but lower returning municipal bonds? Would it make no difference?
As someone with a significant amount of wealth, you have the option to spend it entirely on yourself. For example, you could have consumed all of it already, enjoying non-stop parties, expensive toys, buying the temporary, albeit intense, adoration of an entourage etc. Thank you for not doing those things.
Instead, you have invested this capital. You have put it into a variety of investments, each with their own risk-reward profile. I am hopeful that as you grow wealthier, you will become more charitable, both by donating more wealth to help others, and also by accepting a lower rate of private return (or higher private risk) for investments that have a bigger social return (e.g. biotech investments, space exploration, etc). Even there, I hope you exercise some prudence and a portfolio approach, since it doesn't help anyone ex post if you lose all your money developing an invention that doesn't work.
In the meantime, we (society) are grateful for your concern, but would probably rather that you did not dump more money into our tax coffers. If you want to give money to the people, give money to the people, Give Directly style.
And if you still feel that the government is necessary to solve some of the problems that are bothering you, spend it instead to incentivize better government, or to design and build a government that allocates each tax dollar more efficiently as the years go by.
Both parties and failed research result in jobs and markups going to externalities, bar tenders, servers (people), researchers, fabrication materials, whiskey distillers, etc.
investments today are risk averse on a large, almost cultural scale by now. You invest into monopolies who dominate entire markets or even provide them, fonds who own industries where they start to even forget how innovation-the word is written.
This means, that the aggregated money does not go anywhere, witin any industry today, where it creates growth or change. Its all about nailing another board to the fortifications.
What else remains, spills into citys as urban blight by creating empty overpriced apartments.
The trickle-down- economic model you have in your mind, has been tested. It does work as well as socialism.
Which is one of the reasons, the pulbic has turned away from this and is ready to give the likes of marx and engels another chance to fail.
The idea the governments spend money productively is mind bending and against everything I see every day in the United States. Go figure, maybe it’s different in Europe, but I can’t imagine that people who can’t make it in the private sector—and that’s really all government is, people who otherwise can’t make it in a competitive market environment—would somehow be efficient and productive in the public sector.
I think peter thiel tends to see this in quite an open minded way. It might have worked before but it really doesnt work well Now. (https://youtu.be/FDkhfm6CYjE)
The central premise of the article, that preferencing capital gains doesn’t create jobs, is hotly debated. Even some pretty liberal economists agree that capital gains should be taxed lower than ordinary income: https://slate.com/business/2012/09/mitt-romney-s-effective-t...
Lower capital gains rates are also not an American invention. It’s a feature of almost every Western European tax code. Sweden’s capital gains tax rate is half of the top ordinary income rate.
The tax code could have been rewritten last year to eliminate the corporate income tax, but require full income taxes on capital gains (potentially with some discounts or taxes on long term / short term)
Corporate taxes + lower capital gains taxes are double taxation on the same earnings; but also serve to very much politically obfuscate who pays the taxes, consumers, businesses, or the profiteers - which, while fungible - could drastically simplify the tax code.
> Take it from me: I am an investor. I have not actually worked in years. I let my money make me money. Over the past year, do you know how many jobs I’ve created? Zero. The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars.
Investing does great jobs because businesses need capital to grow, and growth leads to more employment. Not employing people directly does not mean the money didn’t lead to some job creation. It’s just harder to quantify.
Businesses need to grow because capitalism requires them too. If they don’t, then the music stops and fictitious future values are shown for what they really are. Really urge all of you to read the Limkts of Capital or End of Capital. Unless workers start getting a fair share of the value they create, the financialiaation of a business will become the only way to create more profit for those having capital. I don’t know. Jesus. Read some Marx.
This article is mostly correct as applied to service based businesses. The "old men" in U.S. power today made their money building tangible things, so those are the jobs they understand and want to bring back through tariffs.
Companies outsourcing IT functions just happen to be outside the purview of taxes and tariffs. But that's no guarantee long-term.
What are some arguments against chaneling all forms of taxes into sales tax? To me that seems the simplest way to ensure everyone is contributing, regardles of how or where the money is made.
The primary argument against consumption taxes is that they're regressive on a percentage-of-income basis, as your spending as a percentage of total income tends to drop as your income increases (it's worth noting, though, that payroll taxes are already functionally regressive, as the percentage of income from non-payroll sources rises with total income). The other is that you generally tax things you want to disincentivize, and since aggregate demand is the primary driver of economic growth, you want to be careful to not dent it too badly. You could make it progressive by refunding a baseline amount annually, but people have to effectively carry the outlay until tax time.
The primary argument for them is that the wealthy have a higher marginal propensity to consume, so it acts as a functional wealth tax, and can't be easily evaded through income restructuring. It would be strictly progressive on an absolute basis, and may marginally incentivize investment over consumption.
"…not only is the corporate tax rate on overseas profits just half the normal rate (10.5% versus 21%)"
Never mind that the US is one of what two? countries that tries to tax their companies sales (and citizen income) based on activity abroad?
Say what you will about more progressive income tax policy, capital gains, or tech companies dodging due to the nature of software, but the US has had the highest effective corporate tax rates in the world and was definitely driving offshoring.
A corporate tax rate of 0% is very much an increasingly non-fringe goal as opposed to raising revenue through other means. It's a testament to the US laws and business health it has as many companies remaining despite the tax disadvantage.
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[ 3.8 ms ] story [ 177 ms ] threadGo ahead, donate it, make it more useful. Don't let the minimum stop you. I suppose they prefer the government decide where it should be spent. Why not donate to the gov program they prefer themselves? Or Donate to the efficient programs, or donate to the one with ornery staff, if you like. No one will stop them.
Changing the tax code is about who plays, it has ~zero impact on how much the government spends.
Obviously the marginal effect of one person paying more in taxes is close to zero. There's no hypocrisy in advocating the group pay more collectively without unilaterally taking it upon oneself first.
There is a clear distinction.
If this individual was advocating for people in his position to pay more, he could simply start a campaign for like-minded millionaires to pay more, and perhaps build some infrastructure to support this voluntary donation to the government.
That is actually what he's doing, the whole point of the article.
He is not campaigning for like-minded millionaires to pay more voluntarily, he is campaigning for them to force other millionaires to pay more through the tax code.
You can clearly see that’s what I meant if you hadn’t just quoted out of context, so I question whether your comment is in good faith.
Take a chill pill. It's not clear that's what you meant, I think many people will agree. It's the internet after all. That doesn't mean we have to be accusing each other of bad faith immediately.
That makes it abundantly clear that I was talking about a voluntary scheme because that is plainly stated, and it seems like you saw the sentence because you chose to quote the first half. The first paragraph also makes that same distinction.
If you had quoted the full sentence instead of the partial one, your comment would simply be false.
I didn’t accuse you of bad faith but I did raise the question, and this is why.
Think about it, why would the government need anyone's help to collect money? And in what sense would it be voluntary? The taxpayers are either forced to by law or by social pressure to pay.
Anyway, let's put that to bed.
It seems odd to me that you don’t seem to make a distinction between government power and social pressure.
A key principle of the legal systems of the US and tbe UK and many other western democracies is limit the use of force to the government precisely so that confirming to social pressure is voluntary and not forced. Forcing people to do things is reserved to the government.
I realize this is not the case in many regressive regimes or weaker states, but the author is writing for a British publication about the US tax code.
He is not asking for infrastructure to support voluntary donation tobthe government. That would be stupid and ineffective. He is asking for the government to change its tax structure to tax people like him more.
How do you know if it would be stupid and ineffective? Perhaps he’s representative of rich people who want to pay more tax.
Because you can already pay more taxes than required in many places, and (almost) nobody does so.
> Perhaps he’s representative of rich people who want to pay more tax.
He is representative — he doesn't pay more than is required. He is proposing that the government require people like him to pay more taxes, which would mean that low income people pay less.
There are lots of things people can do but don’t until a social movement encourages them to do so. Charities for example don’t receive donations until someone makes a case for why they should.
Also, I’m not sure why you think that raising taxes on one group automatically results in other groups being taxed less. That isn’t typically how it works.
That is exactly how it works. The state has the same expenses and must fund them somehow. Reducing taxes for one group doesn't magically make those expenses go away. When one group pays less, other groups pay more. Similarly, when one group pays more, others pay less. The state doesn't magically have more expenses.
When states take in more tax than their expenses, they run a surplus. When they take in less, they run a deficit. Usually when they run a surplus, they find ways to spend it after not too long.
Raising taxes on any particular group or activity has no direct effect on the other tax rates.
Those ways to spend it typically help the poor, so taxing the rich more helps the poor. The money doesn't magically disappear.
“Similarly, when one group pays more, others pay less. The state doesn't magically have more expenses.”
And that is absolutely false.
Also, there is certainly no relationship between raising taxes and the poor benefiting. The money can be wasted or spent on the military, etc.
You are also still confusing taxes with spending.
Exactly the same as when other people do. Probably more, actually.
If you already know this then why ask the question? If you dont then I can recommend you study some games https://en.wikipedia.org/wiki/List_of_games_in_game_theory
In the meantime, I need as much of the money that _I earned_ as the gov't will deign to let me keep. Why? None of your damn business, that's why. I earned it, let me save or spend it as I please, without even more of gov't sticky-fingers rooting around in my damn pie.
Who exactly is allowed to advocate for higher taxes on the rich?
Ouch.
Why would anyone suggest giving the federal government more money? The states in general do more in general to actually help everyday Americans.
so government can directly employ people who don't currently have jobs. this will create a money multiplier effect as those workers go out and spend their new paychecks, which puts more cash in the hands of other workers in the economy, who then spend some of it, and so on and so on. in this way, GDP grows.
that's an answer. i'm not sure it's a great answer, but it's an answer i've heard an awful lot.
another answer is so the federal government can build large infrastructure projects (like an interstate highway system or Hoover dam), the theory being that this will pay off richly for society and the economy later on.
Why shouldn’t we make it easier for private industry to compete -for instance by not making the US the only industrialized country where your insurance is tied to your company?
Why not increase the earned income tax credit and make it easier to be distributed during the year. That would encourage work and it was something that was historically supported by both Republican and Democratic administrations.
The way things are going lately, I have a lot more trust in private industry than the federal government.
So other groups have to give tbe federal government less money. The article was pretty clear about that.
Not an argument that can be settled here, but the moral argument for job creators has to be that it is not a near zero sum game (i.e. it is not the case that if you don't create jobs then someone else will) and that they are systemically important. That is if we remove (magically/without shock) some of the current crop of job creators we would end up with an economic depression and as such they are an important societal good.
The tax department opened up a bank account, that people could pay in extra taxes for, if they wanted. If you felt like you should pay more, you could.
Two years later, the initiative was shut down - having accumulated about 15000USD (fifteen THOUSAND) - in a country with 5.5M inhabitants.
A lot of people want OTHERS to pay more in taxes and some people SAY they should pay more in taxes to score some cheap karma-points. Almost nobody ACTUALLY want to pay more in taxes.
I believe that if all people of my income paid more, we could make a difference.
I support all people of my income, including me, paying more taxes and opposed me alone paying more taxes.
The evidence you've provided does not provide significant support to your conclusion.
Here's what WOULD support your conclusion: If given the choice between someone who would increase taxes for people of my income or keeping them the same/lower (ceteris paribus), I voted for the latter. If I'm voting for the former, that straight up contradicts your position.
Guess how I vote. Guess how the author votes.
You don't want to pay more in taxes -- you don't believe it would make a difference, despite knowing how numbers work, and knowing that it literally would. I suspect you mean that the marginal difference for the government doesn't justify the loss for you.
That's fair, but it's exactly GP's point: you don't want to pay more taxes, because you don't care when there's no reward for you personally; instead, you want millions of people to pay more taxes for your benefit.
If all people pay more taxes, a large majority of us will see a net benefit that outweighs our own cost.
I support raising taxes for everyone, including myself. This should not be a difficult concept to understand.
Are you suggesting that there's a magic threshold that needs to be crossed where individual contributions amount to more than the sum of their parts? If so, what is it, and why does it exist? And why does that threshold always seem to be conveniently too high for people who claim they want to contribute more?
Yes, of course having more money scales the ROI superlinearly. Lots of projects can't be done at all without a minimum investment. Others just have economies of scale (e.g. dilution of fixed overhead).
And considering that the government usually does stuff on very large scales, it's not strange that a single taxpayer's contribution is too small to be meaningful. Just creating a government program probably takes more than what I pay yearly.
No, I'd say they want millions of people to pay more taxes (including themselves) for everyone's benefit. The comparison is between an account that a few people can contribute to and not make a significant difference, vs everyone agreeing to raise tax rates and therefore have more common wealth.
Society benefits from taxes being spent on amenities, healthcare, education, police, when less taxes are spent everyone benefits less.
That's exactly how numbers work. Marginal increase of income from a single taxpayer is worthless to the government in isolation, and has zero impact for anyone. Hell, it's probably of strictly negative value if someone has to create a special account and procedures just for you.
Consider this as an illustrative example: if you were to suddenly start paying 2x the taxes you used to, literally nothing the government provides would change for you, or for anyone else for that matter. But if the entire country suddenly started paying 2x the taxes, you could expect much increased quantity and quality of public services.
Just like many private enterprises, government services too tend to have a lot of fixed costs, low marginal costs, and non-uniform access patterns.
I donate money and goods to a couple, carefully selected, charities every year. Having volunteered for them on a couple of occasions, I can definitely tell you my relatively modest help DID make a big difference to at least a few families.
I am not forcing anyone else to be charitable, yet there are many people who give (much more than I do).
There are two problems with your thinking:
- the return on our taxes paid in the USA is very, very low - we pay only a bit less in taxes then people in Europe, yet the infrastructure is crumbling, there are lots of desolate/mentally ill people in the streets, etc.
- you seem to want to FORCE people to pay more tax for your noble causes. Guess what - not everyone will agree with you what they are. That's why taxes should be limited to defense, law enforcement, public infrastructure, standardization, etc.
My hypocrisy does not detract from the veracity of the belief that taxes should be higher for people like me. That belief is correct/true/valid or wrong independent of my hypocrisy.
You do realize that people do seemingly contradictory things, right? And sometimes have overtly contradictory beliefs relative to their actions. As Saint Paul referenced; the thorn in his side.
My beliefs versus my actions in this instance is an aspect of the free rider problem. Look it up.
I don't know anyone who is hungry so I can't directly give food to the hungry. One can seek out an organization to provides food for the hungry. I believe that the organization best suited to do this government. Besides, there is more to the proper running of a society than just feeding hungry people.
We need roads, sewers, clean water, a legal system, police, teachers, etc. The umbrella organization that we give money to in order to provide these things is the government.
Empirically speaking, government is one of the least suited and efficient organizations to do this [1].
“[Government] income redistribution agencies are estimated to absorb about two-thirds of each dollar budgeted to them in overhead costs, and in some cases as much as three-quarters of each dollar. Using government data, Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents of each dollar budgeted for government assistance goes not to the poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split.
“In contrast, administrative and other operating costs in private charities absorb, on average, only one-third or less of each dollar donated, leaving the other two-thirds (or more) to be delivered to recipients. Charity Navigator, www.charitynavigator.org the newest of several private sector organizations that rate charities by various criteria and supply that information to the public on their web sites, found that, as of 2004, 70 percent of charities they rated spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent. The median administrative expense among all charities in their sample was only 10.3 percent.”
[1] http://mises.org/journals/jls/21_2/21_2_1.pdf
Thus it is safe to say that government is much more efficient at accomplishing these goals than charity. Charity is much more efficient at the margins. It’s great for the fringe cases once the majority of the problem has been addressed.
It's all great in theory, but every single developed country wastes billions in taxpayers money every year on all sorts of irrelevant things. Politician pet projects. Projects going massively wrong and overrunning in cost at inflated prices. Inefficiencies. Etc..
I'd rather donate a healthy amount of money to a nonprofit of my choice (and yes, take the tax deduction for doing that -- can donate almost twice as much!). Those charities generally will be able to allocate said resources much more efficiently.
"I want to pay more taxes" is obviously a stand-in for "tax rates should be higher", not because we love taxes, but because they help us achieve national priorities. Individual action doesn't do that, which is precisely why they're national priorities.
Okay, but I don't regard you as an sort of moral actor for that: you intentionally don't do something you readily admit would make the situation better, out of your emotional needs, while politicking to force everyone to do the thing you're not actually willing to do yourself.
So no, I simply don't believe you: I don't think you believe you should pay higher taxes, I think you believe other people in your income bracket should, to run society the way you envision. If somehow that didn't apply to you, but applied to every one, well that would be just fine wouldn't it?
I originally didn't agree with GP, but the posts like yours trying to refute it are actually bringing me around to that position -- because they're deeply morally compromised, full of special pleading, and so on.
..you're not actually willing to do yourself."
That should be:
...you're not actually willing to do solely by yourself.
As I said, what does it matter if I'm a hypocrite? My belief that taxes should be higher for people like me is true or false independent of my hypocrisy. The question of taxation levels should not be determined or influenced by the level of my own personal hypocrisy.
I don't think you believe you should pay higher taxes, I think you believe other people in your income bracket should,..
You inserted other. This is wrong. I believe all people in my income bracket should pay more in taxes. This includes me. I do believe that government should tax me more. I'm also not going to donate more to the government if it isn't forced. Free rider problem and all that.
There's no special pleading in my position and I don't claim that my position on taxation levels is some sort of moral action on my part. All I've said is the following 2 things:
1. Taxes should higher for people in my income bracket.
2. I'm not going donate more to the government than what is required.
Make of this what you will. I'm a hypocrite. But I still think taxes should be higher for people in my income bracket and this obviously includes myself.
I still believe tax rates are too low for people in my income bracket. Also one should ponder that the marginal effect of donations to the government by me are neglible but when done on the scale of millions of people they end up not being negligible. I don’t think me paying an extra $x thousand will actually help anyone. I do think that millions of people paying $x thousands more will. In this case, size matters.
Then by the same logic, doing so when other people pay won’t actually help anyone either.
Replace the word other in your comment with everyong in the tax bracket I’m in and you’ll see that your conclusion is wrong. Consider this analogy. Me pooping in the local lake isn’t going to adversely affect the lake’s ecology. A million people doing so will.
It sounds like you think government waste implies $1000 is meaningless. Certainly $1000 in some private folks' pockets will materially help them.
We're talking about marginal returns here, i.e. whether or not the author should donate that extra $1,000 to the government. Donating that extra $1,000 when other people don't will help just as much, if not more, as when other people do.
You are consistently confusing marginal effect and aggregate effect in your posts. You are consistently misunderstanding that there is a huge difference in effectiveness in everyone in a tax bracket having increased taxes versus a single person paying the increase in taxes. There’s big difference in me wanting to pay $1,000 more in taxes versus wanting everyone in my tax bracket to pay $1,000 more in taxes.
What I’m discussing is precisely marginal effects and not aggregate effects. See https://news.ycombinator.com/item?id=18836313. Read more carefully next time.
Your emphasis on marginal vs. aggregate is why you are wrong and why your statements are wrong.
Nowhere did I make that claim.
> Your emphasis on marginal vs. aggregate is why you are wrong and why your statements are wrong.
No. You just can't read, apparently.
That's not what they said, at all. You appear to think everyone is maximally selfish and short-sighted:
you believe others should pay...if that somehow didn't apply to you...that'd be just fine
That is not the case. Not everyone thinks like this.
Having thought about this a bit more, the idea of "not being taxed enough" is not necessarily about raising revenue for the government. They don't need to take your money to tax you, they can just print money and tax everyone with inflation. The point of taxing the "rich" more is to level the playing field. It is prevent power from concentrating in people who are not democratically accountable. So in that case, donating your estate will not achieve that goal.
Whether or not taxes should be raised is independent of whatever level of hypocrisy I possess.
If "a lot of people" is simply the 99.9%, and "Others" are the super rich 0.1%... I'm pretty sure the 99.9% would massively benefit... and the "others" would probably still be extremely rich.
That's a silly conclusion.
I'll gladly vote for a policy measure that benefits a group of people at the expense of a group of people among which I find myself.
But I won't vote for a policy measure that benefits a group of people at the expense of just myself and nobody else. In that case, I would prefer a straight up donation of my own choosing. As such, this Danish bank account would see no money from me.
I don’t want to pay more taxes. I want myself and those in my peer group to pay more taxes. Your referenced experiment proved little other than that a few of the Dutch don’t understand game theory (or are just really philanthropic).
Or perhaps people want everyone, including themselves, to pay more taxes. A fair, equitable, and shared burden.
If it's just you, you feel like a sucker being taken advantage of.
What they should have done is make a rule that says if I pay into this special account, everyone else's tax rate goes up.
See what happens then.
If you're familiar with the prisoner's dilemma, which is a toy, two-party example, there's a massive difference between coordinating cooperation and unilaterally taking the cooperate action.
For an overly reductive example: a rich person could support higher taxes (including his own) to be raised to a level that could feasibly fund a social safety net on par with a UBI. If he were to unilaterally provide his portion of higher tax revenues, the government wouldn't instantly implement a minuscule, partial increase in the safety net. OTOH, a consistent tax regime based around a consistently higher revenue base is a fiscal environment in which we could move further towards this person's preferred policies.
(Note that I'm making no endorsement or rejection of the specific policy described above, just using it as an example to point out how nonsensical the complaint in this thread is).
I'm not saying it is irrational for the author to advocate raising taxes for everyone, including themselves. I'm saying that if the author really thought donating that extra $X to the government (when other people do) was such a good idea, they would be donating it right now even if other people don't. The reason is that the marginal benefit to the government of the author handing them an extra $X when other people do the same is no higher than when they don't.
Unless, of course, the author plans to dodge the tax themselves once taxes are raised for everyone.
The prisoner's dilemma is not a valid comparison because donating when the other person doesn't yields an equal or higher marginal return as donating when the other person does. In the prisoner's dilemma it's the other way around: cooperating when the other person defects results in a lower marginal return than when the other person cooperates.
This is an aspect of human behavior. Sometimes people won’t do something if they aren’t forced to even if they think its a good idea. This is why the free rider problem exists. Your conclusion ignores facts surrounding human psychology. People don’t see a $1,000 donation to the government as being helpful if it’s just them doing it. They can see it being beneficial if millions of people do it. Hence an individual is unlikely to make a voluntary donation to the government whilst supporting increased taxation for everyone in their income bracket.
Which conclusion? You basically said I'm correct.
> if the author really thought donating that extra $X to the government (when other people do) was such a good idea, they would be donating it right now
Which part are you disputing? Your comments about human psychology merely support the fact that the author doesn't really think it's a good idea, and that there are psychological factors other than rationality and honesty at play.
And what is being “demanded”? Products and services that are the result of investments made earlier in time. Consumer demand is the inherent PAYOFF of successful investment. Consumers demand more, faster, cheaper, better. None of that comes without investment first.
This guy sees investment as leeching off the productive economy. Probably because he has only ever been on the “money-shuffling” side of things, rather than standing in the shoes of a business owner who needs to raise capital to create something new.
That capital comes from either loans or equity, both of which require 1) substantial sums of latent savings in the economy, and 2) money-shufflers to find allocation opportunities (capital does not yet, alas, allocate itself).
Investment is the LAST thing we should tax. Consumption (especially of positional and rivalrous goods) is the first.
Consumption is what drives the economy, not investment. You can invest all you want in a giant rubber duck factory, if nobody wants to buy giant rubber ducks your investment will be worthless. Investors either gamble where demand will occur or create it artificially through marketing, but in neither of those circumstances is consumption the direct result of investment.
The last thing you should tax is consumption, since it is the fuel for all other economic activity. Less consumption, less everything else. Also, taxing consumption tends to be a regressive tax policy in practice, which leads to economic inequality and reduced quality of life.
IMHO what should be taxed is income in all forms, whether out of labor or out of investment, since that’s the most fair. Consumption should not be taxed. Additionally tax rates should be progressive since there are many engines of inequality in the economy and we need a bit of counterbalance to that.
We need to figure out how to transition to a steady state, or a shrinking economy.
Even if everyone wants to have rubber ducks in their lives, if everyone is hunting-gathering (thus no saving or investment) there won't be a way to finance the factory.
That's true, but it's missing the point. Investment allows people to fund projects that drive up consumption. It may not be "as important" as labor, but it still helps the economy. If the capital gains tax is too high, rent seekers will just find a safer alternative to way to park their money that is even less economically productive, like renting out real estate.
I’ve also never been convinced by the “big money will flee if we tax it more” argument. Nobody has ever tried leaving no ground to flee to by leveling the taxation system so there’s no loopholes. The only way to flee would be to leave the country entirely, but as long as it remains profitable to stay (taxes do not exceed profits) it would be foolish to do so.
but i think this is one of the key issues of the article. the author claims that investment does not create jobs.
also, in absolute dollar terms the author may spend more than you, but in percentage-of-income terms he's spending less. and I think maybe that percentage difference is another key point the author makes, given how much wealth is tied up in the hands of the rich.
I mean, I think the author believes that wealthy people pouring almost all of their money into various investments -- as opposed to middle class and poor people spending all or almost all of their money on goods and services -- is not a very strong way to create domestic jobs.
IMHO, this is not a complete accounting of the situation. I mean, US people are spending -- we're spending big time. but where are all the jobs? the US has this giant trade deficit. a helluva a lot of jobs are in overseas manufacturing. so, we can force billionaires to spend all of their income every year on goods and services -- but how many domestic jobs is that going to create if what they buy is expensive Euromade yachts and New Zealand real estate?
it's almost like we need more than just tax policy, it's like we need some kind of domestic industrial policy
https://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-...
TL;DR:
> It turns out that 12% of the population will find themselves in the top 1% of the income distribution for at least one year. What’s more, 39% of Americans will spend a year in the top 5% of the income distribution, 56% will find themselves in the top 10%, and a whopping 73% will spend a year in the top 20% of the income distribution.
The reverse side of that phenomenon applies, as well - a significant portion of the population will find themselves in the _bottom_ part of the distribution at some point in their lifetimes, as well.
People can and do vote for things that give no benefits to them if it aligns with their concept of fairness. In this case, if you believe a person deserves to keep as much of their income as possible, you will vote for lower taxes, because it feels right.
The most fundamental one is this: capital is mobile, people are not.
If you increase taxes on capital, it will flow to a lower-tax jurisdiction relatively quickly. A decent legal system and financial infrastructure is necessary, but the hurdles aren't as great.
But if you increase taxes on salaries, people will be hesistant to leave for personal reasons (e.g. friends, family), cultural reasons, security reasons etc.
As such, tax competition between jurisdictions on capital is much more fierce than it is on labour. This is typically why you see lower taxes on capital.
The other reason is that labour tends to be viewed by part of the voter base as a normal tax, and capital as a double tax. i.e., if you earn $100k a year and save much of it after taxes, you now have capital to invest. And getting that capital taxed again is sometimes viewed as even less popular, a sort of tax ontop of tax, particularly as these wealthy people are more mobile and can more easily choose a lower tax jurisdiction.
As for the notion that his capital doesn't create jobs, I don't know if that is true. Fact is that if people like him withdrew their capital from the market, rather than invest it, you'd see many financially-constricted companies that would bin their expansion plans, cancel their investments in R&D, withdraw from new products and markets etc, and on the whole, generate far fewer jobs. It's essentially what the credit crisis looked like. The notion investments like his aren't creating jobs seems erroneous.
That doesn't mean I'm a fan of low capital taxes, by the way. But tax reform is incredibly complex because it requires essentially all countries around the world to work together, to give up some control over an important component of sovereignty (taxation), to restrict tax competition somewhat. There's been a lot of decent work in that regard already by the way in the past few years, with the worst aggressive tax planning and tax havens being dealt with (e.g. BEPS), which allows countries to implement more sensible taxes on capital without worry of their tax base shifting abroad.
The US of A started throwing its weight around to break down Bretton Woods got us to now. (Oversimplified for brevity)
Go back to pre WW1 and people were fully mobile with few countries having border controls or passport/visa requirements but most having capital controls.
Actually he claims
> Investing doesn’t create jobs
So he’s denying the effect that a company can raise more capital if it has stronger demand for its shares. And he’s denying the incentive of stock for employee compensation, which consequently creates jobs just like cash.
So I’m going to file this under “rich guy doesn’t understand the system that made him rich”. I also worked on Wall Street, and it doesn’t automatically imbue you with an understanding of all things economic. You have to explicitly study to gain expertise.
I have no particular explanation nor suggestion based off of that, but I know I've read a lot of articles about companies simply sitting in large bankrolls.
Not a single country in such a consortium would permit industry-level collusion among private enterprises to similarly inflate prices. If it's disgusting if the airlines do it, it is disgusting if the West does it.
I wonder how a higher tax rate for investment income would change the pools of money available to startups? Would more of it flow to other asset classes, like tax-free but lower returning municipal bonds? Would it make no difference?
As someone with a significant amount of wealth, you have the option to spend it entirely on yourself. For example, you could have consumed all of it already, enjoying non-stop parties, expensive toys, buying the temporary, albeit intense, adoration of an entourage etc. Thank you for not doing those things.
Instead, you have invested this capital. You have put it into a variety of investments, each with their own risk-reward profile. I am hopeful that as you grow wealthier, you will become more charitable, both by donating more wealth to help others, and also by accepting a lower rate of private return (or higher private risk) for investments that have a bigger social return (e.g. biotech investments, space exploration, etc). Even there, I hope you exercise some prudence and a portfolio approach, since it doesn't help anyone ex post if you lose all your money developing an invention that doesn't work.
In the meantime, we (society) are grateful for your concern, but would probably rather that you did not dump more money into our tax coffers. If you want to give money to the people, give money to the people, Give Directly style.
And if you still feel that the government is necessary to solve some of the problems that are bothering you, spend it instead to incentivize better government, or to design and build a government that allocates each tax dollar more efficiently as the years go by.
Thank you.
investments today are risk averse on a large, almost cultural scale by now. You invest into monopolies who dominate entire markets or even provide them, fonds who own industries where they start to even forget how innovation-the word is written.
This means, that the aggregated money does not go anywhere, witin any industry today, where it creates growth or change. Its all about nailing another board to the fortifications.
What else remains, spills into citys as urban blight by creating empty overpriced apartments. The trickle-down- economic model you have in your mind, has been tested. It does work as well as socialism.
Which is one of the reasons, the pulbic has turned away from this and is ready to give the likes of marx and engels another chance to fail.
Thank you
http://historymatters.gmu.edu/d/5030/
Personally I’d rather the rich hoard wealth than pay taxes and thereby justify the idea that planned command economies lead to anything good.
Lower capital gains rates are also not an American invention. It’s a feature of almost every Western European tax code. Sweden’s capital gains tax rate is half of the top ordinary income rate.
Corporate taxes + lower capital gains taxes are double taxation on the same earnings; but also serve to very much politically obfuscate who pays the taxes, consumers, businesses, or the profiteers - which, while fungible - could drastically simplify the tax code.
Investing does great jobs because businesses need capital to grow, and growth leads to more employment. Not employing people directly does not mean the money didn’t lead to some job creation. It’s just harder to quantify.
Companies outsourcing IT functions just happen to be outside the purview of taxes and tariffs. But that's no guarantee long-term.
The primary argument for them is that the wealthy have a higher marginal propensity to consume, so it acts as a functional wealth tax, and can't be easily evaded through income restructuring. It would be strictly progressive on an absolute basis, and may marginally incentivize investment over consumption.
Never mind that the US is one of what two? countries that tries to tax their companies sales (and citizen income) based on activity abroad?
Say what you will about more progressive income tax policy, capital gains, or tech companies dodging due to the nature of software, but the US has had the highest effective corporate tax rates in the world and was definitely driving offshoring.
A corporate tax rate of 0% is very much an increasingly non-fringe goal as opposed to raising revenue through other means. It's a testament to the US laws and business health it has as many companies remaining despite the tax disadvantage.