Think you’re both looking different sides. OP is saying that CA is becoming a parasitic government that taxes the producers for being so awesome, and you’re saying it’s the haven for producers where they can be free from parasitic government.
This is completely inaccurate. Galt's Gulch is an insular community populated by people who largely support themselves. No real gov't or tax system. It's basically the stereotypical ancap paradise. SF is going towards the other end; did you even read the book?
Which, to be fair, can only function, even in the context of the story, by relying on a fictional device that would effectively provide free energy (in massive quantities) for the lifetime of the conceivable universe, with no side effects.
Please don't respond to a bad comment with another bad comment. That just makes the thread worse, and the site guidelines explicitly ask you not to do it.
Oh, you mean the discredited pop-psychologist who practiced almost none of what she preached, yet somehow influenced an entire generation of sociopaths?
"Eschew flamebait. Don't introduce flamewar topics unless you have something genuinely new to say. Avoid unrelated controversies and generic tangents."
At some point California will hit the socialist threshold that will interfere with its main revenue source, Googles, Facebooks etc. It is at that time that the encampments will become permanent favellas, like in Venezuela or Brazil.
A government middle man is not going to reduce income inequality. First, we need to decide whether or not inequality is necessarily a bad thing if everyone's situation is improving. Otherwise, it just comes off as covetousness. Second, we need to evaluate if mental health/drug rehabilitation facilities would solve a lot of the homelessness problem. Third, we need to reduce government restriction on building to put some downward pressure on housing costs or encourage people to establish employment or businesses in areas that are more economical.
Im actually for doing something about income inequality but most of the homeless problem has nothing to do with it in SF. The main issue is the city lets a lot of psychotic people that need help do whatever they want with no consequences.
Initiatives like this, which increase upward economic mobility, should have precisely the opposite effect. Shanty towns are populated by people who have been left behind by the economic system.
But while your ability to get funding is 10x if you have an office in a certain geographical area, there will still be incentives to being there. Because sure, the chances of success for your gig economy app for mimes is much greater if your developers are working in the Mission and eating avocado toast for breakfast, so here's a million dollars, go build it
Makes sense though. If Californians created a mess in California then people from other states are probably suspicious of those Californians moving to their state lest they create a similar mess there.
I love hearing all this stuff about how California is so business unfriendly when it routinely ranks near the top for largest economies in the entire world.
If anything, it’s massively underegulated when put up against to comparably-sized economies in the developed world.
I'm a Californian. As are many on here. May I ask what is it about Californians or the state that would make you say something that is borderline insulting?
Don't take it personally, but as anecdotal evidence all the people I know believe California is dysfunctional. Most use even stronger words. You need to take a step out of the bubble and look at it to understand. Btw, half of the people I know are in US (East coast), the others in Europe, I am in Europe.
Right, except you can't say that to the face of a Californian or on a forum where Californians are. This will inevitably be taken personally.
If all Californians say that people from Texas need to leave the country that is an insult, it is personal to the state of Texas just like someone saying that he's happy for the idea that California is losing business.
I have been hearing how California has been business unfriendly for the last 20 years, only for our economy and job growth to crush all other states. I mean just look at VC investment and IPO creation and the last decade and decide which state creates more business. By all objective stats, California seems to be the most business friendly state
Yes, a state with the best business friendly outcome and best business growth, is by definition the most business friendly. In data science and research, we believe in the concept of don't trust what they say, but look at what they do. A user behavior is far more telling, than their response to a survey. Similarly, a businesses behavior is far more reflective of business friendly than a bunch of partisan rhetoric.
I strongly believe that in the knowledge economy, the traditional narrow definition of business friendliness (defined by low tax and low regulation) doesn't apply. That's why many states (e.g., Kansas) tried this tax based pull strategy which fell flat. In the 21st century, you need a more a holistic definition of business friendliness that takes into account talent as a stakeholder. Thus defining policies that make a place attractive for talent to migrate, should be part of the business friendly discussion. This will include non-competes, climate and environmental laws, labor protections, social safety nets, parental leaves, LGBT friendliness, other protections etc.
Then it looks like West Virginia and Texas are the most business friendly states, with California coming in 29th(despite being one of the nicest places to live in the U.S.).
You must know different people than me. But everyone I know who moved, moved because of a job, wanted to be in a cool city, or temperature/weather/availability of natural beauty. None moved because of non-compete laws, environmental laws, labor protections, social safety nets, parental leaves, or LGBT friendliness(I never lived anywhere especially rural).
You can see why highest GDP and most number of jobs would be problematic right? If we cut California in half suddenly it would be half as business friendly.
And I'm pretty sure none of them were thinking about the non-compete laws or environmental regulations when they thought cool city.
> In data science and research, we believe in the concept of don't trust what they say, but look at what they do.
Is that why everything keeps getting dumber and shittier to use after the company added machine learning, data science and data driven framework to their stacks?
They don't need to listen to people when they can just pretend they know what people want with their 'data stick'.
Obviously, majority of people know what they want. We are not just smart monkeys with terrible exploits, we are different and resistant to many short comings.
There is no historical context to look at. There is no reason to believe that something is a random occurence leading to a wide chain of events afterwards.
Naturally, if you opened similar app to facebook now and deployed same strategy, tracking behaviour. You would get users at the same pace.
While I do think you have some valid points, intelligent people will move towards places of better quality of life and opportunities, I don't think it applies in the current example well. There are better places than California depending on metrics - homelessness, cost, pollution, transportation etc on quality of life. For opportunities, don't know but it can't be a hub for everything out there.
Lol, by your thinking the concentration camps were the best resorts because they have most occupants becoming long term residents and it means they loved the place. And you think Kansas failed because low tax is a bad idea for business, not because nobody wants to go to Kansas.
It isn't the most business friendly. Businesses stay here either because their customers are here or because they want to hire high-skilled workers. This is why the wealth gap in California grows bigger and bigger. High-skilled workers come here for high-paying jobs.
Wealth inequality is real and I think it's good to have some sort of pushback on it, pay ratio caps or otherwise. At the same time California is so stupidly dysfunctional that I don't think they deserve any more tax revenue - San Francisco alone had a higher budget in 2019 ($12 billion) than 13 entire states, yet absolutely nothing gets done.
This is objectively false, of course. Governments do get things done all the time, even if policy changes you want are not happening. Even as hyperbole, your statement serves to fray the social fabric.
People seem to think that governments should be solving all the problems on their own. But a democracy is a government of the people. If people don’t participate beyond just voting, they deserve what they get.
I dunno. When my state ends up with more homelessness and sanitation problems and police ignore low-level crimes, I'm not inclined to give it more money.
When the government takes your money, they have the obligation to do everything they are supposed to do; if you don't do your part of the deal (paying taxes) you go to prison, if they don't do theirs, they should go to prison. Equal treatment, right?
When you pay your taxes there is no disclaimer: "people have to participate beyond just voting". Your taxes is your participation by the social contract, the government needs to either deliver or stop collecting taxes and everyone will have to get their services from private entities (of course this is not possible).
Paying taxes for a working government is simply not the social contract we made in the United States. You may be thinking of other forms of government. The US Constitution says that you, as one of the people, are the ultimate authority of the government. In a representative democracy, this means not only electing representatives but advising them and holding them to account. The transactional nature you are suggesting simply doesn’t exist. Good governance is not an entitlement program, it’s part of your duty as a citizen.
> San Francisco alone had a higher budget in 2019 ($12 billion) than 13 entire states
While I agree that I definitely wonder where a lot of the money in SF goes, this "bigger than 13 states" isn't a particularly impressive statistic IMO. First, SF has a bigger population than 5 of those states. In many states depending on how they split responsibilities, per-capita budgets can be significantly higher at the municipal level than the state. Finally, SF is obviously a very expensive city, so getting things done (hiring people, works projects, acquiring land, etc.) is much more expensive than most states.
Also, SF is both a city and a county; if you compare it to the sum of other cities' budgets plus their prorated share of the county budget, it's a lot more in line.
Still, SF does have to pay a lot more for workers these days thanks to its self-inflicted housing shortage.
Cities become expensive when people there spend a lot of money. Similar cities in different parts of the world have different prices for goods, services and rent. This is why Silicon Valley is so expensive, there are too much money there.
The biggest pay imbalance ratios in the US are in professional sports.
The top 30 NBA players are earning a combined $1 billion per year in salary.
122 players in Major League Baseball are presently earning $10 million per year or more.
The NBA + MLB + NFL is around $14 billion per year in salary for the top 2,000 active players. Probably $200 billion in salary over the next ten years.
It's more than what the top 2,000 executives are extracting from corporations in the US.
I can't wait to see what the Lakers, Clippers, Kings, Warriors, Rams, Chargers, 49ers, Dodgers, Giants, Athletics and Angels look like after California makes things right.
Lebron James should only be allowed to earn a maximum of ten times what a janitor in the stadium earns or a secretary in the front office, were California to be consistent.
Oh wait, they won't do anything about that extreme inequality because no professional athlete would want to play for a California team ever again?
That still happens. The top 5 players make $30m-$40m, but they’d probably make closer to $50m+ in an open market. After all, the best players still get multiple teams trying to get them on max contracts.
The current effect of the cap is mostly to redistribute some of that money to top 10-30 players who also get max contracts even as everyone knows they are not quite as good.
There are also competitiveness reasons to avoid true maxes like parity between the teams of relatively rich and poor/thrifty owners. But yeah the union does depress the salaries of the very best.
> You want to limit professional athlete salaries?
Of course I never said that, you did.
I'm very clearly pointing out the hypocrisy of California and its regressive, anti-human policies in action.
If they weren't hypocrites, they'd similarly cap athlete salaries based on the lowest paid employees of the team the athlete plays for - given the extreme pay imbalances in question. I believe the state officials proposing this are cowards and going after easy populist targets, so they'll never dare to act consistently and target athlete pay for exactly the same reason as executive pay.
Citizens can hardly run away from California any faster. It's so bad they're set to begin losing congressional seats for the first time in their history.
> Citizens can hardly run away from California any faster. It's so bad they're set to begin losing congressional seats for the first time in their history.
Liberal California may be losing population to conservative states like Texas, but conservative states like Texas are becoming far more liberal.
> I believe the state officials proposing this are cowards and going after easy populist targets, so they'll never dare to act consistently and target athlete pay for exactly the same reason as executive pay.
The reason is that executives decide other employees pay; the rule doesn't cap highest-paid-employee pay but executive pay. Higher paid athletes don't set the salaries of lower paid athletes.
Is that why California’s population actually went up by 2 million ? The people leaving CA myth is more nuanced. There is domestic out migration of poorer and conservative population, which is replaced by higher income international migration. That story never seems to be told because it doesn’t jive with the narrative ?
> More people are leaving California than moving in, evidence of the toll the state’s housing crisis is taking as the world’s fifth largest economy inches toward 40 million people. [1]
The myth is that there is overall net out migration. But the reality is that California's population is actually growing and there is net migration into the state. There is net domestic migration out of the state, which is more than offset by positive international migration into the state.
Even within domestic migration - people leaving are poorer and people coming over are richer and wealthier.
The "exodus" stories are often peddled to tell a story on how productive people are leaving and there will be no tax revenues. But the opposite is actually true.
So, to summarize - 1) Net migration to CA is positive and 2) Net migration is actually bringing in more high income folks
I’m not sure how comparable a professional athlete is to a CEO.
CEOs exist to help a company sell more product, while in sports the athlete IS the product. In that respect they have more in common with movie stars than with CEOs.
Which I suppose just raises the question of the rule applying to movie studios—a similarly unlikely scenario—and how CA can defend the inconsistency. Is there a loophole for sports/film in that the famous people are contractors and not employees? I don’t know if that’s even the case, just ruminating.
> I’m not sure how comparable a professional athlete is to a CEO.
I agree that this is a difficult question. But why in the world is the government, with all it's perverse incentives, trying to figure this out? The shareholders, the people with a literal financial stake in the outcome, have spoken. Good CEOs are worth their weight in gold. Actually, gold isn't valuable enough. Steve Ballmer's resignation immediately added $20 billion to Microsoft's market cap. That's worth about 400,000 kilograms of gold.
are we sure it won't? and whether the goal is to lift anyone from poverty (not sure that's a stated goal), perhaps it may force companies to look for other ways to spend their money. Perhaps more will find its way in to company/equipment reinvestment, more hiring, etc, or... uh-oh - might just end up getting taxed and make its way back to society via govt confiscation(!)
There is a popular argument being made that any amount of inequality is evil and must be stamped out. I’ve asked several people to define in logical terms the line beneath which someone is not evil, and above which they are an evil rich person taking too many resources.
There is no logical explanation for such a line, it’s always an emotion against people who have more than them. Everyone always compares themselves to someone richer, whether they make 15k, 150k, or 1.5m. If you keep voting for such policies, you will eventually outlaw anyone for trying to do anything but living on government dole. It’s a sad future some people want. Venezuela collapsed rather quickly.
Are you saying that people who don’t earn few millions a year are doing nothing? Mind you, the majority of people are in this situation and contribute a lot to the society (teachers, doctors, researchers, any workers really). I’m not a leftist but I recognize the concentration of money in a few hands is probablematic, and a lot of business models to get to this point are harmful to the society at large.
Depends on your ethical framework. A utilitarian could claim that after the point where the marginal value of the dollar to the rich person is so low that seizing it results in higher global utility, even taking into account the angst and disincentives on the rich as a result.
Is society better off if you take 100 mil in income from Larry Ellison and Sundar pichai and build a few hundred units of low income housing? Even if it pisses off ellison and Google pays pichai less the next year?
I see the wealthy person as someone who is clever and disciplined. The government is neither clever nor disciplined. I believe letting the billionaire keep his or her money is more likely to increase world utility.
Elon and Bezos send people to space with the wealth they fairly gained. The government prints trillions of dollars every year to fund their deficits and wars. If the government needs another billion dollars, it’s quite easy for them to create it.
Why seize money from the rare person who is talented enough to make so much of it?
Let's say some incredibly talented person "fairly" comes to own all the water in the world. All the rest of us would depend on this person to live, and he/she could choose which of us lives or dies simply by not selling us any water.
Would you want to live in such a world? Or do you think maybe the rest of us deserve to have some of that water, even if we're not as clever and we didn't "fairly" earn it?
Dialing back to the real world, all these billionaires and other elites are having very real outsize impacts on the lives of the less wealthy -- from whether/where/how they work, to how they and their children get educated, to what information we have access to, to who goes to jail and who goes free, who goes to war and against whom, and who lives or dies.
Incredible wealth gives people incredible power, and the concentration of this incredible power in the hands of a small minority is distorting the world in ways those not in this minority are having trouble swallowing, no matter whether this concentration of wealth and power was "fairly" arrived at or not.
If you are concerned about that focus on anti monopoly laws not taxes. If one person owns all the water so you prefer a solution that forces them to give % of income derived from it to others or do you prefer a solution that prevents them from owning all the water?
Anti-monopoly laws are not enough (even if we ignore the problems of regulatory capture). If all the water was owned by three people instead of one person, or even by five people, or a thousand, there'd still be the other seven billion of us which would die of thirst if these thousand commanded.
But, yes, giving up some of what they own is one way of dealing with it... though one could argue that by the time they have control of all that water or wealth, it's too late, because by then they have so much power that they, not you, get to call the shots.
Another way is to change the system so that they don't gain so much control in the first place, and so that water (or wealth) is distributed more equitably among all seven billion of us instead of just a tiny few.
The government sent people to space decades ago. Elon and Bezos would be nowhere near sending people to space without the work government has done.
The government spends trillions on wars exactly because of the power concentration you are defending. It's not the common man that decides to go to war, it's the network of wealthy people who benefit from it.
> A utilitarian could claim that after the point where the marginal value of the dollar to the rich person is so low that seizing it results in higher global utility, even taking into account the angst and disincentives on the rich as a result.
>"For example, utilitarianism apparently endorses killing a single innocent person and harvesting their organs if it will save five other people. It also appears to imply that donating all your money to charity beyond what you need to survive isn’t just admirable but morally obligatory. "
So I don't think a strictly utilitarian argument is sufficient.
> A utilitarian could (and has) claimed that this marginal dollar occurs at the point where you have the bare minimum to survive
There's a few problems with this line of reasoning:
1. Its not clear to me that this argument is being made by a utilitarian, as you claim
2. You at least appear to show a misunderstanding of what "the marginal dollar" is. Every dollar is the marginal dollar. Its just that the relative value of dollar 1 (which you need to survive) is greater than the relative value of dollar 1 Billion, which you use to, uhhh, buy an island. I think what you're saying is that there is a point where the marginal value of your dollars is low enough that you are ethically obligated to donate them is at or around subsistence level, and that might be true, but it leads to the third problem:
3. Even for a strict utilitarian, if you take into account externalities, the right thing to do might not be to take all the money away from people. If you're optimizing for something like reducing death, reducing everyone in the US to subsistence level probably isn't the best solution: you'll likely do something unwarranted like cause a revolt. This has two major net negatives: a bunch of people die in the revolt, and you end up losing a lot of your money, either because you spend it to put down the revolt or because you don't and you lose and people take it back.
4. While improving the life of those in absolute poverty is a laudable goal, it's not clear that it makes sense for a government to do that, except when it ends up being beneficial to the government or its people. In other words, a government's moral imperative probably doesn't extend (far) beyond its borders.
> So I don't think a strictly utilitarian argument is sufficient.
People often forget about externalities.
On the other hand, if you think of the supply of billionaires as a revenue source, and then you think of there being decreasing demand for being a billionaire as taxes go up, but increased revenue per billionaire as taxes go up, you can draw up supply and demand curves and optimize to maximize revenue from billionaires (or people in general really, its just that the marginal rates can likely be higher on billionaires and they're the talking point of the day). If there are 100 billionaires, and you tax 2% more, and 1 billionaire moves away, you're still up on revenue. I often hear people arguing that we should operate our government more like a business.
> If there are 100 billionaires, and you tax 2% more, and 1 billionaire moves away, you're still up on revenue. I often hear people arguing that we should operate our government more like a business.
This is actually one of the standard strategies for taxation: we should setup a tax system that optimizes for the maximum total tax receipts. When you tax too much, incentives go down and you actually lower your total tax receipts. In principle, there is an optimal taxation amount.
The problem with this approach is that we don't have good enough data. No one really knows how many fewer billionaires there would be if we increased their taxes, and biased interests each have plenty of conjured data to make their argument.
There are other tax strategies as well: trickle down economics (a favorite of the right, also based on suspect data); and guaranteeing living wage (a favorite of the left). One advantage of the latter is that the argument is not based on numbers or data, but on morality.
>If there are 100 billionaires, and you tax 2% more, and 1 billionaire moves away, you're still up on revenue.
But that's not the only thing that happens though.
A prospective billionaire that is not yet a billionaire might think "there's little point in putting in all this work on this new project, because the government will take more of my money".
Another thing that can happen is that a foreign company decides to invest somewhere else because of that tax. They might look at the tax and expect it to discourage investment internally and look for potentially better prospects.
Emotion has nothing to do with it. A strong, functional middle class is critical for the economic health of the nation, as will as it's ability to survive as a Democracy. With very, very few exceptions - wealth disparity is inversely related to the health, stability, and happiness of a populace. Nations with greater wealth disparity generally have less freedom, choice and social mobility. This was recognized multiple times in the nation's history, and upon action, economic growth was spurred. These are not emotions, these are facts that I won't even cite because a simple google search results in many scientific studies backing them.
On a slightly more emotional side:
With individual productivity increasing annually, it's a shame that individuals are not seeing proportional wage increases in return.
And none of that even touches upon the reality that those making the billions are rarely those with exceptional talent or skill. It's those who had the connections and financial wherewithall to build networks that are unreachable for those born into lower socioeconomic circumstances. No, I don't have data for that, but a simple unscientific survey of Execs making hundreds or thousands of times more than their employees are rarely from anything less than middle-upper class backgrounds, and most often have family money that allowed them opportunities never imaginable to lower rungs of society.
I do not like the idea of paying higher taxes, but I also recognize that individuals and companies are sitting on trillions upon trillions of dollars because they are making so much money that they can't spend it all. Just ask Bill Gates or Warren Buffet, both who agree with this and argue for higher taxes.
But emotions aside, it's simple economics. When social mobility is poor and inequality high, there simply aren't enough consumers to support the level needed for a country to remain 'first world'.
The rate of wage increase for the lowest earners in America is higher than for the highest earners. Unemployment is lower than ever. I won’t even cite because you can prove this with a simple google search.
The fact remains that you think it’s morally correct to take money from people simply because they have it. To me, that’s theft. What is the salary at which we should seize money? You still haven’t answered this original question.
I didn't say money had to be taken from people. Actually I think it should be taken where it is: at the big company level. Except a few exceptions (Japan, South Korea) most of the taxation is on the shoulders of individuals and small/medium enterprises. Huge corporations such as Total has super low taxation rate, and others (GAFAM) avoid almost entirely taxation with taxes evasion schemes despite making billions from Europeans.
Then, besides taxes, companies should also fulfil their role in society by employing "useless" or low productivity people to a certain extend (this is already done a little In France for instance with law imposing a quota of disabled people). I saw it all the time where I live (Japan): people with useless jobs that have been completely removed by automation in Europe.
And finally, limiting the coefficient of the highest paid executive (let's say 100x) in comparison to the lowest paid on is no theft either, because the money didn't came in their pocket in the first place.
The idea at large is not the "rob" the C-execs of their money but to put more responsibilities on companies, which have acquired a disproportionate power in the last few centuries.
The countries with higher teacher salaries, like Canada, or in our general vicinity all have low corporate taxes.
There are things we need to fix in the US, like people who don’t have healthcare, and the housing market. (All the losses in the share of GDP of labor since the 1980s went to landlords, not capital owners.) But it’s not clear to me that income inequality is in and of itself something worth fixing, at the risk of novel measures that could give other countries a competitor advantage over us.
Income inequality becomes an issue for the rich in cities like SF and NYC when costs of living rise faster than wages for the lower class and you end up with a rising homeless population.
I mean if you take the income inequality argument and apply it to the world it is clear that pretty much every person in a developed country is an evil rich person taking too many resources.
You gotta factor in cost of living though too. Someone in a crappy part of the world might live on $2 a day, but regardless of where or how you live in the US that would never keep you alive or a roof over your head where there it might, even if it is crappy.
Why not? Is it impossible to survive in a forest in the US through hunting and gathering? Because that's exactly how our ancestors lived long ago. The people living on $2 a day in the poorest parts of the world are essentially living on that level of wealth. They don't buy most of their goods, they make them.
Go check out primitive technology on YouTube and see the stuff he does in a forest. That kind of stuff is available almost anywhere with a temperate forest.
The cost of living is higher in the US because people expect better stuff and they've put a limit on how low the quality can go. Eg building permits and other housing regulations. All of that significantly increases the cost of housing, but it also makes your minimum housing much better than in poor parts of the world.
You could make a similar argument about pollution. A certain amount of it is necessary, it’s not possible to have a society, especially a developed one, that doesn’t pollute at all. So where do you draw the line?
It’s arbitrary, and yet saying that means we should just let people pollute endlessly doesn’t make sense either.
Pretty much. This will exacerbate the practice of hiring high paid white collar workers directly while contracting out to staffing firms for low paid positions.
This is so funny but it is very true. I work as a tax auditor and I see more and more companies doing his. They restructure the entire business to optimize for certain benefits. For example, all of the real estate will be structured in separate entities to protect from liability. Same thing can be done for taxes. Gets even worse when it is a foreign parent that controls all the subs. You can't audit the foreign parent and the domestic subs have minimal tax exposure.
True, although this would also capture revenue from companies whose executives don't live in CA, and therefore pay no taxes there. This actually raises an interesting constitutionality argument — it's arguably an indirect tax on the income that would have been paid to a non-resident executive. Sounds sort of like taxation without representation, but this is probably too much of a stretch. (I used to be a tax lawyer.)
This is just so... weird. The obvious unintended consequence is to fire the lowest-paid workers. Outsource it to contractors, automate, whatever. Why does the ratio matter?
If you want to redistribute wealth, do it the honest way that doesn't distort markets. Take it from rich people and give it to poor people!
I mean it also requires the companies to be incorporated in CA, but Delaware has gone to great lengths to make it super easy to be "a Delaware company" w/o any actual meaningful proportion of the business there.
The status quo is that every company with operations in CA has to pay the CA corporate income tax based on its CA-derived taxable income. This is true regardless of where the company is incorporated. This is also broadly true for every state that collects state corporate income taxes i.e. they use their tax authority to levy tax on business activities conducted within their state.
Part of the problem is that there are too many edge cases.
Consider when Steve jobs had a $1 salary but the rest was stock options. This tax would not apply in these instance, but should. Wed also find that it does apply when it shouldnt.
The biggest issue with any tax is the disproportionate impact on middle tier/s. The richest always find a way avoid it, and it doesnt target the poor.
> the bottom 50% accounted for a measly 3% of all tax.
Of course they do, that is a symptom of the problem. Take an absolute extreme of society: one person has all the wealth, and everyone else has nothing. Obviously, that one person will pay 100% of the taxes, and everyone else will pay 0%.
Today, we see a similar but less extreme situation. It's not intuitive at first glance, but think about it for a few seconds and it makes sense: if you want a more balanced distribution of tax burden across society, you need a more balanced distribution of wealth across society.
Accordingly, if you want the bottom 50% to pay more, you actually have to tax the rich more to reach a more equal distribution of wealth.
> Take an absolute extreme of society: one person has all the wealth, and everyone else has nothing. Obviously, that one person will pay 100% of the taxes, and everyone else will pay 0%.
Only if the only taxes are wealth taxes. You're in a discussion about income taxes.
> Only if the only taxes are wealth taxes. You're in a discussion about income taxes.
wealth = income - consumption
In the U.S., we tax all three: general income tax, consumption tax (e.g., sales tax), and wealth tax (e.g., property tax). Taxing any one has an effect on the other, and a discussion about one is relevant to all others.
No, income - consumption is net increase in wealth. Those are all flows. Wealth is a stock. Wealth taxes are periodic taxes on the value of the stock, income taxes are taxes on the flow.
> No, income - consumption is net increase in wealth. Those are all flows. Wealth is a stock. Wealth taxes are periodic taxes on the value of the stock, income taxes are taxes on the flow.
You're introducing periodicity, which I did not have in my simple model. Maybe a more complete model would be:
Wealth_N = Sum {i=1 to N} ((Income_i - Consumption_i)*CapitalGrowth^(N-i))
Where N is some period like a year. Here, we can tax wealth, income, consumption, or capital growth. Regardless, it's silly to think of any one in a vacuum when considering tax policies.
wealth is not zero-sum, and it's not finite. never has been, never will be. anyone can become rich as demonstrated by all the self made uber rich. if we can't understand this as a group, i don't see how driving away tax income by way of over taxing the rich has anything to do with making the bottom 50% pay their fair share.
In a society with 100 people where 99 make $1/year and 1 makes $1000/year you would have an even more absurd ratio. That ratio may be shocking and useful for political arguments.
But isn't the real issue that 1 person is making a thousand times what everyone else makes? And wouldn't it be truly absurd to expect those 99 to pay more instead of the 1%?
Things grow exponentially fast as you reach the top. If you look at the Forbes 100, Jeff Bezos is worth about 2x number 5, 10x number 40. [1]
The net worth of the top 1% is 10 million. That's 10,000x less than Jeff Bezos. The percentile/wealth graph is an insane hockey stick.
I don't doubt the 1% pay a big chunk of the pie. I do wonder if it's an amount proportional to their wealth, but let's leave the millionaires aside. I wonder what part of that 37% the billionaires are paying, and if _that_ is a fair amount.
> I do wonder if it's an amount proportional to their wealth
Federal income tax is based on income, not wealth. It's entirely possible (and happens all the time) that wealthy people have a bad year with their investments and lose money. They don't pay income taxes on losses.
You don't need to make much more than me for that to start become profitable - accountants, trust costs, etc eat up a relatively fixed amount of money. But once you exceed that cost then it's time to start shifting money around.
Not that this doesn't reduce the tax you pay on your income. it directly reduces your "income" itself.
> Part of the problem is that there are too many edge cases.
IMO, if there was the will to build a better system there would be a better system. There's a lot of edge-cases in space travel, or medicine, but there was will to put very smart people with very powerful computers to work on both of these, and now we have rockets that land on drone ships and medications that can control HIV.
> The biggest issue with any tax is the disproportionate impact on middle tier/s.
How do other countries do it? There's countries with a healthy middle class, why isn't the US's thriving like theirs?
The system in each country is very complex and it's hard to tell which parts make it work better and which parts make it worse than another. The effects are all related.
First of all, the middle class is not well defined in many of the popular articles. There can also be a significant difference between middle class defined by income vs. by self-identification. See Figure 1.1 in [oecd]. I'd start with the premise that the US is an outlier in many areas - tax system, health care, pensions, education... All of which dramatically changes how the middle class is able to structure its finances.
My guess is that many of the US citizens have higher disposable funds in absolute value than Europeans but it helps them mostly in international travel and when buying easily transportable goods. Not as much in day-to-day living.
I'll try to compare with my country (Central Europe, laws similar to Germany's but with slightly worse execution). There's a healthy middle class but according to studies, it's shrinking. It seems middle class is shrinking worldwide. Even the [oecd] study I link is named "Under Pressure: The Squeezed Middle Class". I think this feeling also led to the rise of populist governments in many of the European countries.
I'll give some facts first, then try to interpret them:
- Effective tax rate at ~50 - 60 % for employees, ~30 % for IT freelancers. I'm including mandatory social and health insurance.
- Median wage: $15,500/year, typical IT wage around me: $30 - $60,000/year.
- Supermarket cashier earns 85 % of median wage, public bus driver at around the median.
- Served restaurant lunch (just meal) costs ~$7, dinner ~$10.
- Appartments cost (capital city) at around $300/sq ft
- Most (78 % [wiki]) of people own their housing (vs. 65 % in USA).
- Mortgage rates are at 2.5 % APR, some going as low as 2 % APR (10 years fixed), inflation at similar levels (last year around 2.8 %).
- I know personally just two people who went to private universities (one because he liked the school, the other one because it was easier) and no one who went to private primary or high school. The public schools are generally free.
- My family's out of pocket medical expenses amounted to $ 500 last year, mostly over-the-counter medication for our two kids (common cold, cough, supplements, vaccinations...).
- In hospital, you can pay around ~$10/night for the privilege of a private room but there's usually a shortage of them. There wasn't a shortage 10 years ago. People just
weren't used to paying in hospitals.
- The medical services are free. There was a HUGE political fight around paying $4 flat for emergency (out of working hours) doctor visits.
- Fuel is taxed at 30 % extra to VAT, there are similar extra taxes for tobacco and alcohol.
- When you buy a real estate, you're immediately taxed 4 % of the value.
- Only 20 % of people use credit cards. Most of the credit is mortgages (which were mostly profitable due to rising prices so far) or car leasing. Outside of these bigger tickets, most of the credit seekers are low income.
I feel I live in a safe environment, the public transport is well functioning and clean (daily user). You can screw up, not save for some time, get ill and you're still likely to recover financially even if you work for a median wage. You may not be able to buy housing if your parents can't help you.
But in general, I think the ability to experiment a bit and a general feel of stability allows for much more effective negotiations with employers, even for comparatively lower income people, driving minimal wages down. On the other hand, because so big share of the money goes through the government, there are many inefficiencies.
If I moved for example to the US, I might end up in higher percentile of earners and most probably I'd have more money to spend on international travel and electronics. On the other hand there are the co...
> There's countries with a healthy middle class, why isn't the US's thriving like theirs?
Someone tricked you. The US has one of the richest middle classes in the world. A CEO being paid obscenely has absolutely no impact on the middle class, it just makes a nice boogeyman for politicians.
Yes, White nations have a critical shortage of White people. USA will be majority non-White in our lifetimes. Much of Western Europe too. Needless to say, they will not survive.
If your idea of the health of Japan is totally disconnected from whether the Japanese -- technically -- exist, then no, we don't.
When the English and the Germans came to North America and replaced the population there, was that a success for North America? If so, is it the kind of success you'd like to have someone else give to you?
> A CEO being paid obscenely has absolutely no impact on the middle class, it just makes a nice boogeyman for politicians.
Except that envy is part of the human condition, and arguably, a key component of human progress. Left unchecked, though, envy can lead to social instability. See, e.g., Kahneman and Tversky's work about how people are willing to incur harm to themselves to punish what they perceive as unfairness (sorry, no time to get the cite). So arranging our societal structures to keep envy in check might be necessary, even if it means giving some high earners a haircut on their income.
Please give a few examples of countries with a healthy middle class; in Europe, where I know the situation best, there are no such countries anymore. The Emirates have some, but they have zero income tax, so it is politically not correct to use it as an example.
The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits. This is a huge difference. So rich people, who can have companies do what they want, get taxed very little and people, with just income, get taxed a lot. I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off. You could just work for whoever you wanted without any paper work and people could just pay you. Rich people would have no need to create all of these companies and foundations. Everything would be much more free and efficient.
> It would be the exact opposite of what the GP comment suggested.
Huh?
That comment suggested
> The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits.
and
> I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off.
Replacing the income tax with a consumption tax follows directly from both of those points. As to the first, it replaces the system where companies are taxed on profits and people are taxed on revenue with a system where companies are taxed on profits and people are taxed on profits. As to the second, obviously, it gets rid of the income tax.
Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.
Consumption is expenses, profit = income - expenses.
Rearranging. Consumption tax = y * expenses = y * (income - profit) where y is the consumption tax rate. So, as profits increase, expenses decrease and consumption tax goes down.
> Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.
> Consumption is expenses, profit = income - expenses.
No, a person's profits are their consumption. Savings are not profits -- they don't benefit you at all.
There's a chain going like this:
Company spends money so that company receives (more) money so that person receives money so that person can spend money.
The goal of the company is to accumulate money for someone else and that's how its profits are measured. Profit is money the company loses by paying it out to its owners. (Money the company loses by paying it out to non-owners is "expenses".)
The goal of the person is to spend money on things it can actually use; for the person, money is an accounting tool, not an end goal. But we can identify profit the same way. Money that you lose by paying it out to yourself ("consumption") is your profit; savings is just money you might one day allocate to profit.
From a values perspective I like this approach. I don’t like that other people get to determine how much of the capital I pull in gets to be mine after all.
On the other hand, I don’t think it would create much tax revenue.
We only gave our government the right to institute an income tax thanks to the idiots who banned alcohol. Before that the feds relied on alcohol taxes to survive.
> I don’t like that other people get to determine how much of the capital I pull in gets to be mine after all.
Let me paraphrase Adam Gopnik's recent book, "A Thousand Small Sanities: The Moral Adventure of Liberalism": When you talk about "the capital I pull in," you're risking celebrating the driver while taking cars, roads, and gasoline for granted. [0]
See also Elizabeth Warren's famous talk in her first Senate campaign: "There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [1]
And of course Barack Obama's correct statement, intentionally taken out of context by the right: "You didn't build that" (referring to the roads and bridges that businesses depend on). [2]
Correction: It wasn't Gopnik I was paraphrasing but Binyamin Appelbaum, The Economists' Hour [3]: "[Milton] Friedman chose to see the role of individual initiative rather than the context of public support. He celebrated drivers and took roads for granted."
They do IF you consider all out-flow as taxable goods/services... i.e. E.g. estate, investments, property, employee wages, land (would be calculated differently...not on spend but on just ownership), purchases. Investment firms would pay the tax on money paid out to investor, so it'd need to put that rate in there somewhere.
If you combine this with UBI + Single Payer + Free College -- then everyone will be able to afford the taxes they will pay on goods/services at the store/etc.
If the lowest safety net keeps just about everyone around 35-45k with medical safety, then they can probably afford 5-10k in VAT fees, and if they no longer peg benefits to companies -- people have more fluidity about where they work based on the fact they aren't going to lose their medicare for all.
This also means those who are fine not working and living on UBI ALSO drive up the rate of pay for those who DO want to work because supply/demand of workers will go down.
They don't consume more goods, they consume goods of much higher value (ex: luxury items and fine cuisine) and services so in the end they will pay much more taxes. What else do you think they spend the money on, if not goods and services?
Equities (stocks), fixed Income (bonds), real estate, commodities, futures and other financial derivatives mainly. Basically they spend their money on investments.
Asset tax in combination with negative interest rates is the most equitable model in a capitalist society like ours. Use the proceeds to fund a universal basic income.
This is a complete nonsense: it is mixing an economic model with a taxation, gets to social ideas that are anti-economic (why bother having an economy at all if you do redistribution?) and throw the magic word "equitable" in it, all without any supporting argument. It is amazing, better crafted than demo scene.
Anywhere? Panama, Cayman Islands, bitcoin, foreign real state, gold... take your pick. Wealth is pretty fluid these days, even for people who live under Chinese-style capital "controls".
Tax evasion is not a valid answer. The others are issues though gold would be subject to the same taxation. Moving money abroad is a major issue but its already a major issue (see apple in Ireland or Chinese in Australia).
Consumption taxes are income taxes with a loophole for whatever you exclude from the consumption side of thing. Exclude land purchases but not rent, and people have a huge incentive to buy land. The stated loophole is investment, again that’s equivalent to allowing people to deduct investments from income tax which clearly favors the wealthy.
In the end countries spend a high percentage of GDP on thing people actually want. Everything after that is just deciding who pays for it.
PS: Consumption taxes also push people to vacation and retire in different countries.
A consumption tax also gives the working poor tremendous levers to better their circumstances. They aren't taxed on necessities for food and folks who make under a specified amount don't pay the tax at all. Most of the potential issues you pointed out impact any taxation system (i.e. carve outs for the wealthy) because they're political/power problems.
> people are taxed on their total income and companies are taxed on their profits. This is a huge difference.
Arguably not. The progressive tax bracket system means that a bare minimum amount of money (up to the lowest threshold) is available basically tax free to cover necessities and then everything above that is effectively profit for an individual. Living in an expensive house, eating expensive foods, raising a well resourced family aren't really expenses in the sense that businesses have expenses. If they were like business expenses people would try to minimise them, whereas most people I know actually try to maximise those costs when you look at what decisions they make. I've never convinced anyone with arguments that they should move into a cheaper house to save money. In that sense, both systems are philosophically the same but people have very low necessary expenses.
Almost an aside, but taxing people only on their savings would be truly bizarre. Someone measurably adds more to the economy than they consume and they are the ones who get shafted with tax? Ethically a case could be made, but practically the incentives are so nutty I'd hope it doesn't warrant serious discussion.
Taxing corporate revenue rather than profit would cause price increases and act like a consumption tax. Certainly possible, but that is a regressive tax policy and generally frowned upon.
> Also, inflation. If the government does something that increases inflation (like printing money), then they're essentially taxing savings.
Not exactly, if the government prints money, then the value of the dollar will decrease, but it the value of other assets will increase to adjust for the lower dollar value. So while printing money can be thought of as a tax on cash savings, it's not a tax on all assets (e.g., stocks, property, etc.).
Taxing savings encourages spending and helps the economy flow. When money is held outside of the economy it (say under your bed) it kills any benefit and creates depressions.
Taxing savings makes sense over income. Why tax someone producing, removing the tax encourages more work performed. We tax income because it is easier. We tax the estate in death because everything is collected and recorded. In Roman times they sent a tax collector who would go through the home to find valuable objects to pay taxes (tax on savings).
It is not as wierd as it sounds. It's impossible to implement in our society before death and taxing payrolls and self reported income is a lot easier.
> Taxing savings encourages spending and helps the economy flow. When money is held outside of the economy it (say under your bed) it kills any benefit and creates depressions.
But that is a bad goal - we don't want to optimise economic flows, we want to optimise quality of life and standards of living.
The goal in this era of plenty shouldn't tend towards everyone teetering towards bankruptcy and wage slavery so that the politicians can talk about how the GDP is 2% higher. Everyone should have a reserve of real wealth in case they fall on hard times and the bigger the reserve the better as far as I'm concerned.
In my lifetime there have been a constant stream of inflationary collapses and a noticeable lack of problems caused by deflation. That theory is very popular with governments because it justifies the creation of money on a grand scale, but it has a certain lack of evidence. We've seen communism tried more often than deflation.
It helps wasting resources; why save and pay it to the government when you can buy more than you need, producing more CO2 in the process and wasting limited resources? Long live the waste.
> If they were like business expenses people would try to minimise them,
Perhaps in some cases, but many companies I know have "spend it or lose it" policies wrt budgets, so often money gets spent just to justify being able to spend more next year. And I've worked with a couple small companies that tried to spend more (legitimately) to try to avoid having as much profit to pay tax on. So not every business tries to minimize cost (or not as efficiently as you might assume).
It seems weird that you complain that the wealthy are under-taxed and then propose we switch from an income tax to a land tax which shifts a large portion of the tax burden from the rich to the middle class and poor.
Also the reason for the formation of most of the companies mentioned in the article is liability reduction more than tax reduction.
LVT is indeed really good, but the transition is awkward. Many proponents don't really buy being poor with valuable (not farm) land as something deserving protection, and frankly think it's mainly bs boogieman thrown out by actually rich people. But yes, given the sorry state of the US we can't really afford politically or policy wise to fuck over yet another group of for people for a 10 year transition.
But the fix is easy. Wealth tax and/or UBI smooths it over and then we are set. You lost your family home, poo poo, but now get a nice stepand and can also afford appartments near where you work. You'll walk or bike more, be healther including mentally and socially (not isolated among neighbors richer than you in a dust trap), and spew out less C02.
Fun fact: this is already happening due to ERISA, the law governing 401(k) and other retirement plans. The law says, in part, that you have to offer your tax-advantaged plan to everyone that qualifies as an employee. You do not have to make everyone who contributes to your business in any capacity an employee.
Google's 401(k) plan is pretty much the most generous you are allowed to give to employees. They contract out for every non-professional role and keep a sharp distinction between the "help" that cleans and cooks, and the employees that code and do business development etc.
Well they already went after the contractor loophole.
This is virtue signaling and not the most effective, but it does create a real incentive and being forced to hire less and therefore automate more low wage work would be a good thing.
Seems like it's something to incentivize owners (e.g. Abigail Disney) / founders at the expense of executives? Non-founder executives tend to be somewhat parasitic leeches / mba types, so I can't say I'd be unhappy with them getting payed less. That said, this sort of initiative seems to be part of a pattern of poorly thought out attempts to attack "income inequality".
Probably just another way to raise taxes and bill it as a way to help the poor. Execs usually get a % of the gains during their rein so they re not leeches. Disney can also pay a John Doe with a high school diploma to run Disney for $240K a year. But they'd rather pay $50+ Million for Iger et al because so far if has paid off.
I can't find details on this bill, but as a former tax lawyer, I am wondering about these issues:
• Are contractors counted as employees? If not, then companies would have an incentive to keep low-paid workers as contractors instead of employees.
• How is stock-based compensation, or other incentive-based compensation, treated? Executives are compensated largely with variable compensation like this in order to align their incentives (at least in the short run) with the company's. I could see SBC being exempted from this calculation, which would render the bill largely meaningless. For example, Steve Jobs took $1 in salary for many years.
• What about stock previously owned by the executives? That is, Mark Zuckerberg owns a ton of FB stock, so any income he receives via capital gains or dividends is not tied to his role as CEO. Presumably these are not counted?
I'm not sure this is relevant. You can bring in an outside company as a contractor, and that company can have employees that effectively work for you but aren't employed by you.
Definitely true. As other commenters have noted, you can just outsource the function to another company. That is, I don't think AB5 has any impact on a worker who is an employee of a janitorial firm that is contracted to a tech company. I think it only applies to workers who are directly contracted with/employed by the main company itself.
The law would be agnostic about this because the worker is getting the benefits of employment so long as he/she is an employee of some company. This new proposed legislation would make it matter which company is designated as the employer, for purposes of ratio calculation.
Note: I have not been able to find the text of this bill, nor have I read AB5 (just read news about it).
Lots of excitement in the comments. Has anyone considered the possibility that California wants to create the appearance of solving real problems, without actually solving them? Politics, like social media, contain quite a large amount of virtue signaling. What places California somewhat uniquely is as its liberal ethos clashing with moneyed interests. There's the Abigail Disney's out there, but wealthy egalitarians are vastly outnumbered by wealthy capitalists who oppose redistribution. As many others have pointed out, there are potentially obvious workarounds to optimizing for expensive pay ratio.
Executive pay ratio is mostly determined by the size of the company. We have allowed mergers and more mergers, even ignoring monopoly concerns, creating huge companies.
Think of the corporate structure tree, with perhaps 5 to 15 people reporting to each manager. In a large company, there are many individual contributors per executive. With those numbers, total executive pay is not a large portion of total employee pay. This is what makes extremely high executive pay possible.
The fix is simple in concept, but politically difficult. Break up huge companies into smaller companies.
> Executive pay ratio is mostly determined by the size of the company
At least executive pay is. Amazon and Google have different ratios because Amazon has warehouse workers. Executive to worker pay ratios are more interesting in aggregate.
> The fix is simple in concept...
Companies age out and split themselves up on their own enough that it's probably better to just be a lot more restrictive on mergers. My fear with breakups is they can be somewhat silly. Breaking up AT&T just created regional monopolies and split local and long-distance. In the era of cell phones, this just looks weird.
You're also falling victim to Goodhart's law. Worrying about how much the 500 best-paid executives make doesn't explain why overall wages aren't rising, and that's what we should care about.
But I completely agree that company size and executive compensation are correlated, and it's an observation people don't bring up a lot. This ratio might be a better indicator of the size of companies than actual inequality.
Overall wages are rising, particularly at the low end. Wages are growing at about a 3.7% annual pace.
Income inequality is dropping too. The share of income earned by the top quintile has dropped, and this shows in the Gini coefficient.
The above is to be expected based on unemployment numbers. For the first time ever, there are more job openings than people seeking jobs. This has come about because imports have been replaced by domestic goods (the tariffs helped) and because there are fewer immigrants to drive down the cost of labor.
I've seen this happening in some countries, the result was the disappearance of the middle class: the minimum wage was pushed up until it got close to the median, now people are closer and closer to the minimum wage. Imagine minimum wage is 50 units and median is 100, if you grow minimum to 70-80, but you cannot increase the median (because the market does not support all the raises), then the former middle class is now close to lower class; as you increase the minimum wage, this creates inflation and makes purchasing power of the middle class even lower, so in the end you get it transformed in an upper poor class.
>Worrying about how much the 500 best-paid executives make
I think this is actually one of the most important parts about the issue of "CEO pay ratio". Many people don't seem to understand that the ratio that's talked about is among the X largest companies and those companies have grown larger over the years. It makes sense why the pay of someone that needs to manage more people would go up.
It’s staggering how much the sizes of mergers and acquisitions have grown. Looking at inflation-adjusted numbers, there’s the anomalous $15B purchase of Carnegie Steel by US Steel in 1901, and then nothing >$1B until the 1960’s and nothing >$10B until the 1980’s.
Maybe it’s just me, but California’s future seems to be echoing New Jersey’s.
Wealthy state, high tech industry (there was lots of Pharma in NJ). State starts to get really onerous on business, businesses start leaving, state goes into the toilet.
Also many other states are starting to have "tech hubs" as well like Austin and Nashville so one would expect the allure of the bay area is going to decline overtime.
California will actually succeed in driving away its wealth-generating companies at some point. A lot of places will be happy about benefitting from the exodus. California has way too much concentration of brainy people. We need to spread them out across the world. These kinds of policies will succeed in doing that.
The key of the matter is that California wants to tax, full stop. The socialist greenies running the state are neck deep in debt and making new exorbitant taxes is their only option. No wonder people are fleeing from the Californian dream in droves! https://www.nytimes.com/2020/01/16/us/california-congression...
Let's present a new thing called immigration: people coming from other countries. When you come from Honduras, even a slum in LA is a step forward, so people are moving from countries like Honduras to California. How many have any education, get good jobs and pay taxes is usually ignored because it does not look good to look in the dirt, you put it under the carpet.
I actually lived under the end state of this process: the Soviet Union. There _everyone_ worked for the government and made similar money (peanuts). Janitor? Here's 70 rubles a month. Engineer? Here's your 120 rubles. Run a factory? Here's 200. No "inequality" woo-hoo! Socialist utopia! Didn't work too well though.
Good with the change in California. I have seen a time trend where upper management started to get paid $100k per year, then it was $250k per year, $500k, $1M, $10M.
Then executives started motivating their VP salary with comparison of executive peers they have $500k so I should also have $500k or higher.
This causes income inequality which causes tensions in society.
In the past these type of income equality would be Kings, Noble men, then we transitioned to a period of more equality. Now its back again. You could say Kings and noble men have changed to ->high VP management layer in large corporations.
High income inequality tears societies apart, I would advise not to go in that direction.
In page 5 of this Worldbank paper on income ineqality vs violent crime rate you can see a plot between inequality Gini coefficient, where a high number Gini is high inequality and crime rite. High income inequality is linked to high crime rates.
https://siteresources.worldbank.org/DEC/Resources/Crime&Ineq...
> President Rob Lapsley said the bill would keep companies from coming the state.
This is a problem why? California is constantly in a draught. It's resources are stretched thin. It has housing crises all over the place.. wouldn't 'thinning' the herd or at least slowing business growth there be a good thing long term?
Why must a place with as many problems as California has in terms of fire/environment/housing always increase business, when those businesses could move out to other places bringing more diversity across America. Maybe try Kansas or Tennessee? I mean if trucking is ever replaced we'll need some good jobs in the heartland.
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Note also the guideline against "did you even read" comments.
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Note also the guideline against being snarky.
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IMO this is just a reaction to an imbalance, because clearly the market is unable to balance itself.
And is a lack of funds the reason California can't address their mental health, or is an inability/lack of interest the reason?
Other places need to be happening, too.
Yes, it is ridiculous.
There are certainly some aspects which are less attractive to business, but in the end, it's one of the best places for business.
If anything, it’s massively underegulated when put up against to comparably-sized economies in the developed world.
May I also ask what state are you from?
If all Californians say that people from Texas need to leave the country that is an insult, it is personal to the state of Texas just like someone saying that he's happy for the idea that California is losing business.
I get a giggle at Californian's persecution complex. See, that's insulting.
I'm just saying you can't say stuff like that. It's against the rules here and it's against common courtesy.
I strongly believe that in the knowledge economy, the traditional narrow definition of business friendliness (defined by low tax and low regulation) doesn't apply. That's why many states (e.g., Kansas) tried this tax based pull strategy which fell flat. In the 21st century, you need a more a holistic definition of business friendliness that takes into account talent as a stakeholder. Thus defining policies that make a place attractive for talent to migrate, should be part of the business friendly discussion. This will include non-competes, climate and environmental laws, labor protections, social safety nets, parental leaves, LGBT friendliness, other protections etc.
Then it looks like West Virginia and Texas are the most business friendly states, with California coming in 29th(despite being one of the nicest places to live in the U.S.).
You must know different people than me. But everyone I know who moved, moved because of a job, wanted to be in a cool city, or temperature/weather/availability of natural beauty. None moved because of non-compete laws, environmental laws, labor protections, social safety nets, parental leaves, or LGBT friendliness(I never lived anywhere especially rural).
Anecdotal evidence is irrelevant to the macro reasons on why job growth happens. Dig deeper into what is a "cool city"
And I'm pretty sure none of them were thinking about the non-compete laws or environmental regulations when they thought cool city.
Is that why everything keeps getting dumber and shittier to use after the company added machine learning, data science and data driven framework to their stacks?
They don't need to listen to people when they can just pretend they know what people want with their 'data stick'.
Obviously, majority of people know what they want. We are not just smart monkeys with terrible exploits, we are different and resistant to many short comings.
There is no historical context to look at. There is no reason to believe that something is a random occurence leading to a wide chain of events afterwards. Naturally, if you opened similar app to facebook now and deployed same strategy, tracking behaviour. You would get users at the same pace.
While I do think you have some valid points, intelligent people will move towards places of better quality of life and opportunities, I don't think it applies in the current example well. There are better places than California depending on metrics - homelessness, cost, pollution, transportation etc on quality of life. For opportunities, don't know but it can't be a hub for everything out there.
People seem to think that governments should be solving all the problems on their own. But a democracy is a government of the people. If people don’t participate beyond just voting, they deserve what they get.
When you pay your taxes there is no disclaimer: "people have to participate beyond just voting". Your taxes is your participation by the social contract, the government needs to either deliver or stop collecting taxes and everyone will have to get their services from private entities (of course this is not possible).
While I agree that I definitely wonder where a lot of the money in SF goes, this "bigger than 13 states" isn't a particularly impressive statistic IMO. First, SF has a bigger population than 5 of those states. In many states depending on how they split responsibilities, per-capita budgets can be significantly higher at the municipal level than the state. Finally, SF is obviously a very expensive city, so getting things done (hiring people, works projects, acquiring land, etc.) is much more expensive than most states.
Still, SF does have to pay a lot more for workers these days thanks to its self-inflicted housing shortage.
The top 30 NBA players are earning a combined $1 billion per year in salary.
122 players in Major League Baseball are presently earning $10 million per year or more.
The NBA + MLB + NFL is around $14 billion per year in salary for the top 2,000 active players. Probably $200 billion in salary over the next ten years.
It's more than what the top 2,000 executives are extracting from corporations in the US.
I can't wait to see what the Lakers, Clippers, Kings, Warriors, Rams, Chargers, 49ers, Dodgers, Giants, Athletics and Angels look like after California makes things right.
Lebron James should only be allowed to earn a maximum of ten times what a janitor in the stadium earns or a secretary in the front office, were California to be consistent.
Oh wait, they won't do anything about that extreme inequality because no professional athlete would want to play for a California team ever again?
Saving this one for the next time I hear some canard about unions preventing top performers from their deserved compensation.
The current effect of the cap is mostly to redistribute some of that money to top 10-30 players who also get max contracts even as everyone knows they are not quite as good.
There are also competitiveness reasons to avoid true maxes like parity between the teams of relatively rich and poor/thrifty owners. But yeah the union does depress the salaries of the very best.
Of course I never said that, you did.
I'm very clearly pointing out the hypocrisy of California and its regressive, anti-human policies in action.
If they weren't hypocrites, they'd similarly cap athlete salaries based on the lowest paid employees of the team the athlete plays for - given the extreme pay imbalances in question. I believe the state officials proposing this are cowards and going after easy populist targets, so they'll never dare to act consistently and target athlete pay for exactly the same reason as executive pay.
Citizens can hardly run away from California any faster. It's so bad they're set to begin losing congressional seats for the first time in their history.
Liberal California may be losing population to conservative states like Texas, but conservative states like Texas are becoming far more liberal.
The reason is that executives decide other employees pay; the rule doesn't cap highest-paid-employee pay but executive pay. Higher paid athletes don't set the salaries of lower paid athletes.
What is the myth again?
[1] https://ktla.com/2019/12/20/californias-population-stalls-at...
Even within domestic migration - people leaving are poorer and people coming over are richer and wealthier.
The "exodus" stories are often peddled to tell a story on how productive people are leaving and there will be no tax revenues. But the opposite is actually true.
So, to summarize - 1) Net migration to CA is positive and 2) Net migration is actually bringing in more high income folks
https://calmatters.org/explainers/california-population-migr...
https://www.latimes.com/politics/la-pol-sac-skelton-income-t...
CEOs exist to help a company sell more product, while in sports the athlete IS the product. In that respect they have more in common with movie stars than with CEOs.
Which I suppose just raises the question of the rule applying to movie studios—a similarly unlikely scenario—and how CA can defend the inconsistency. Is there a loophole for sports/film in that the famous people are contractors and not employees? I don’t know if that’s even the case, just ruminating.
I agree that this is a difficult question. But why in the world is the government, with all it's perverse incentives, trying to figure this out? The shareholders, the people with a literal financial stake in the outcome, have spoken. Good CEOs are worth their weight in gold. Actually, gold isn't valuable enough. Steve Ballmer's resignation immediately added $20 billion to Microsoft's market cap. That's worth about 400,000 kilograms of gold.
There is no logical explanation for such a line, it’s always an emotion against people who have more than them. Everyone always compares themselves to someone richer, whether they make 15k, 150k, or 1.5m. If you keep voting for such policies, you will eventually outlaw anyone for trying to do anything but living on government dole. It’s a sad future some people want. Venezuela collapsed rather quickly.
Are you saying that people who don’t earn few millions a year are doing nothing? Mind you, the majority of people are in this situation and contribute a lot to the society (teachers, doctors, researchers, any workers really). I’m not a leftist but I recognize the concentration of money in a few hands is probablematic, and a lot of business models to get to this point are harmful to the society at large.
Is society better off if you take 100 mil in income from Larry Ellison and Sundar pichai and build a few hundred units of low income housing? Even if it pisses off ellison and Google pays pichai less the next year?
Elon and Bezos send people to space with the wealth they fairly gained. The government prints trillions of dollars every year to fund their deficits and wars. If the government needs another billion dollars, it’s quite easy for them to create it.
Why seize money from the rare person who is talented enough to make so much of it?
Would you want to live in such a world? Or do you think maybe the rest of us deserve to have some of that water, even if we're not as clever and we didn't "fairly" earn it?
Dialing back to the real world, all these billionaires and other elites are having very real outsize impacts on the lives of the less wealthy -- from whether/where/how they work, to how they and their children get educated, to what information we have access to, to who goes to jail and who goes free, who goes to war and against whom, and who lives or dies.
Incredible wealth gives people incredible power, and the concentration of this incredible power in the hands of a small minority is distorting the world in ways those not in this minority are having trouble swallowing, no matter whether this concentration of wealth and power was "fairly" arrived at or not.
But, yes, giving up some of what they own is one way of dealing with it... though one could argue that by the time they have control of all that water or wealth, it's too late, because by then they have so much power that they, not you, get to call the shots.
Another way is to change the system so that they don't gain so much control in the first place, and so that water (or wealth) is distributed more equitably among all seven billion of us instead of just a tiny few.
The government spends trillions on wars exactly because of the power concentration you are defending. It's not the common man that decides to go to war, it's the network of wealthy people who benefit from it.
A utilitarian could (and has) claimed that this marginal dollar occurs at the point where you have the bare minimum to survive: https://www.lesswrong.com/posts/Y4Adk743X2ZoMBSBi/does-utili...
>"For example, utilitarianism apparently endorses killing a single innocent person and harvesting their organs if it will save five other people. It also appears to imply that donating all your money to charity beyond what you need to survive isn’t just admirable but morally obligatory. "
So I don't think a strictly utilitarian argument is sufficient.
There's a few problems with this line of reasoning:
1. Its not clear to me that this argument is being made by a utilitarian, as you claim
2. You at least appear to show a misunderstanding of what "the marginal dollar" is. Every dollar is the marginal dollar. Its just that the relative value of dollar 1 (which you need to survive) is greater than the relative value of dollar 1 Billion, which you use to, uhhh, buy an island. I think what you're saying is that there is a point where the marginal value of your dollars is low enough that you are ethically obligated to donate them is at or around subsistence level, and that might be true, but it leads to the third problem:
3. Even for a strict utilitarian, if you take into account externalities, the right thing to do might not be to take all the money away from people. If you're optimizing for something like reducing death, reducing everyone in the US to subsistence level probably isn't the best solution: you'll likely do something unwarranted like cause a revolt. This has two major net negatives: a bunch of people die in the revolt, and you end up losing a lot of your money, either because you spend it to put down the revolt or because you don't and you lose and people take it back.
4. While improving the life of those in absolute poverty is a laudable goal, it's not clear that it makes sense for a government to do that, except when it ends up being beneficial to the government or its people. In other words, a government's moral imperative probably doesn't extend (far) beyond its borders.
> So I don't think a strictly utilitarian argument is sufficient.
People often forget about externalities.
On the other hand, if you think of the supply of billionaires as a revenue source, and then you think of there being decreasing demand for being a billionaire as taxes go up, but increased revenue per billionaire as taxes go up, you can draw up supply and demand curves and optimize to maximize revenue from billionaires (or people in general really, its just that the marginal rates can likely be higher on billionaires and they're the talking point of the day). If there are 100 billionaires, and you tax 2% more, and 1 billionaire moves away, you're still up on revenue. I often hear people arguing that we should operate our government more like a business.
This is actually one of the standard strategies for taxation: we should setup a tax system that optimizes for the maximum total tax receipts. When you tax too much, incentives go down and you actually lower your total tax receipts. In principle, there is an optimal taxation amount.
The problem with this approach is that we don't have good enough data. No one really knows how many fewer billionaires there would be if we increased their taxes, and biased interests each have plenty of conjured data to make their argument.
There are other tax strategies as well: trickle down economics (a favorite of the right, also based on suspect data); and guaranteeing living wage (a favorite of the left). One advantage of the latter is that the argument is not based on numbers or data, but on morality.
But that's not the only thing that happens though.
A prospective billionaire that is not yet a billionaire might think "there's little point in putting in all this work on this new project, because the government will take more of my money".
Another thing that can happen is that a foreign company decides to invest somewhere else because of that tax. They might look at the tax and expect it to discourage investment internally and look for potentially better prospects.
On a slightly more emotional side:
With individual productivity increasing annually, it's a shame that individuals are not seeing proportional wage increases in return.
And none of that even touches upon the reality that those making the billions are rarely those with exceptional talent or skill. It's those who had the connections and financial wherewithall to build networks that are unreachable for those born into lower socioeconomic circumstances. No, I don't have data for that, but a simple unscientific survey of Execs making hundreds or thousands of times more than their employees are rarely from anything less than middle-upper class backgrounds, and most often have family money that allowed them opportunities never imaginable to lower rungs of society.
I do not like the idea of paying higher taxes, but I also recognize that individuals and companies are sitting on trillions upon trillions of dollars because they are making so much money that they can't spend it all. Just ask Bill Gates or Warren Buffet, both who agree with this and argue for higher taxes.
But emotions aside, it's simple economics. When social mobility is poor and inequality high, there simply aren't enough consumers to support the level needed for a country to remain 'first world'.
The fact remains that you think it’s morally correct to take money from people simply because they have it. To me, that’s theft. What is the salary at which we should seize money? You still haven’t answered this original question.
Then, besides taxes, companies should also fulfil their role in society by employing "useless" or low productivity people to a certain extend (this is already done a little In France for instance with law imposing a quota of disabled people). I saw it all the time where I live (Japan): people with useless jobs that have been completely removed by automation in Europe.
And finally, limiting the coefficient of the highest paid executive (let's say 100x) in comparison to the lowest paid on is no theft either, because the money didn't came in their pocket in the first place.
The idea at large is not the "rob" the C-execs of their money but to put more responsibilities on companies, which have acquired a disproportionate power in the last few centuries.
The countries with higher teacher salaries, like Canada, or in our general vicinity all have low corporate taxes.
There are things we need to fix in the US, like people who don’t have healthcare, and the housing market. (All the losses in the share of GDP of labor since the 1980s went to landlords, not capital owners.) But it’s not clear to me that income inequality is in and of itself something worth fixing, at the risk of novel measures that could give other countries a competitor advantage over us.
Go check out primitive technology on YouTube and see the stuff he does in a forest. That kind of stuff is available almost anywhere with a temperate forest.
The cost of living is higher in the US because people expect better stuff and they've put a limit on how low the quality can go. Eg building permits and other housing regulations. All of that significantly increases the cost of housing, but it also makes your minimum housing much better than in poor parts of the world.
It’s arbitrary, and yet saying that means we should just let people pollute endlessly doesn’t make sense either.
Thus lowering their ration and tax obligations.
These jealousy based taxes are insane and have to stop.
If you want to redistribute wealth, do it the honest way that doesn't distort markets. Take it from rich people and give it to poor people!
> The proposal would only apply to companies that post at least $10 million of taxable income from business conducted in California
Eg. lets says CA said you have to pay business tax if you make more than $X in CA, would that hold up?
Whether or not this can be gamed isn't the issue here. I think it's good to increase pressure on companies to treat their employees fairly.
Our company specializes in automating low wage clerical work.
I think we put over a thousand people out of work this year through our various engagements.
Consider when Steve jobs had a $1 salary but the rest was stock options. This tax would not apply in these instance, but should. Wed also find that it does apply when it shouldnt.
The biggest issue with any tax is the disproportionate impact on middle tier/s. The richest always find a way avoid it, and it doesnt target the poor.
the rich can afford the accountants that can minimize their "income".
the low income should theoretically have fair low tax rates.
You're left with the middle ground where people earn enough to pay significant taxes, but not enough to afford gratuitous tax accountants.
Not helped by lobbying determined to make taxes intentionally difficult in the US.
It varies year by year.
not only is it true, but most people don't pay income tax or pay very little.
the bottom 50% accounted for a measly 3% of all tax.
this is the same in the UK and other countries.
right now we use the top 1% as scapegoats for the borderline useless politicians.
Of course they do, that is a symptom of the problem. Take an absolute extreme of society: one person has all the wealth, and everyone else has nothing. Obviously, that one person will pay 100% of the taxes, and everyone else will pay 0%.
Today, we see a similar but less extreme situation. It's not intuitive at first glance, but think about it for a few seconds and it makes sense: if you want a more balanced distribution of tax burden across society, you need a more balanced distribution of wealth across society.
Accordingly, if you want the bottom 50% to pay more, you actually have to tax the rich more to reach a more equal distribution of wealth.
Then you don't have a society. You have one person who claims they have "money" while everyone else moves on with their lives.
Only if the only taxes are wealth taxes. You're in a discussion about income taxes.
wealth = income - consumption
In the U.S., we tax all three: general income tax, consumption tax (e.g., sales tax), and wealth tax (e.g., property tax). Taxing any one has an effect on the other, and a discussion about one is relevant to all others.
No, income - consumption is net increase in wealth. Those are all flows. Wealth is a stock. Wealth taxes are periodic taxes on the value of the stock, income taxes are taxes on the flow.
You're introducing periodicity, which I did not have in my simple model. Maybe a more complete model would be:
Where N is some period like a year. Here, we can tax wealth, income, consumption, or capital growth. Regardless, it's silly to think of any one in a vacuum when considering tax policies.But isn't the real issue that 1 person is making a thousand times what everyone else makes? And wouldn't it be truly absurd to expect those 99 to pay more instead of the 1%?
If that 1 person was producing all the food for the other 99, I wouldn't find that to be a problem at all.
Things grow exponentially fast as you reach the top. If you look at the Forbes 100, Jeff Bezos is worth about 2x number 5, 10x number 40. [1]
The net worth of the top 1% is 10 million. That's 10,000x less than Jeff Bezos. The percentile/wealth graph is an insane hockey stick.
I don't doubt the 1% pay a big chunk of the pie. I do wonder if it's an amount proportional to their wealth, but let's leave the millionaires aside. I wonder what part of that 37% the billionaires are paying, and if _that_ is a fair amount.
[1]: https://www.forbes.com/forbes-400/#7795b4417e2f [2]: https://www.forbes.com/sites/jackkelly/2019/10/22/the-number...
Federal income tax is based on income, not wealth. It's entirely possible (and happens all the time) that wealthy people have a bad year with their investments and lose money. They don't pay income taxes on losses.
They should be paying a higher amount based on the amount of money they earned.
We could debate if they should be making so much %wise of total income.
You don't need to make much more than me for that to start become profitable - accountants, trust costs, etc eat up a relatively fixed amount of money. But once you exceed that cost then it's time to start shifting money around.
Not that this doesn't reduce the tax you pay on your income. it directly reduces your "income" itself.
IMO, if there was the will to build a better system there would be a better system. There's a lot of edge-cases in space travel, or medicine, but there was will to put very smart people with very powerful computers to work on both of these, and now we have rockets that land on drone ships and medications that can control HIV.
> The biggest issue with any tax is the disproportionate impact on middle tier/s.
How do other countries do it? There's countries with a healthy middle class, why isn't the US's thriving like theirs?
The system in each country is very complex and it's hard to tell which parts make it work better and which parts make it worse than another. The effects are all related.
First of all, the middle class is not well defined in many of the popular articles. There can also be a significant difference between middle class defined by income vs. by self-identification. See Figure 1.1 in [oecd]. I'd start with the premise that the US is an outlier in many areas - tax system, health care, pensions, education... All of which dramatically changes how the middle class is able to structure its finances.
My guess is that many of the US citizens have higher disposable funds in absolute value than Europeans but it helps them mostly in international travel and when buying easily transportable goods. Not as much in day-to-day living.
I'll try to compare with my country (Central Europe, laws similar to Germany's but with slightly worse execution). There's a healthy middle class but according to studies, it's shrinking. It seems middle class is shrinking worldwide. Even the [oecd] study I link is named "Under Pressure: The Squeezed Middle Class". I think this feeling also led to the rise of populist governments in many of the European countries.
I'll give some facts first, then try to interpret them:
- Effective tax rate at ~50 - 60 % for employees, ~30 % for IT freelancers. I'm including mandatory social and health insurance.
- Median wage: $15,500/year, typical IT wage around me: $30 - $60,000/year.
- Supermarket cashier earns 85 % of median wage, public bus driver at around the median.
- Served restaurant lunch (just meal) costs ~$7, dinner ~$10.
- Appartments cost (capital city) at around $300/sq ft
- Most (78 % [wiki]) of people own their housing (vs. 65 % in USA).
- Mortgage rates are at 2.5 % APR, some going as low as 2 % APR (10 years fixed), inflation at similar levels (last year around 2.8 %).
- I know personally just two people who went to private universities (one because he liked the school, the other one because it was easier) and no one who went to private primary or high school. The public schools are generally free.
- My family's out of pocket medical expenses amounted to $ 500 last year, mostly over-the-counter medication for our two kids (common cold, cough, supplements, vaccinations...).
- In hospital, you can pay around ~$10/night for the privilege of a private room but there's usually a shortage of them. There wasn't a shortage 10 years ago. People just weren't used to paying in hospitals.
- The medical services are free. There was a HUGE political fight around paying $4 flat for emergency (out of working hours) doctor visits.
- Fuel is taxed at 30 % extra to VAT, there are similar extra taxes for tobacco and alcohol.
- When you buy a real estate, you're immediately taxed 4 % of the value.
- Only 20 % of people use credit cards. Most of the credit is mortgages (which were mostly profitable due to rising prices so far) or car leasing. Outside of these bigger tickets, most of the credit seekers are low income.
I feel I live in a safe environment, the public transport is well functioning and clean (daily user). You can screw up, not save for some time, get ill and you're still likely to recover financially even if you work for a median wage. You may not be able to buy housing if your parents can't help you.
But in general, I think the ability to experiment a bit and a general feel of stability allows for much more effective negotiations with employers, even for comparatively lower income people, driving minimal wages down. On the other hand, because so big share of the money goes through the government, there are many inefficiencies.
If I moved for example to the US, I might end up in higher percentile of earners and most probably I'd have more money to spend on international travel and electronics. On the other hand there are the co...
Someone tricked you. The US has one of the richest middle classes in the world. A CEO being paid obscenely has absolutely no impact on the middle class, it just makes a nice boogeyman for politicians.
Of course, by this metric the successful countries are all in Africa. It will be an interesting future.
When the English and the Germans came to North America and replaced the population there, was that a success for North America? If so, is it the kind of success you'd like to have someone else give to you?
Except that envy is part of the human condition, and arguably, a key component of human progress. Left unchecked, though, envy can lead to social instability. See, e.g., Kahneman and Tversky's work about how people are willing to incur harm to themselves to punish what they perceive as unfairness (sorry, no time to get the cite). So arranging our societal structures to keep envy in check might be necessary, even if it means giving some high earners a haircut on their income.
https://en.wikipedia.org/wiki/Consumption_tax
Huh?
That comment suggested
> The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits.
and
> I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off.
Replacing the income tax with a consumption tax follows directly from both of those points. As to the first, it replaces the system where companies are taxed on profits and people are taxed on revenue with a system where companies are taxed on profits and people are taxed on profits. As to the second, obviously, it gets rid of the income tax.
What were you thinking your GP comment said?
Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.
Consumption is expenses, profit = income - expenses.
Rearranging. Consumption tax = y * expenses = y * (income - profit) where y is the consumption tax rate. So, as profits increase, expenses decrease and consumption tax goes down.
> Consumption is expenses, profit = income - expenses.
No, a person's profits are their consumption. Savings are not profits -- they don't benefit you at all.
There's a chain going like this:
Company spends money so that company receives (more) money so that person receives money so that person can spend money.
The goal of the company is to accumulate money for someone else and that's how its profits are measured. Profit is money the company loses by paying it out to its owners. (Money the company loses by paying it out to non-owners is "expenses".)
The goal of the person is to spend money on things it can actually use; for the person, money is an accounting tool, not an end goal. But we can identify profit the same way. Money that you lose by paying it out to yourself ("consumption") is your profit; savings is just money you might one day allocate to profit.
On the other hand, I don’t think it would create much tax revenue.
We only gave our government the right to institute an income tax thanks to the idiots who banned alcohol. Before that the feds relied on alcohol taxes to survive.
Play stupid games, win stupid prizes.
https://www.heinzhistorycenter.org/blog/at-the-history-cente...
Let me paraphrase Adam Gopnik's recent book, "A Thousand Small Sanities: The Moral Adventure of Liberalism": When you talk about "the capital I pull in," you're risking celebrating the driver while taking cars, roads, and gasoline for granted. [0]
See also Elizabeth Warren's famous talk in her first Senate campaign: "There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [1]
And of course Barack Obama's correct statement, intentionally taken out of context by the right: "You didn't build that" (referring to the roads and bridges that businesses depend on). [2]
[0] https://www.amazon.com/Thousand-Small-Sanities-Adventure-Lib... (not an affiliate link).
[1] https://www.goodreads.com/quotes/439207-there-is-nobody-in-t... — also YouTube: https://www.youtube.com/watch?v=60fQCDqXfq0
[2] https://www.wikiwand.com/en/You_didn%27t_build_that
[3] https://www.amazon.com/Economists-Hour-Prophets-Markets-Frac...
If you combine this with UBI + Single Payer + Free College -- then everyone will be able to afford the taxes they will pay on goods/services at the store/etc.
If the lowest safety net keeps just about everyone around 35-45k with medical safety, then they can probably afford 5-10k in VAT fees, and if they no longer peg benefits to companies -- people have more fluidity about where they work based on the fact they aren't going to lose their medicare for all.
This also means those who are fine not working and living on UBI ALSO drive up the rate of pay for those who DO want to work because supply/demand of workers will go down.
In the end countries spend a high percentage of GDP on thing people actually want. Everything after that is just deciding who pays for it.
PS: Consumption taxes also push people to vacation and retire in different countries.
Arguably not. The progressive tax bracket system means that a bare minimum amount of money (up to the lowest threshold) is available basically tax free to cover necessities and then everything above that is effectively profit for an individual. Living in an expensive house, eating expensive foods, raising a well resourced family aren't really expenses in the sense that businesses have expenses. If they were like business expenses people would try to minimise them, whereas most people I know actually try to maximise those costs when you look at what decisions they make. I've never convinced anyone with arguments that they should move into a cheaper house to save money. In that sense, both systems are philosophically the same but people have very low necessary expenses.
Almost an aside, but taxing people only on their savings would be truly bizarre. Someone measurably adds more to the economy than they consume and they are the ones who get shafted with tax? Ethically a case could be made, but practically the incentives are so nutty I'd hope it doesn't warrant serious discussion.
Taxing corporate revenue rather than profit would cause price increases and act like a consumption tax. Certainly possible, but that is a regressive tax policy and generally frowned upon.
It happens all the time, it's called property taxes.
Not exactly, if the government prints money, then the value of the dollar will decrease, but it the value of other assets will increase to adjust for the lower dollar value. So while printing money can be thought of as a tax on cash savings, it's not a tax on all assets (e.g., stocks, property, etc.).
Taxing savings makes sense over income. Why tax someone producing, removing the tax encourages more work performed. We tax income because it is easier. We tax the estate in death because everything is collected and recorded. In Roman times they sent a tax collector who would go through the home to find valuable objects to pay taxes (tax on savings).
It is not as wierd as it sounds. It's impossible to implement in our society before death and taxing payrolls and self reported income is a lot easier.
But that is a bad goal - we don't want to optimise economic flows, we want to optimise quality of life and standards of living.
The goal in this era of plenty shouldn't tend towards everyone teetering towards bankruptcy and wage slavery so that the politicians can talk about how the GDP is 2% higher. Everyone should have a reserve of real wealth in case they fall on hard times and the bigger the reserve the better as far as I'm concerned.
In my lifetime there have been a constant stream of inflationary collapses and a noticeable lack of problems caused by deflation. That theory is very popular with governments because it justifies the creation of money on a grand scale, but it has a certain lack of evidence. We've seen communism tried more often than deflation.
Heh it's a great idea for the powers collecting that spending though ;)
Perhaps in some cases, but many companies I know have "spend it or lose it" policies wrt budgets, so often money gets spent just to justify being able to spend more next year. And I've worked with a couple small companies that tried to spend more (legitimately) to try to avoid having as much profit to pay tax on. So not every business tries to minimize cost (or not as efficiently as you might assume).
Also the reason for the formation of most of the companies mentioned in the article is liability reduction more than tax reduction.
But the fix is easy. Wealth tax and/or UBI smooths it over and then we are set. You lost your family home, poo poo, but now get a nice stepand and can also afford appartments near where you work. You'll walk or bike more, be healther including mentally and socially (not isolated among neighbors richer than you in a dust trap), and spew out less C02.
Google's 401(k) plan is pretty much the most generous you are allowed to give to employees. They contract out for every non-professional role and keep a sharp distinction between the "help" that cleans and cooks, and the employees that code and do business development etc.
This is virtue signaling and not the most effective, but it does create a real incentive and being forced to hire less and therefore automate more low wage work would be a good thing.
Basically, this policy sets us up nicely for UBI.
Moving to Nevada next month.
Jesus this state is doomed
• Are contractors counted as employees? If not, then companies would have an incentive to keep low-paid workers as contractors instead of employees.
• How is stock-based compensation, or other incentive-based compensation, treated? Executives are compensated largely with variable compensation like this in order to align their incentives (at least in the short run) with the company's. I could see SBC being exempted from this calculation, which would render the bill largely meaningless. For example, Steve Jobs took $1 in salary for many years.
• What about stock previously owned by the executives? That is, Mark Zuckerberg owns a ton of FB stock, so any income he receives via capital gains or dividends is not tied to his role as CEO. Presumably these are not counted?
The law would be agnostic about this because the worker is getting the benefits of employment so long as he/she is an employee of some company. This new proposed legislation would make it matter which company is designated as the employer, for purposes of ratio calculation.
Note: I have not been able to find the text of this bill, nor have I read AB5 (just read news about it).
Think of the corporate structure tree, with perhaps 5 to 15 people reporting to each manager. In a large company, there are many individual contributors per executive. With those numbers, total executive pay is not a large portion of total employee pay. This is what makes extremely high executive pay possible.
The fix is simple in concept, but politically difficult. Break up huge companies into smaller companies.
At least executive pay is. Amazon and Google have different ratios because Amazon has warehouse workers. Executive to worker pay ratios are more interesting in aggregate.
> The fix is simple in concept...
Companies age out and split themselves up on their own enough that it's probably better to just be a lot more restrictive on mergers. My fear with breakups is they can be somewhat silly. Breaking up AT&T just created regional monopolies and split local and long-distance. In the era of cell phones, this just looks weird.
You're also falling victim to Goodhart's law. Worrying about how much the 500 best-paid executives make doesn't explain why overall wages aren't rising, and that's what we should care about.
But I completely agree that company size and executive compensation are correlated, and it's an observation people don't bring up a lot. This ratio might be a better indicator of the size of companies than actual inequality.
Income inequality is dropping too. The share of income earned by the top quintile has dropped, and this shows in the Gini coefficient.
The above is to be expected based on unemployment numbers. For the first time ever, there are more job openings than people seeking jobs. This has come about because imports have been replaced by domestic goods (the tariffs helped) and because there are fewer immigrants to drive down the cost of labor.
I think this is actually one of the most important parts about the issue of "CEO pay ratio". Many people don't seem to understand that the ratio that's talked about is among the X largest companies and those companies have grown larger over the years. It makes sense why the pay of someone that needs to manage more people would go up.
Wealthy state, high tech industry (there was lots of Pharma in NJ). State starts to get really onerous on business, businesses start leaving, state goes into the toilet.
Then executives started motivating their VP salary with comparison of executive peers they have $500k so I should also have $500k or higher.
This causes income inequality which causes tensions in society.
In the past these type of income equality would be Kings, Noble men, then we transitioned to a period of more equality. Now its back again. You could say Kings and noble men have changed to ->high VP management layer in large corporations.
I think the term is Feudalism, where the ruling class has changed to VP from Noble men, Kings. https://en.wikipedia.org/wiki/Neo-medievalism https://en.wikipedia.org/wiki/Feudalism
High income inequality tears societies apart, I would advise not to go in that direction.
In page 5 of this Worldbank paper on income ineqality vs violent crime rate you can see a plot between inequality Gini coefficient, where a high number Gini is high inequality and crime rite. High income inequality is linked to high crime rates. https://siteresources.worldbank.org/DEC/Resources/Crime&Ineq...
Gini coefficient of inequality https://en.wikipedia.org/wiki/Gini_coefficient
This is a problem why? California is constantly in a draught. It's resources are stretched thin. It has housing crises all over the place.. wouldn't 'thinning' the herd or at least slowing business growth there be a good thing long term?
Why must a place with as many problems as California has in terms of fire/environment/housing always increase business, when those businesses could move out to other places bringing more diversity across America. Maybe try Kansas or Tennessee? I mean if trucking is ever replaced we'll need some good jobs in the heartland.