They also pay way more than John Q. Public and yet only get the same amount of access to what taxes fund (police, fire departments, public schools, roads, military protection, etc). I make about 36k USD a year, in 2020 Beos sold at least $4.1 billion worth of shares, if he paid 1/10th of 1% of that as taxes he paid more in taxes than I will gross in my entire life.
The whole situation stinks because many do have more money than they can realistically ever spend, so your gut reaction is "make 'em pay" but on the other hand, some of them pay more taxes in a year than I do in my lifetime so they're already contributing an order of magnitude or more than I am.
The only thing that ever "makes sense" to me when trying to make it "fair" is a federal sales/service tax replacing the vast majority of taxes. This still isn't perfect but, at least to me, it makes way more sense than the way taxes currently work in the United States.
I don't think it makes sense to try and put a number on it. It makes more sense to look at narrow sources of income and ask "was this wealth earned or extracted?"
In many cases (e.g. rental income from property passed from one generation to another that is managed by an agency) it is extremely obvious.
In other cases (e.g. dividend income from a company you founded) it is less so, and there is probably a split.
With outrageous sums of wealth (e.g. Bezos) you can bet that it's probably almost all extracted. I doubt we'd be losing much productive labor (if any) by taxing all people with assets over a billion $.
It's hard to say, but except for some outliers, on average, won't it be something like:
40 years x the salary of the best paid profession x the compounded interest rate over those 40 years x heck, I'll be nice and add a 2-5-10x multiplier to account for various other factors
More than that, aren't we talking about sheer, dumb, luck? Plus, anything over that, it doesn't really matter anymore, you're living like a king compared to the average person. If you're a religious person, it kind of feels like greed :-)
It's not about living like a king, it's about changing the world. If it was just about consumption I would never work another day in my life even though I probably have at least 25 productive ones left.
I haven't exploited anyone either, I created software with my own hands and sold it to people without employing anyone (I have a partner and we sometimes had short term contractors but not employees). We are not a monopoly and we have very smart competitors.
The reason I will not stop working? With enough money I can change the world around me: open a racket sports club/gym, maybe my gf opens a kindergarten for autistic kids (she currently works at one), maybe I can influence local politics so we finally get rid of the biggest polluters from my town.
If it wasn't possible to do those things with money it wouldn't be the game worth playing and that would be a loss for everyone involved: me, my customers
and the government taxing me.
I can only change the world at a very small local scale. Jeff Bezos can send rockets to another planet. Elon Musk can among other things build infrastructure to give everyone around the world internet access. Please let them, the governments have enough money already and they don't have a monopoly for good ideas how to spend it to put it mildly.
That's not how this game is played. For every billionaire trying to make the world a better place, 10+ billionaires are just treating this whole thing as a game and abusing us, peons.
And even for the folks working on those rockets, it's not so clear cut. Reading how their workers are treated, the whole thing is quite gray and murky.
The problem is other people are also trying to change the world: lobbying for more military spending, killing environmental legislation and Green New Deals, building media empires to undermine democracies, etc.
The answer is more democracy and less rich people calling all the shots.
>Jeff Bezos can send rockets to another planet. Elon Musk can among other things build infrastructure to give everyone around the world internet access.
When taxes were ~90%NASA used to do the research and spend the money to send rockets into space.
Several tax cuts later and we had to be reliant upon one billionaire out of 650 picking up the rocket research where they left off (literally).
>Please let them, the governments have enough
Not enough to build rockets these days. That's why it's outsourced. NASA's budget got converted into tax cuts.
Also Bezos fucked up his program through his own hubris.
>they don't have a monopoly for good ideas
It wasn't Elons ideas that got SpaceX rockets worrking. It was NASA ideas + Elon cash.
NASA being underfunded has nothing to do with lack of money. The governments spend way more than ever. They just spend it in a questionable way.
Back then they thought competing with Soviet Union for space supremacy was important so NASA was funded. It has absolutely nothing to do with tax rates.
Say it was 1000x what the poorest member of society has. That would seem to align incentives nicely. There is no limit on how much you can earn, but in order to earn it you have improve society in a way that actually impacts those who need it the most.
If all I have is $10, spending $5 on something risky and losing it is a tragedy.
When I have $1bn and I spend $5 million x 100 risky investments, then losing $500 million means that I, my children, grandchildren, great-grandchildren will still be richer than the top 10% in even the most developed country.
At some point the whole risk-reward shtick breaks down.
This is why the pat answer of "capital is rewarded for taking risk, that justifies their pay" doesn't ring true to me. Your downside is... still being rich and never, ever having to work if you don't want to? Hot damn, give me some of that risk!
How did he amass that billion in the first place? By contributing 1000x, or just because the capitalistic society rewarded him more for his efforts than some other workers earlier in his career?
More likely than not he/she inherited it. It's true for the vast majority of multimillionaires, from royals and aristocrats (obviously) to the Waltons/Rockefellers/Rothschilds/Abby Johnsons of this world, to the Chinese Party Princeling, to the 2nd generation of Silicon Valley aristocracy like Laurene Jobs & co.
why is hoarding an appropriate word to describe what extremely rich people are doing with their wealth? is jeff bezos hiding a huge company in his basement?
Because the only way to have that much in the first place is to decide "I will be keeping this, rather than using some significant portion of it to make the world a better place."
Like, for instance, by paying all Amazon workers enough, hiring enough that you don't have to schedule them so strictly that they don't have time to pee, not deliberately copying and undercutting independent products sold on Amazon...
I see what you're saying in a "squint hard enough" sort of way, but I still don't think "hoarding" is a good way of describing it. "hoarding" is holding onto some useful thing, but without using it yourself or allowing others to do so. if I converted all my savings to cash and hid it under my mattress or owned a house that I neither lived in nor rented out, that would be hoarding.
I don't think this accurately describes owning a huge amount of company stock. I'm sure jeff bezos tries to keep his assets in use as much as possible. the issue is not that he is "hoarding" them, but rather that he is not choosing to use them in the way that you or I would prefer. mere semantics perhaps, but I suspect a lot of people read these sorts of sentences uncritically and come away with the impression that billionaires are just sitting on massive piles of idle cash.
Yes, most are objectively paying far more taxes in terms of dollars than the average person. That is what the OP means.
> I don't like how hoarding assets is seen as 1000x more contributing than someone working 8 hours a day.
You are falsely assuming that all of these people "hoarding assets" aren't themselves working at least 8 hours a day. Additionally, if we are being real, contributing large amounts of capital to a project (i.e. investing) probably IS worth a lot more in terms of value added than 8 hours of the average person's labor.
You're missing the point. Yes, most people work 8 hours a day. Why is someone's effort worth billions more than others?
And contributing capital is worth much, yes, but that's a chicken and egg problem: how did they amass that capital in the first place, if their 8 hours work a day isn't worth billions more than other's 8 hours of work?
> Why is someone's effort worth billions more than others?
Because the output of their labor (which is largely a mix of strategic decision making, operations, and planning) adds billions of dollars worth of value in a manner that is not easily reproduced. Imagine we put thousands of the world's best devs / admins / whatever under the command of the average HN reader with a budget to match. How many of them would be able to create a company that adds anything close to the value that Amazon generates for its owners and users? Probably almost none; and that is comparing the output of Bezos to high output, skilled, educated labor that itself commands a high price. Lets now imaging putting those devs and money under the command of someone who didn't finish high school and works a minimum wage job. Do you see them creating an Amazon? There is a low supply of people who can innovate and lead well, and a high demand for high quality leadership and vision, so people are compensated accordingly.
Not buying it. If it weren't Bezos, it would be someone or something else. And I don't think Bezos' effort is worth his net worth. His output would be nill without the thousands of people actually doing the stuff.
> Not buying it. If it weren't Bezos, it would be someone or something else. And I don't think Bezos' effort is worth his net worth.
Well, ok, but that's a value judgement that is frankly not backed by data.
> His output would be nill without the thousands of people actually doing the stuff.
If all the value is being created by the rank and file, then why has no other company with the same rank and file been able to replicate the success of Amazon? Walmart hasn't; Best Buy hasn't; Jet couldn't; no other company has been able to. Why weren't any of the big stores like Sears that existed before Amazon, and who were full of smart, high performing employees, able to create an Amazon analog before Bezos?
> And "being compensated accordingly" is fine, but nothing says that has to be billions more than someone else doing basically the same amount of work.
The amount of work someone does is irrelevant, it's the value the work adds that matters. I can go outside and dig holes in my backyard for 12 hours, filling them in at the end of the day, for a year straight. That is a lot of work, but it isn't creating much value which is why no one is willing to pay me to do it. Alternatively, if I wrote a program in a few days which could generate more value than 40 people's yearly work output, people would be willing to pay me very large amounts of money for those few days of work. Those few days of work would be worth much more than the entire year of digging holes despite the fact that they required far less work. The average employee isn't doing the same type of value adding work that Bezos is doing, and they couldn't if they tried. That's the point.
> They also pay way more than John Q. Public and yet only get the same amount of access to what taxes fund (police, fire departments, public schools, roads, military protection, etc).
Well the government also enforces contracts and your claims to property. The amount this helps you is obviously proportional to your wealth.
Ding ding ding. It's amazing the number of people who think that private property is this "natural right" and then goverment comes and "steals" part of it, when in fact the institution of private property and its enforcement is precisely what the state does, without which your company wouldn't exist! This means courts, legislature, law enforcement, an army. Even more generally: your company ultimately only exists because the country provides you with a stable environment and millions of well-fed people with money kn their pockets to spend at your company.
So you actually have a lot to pay society/the state back for! I'm very partial to a georgist/mandatory public shares approach because of this.
Can you explain it? My understanding is they bought the stock from another investor, held on to it, and then sold it. I'm not sure where the value was created.
Maybe if the company was creating more shares and the investor bought them directly from the company, then the company use the new funding to create value, but I'm not sure that is what actually happened.
It's not that simple. Buying $500k of stocks does not mean you gave $500k to a company to use unless the stocks were bought directly from them. More likely it was bought from another investor with cold feet, and at best the company benefited from the increased stock price generated by the demand.
Yeah but the reason companies are able to raise as much money with stock issuance is the promise of liquidity thus providing liquidity is valuable.
This example isn't a problem either. Someone made 700k at the cost of someone else, likely an over-leveraged players who were forced to liquidate because of the threat of the pandemic. The market is far from efficient and the swings in prices are unavoidable. Normal long term investors didn't lose much if anything during this crash. The government got a cut because of money changing hands. If anything one could ask why is the government getting anything if no value was created.
The problems people have with the rich are that there are 2 ways you can make money:
A/ sell time
B/ buy/sell assets
One of these is heavily taxed, the other is not.
One of these produces value to society and the other does not. I acknowledge that some "time sellers" don't produce value, but _on average_ most time sellers are producing something positive.
Nominally, by providing capital to companies innovating in the market, allowing them to improve their business and provide more value to their customers.
One person is putting money into the market at the same rate someone is taking money out. Buy and selling doesn't inherently raise the price of a stock.
Classic example of justifying a thing with the thing itself. The reason companies need the wealthy to innovate and invest is precisely because capital and credit is privatised. So in effect you're saying people deserve a reward for private capital because capital is private. x) Regardless of your feelings about this, the argument is unsound.
There are several benefits that the wealthy generally take advantage of that the average person does not. Three big ones are:
1. An educated workforce
2. Enforcement of private property
3. Bailouts and junk bond purchases
Most businesses benefit from a workforce which they do not need to pay to "produce", but merely hire at an hourly rate.
Private property is only really possible in a system that allows it, otherwise might = right, and we would be talking about the 1% with the biggest biceps.
My pet solution is a wealth tax. For those who argue that wealth is hard to trace, see point 2, the system can be designed to allow only declared private wealth.
Every dollar is ultimately backed by something. An increase in money supply is not by itself a bad thing, but if those new dollars don't result in the creation of new assets on the other side of the balance sheet, the new money will just shuffle around to eventually map onto the same existing assets. In the worst case, the momentum this creates will cause people to follow suit and throw their savings into the asset market creating a bubble.
While they are people benefiting from that it's people in specific industries and/or connections to politicians. Your average 1%'er is not in position to benefit.
We can all agree though that bailouts are bad but it's not a tax problem is a problem with a flawed system that induces a lot of short term pain if a given company fails and politicians being able to convince the public bailouts are necessary.
> But such reviews turn up very little evidence of evasion among the extremely wealthy, in part because the rich use sophisticated accounting techniques that are difficult to trace, such as offshore tax shelters, pass-through businesses and complex conservation easements.
This is a weird set of examples.
To start with - the top 1% is a relatively accessible level of "rich." That's an L5/L6 software engineer at Google, or a mid career doctor. Are offshore tax shelters actually available and economically feasible to these people?
As for pass-through businesses: I had a pass-through LLC when I ran a consultancy. Was I engaged in tax evasion? I'm pretty sure I wasn't - as I understood, this was exactly what I was supposed to be doing. I think you're essentially required to do this if you run businesses where you're the only partner (but I could be wrong).
But even if you're not - that's not a 1% thing. That's basically the best practice pursued by anyone running a single member LLC...which describes a huge number of small businesses. A struggling bakery would realistically have pass-through income.
I don't know what "complex conservation easements" are so I can't speak to that.
> To start with - the top 1% is a relatively accessible level of "rich." That's an L5/L6 software engineer at Google, or a mid career doctor. Are offshore tax shelters actually available and economically feasible to these people?
I wonder if "1%" is just a number that is repeated when talking about this subject. Another article debated on HN:
EDIT: It seems to me that 1% is beyond accessibility. I think that 10% is a (very generic, rough) threshold that can be reached with effort, but not 1%.
>I wonder if "1%" is just a number that is repeated when talking about this subject.
I'm inclined to think it is. Often times I'll see 1% discussed in articles and the threshold is different each time. At this point, I'm certain that 1% is just a rhetorical device used to mean "bad people with money".
I'm pretty sure you are projecting. The "1%" became a slogan around the time of the Occupy movement, coming frkm the fact that 1% of the world's population owns 50% of its wealth, which is such a hilariously skewed proportion.
> The "1%" became a slogan around the time of the Occupy movement
This is correct. Since then it's become more of a slogan like "power to the people" than a useful statistic.
In some countries, 1% would include a couple who are both mid level engineers -- that's well off, but not "ultra rich" by any rational standard. The main reason is that the 1% figure often refers to households, rather than single individuals.
It's more a short hand for "ultra rich", rather than an actual measurement of what portion is actually "ultra rich".
Did you read what I said? The top 1% of income is ~750,000$ individual, hardly mid-level engineers... As for top 1% net worth, it's ~11 mil$, again hardly "upper-middle class".
In the USA, sure, where I'm from it's $300,000 gross household. The United States isn't the representative of the entire world. That's why I specified in some countries.
They use 1% because number 1 is an integer and it can represent a whole person.
This is useful for scapegoating and hatred.
"The 99% vs. the 1% is the modern articulation of this classic scapegoating mechanism. It is all minus one versus the one. And it has to just be the one. 99.99 people or percent is too granular. Scapegoating 0.1 doesn’t really work. You need a whole person to play the victim. Similarly, 98-2 doesn’t quite have the same ring to it either. "
The "1%" slogan arose in the Occupy movement, from statistics such "1% of the people own 50% of global wealth", which such an inexcusable level of inequality.
There are a lot of people making 360k+ with effort.
You most likely need to be talented and have very good work ethic (rare combination) and then focus on right industry. Big trading firms, programming if you're very good or not that good but not risk averse and willing to take shots to start businesses.
Of course not everyone can get there, it's 1% after all but you don't need to be born into it or one in a million genius.
Keep in mind the level of churn. An implicit bias easy to make is forgetting that these are percentiles, not people, and most people move through different percentiles at different times in their life.
11% of Americans will be in the 1% for at least 1 year in their life, 39% will be in the top 10% at some point, 61% in the top 20%[1][2].
94% of those in the top 1% fall out in a year, 99% within a decade[1].
In other words: being a 1%er is a very transient title for the vast majority of even the rich who make it there.
Is 11% earning $500k for at least one year really that surprising? For example, a mom and pop small business selling their store in order to retire could qualify for one year, but that money would likely be the bulk of their retirement savings. It's probably not a useful metric though, if most of those people break $500k due to one-off lump sum payments.
What matters more, I believe, is wealth rather than income. It’s been awhile since I’ve read it, but The Meritocracy Trap outlines the case that wealth can be less transitory.
To start with - the top 1% is a relatively accessible level of "rich." That's an L5/L6 software engineer at Google, or a mid career doctor. Are offshore tax shelters actually available and economically feasible to these people?
The article's use of $200K is very weird, and the top 1%-5% definitely make much more than that (and they don't depend on an annual income/salary). $200K after taxes is not that much, especially if you have a house, more than one car, children, student loan debt, want to save, etc. I don't know of anyone at $200K or even more to be involved in any sort of offshore tax shelters.
As for pass-through businesses: I had a pass-through LLC when I ran a consultancy. Was I engaged in tax evasion? I'm pretty sure I wasn't - as I understood, this was exactly what I was supposed to be doing.
Pass-through isn't tax evasion, but as an example opposite to yours, I used to know someone who created an LLC and then bought things as LLC expenses (like computers, printers, etc) that were really for personal use.
Those are both household numbers. So, the top 1% wouldn't be unusual for a couple in mid-career working for a FAANG on the West Coast. But, definitely not normal or easy, especially anywhere else in the country.
Top 5% would be just about any dual-income, white-collar household in a reasonably sized metro area.
Pass-through isn't tax evasion, but as an example opposite to yours, I used to know someone who created an LLC and then bought things as LLC expenses (like computers, printers, etc) that were really for personal use.
Not necessarily a pass-through technique, but the example that pops to mind is the tax treatment of vehicles over 6500lbs GVWR. It's a major incentive for any business owner to over-spend on luxury SUVs when either a nice sedan (realtor, sales people, etc entertaining clients) or a smaller van/truck (many painters, florists, etc) would be more than sufficient.
>$200K after taxes is not that much, especially if you have a house, more than one car, children, student loan debt, want to save, etc.
I understand your point, particularly if you are referencing a high COL area like SV. But this reads as a bit tone deaf when the median salary in the US is a shade under $40k/yr [1]
Honestly I think a global or national percentile is not very informative.
If you make $40k in a small town, you’re doing okay. If you make $80k in a mid-major city like Indianapolis or Raleigh, you’re doing okay. If you make $160k in San Francisco you’re doing okay. From my own life experience, all of those feel like about the same amount of purchasing power after you’ve paid your bills.
However if you’re making $40k in SF your housing situation is borderline desperate. At $80k you’re just scraping by.
The US has really fractured into a few different economies, and it’s as hard to make comparisons of income, wealth, and quality of life between San Francisco and rural Kansas as it is to make comparisons between the rural US and rural Guatemala (or any number of other countries).
I agree 100%. That’s why I don’t think statements like “$X amount is really not that much” are very useful.
In many places in the US $200k is doing really, really well. Sometimes those arguments are still used in those areas, but I think it says more about lifestyle inflation than the ability to live on that income. (E.g., it’s not much IF you get a new car every few years and IF you have a mortgage on a 4K Sqft home and IF you send your kids to private school). The tone deaf comment relates to how those self-imposed lifestyle constraints are out of touch for most people anyway.
I don’t see an issue with saying both that $200k is not that much and that the median salary in the US is ABSOLUTELY TOO LOW. Both can be true and not tone deaf. Do you disagree? Or put another way: why did you find the comment tone deaf?
It can potentially be true but probably only to a certain extent. I find it tone deaf because the vast majority of people are getting by on much, much less. Which means almost by definition, it IS quite a bit. So to say it isn’t much comes across as oblivious to the way most people live, and potentially not aware of the problems that the average person faces. Would you complain to a person in a wheelchair about how bad it sucks to have to take the stairs to work even though it may still be true?
Giving the OP the benefit of the doubt, it may be COL dependent. But even in SV, $200k is nearly double the median household income and nearly 4x the median personal income. It reminds me of an article I read during the financial crises of 2007-2009 written by someone who was making the case that being a one-percenter doesn’t mean you have lots of money. She then later described her new Lexus payment, costs of private school, oversized mortgage etc. Both can be true iff that is considered a reasonable lifestyle for the average person. To be generous to the OP, the average way an American lives is probably not the best measuring stick (e.g., something like 60+% can’t meet an unexpected $500 bill. However, just like the OPs statement, I tend to think this is related more to lifestyle choices)
That makes total sense. I disagree with your takeaway but it seems like a valid one to have.
From my experience coming from homelessness type of poverty to making 6 figures, I have access to many things and don’t have to worry about food anymore. But. I still don’t have enough savings to live off of if I lose my job, am still one serious accident away from bankruptcy, etc. the way I’ve explained it is that I now have something to lose, not that I’ve gained all that much outside of benefits (I now have two front teeth!)
Maybe the point I’m trying to make with my anecdote is that making $$$ isn’t the same as having $$$, high CoL or not.
>the point I’m trying to make with my anecdote is that making $$$ isn’t the same as having $$$
This is very true but I feel like it misses the point. Making $$$ gives you resources to have many things that are outside the grasp of the majority. (Whether you squander that opportunity or not is up to you) There’s nothing wrong with that, but feeling like you are disadvantaged when you have access to more than most comes across as out of touch.
I think there’s probably some hedonic treadmill effects here. Thinking at one point in your life “if I can make $200k a year, I’ll be rich” and “feeling rich” once you get there may not align as often as we’d hope. But you likely live a rather “rich” lifestyle compared to those making $40k/yr. I also think there’s often comparative effects that reduce how it feels. $200k feels low once you realize your neighbor who owns a landscaping company pulls $400k.
I find it tone deaf because the vast majority of people are getting by on much, much less.
I said $200K isn't that much because I was responding to the article saying $200K is in the 1%-5% and those making that much use offshore tax shelters and other practices. $200K immediately becomes what, $140K or less after taxes? My original comment still stands; I don't think someone making $140K is in the top percentages of wealth and hiding their money in offshore schemes.
So to say it isn’t much comes across as oblivious to the way most people live, and potentially not aware of the problems that the average person faces.
I spent a decade working in the nonprofit sector with low-income, homeless, addicts, etc., with my first job at $24K and my last job in the sector at $55K. I think I'm somewhat aware of what the average person faces. You and others on my post have covered things adequately, but I would just add that sometimes things aren't about lifestyle choices/sometimes there are no "good" choices -- If you have to pay $3K for rent in an average apartment because it's close to your new job that pays more, really the only other option besides not taking the job is to move farther out, but then you pay more in transportation, insurance, parking, etc.
>I don't think someone making $140K is in the top percentages of wealth and hiding their money in offshore schemes.
I agree, this income doesn't feel indicative of those type of tax avoidance plays. But I think making $200k is still objectively "a lot", if for no other reason than it is statistically proving one to be in the top 5%. I don't know a better way to define it because the subjective scale will always hold true; someone in the top 1% will feel inadequate to someone in top 0.1% who will feel inadequate compared to a Saudi prince.
I guess what I'm trying to get across is that both can be true: 1) a salary of $X amount can objectively be high and 2) somebody earning $X can subjectively not feel like it's enough. The dissonance between the two is created because of the way we're wired to gauge our position relative to those around us.
Looking at income alone is misleading. To be in the top 1% of income you only need to make about $500k per year. But to be in the top 1% of net worth, you need to have almost $12M.
Just to make the math simple, supposing you made $500k/year and saved every penny that’s 24 years of savings before you crack the top 1% in net worth. Of course in reality you don’t save every penny, and you may have a lot of student loans to pay off, and some of your savings is surely investments that compound so it’s impossible to say how long this would take in practice, but it’s still fair to say at least a decade if not multiple decades.
This is why I think it’s misleading to say that FAANG engineers are all 1%ers. There’s a huge difference in someone who just cracked $500k in income for the first time at age 35 and someone who has been earning that foe their career and has more than $10M net worth at the end of their career. Even more difference with someone who started off with a $5M starter fund from mom and dad.
Wealth of $4.4 million USD seems to get you to top 1% globally[0].
If you earn $500k and put $300k into a total market index fund that earns you 7% net growth per year over 10 years, after 10 years, your wealth will have grown to $4.4 million[1]. (If you use the $200k the article uses for top 5%, assuming all income could somehow be invested, it'll take a bit over 13 years.)
Is this extending the OP example that you have no living expenses? The effective tax rate from what I could quickly find ranges from 32% (Texas) to 43% (NYC). In the latter, your take home isn’t enough to cover $300k/yr and in the former you’re left with $35k/yr. Maybe doable in the latter case but not the most likely lifestyle for someone making over 10x the median salary.
Maybe this is pedantic to some but I despise the inequality comparisons with pure savings.
Sure, if you stuffed your post-tax $500k into a savings account it’d take 2 and half decades to be in the 1%. More realistically, if you simply invested each month with a historical return of 7%, you’d get there 10 years faster.
It just serves to be disingenuous about inequality. Zuck didn’t stuff a big paycheck into a savings account, because he wouldn’t be that rich either if he had. Level the hypothetical playing field so comparisons are actually reasonable.
I would agree with you, but the article itself is examining percentiles of income, not net worth.
> But evasion peaks among the richest 5 percent, who have an income of at least $200,000 and who, as a cohort, capture more than one-third of total national earnings. Taxpayers in this group hide more than 20 percent of their income from tax collectors.
If the income tax were abolished, there would be no taxes to dodge & the stimulus effect would far surpass any rebate from the government. It would also be equitable since the wealthy can hire the accountants, lawyers, lobbyists, as well as make laws themselves to game the current system to transfer wealth from the poor to the rich. If we remove this bloat, then it's one less thing for the 99% to worry about.
Governments needs income to provide services like electricity, healthcare, military, roads, infrastructure in general etc etc... and that simply requires taxation. How would you go about gather all that dough? Or are you saying everything should be privatized? Or corporate taxation only? That sounds like a ludicrously idea to me given how easy it is to avoid corporate taxes altogether.
Organized crime syndicates needs income as well. They even printed services such as feeding the poor, building roads, & martial defense from time to time. Better yet, they also believe in Democracy.
Point being, the government can earn its money just like the rest of us; by providing services in the open market which we have the option to purchase or not purchase. If the government provides useful services, people will voluntarily purchase those services. If not, the government will need to provide more valuable services, reduce costs, or go bankrupt. Either way, the citizenry should not be liable for the irresponsible mismanagement, grifting, & mass violence that is made possible by compulsory income tax.
I think this assessment falls prey to the usual issues libertarianism has as it tries to move from the theoretical to the practical. It relies on a couple assumptions to ensure that good decisions can be made by the citizenry: 1) that information is symmetric and acquiring this information is relatively frictionless and 2) that humans make rational decisions, particularly as it pertains to risk uncertainty.
There's quite a bit of research that undermines each assumption, especially in behavior economics.
Your assessment falls prey to classic self-serving statist blunders in logic, such as the state has the ultimate monopoly on ethics & it's enforcement.
Even if information is asymmetric & humans don't always make rational decisions, you are running under the assumption that human government officials are somehow immune from these asymmetries, irrational decisions, & bouts of dishonesty. With government having the ultimate monopoly of power & acting "for the greater good", it's not surprising that government officials will always act in their own interests at the expense of the citizenry. Every system is ultimately gamed over time. Even if the government official is 100% benevolent, maintains 100% benevolence over the entire career, & gains sufficient power to make decisions (probably impossible), that official lacks the ability to model every citizen's unique set of preferences & optimizations better than that individual citizen's ability to make their own choices.
>you are running under the assumption that human government officials are somehow immune from these asymmetries
I may need you to elaborate a bit on this for me to really understand your point. Am I claiming that politicians are magically immune from cognitive biases? Absolutely not; I'm actually claiming the opposite: nobody is immune from them. That is exactly why laws and regulations exist to provide the guardrails for better decisions. There's certainly a point where overreach happens, but I don't think you've yet made a very concrete argument about how the extreme of no government somehow is an improvement over some government.
Or are you claiming government can't alleviate the asymmetries of information (the actual 'asymmetry' in my OP)? I do think the government is better at this via regulations. See the Sarbanes-Oxley Act about disclosing accurate financial information passed in the wake of Enron as a concrete example.
>official lacks the ability to model every citizen's unique set of preferences & optimizations better than that individual citizen's ability to make their own choices.
Except it's not a case of a lone official. It tends to be a case of groups of officials and experts. And yes, each has their own biases, but with a diverse group there's a lesser chance that a single bias will overrule the decision (unlike at the individual level). With modern society as complicated as it is, do you think an individual has the bandwidth to properly gauge risk in terms of items like public health, transportation, engineering, etc.? The mechanism chosen by citizenry in most Western countries is to choose the constituent politicians and policies via a voting mechanism rather than shoulder the burden of making all those decisions individually.
The utopian ideal you espouse seems better suited to fun though experiments than a large society that must also factor in pragmatism. It's a bit of a privileged indulgence in that sense. I suspect that's why it hasn't ever been implemented in a large, diverse, and complicated society facing tough problems. I understand the seductive allure of libertarianism; it feels like a straightforward and simple way to maximize freedom. Unfortunately, most people in society want to optimize across more domains than just freedom. They want security as well as other objectives that may be in conflict with absolute freedom. You can see this play out in countries that are borderline failed states. Unfortunately, I think the framework you advocate to maximize freedom almost naively over-simplifies the model of the human condition.
> extreme of no government somehow is an improvement over some government
I'm giving the argument to remove the income tax, not to remove government completely. I'm aware that power vacuums will be filled one way or another. However, the government has grow unchecked due to self-interested officials (bureaucrats, politicians, contractors, etc.) & lobbyists.
> Or are you claiming government can't alleviate the asymmetries of information (the actual 'asymmetry' in my OP)? I do think the government is better at this via regulations. See the Sarbanes-Oxley Act about disclosing accurate financial information passed in the wake of Enron as a concrete example.
As stated in my other post, you statists are very predictable. Sarbanes-Oxley is simply the same interests that perpetrated the centralization & speculation that led to the stock market crash to be the industry regulators. The same revolving door is in EVERY SINGLE regulatory body. The revolving door between regulator and industry effectively allows the large industry players to regulate the industry, thereby adding undue stress to competitors.
> It tends to be a case of groups of officials and experts. And yes, each has their own biases
That the "officials and experts" have common interests that are at odds with those who they are regulating. The word "political class" means something. Do some research on the implications of the "political class" & it's numerous examples of circling the wagons against any grass-roots citizen oversight.
> The utopian ideal you espouse seems better suited to fun though experiments than a large society that must also factor in pragmatism. It's a bit of a privileged indulgence in that sense. I suspect that's why it hasn't ever been implemented in a large, diverse, and complicated society facing tough problems.
If you study history, the Income tax was introduced to raise money for a war that ultimately killed about 100 Million people. Before the income tax & before the FED, the world had unmatched growth. We are the beneficiaries of this innovation, that occurred BEFORE THE INCOME TAX & BEFORE THE FED. The surplus created by the innovation of the population, not the government, created the "privileged indulgence" of the government to siphon money away from the population to support the income of self-interested parties.
You statists are also predictable, in that you forget who pays the bills of the state. So you justify your theft of the population by claiming that the population is somehow spoiled or privileged. You statists have contempt for the people who support you, which is why the state has a terrible history of perpetrating mass genocide against it's own population many times in history.
Your naively over-simplistic historically revisionist ideal that the state is somehow the source of innovation, ingenuity, & human progress is simply incorrect. People make things happen.
The state is an expense & will almost always do tasks in a more expensive, more bloated, less effective way. Why? Because there is no feedback loop to incentivize good behavior while disincentivizing bad behavior of government officials & processes. Let's be real, the state, despite it's high minded rhetoric, always devolves into an organized criminal enterprise & conquerors siphoning the energy away from the people who do the real work in making the world a better place.
What do you feel is the appropriate role for government?
I’d implore you to also not jump to conclusions about what my beliefs are by extrapolating to positions I haven’t explicitly defended. Your posts are coming across like you are actually having an argument with someone else. You seem more inclined to tell me what I think rather than ask
A good clue is to look into the systems (i.e. cybernetic) interpretation of the word "governor" or "government". Within a system, the "governor" is meant to ensure that the timing & operation of the other components is in order for the system to operate as designed. The "governor" should minimize intrusion into other components, or it will tax (a pun naturally formed here) the efficiency of the overall system.
Which begs the question, what is this system, that we call civilization or society, designed for? If it's for the well-being & growth of all people, then it's the government's role to minimize intrusion into peoples' lives & to be be non-permanent; meaning the government should shrink after it grows to respond to a crisis. This is why early government did not have "professional" politicians or bureaucrats. Once it becomes somebody's livelihood to govern others, the teleology will always be a relationship of ever-increasing extraction until collapse. This is also why early government did not have "professional" armies. The "governor" (or political class) becomes the monarchy/aristocracy in a neo-feudalism state. One can see the state of American politics with it's two-tiered justice system as a proto-aristocracy which will eventually lead to a monarchy. Perhaps we should think twice before our celebration of giving James Bond a "license to kill".
If there is a crisis of some type, the government may be useful in theory, though in practicality it's function is restricted by the autopoetic traits of people that run the government not being able to avoid being self-interested and self-selecting to form cartels. See the Stanford Prison Experiment & Milgram Obedience Experiment as references.
Persistently high taxes are a good indicator of the breakdown of feedback loops re: the performance/utility/effectiveness vs the cost of the government.
>A good clue is to look into the systems (i.e. cybernetic) interpretation of the word "governor"
A small pedantic nit but I think the word "governor" in systems engineering predates cybernetic systems. I think the centrifugal ball governor on steam systems was one of the first implementations. As a literal pressure regulating valve, the term "governor" can be derived from literally regulating a system for a desired outcome.
>meant to ensure that the timing & operation
So from this vantage point, the primary role of government is to facilitate coordination between constituent parts of society? I.e., you don't feel they have a role in terms of a service component? Can you give more concrete examples of exactly how this facilitation would be employed? (e.g., it reads to me that creating and maintaining a coherent monetary policy would fit this definition, but your previous comments lead me to believe you may be against that idea). Going way back to my original post, I'm trying to get an understanding of how this view moves from the theoretical to the practical.
>This is also why early government did not have "professional" armies.
Can you elaborate on which governments you are specifically referencing? Because my understanding of many "early" governments is that they were predicated on standing armies, particularly those governments that used them to protect commerce and/or expand their territory.
>If it's for the well-being & growth of all people
This is probably the biggest area where we diverge in opinion. I don't think the overall utility function is increased by getting rid of programs like Medicaid/Medicare, SNAP, etc. and other quality-of-life programs that are largely funded by the income tax you want to abolish. Is your aim to return back to resorting to charity to solve these problems? If everyone acted ethically, I agree that may work better than the current paradigm but I think we've already agreed we can't count upon everyone to act rationally or morally (leaving out the mental bandwidth necessary to understand the problem effectively to best allocate resources). It would be more useful if you could speak in pragmatic terms; this is the point where I (non-derisively) tried to avoid the "hand-wavy" free-market arguments about how the market will solve it.
One area you haven't touched upon that I would be curious about your opinion is the role of government in fostering the growth of nascent industries, particularly those that have such a high-risk/low-reward that the market's individual players generally aren't willing to fund although the potential to benefit society as a whole is large (I'm thinking of industries like early aircraft or, more recently, the space industry). Do you think the government has a role in tragedy of the commons scenarios? (E.g., is it the governments role to price in externalities, to fund research in problems that are a large societal risk but small individual risk etc.?)
I do agree that a real problem in government is the "self-licking ice cream cone" phenomenon. Although, I think my preference is that citizens correct this at the voting booth. How do you think about the ability of people to make rational decisions in that regard? (I.e., if government isn't working to the people's liking and they have the power to change it, why isn't either a) the change happening or b) the citizenry leaving? c) are we failing because of our individual cognitive biases?)
> A small pedantic nit but I think the word "governor" in systems engineering predates cybernetic systems.
Cybernetics & systems design is the distillation of patterns common across various engineering & science domains. It still applies as an apt description.
> So from this vantage point, the primary role of government is to facilitate coordination between constituent parts of society? I.e., you don't feel they have a role in terms of a service component?
The government has become insanely bloated, full of grifters & opportunists, pseudoscience, revolving door lobbyists, misinformation, & other self-serving interests that have had a detrimental effect on society. Any "service" or "cure" that the government provides is caused by the government in the first place.
> Can you give more concrete examples of exactly how this facilitation would be employed?
Yes, let humans coordinate their own activities without the income tax & reduce intervention and watch many societal ill including poverty, violence, drug use, & disease decrease.
> Because my understanding of many "early" governments is that they were predicated on standing armies, particularly those governments that used them to protect commerce and/or expand their territory.
The USA did not have a professional army. Most governments, before conscription & the draft, had a small, if any, professional army.
> Medicaid/Medicare, SNAP, etc. and other quality-of-life programs
If these programs worked, why are there so many people who depend on these programs in poor health? Why are unhealthy practices, such as the food pyramid, foisted on the public, encouraging obesity? No, large government programs completely miss the mark & merely act as vehicles to create profit for large pharmaceutical, insurance, & tech companies, at the expense to the public. Just because somebody is insured does not mean they are following an optimal lifestyle of health. There are many doctors who dislike the paperwork caused by Obamacare, because paperwork distracts from caring for their patient.
The "voting booth", or now mail in voting without ids, is probably the sickest joke. The notion of Democracy, where 51% have tyranny over the losing 49% does not represent most people in the county, as most people do not even vote & the choices are between bad & worse.
The only way to escape the madness of this growing government intrusion is to escape to less governed states & nations (currently occurring) & watch the bloated governments collapse under their own weight & greed, while creating systems that work for us, not the top-heavy self-serving technocracy/bureaucracy. The government is going down it's typical autopoetic path & will have a major collapse of some type, probably within this decade. Good luck!
> You are doing the exact hand-waving I’ve specifically requested you avoid “meh... let people sort it out “ is not a sound policy unless you are an anarchist. So I can’t tell if you really don’t have any real insight or are just struggling to communicate them. Without concrete examples or evidence, most of this reads like an Ayn Rand book report.
Your problem is you have black & white thinking. Your response my claim that there are broken feedback loops, that taxes are too high, & there is an autopoetic tendency for psychopathy to set into big government systems including mass genocide is "government good", "you must be anarchist".
Your religion of statism blinds you to obvious points that I have already clearly stated. It's you who has a comprehension problem due to your religion. You do seem like you have a semblance in your intelligence, despite your sophistry. It's too bad you are blinded to certain obvious realities due to your ideology.
You still deflect and refused to answer a number of specific questions. You also continuously err into assuming you know my position. I’m asking questions to try and get clarity into your ideas rather than making those assumptions. Yet, you refuse to answer them and seem more interested in getting on a soap box rather than having an actual dialog. I’ll try to give an actual example so you can see what I mean.
You bring up the inability to improve health outcomes with specific government programs. I ask you how you would propose to fix that and your answer is “shrink the government and let people choose.” That’s a superficial sound bite and not a real answer. I was hoping for something like
1) Reduce price controls by reducing Medicare and Medicaid
2) To avoid those left out who would previously have been covered, create a health savings program for each individual
3) Expand the HSA benefits to those gainfully employed to reduce tax burdens
4) Create clear quality metrics to objectively measure various health insurance providers and clear, standardized, transparent guidelines to measure health providers to be eligible
This would reduce government to a role of oversight while reducing tax burdens on income. It would also allow individuals to make their own decisions about providers while allow the free market to innovate. It would alleviate some of the information transparency issues.
Instead, all you can advocate is:
Get rid of government + { hand wave + magic } = better outcomes
The latter comes across as a sophomoric understanding of the actual problem. Not unlike your overly simplified model of what you seem to think you can assume about my personal position. You’ve probably had some success in the past your word salad veiling approach without showing much concrete understanding but it’s failed to convince me
> I'm giving the argument to remove the income tax, not to remove government completely.
Then maybe you shouldn't be calling other people "statists". Especially you shouldn't be using it as a put-down or a condescending dismissal.
> Before the income tax & before the FED, the world had unmatched growth.
It also had unmatched financial crises every decade or so. (Yeah, I know, we had the Great Depression with the Fed existing. We also had the mess in 2008. That's one and a half in a hundred years. That's a far cry from where we were without the Fed.) So maybe don't trumpet how wonderful everything was pre-1913, because it had a downside that destroyed a lot of people.
> Then maybe you shouldn't be calling other people "statists". Especially you shouldn't be using it as a put-down or a condescending dismissal.
He started it by trying to put me down as being a Libertarian. Statist is an accurate term. It's only a put-down because when you look at it, it's a self-serving & ultimately abusive position. I don't need to try very hard b/c it's obvious that the statist position is ultimately about a tranfer of wealth from the people who do the real work of making the world better to the people who want to control others.
> It also had unmatched financial crises every decade or so
There was a feedback loop, often based on speculation & financialization.
> That's one and a half in a hundred years
You forgot the S&L crash in 1986, the dot com bust, the housing bust, the neverending & accelerating QE (money printing), etc.
The current fiat petrol-dollar paradigm, that directly perpetuated neverending wars, is crashing around us as we speak.
> So maybe don't trumpet how wonderful everything was pre-1913, because it had a downside that destroyed a lot of people.
I fail to see how the invention & propagation of electricity & sanitation leading to the rapid increase in life expectancy and unprecedented increase in real (as opposed to fiat, which is another blunder of statists) wealth, "destroyed a lot of people".
You have an argument that certain aspects of industralization & centralization had negative effects on the human. However, the positive aspects of our growth & transcendence of previous poverty was due to the spirit of human ingenuity & the collective energy of the population to improve their lives & the lives around them. Governments only (with few exceptions) got in the way of this progress.
>He started it by trying to put me down as being a Libertarian.
Besides the "he started it" being a weak argument, I never claimed you were a Libertarian. There is a world of difference in saying, "the ideas you're talking about fall in line with libertarianism" and saying "you are a Libertarian". The latter treads closely to ad hominem fallacy.
>the housing bust
Is this distinct from the sub-prime crisis they already alluded to in their post?
>neverending & accelerating QE (money printing)
Again, this is almost always phrased in terms of inflation and to reiterate it has not yet happened despite people claiming for the last decade that it was just around the corner. Inflation may still happen but what I'm trying to get at is: if inflation turns out to not be the problem do you have another case against fiat currency?
>propagation of electricity
The early days of this were quite literally a mess which is why the government began instituting regulated monopolies.
>transcendence of previous poverty was due to the spirit of human ingenuity & the collective energy of the population to improve their lives & the lives around them. Governments only (with few exceptions) got in the way of this progress.
Citation rather than glossy overtures are strongly needed here
> Is this distinct from the sub-prime crisis they already alluded to in their post?
Perhaps. There have been more than one...
> Inflation may still happen but what I'm trying to get at is: if inflation turns out to not be the problem do you have another case against fiat currency?
Inflation is already here. Cost of living, rent, gas, food, lumber, taxes, etc. are rising today. Coupled with the government mandated shutdown, particularly of select "non-essential" (aka small) business, we saw a large contraction in the economy. The government's official numbers are self-serving & moving goal-posts. http://www.shadowstats.com/ measures the economic numbers according to benchmarks consistent with the past. Inflation is here & has been here for a while.
> The early days of this were quite literally a mess which is why the government began instituting regulated monopolies.
It was even more of a mess before the invention of electricity. The regulation of utilities could be considered a success. At least the government did one thing right. Problem is despite the Trillions going into taxes over the years, we have a grid that is vulnerable to long term blackouts. With the Grand Solar Minimum being here & a geomagnetic excursion occurring, we can expect space weather to create more issues (e.g. Carrington Event). We are also vulnerable to CME attacks caused by foreign governments. Not good.
> Citation rather than glossy overtures are strongly needed here
My citation is the amount of time that people have to spend working to pay taxes & their unhappiness in doing so.
Who makes things happen in everyday life? The citizenry/people, not bureaucrats.
> You understand there are targets for inflation, right? Meaning the goal is not 0%. The problem with the last decade is that inflation has been lower than expected and the strengthening dollar has caused its own problems.
Except John Williams is showing real inflation to be around "9.0% in Aggregate, 16.0% in Goods and 5.6% in Services". Is 9% the target?
> Your citation is that proper don’t like spending their money? Really? That’s exactly my original point about the issue with cognitive biases.
Not sure what you are trying to convey here. It's not like you used any citations. I'm not asking for one anyways. I was hoping to be able to discuss simple logic & simple observations without the need to invoke the "experts" with their narrow fields of expertise. You obviously have cognitive biases as well. I hope you don't think you are some arbiter of truth because you are way off the mark.
>People don’t want to pay and simultaneously don’t want to give up government programs. That is not a rational stance
Government programs are expensive & ultimately don't work. I'd rather have a free(ish) market create solutions. There are few true free markets, since almost every market is regulated (except the "black market"). There are more solutions than the electric grid as it currently stands.
The best solution is for people to be educated on how our climate systems work, our solar cycles, our movement through the cosmos, & the impact of electricity & magnetism on our planetary systems. Not this APGW nonsense that has wasted so much money & time.
>It's not like you used any citations. I'm not asking for one anyways.
You cite biased sources that fit your predetermined worldview. I’ve already conceded inflation has happened, but it tends to be transitory type. Or did you miss that part of the discussion? Even if your source was reliable, it doesn’t display the type of evidence I think you assume it does. It’s fairly clear you start with a conclusion and work backwards, disregarding anything that’s inconvenient from the conversation.
I’ve given you citations elsewhere. But the larger point your statement portrays is that there literally no evidence that can be provided to change your mind. That’s not a productive person to try and maintain a dialogue with.
The S&L crisis is not remotely comparable to the Crash of 1893, say - to the point that trying to use the S&L crisis as a counterargument to my point is laughable. And why didn't it turn into something like 1893? Because of the Fed and the FDIC.
Sure, we've had "crises" pretty regularly. Those crises are on average much less severe than crises were before the Fed.
1929 occurred on the FED's watch. So did 1971, 2008, & these https://www.wikiwand.com/en/List_of_economic_crises. So will the next series of crises currently in motion for at least the next couple of years & probably for a decade or more...
@bumpy, it's amusing that you, being the statist, are tag-teaming to downvote my comments like it even matters. It's just pathetic passive-aggressive behavior on your part...
One more time: 1929 was comparable to previous crises. 2008 came very close to being huge, but did far less damage than a real crash. 1971 was nothing like the pre-Fed crashes, and neither was anything else on your list.
You're being downvoted because you're wrong, and because you're being gratuitously abrasive. And you want to use that as evidence that you're right? As Jane Austen said, "You tell yourself that, if it gives you comfort."
You snipe at me then criticize me for matching your level of in-graciousness.
Growth was unprecedented before the FED, even with the short-lived ramifications of the crashes. 1929 & the 1930's lasted longer than previous downturns. 1971 was a complete failure of Bretton Woods & we were only bailed out by Oil & wars. It was pretty big failure in monetary policy. 2008 was bad. The 2020's are not looking good as well. Record & increasing amounts of money are being printed. Income disparity is increasing. Life expectancy is going down. I'm amazed that the plates have been kept spinning this long...
> You're being downvoted because you're wrong, and because you're being gratuitously abrasive
I've learned a long time ago to not care about silly karma points (distilling karma to a number is a complete misrepresentation of karma anyways) & these sort of passive-aggressive games. I'm not the only one being "gratuitously abrasive" in this conversation. I see myself from your perspective. I also see how I have been treated as well. If you want to call me a troll, then so be it, I'm a troll.
> As Jane Austen said, "You tell yourself that, if it gives you comfort."
I bet you felt all sorts of self-righteous endorphins when your wrote that. Too bad it was not in good faith. You have to dig deeper into your own actions to see the bigger picture here.
And the longest period of economic contraction in the US happened before the Fed (which isn’t an acronym, so all-capsing it just makes you look like a kook), in the Long Depression.
> And the longest period of economic contraction in the US happened before the Fed
Even with the contraction, the overall expansion between the Civil War & the creating of the Fed was still unprecedented & has not been matched since. Good thing the Fed was created just in time to finance the World War 1 resulting in over 20 million deaths. Interesting coincidence...
> (which isn’t an acronym, so all-capsing it just makes you look like a kook)
Wow, I look like a "kook" for all-capsing FED? Hah, I'm obviously not fitting in with this crowd. Perhaps you could have picked up on a different detail...
>stimulus effect would far surpass any rebate from the government.
This may need some qualifiers. There are definitely people who are net beneficiaries under the current tax code that i doubt would get nearly as much from the stated stimulus effect
If there were no income taxes, there would be no net drain on the citizenry, thus more stimulus. The whole concept of stimulus is a bait & switch as the government takes away more money to presumably give a partial refund back to the public by printing more fiat, thereby devaluing the existing holdings.
If you are anti-war, how will the government pay for its Neverending wars without taxes?
Do you agree that not everyone receives a net negative amount from the government? E.g., for those ~47% who pay an effective 0% federal income tax rate but get services (stimulus, roads, Medicare, SNAP benefits, Social Security etc.), I don't think they will be better off. If the stance is that the free market will magically make things better for them, that's a little too hand-wavy for me and I'm not sure history backs this up.
I know the bogeyman for fiat currency is inflation, but we heard people screaming about that over the bailouts of the financial crisis and yet we arguably suffered from a lack of inflation in the ensuing decade. Only now are we starting to see some inflation in commodities; it's yet to be seen if this is short-lived (as commodity inflation can be) or if we see real inflation hit metrics like wages.
The problem with your assertion that the way to be "anti-war" is to shut the door on taxes is that it also shuts the door on everything else. I do believe there are some things the government does well, and potentially better than the private sector.
History does back it up. When America had a 0% income tax & did not have the FED, America had unprecedented growth in population, quality of life innovation, & prosperity. Note that America has risen to prominence due to a number of factors, included a history of relatively limited government, despite recent increases in government size, scope, & power. America is riding the wave of prosperity created by it's citizens over 200+ years, not the expansion government, in fact, despite the expansion of government.
You fail to mention that those ~47% are still trapped in poverty & w/ disparities in health despite the government services. If the government services were so good, why are they suffering? Why do families that enter welfare & assisted housing have an abysmal rate of improving their livelihood? Why are there many stories of people escaping poverty before any form of government assistance due to their own ability to create prosperity, free from regulations which only inhibit their growth?
You may mention the 1930's stock market crash, caused by insiders gaming the market combined with financialization created by centralization (enforced by the government). Note that the some of same people responsible for the crash later oversaw the market by creating the SEC & other related entities.
You may have an argument that courts are useful, especially in enforcing contract law, though. Though the increase in the amount of laws has created a top-heavy system where everybody is out of compliance in some way & the choice of what to enforce when is a way to tip the scales of justice, allowing the government officials to have a large influence on who & what activities succeed and who & what does not.
I'd be interested from where you are drawing this conclusion. I was interested but the data I looked up seems to tell the opposite story.
Looking at GDP growth, the average from 1800-1913 (when the Fed was created) the average year-over-year GDP growth was 1.48%. From 1913 onward, the average GDP growth was 2.13%. Moreover, if you plot the 10 year moving average, you see that the post-Fed era tends to be much more stable with less boom/bust cycling. The exception is the Great Depression (trough) and the post-WW2 boom (huge peak).
Likewise, life expectancy increase has pretty much been on the same trajectory (except for WW1) regardless of period[2].
Similarly, innovation measured by the 10-year moving average of patent application year-over-year growth rate shows the levels are similar from 1870s-present[3]. There's a marked dip after the Great Depression but the bounds of the growth rate is between 0-7% cycles, being a little higher during the tech boom of the late 1990s.
>Why do families that enter welfare & assisted housing have an abysmal rate of improving their livelihood?
At least from my experience, most would say what the government is providing does provide a huge improvement in their quality of life. Again, I'm asking what is your alternative? How does getting rid of these programs going to benefit those same people? (Please speak in specifics if possible).
>You may mention the 1930's stock market crash, caused by insiders gaming the market
Not my position. Just like 2008 it was due to excessive leverage and speculation.
Maybe my cursory look is taking the wrong conclusions, but your claims (without supporting evidence) come across as claims "that aren't facts, I just know they're true".
Whoa that's a very specific situation, kinda reads you're either regaling an anecdote or you're a shill with an Agenda. If the former, please add a "I happen to know one case of tax credit fraud".
I mean you're really broadly generalizing "poor people" here. It really sounds like you feel strongly about these. Can you elaborate?
The same asinine tax code and welfare rules that give people a massive incentive not to really commit to stable relationships is why so many poor people grow up with absentee fathers.
While a disturbing insight into your though process, I don't see why you felt the need to post it here.
Trust me fella, poor people are not dodging taxes like the wealthy are. The fact you had to invent such a circuitous and baffling story to attempt to illustrate your point should make that that plain.
This reminds me of a study on click fraud that showed that 20% of ad clicks were fraudulent. A separate study also said that ad prices were 20% lower than they should be. (The two studies were unrelated, but the correlation stuck with me.)
If 20% of taxes are under-reported, then just set tax rates 20% higher than they should be and move on.
If the number was higher it might be concerning, but 20% isn't such a high number we need drastic measures.
If you "just set the tax rate 20% higher" to make up for it, it will result in honest people picking up the slack for dishonest people. Obviously, this would not be the outcome we want.
Besides the fact that the math doesn’t get you back to even (1.2*0.8 != 1), is your suggestion just doing this for for the subset of 1%ers or also similarly for every group that legally avoids taxes? What about those in the groups that don’t use the same loopholes? Arent they punished under this scheme?
As much as I despise gambling companies, Denise Coates, boss of bet365 in the UK made the headlines this week having paid herself a salary of £465m. I believe this was then properly taxed by HMRC in the UK, making her the #1 tax contributer in the UK. Whilst googling, one of the results mentioned she's paid more tax in a year to the HMRC than Amazon has in a decade (please correct me, internet).
I currently reside in the UK, and am in the upper %'s of earners (no idea on the actual %), but my company of which I am the sole shareholder currently does around $450k profit per month.
With the planned corporation tax rises that the government has just announced, it means that the majority of my income will be effectively taxed at > 53% (corporation tax + dividend tax). I also pay the government already around $200,000 per month via VAT on my goods sold. I'll get 47c for every $1 earnt.
I understand that I'm a higher earner, and therefore naturally am going to be paying high taxes, but paying over 50% just seem wrong.
I am in a few circles with other sizable business owners, and after this tax hike many of us are now moving abroad (Malta, Monaco & Italy are the top options).
I'm currently in the process of relocating to Monaco, which although I would prefer to continue to reside in London, I simply am unwilling to pay 7 figures per year to do so.
I do wonder how much tax is lost due to people dodging/hiding or relocating, vs if the tax rates were more "reasonable"?
I understand my opinion here is probably biased, just thought I'd throw in my 2 cents.
The problem is that Monaco exists as a tax haven, and is easily accessibly (at least for Europe's wealthy). 99% of the time I hate that the US taxes citizens' income when they move overseas, but then I hear a story like this and change my mind for a day or two.
> I understand that I'm a higher earner, and therefore naturally am going to be paying high taxes, but paying over 50% just seem wrong.
I have to agree with you. A huge number of regular (albeit comfortable) people, also pay > 50% in income tax. When they complain about "the 1%", it's because they see people like you having the means to get out of this system. They're angry you're not suffering alongside them.
Half of that going to tax is terrible for the business's cash flow. That and the abysmal interest rates just incentivise businesses to waste money rather than save it for a rainy day.
I have the means to do it right now, but may not in the future - which is why I am doing it right now. I'm currently 26, with no children. In 10 years, this move may not be so simple.
My goal with this move is to leave for 5 years or so and acquire enough wealth that I will be personally comfortable for the rest of my life.
At which point I would likely to move to wherever I preferred to live in the world (regardless of tax rate), and to work on something more enjoyable and meaningful rather than simply chasing dollars.
Not at all, I actually come from a normal upbringing. I mean we always had food on the table, but not much else. There was certainly no family money.
I started a couple of small niche SaaS tools over the years from age 18-23) which helped me amass low 6 figures. I then jumped head first into the affiliate marketing space for a few more years which took me to around $1M net worth.
From there, I just leveraged my money to launch a couple of other businesses in gaps I saw in the market, primarily in the ecommerce space. Now I have a few businesses that I continue to run on a daily basis.
It's very tiring if I'm honest, I'm an exceptionally hard worker which has definitely attributed to my success, however I have an extremely hard time delegating which means I still work around 15 hours average per day (and have zero staff). It's something I'm working on.
Wow- very humbling and inspiring, especially at such a young age. Congrats on your success. I didn't mean the family money as a dig, just to feel better about achieving less ;)
I've also hit the low six-figures from crypto, now looking to diversify into real estate (a friend is rapidly becoming wealthy and retiring early with low fixed rate mortgages in Germany and is luckily educating me) and building an affiliate site (just dipping my toes in outsourcing and YouTube soon, no way I can grind out content forever). If you'd ever like to shoot the breeze let me know. Email in my profile. I'd love to get in touch.
I don’t know if this is right and can’t find the source, but I vaguely remembering around 40% is when the government doesn’t actually take home more income by raising taxes, because rich people start moving away/hiding income.
I do have to say anecdotally that 40% does “feel” around the upper limit of what’s “fair” to me..
I know myself, and several others I know who are currently moving (mainly in the 7 to low 8 figures per year range) that are currently moving abroad that would likely just stay put at a flat 40% rate.
I know it's entirely psychological, but going over the 50% mark has annoyed several of my peers (and myself) and fueled this move. Something about receiving less than half of what you work for rubs you the wrong way.
50% is a very psychological number. It's half, and telling people that half of their time is spent on money that they literally let someone else spend for the social-good is not a good thing. Start getting into the 80%+ range, and the conversation should rightfully center around indentured servitude and slavery.
One thing that I don't understand why were not discussing/suggesting: If we must have taxes, and we want to go above 40/50%, why not consider giving people more choice in where that money gets spent as a way to offset the "negative" feelings. I think a lot of people would be more okay with large percentage tax-values if they were in control of what that money was being spent on.
You may be thinking of the Laffer curve (https://en.wikipedia.org/wiki/Laffer_curve). Though my understanding of it is that it doesn't prescribe any singulary "point" like 40%, but just says that there is a point somewhere and that this is the relative behavior of total tax collection around it, wherever it exists.
Broadly, retail people like you and me, we don't have an opinion of a specific value, like 22% or 44% or whatever, we just feel up and down or whatever. That's fine.
That notwithstanding: your business profits come from somewhere right? Maybe your customer's customers, seeing as it's probably a software business.
How much lower would taxes get until your customers spend money on health insurance / health catastrophes? On cars to replace a worse metro, or on apartments closer to work? On private schooling? On vacations out of the country?
What if people stopped moving to London? If its services got worse and people left, how could that possibly be good for anyone?
I don't really want to generalize why because I don't live there, it is of course an amazing place to live. Is the underlying problem that London and the UK, the way they are, are expensive?
What you wind up not paying in taxes, your customers will pay anyway, and maybe not even in a strict sense of Non Tax Compulsory Payments - the accounting mechanism typically used in the US - but simply to enjoy a high quality of life.
And maybe this is why so many low tax locales have such primitive economies, people are spending on other things besides sophisticated software services.
Ironically this aligns me still with a "right" amount of slightly lower tax. It's probably about 38-44%, and it ought to be simpler. I really don't like people leaving California, especially high earners, but I understand that they also blame tax for other grievances. So maybe the real takeaway is to not generalize, and instead support technocrats who can explain and analyze these issues.
Islam solved this problem a long time ago. Look up Zakat laws. For your cash in the bank that has been sitting for 1 year, it's an extremely reasonable 2.5%.
I do not plan to reside in Monaco forever, nor do I think I will be particularly happy there. I'm 100% certain I won't be as happy as I currently am in London.
It's simply a place for me to live for a few years until I'm confident that I'll personally have enough funds to live the life I want forever (and provide that life for my family). It's a sacrifice I'm willing to make at 26 years old, so that when I'm 31 me and my family will be good for life.
After that, I will likely relocate to either the south of France, the UK or Canada, subject to change - and work on more meaningful projects.
Because it is my copporation, I would also have to pay the employer and employee NI contributions, and therefore dividends have always been the most tax efficient way for UK business owners to extract their profits.
That said with these new corporation tax hikes, it's approximately the same now (dependent on the amount £££).
You do not pay the government VAT. You collect VAT on purchases on the governments behalf, that amount was never yours in the first place.
That aside I make a comfortable living as a software developer in London. My effective tax rate is around 35%. If I was earning > 10x what I currently earn I don't think I'd be complaining about an extra 18% in tax.
> You do not pay the government VAT. You collect VAT on purchases on the governments behalf, that amount was never yours in the first place.
While technically true from the legal and accounting point of view, but from economic point of view one could argue that there would be one market price level without VAT (p0), and current market price level with VAT (p1, p1+vat). Then real effect of VAT on consumers is (p1+vat-p0) and on providers is (p0-p1).
It seems you’re relocating on principle, and the principle is: you deserve the majority of your company’s profits for yourself.
There are other principles you could apply, though. For example, placing even a very small weighting on overall social welfare would probably reverse your position.
How much happier do you think the increase you are pursuing on your extremely large income will make you?
How much happier do you think the same money could make the kinds of people on whom much of your tax receipts would have been spent? For example, state pensioners, or people struggling in the gig economy and relying on food banks to get by?
You raise good points, and I am not fundamentally against taxes. I believe they are an extremely important part of society.
That said (and this may be unique to me), I am a 1 employee corporation and I still work 15hour+ days. If they keep taking a larger and larger cut, I'm simply going to start working less (and therefore earning less), and I feel like it won't have the impact on tax revenues they are hoping for.
I do however understand that my situation is maybe not "normal".
It's interesting that you mention that higher taxation might lead you to work less hard. In general, it's possible that this would be a good thing for everybody.
You'd get more time for relaxation and other interests. At the same time, everyone else would experience less envy.
I appreciate that this may sound weird. However, there's evidence that people are much more rivalrous about income and consumption than they are about their leisure time.
In the extreme, if people cared only about relative income (i.e. rank), then earning more money would be wholly zero-sum.
In reality, of course, people care partly about relative and partly about absolute income. But that still implies that the socially optimal income tax is non-zero, since that encourages more (non-rivalrous) leisure at the expense of (rivalrous) consumption. The economist Richard Layard has made this argument more formally [1].
Your points are valid, and I tend to actually agree with them. I think you have to consider a longer term outlook however to really piece this all together.
I would absolutely prefer more leisure time in my life right now, the grind is real. However I also have the ability to earn large amounts of money relatively "easy" right now, and that may not be the case in the future.
I think striking while the iron is hot is wise, and will then financially land me in a position whereby I will have more leisure time for the rest of my life, along with being able to provide my family with the same.
My entire upcoming move to Monaco is basically centered around this belief. I am 99% sure I am going to prefer living in London where I currently reside, over Monaco. That said, but just living in Monaco for 5 years, it will put me in a much better position for the next 50 years of my life.
Once I feel I am in that comfortable position, I can choose to reside where I wish almost anywhere in the world, and in theory be the happiest version of my self, regardless of the tax laws where I reside.
> I do wonder how much tax is lost due to people dodging/hiding or relocating, vs if the tax rates were more "reasonable"?
Just look at the 70s in the UK. It was 'tax them until the pips squeak', and it had exactly the effect of driving business and high net worth individuals away from the UK.
If Coates was in the US and paid herself that magnitude of salary she’d be paying a very hefty tax bill as well. Salary (W2 income) is very hard to avoid paying taxes on.
When your income is from equity, dividends, etc, then it becomes much easier to legally avoid taxes on the income.
I'm hardly an accountant, CFA or politician, but the simplest thing is to define a taxation system (our progressive one is sufficient) and simply tax all every dollar that ultimately goes to a person at that rate. Finally, eliminate all deductions.
That should resolve most of the problems. The problems begin when we start saying certain things are virtuous - oh buying a home is a good thing, let's incentive that and allow people to deduct. Donating to charity is good - deduction! Investing in something in the long term is good - lower tax rate! Environment is good! Energy credit.
Enough. Who exactly benefits from all of these deductions? You guessed it! Regardless of how you feel about the actual deductions, if you want to eliminate "tax evasion" (I use quotes because it's not even a bad thing, it's perfectly legal) - that's the only way.
> and simply tax all every dollar that ultimately goes to a person at that rate. Finally, eliminate all deductions.
Well there's your first problem; little money actually goes to a person. Bezos is listed as the richest person in the world, but the vast majority of his wealth is in the company.
It reminds me when the Google head honchos humblebragged about only having a wage of $1 a year. Basically admitting they were dodging income taxes.
That's not a problem - when the stock is liquidated he would be taxed, no - the problem is that he's taxed differently and there are mechanisms in which that tax he pays is deducted, e.g. donating much of it to an organization he controls.
Any asset can be collateralized. Every homeowner in US can do the same thing with a reverse mortgage. Leveraging assets isn't tax evasion. It doesn't even qualify as avoidance.
First because ultra-high earners can and do move abroad to avoid or evade income taxation. So if you kill sales tax/VAT, corporate tax and other taxes, suddenly it is very attractive for people earning millions per year to move their tax residence to Monaco (or indeed London, for "non-dom" taxpayers), where they don't pay income taxes.
Second because there is need for some "fairness" and equivalence between treating employment income and treating small entrepreneurs who do the same. Whether keeping the total percentage of corporate income tax+dividend tax to a similar level as personal income tax, or allowing similar deductions on mortgages for a personal "buy-to-let" rental as for an incorporated rental company, in order to avoid perverse incentives.
And while I agree that mortgage interest deductions are an economically counterproductive and regressive policy, that is besides the point if the point is not tax policy but tax dodging...
I'm not surprised by the level at the top but I straight-up don't believe the ~7% estimate at the bottom. Poorer people I knew always made significant (for their income) tax free money: tips, under the table, selling stuff, maybe minor dealing, etc.
OP is based on a paper[1] which uses and then corrects results from random audits which I wouldn't expect to catch these things. There is some statistical magic called Detection Controlled Estimation done by the IRS that supposedly covers it but I don't know how it works.
If the richest 1% didn't dodge taxes on over a fifth of their income, would it change anything?
They'd still be the richest 1%, right? There wouldn't be any fewer Bentleys and Rolls Royces to go around, so the price would have to come down, but they'd still only be affordable by the richest 1%. Meanwhile poor people might have more 0s in their bank accounts, but there wouldn't be any more food to go around so prices would go up.
I am all for more clarity on this stuff. Income inequality is a real challenge and the tax code is a significant way to redistribute wealth in a county.
That said this article is a bit tough to swallow. It starts by saying how they cant actually be sure how many people are evading taxes because it is too difficult to figure out and then go on to put a plot with explicit percentages around the amount of tax evasion per income bracket and use very specific numbers to back up their points.
(1) It seems like the article is trying paint with a pretty broad brush on a currently well despised class of individuals without much evidence. The argument is -- "their business arrangements are too complex, thus they must be hiding something". It really seems like the kind of headline that reinforces a bias that the system is rigged. Which there is inherent truth too.
(2) Instead of trying to change the tax code - why don't you go arm the IRS to actually pursue tax evaders? The policy that we're just going to change the whole tax code to solve our tax problem ends up in the same place after the fact. New tax code, unarmed IRS.
(3) Seems like Washington post is pushing an article to provide cover for the Dems to change the tax code and foment further anger towards inequality. I am angry about inequality but I am also angry at low quality reporting with a clear axe to grind.
(4) Any Americans who file taxes from abroad know how laborious the reporting requirements are - I would be surprised if most people don't file all the required information which includes all your bank accounts and assets. I highly suspect there isn't nearly as much fraud as in the past - especially with the incredibly painful fines associated with non-disclosure.
Also throw in the generic Trump anecdote to add further disgust/rage. I think Trump is an exception in terms of super super sketchy wealthy people - I don't think he is the example they should be using.
Nobody becomes a reporter at the Washington Post if they're just interested in reporting facts - they get a byline because they're interested in telling a story that needs facts to work.
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[ 8.7 ms ] story [ 294 ms ] threadThe whole situation stinks because many do have more money than they can realistically ever spend, so your gut reaction is "make 'em pay" but on the other hand, some of them pay more taxes in a year than I do in my lifetime so they're already contributing an order of magnitude or more than I am.
The only thing that ever "makes sense" to me when trying to make it "fair" is a federal sales/service tax replacing the vast majority of taxes. This still isn't perfect but, at least to me, it makes way more sense than the way taxes currently work in the United States.
This bothers me less than having more money than you could ever possibly have earned fairly.
If I paid more taxes through dint of making more money than you but also didn't work I'd still functionally be a parasite.
I'm just wondering, but what is the max amount you can earn "fairly"?
In many cases (e.g. rental income from property passed from one generation to another that is managed by an agency) it is extremely obvious.
In other cases (e.g. dividend income from a company you founded) it is less so, and there is probably a split.
With outrageous sums of wealth (e.g. Bezos) you can bet that it's probably almost all extracted. I doubt we'd be losing much productive labor (if any) by taxing all people with assets over a billion $.
40 years x the salary of the best paid profession x the compounded interest rate over those 40 years x heck, I'll be nice and add a 2-5-10x multiplier to account for various other factors
More than that, aren't we talking about sheer, dumb, luck? Plus, anything over that, it doesn't really matter anymore, you're living like a king compared to the average person. If you're a religious person, it kind of feels like greed :-)
The reason I will not stop working? With enough money I can change the world around me: open a racket sports club/gym, maybe my gf opens a kindergarten for autistic kids (she currently works at one), maybe I can influence local politics so we finally get rid of the biggest polluters from my town.
If it wasn't possible to do those things with money it wouldn't be the game worth playing and that would be a loss for everyone involved: me, my customers and the government taxing me.
I can only change the world at a very small local scale. Jeff Bezos can send rockets to another planet. Elon Musk can among other things build infrastructure to give everyone around the world internet access. Please let them, the governments have enough money already and they don't have a monopoly for good ideas how to spend it to put it mildly.
And even for the folks working on those rockets, it's not so clear cut. Reading how their workers are treated, the whole thing is quite gray and murky.
The answer is more democracy and less rich people calling all the shots.
When taxes were ~90%NASA used to do the research and spend the money to send rockets into space.
Several tax cuts later and we had to be reliant upon one billionaire out of 650 picking up the rocket research where they left off (literally).
>Please let them, the governments have enough
Not enough to build rockets these days. That's why it's outsourced. NASA's budget got converted into tax cuts.
Also Bezos fucked up his program through his own hubris.
>they don't have a monopoly for good ideas
It wasn't Elons ideas that got SpaceX rockets worrking. It was NASA ideas + Elon cash.
Back then they thought competing with Soviet Union for space supremacy was important so NASA was funded. It has absolutely nothing to do with tax rates.
https://www.vox.com/policy-and-politics/2019/11/4/20938229/z...
Reality:
"Wealth Inequality in America" https://youtu.be/QPKKQnijnsM
Are they _really_ doing that? I don't like how hoarding assets is seen as 1000x more contributing than someone working 8 hours a day.
When I have $1bn and I spend $5 million x 100 risky investments, then losing $500 million means that I, my children, grandchildren, great-grandchildren will still be richer than the top 10% in even the most developed country.
At some point the whole risk-reward shtick breaks down.
Like, for instance, by paying all Amazon workers enough, hiring enough that you don't have to schedule them so strictly that they don't have time to pee, not deliberately copying and undercutting independent products sold on Amazon...
I don't think this accurately describes owning a huge amount of company stock. I'm sure jeff bezos tries to keep his assets in use as much as possible. the issue is not that he is "hoarding" them, but rather that he is not choosing to use them in the way that you or I would prefer. mere semantics perhaps, but I suspect a lot of people read these sorts of sentences uncritically and come away with the impression that billionaires are just sitting on massive piles of idle cash.
Yes, most are objectively paying far more taxes in terms of dollars than the average person. That is what the OP means.
> I don't like how hoarding assets is seen as 1000x more contributing than someone working 8 hours a day.
You are falsely assuming that all of these people "hoarding assets" aren't themselves working at least 8 hours a day. Additionally, if we are being real, contributing large amounts of capital to a project (i.e. investing) probably IS worth a lot more in terms of value added than 8 hours of the average person's labor.
And contributing capital is worth much, yes, but that's a chicken and egg problem: how did they amass that capital in the first place, if their 8 hours work a day isn't worth billions more than other's 8 hours of work?
Because the output of their labor (which is largely a mix of strategic decision making, operations, and planning) adds billions of dollars worth of value in a manner that is not easily reproduced. Imagine we put thousands of the world's best devs / admins / whatever under the command of the average HN reader with a budget to match. How many of them would be able to create a company that adds anything close to the value that Amazon generates for its owners and users? Probably almost none; and that is comparing the output of Bezos to high output, skilled, educated labor that itself commands a high price. Lets now imaging putting those devs and money under the command of someone who didn't finish high school and works a minimum wage job. Do you see them creating an Amazon? There is a low supply of people who can innovate and lead well, and a high demand for high quality leadership and vision, so people are compensated accordingly.
Well, ok, but that's a value judgement that is frankly not backed by data.
> His output would be nill without the thousands of people actually doing the stuff.
If all the value is being created by the rank and file, then why has no other company with the same rank and file been able to replicate the success of Amazon? Walmart hasn't; Best Buy hasn't; Jet couldn't; no other company has been able to. Why weren't any of the big stores like Sears that existed before Amazon, and who were full of smart, high performing employees, able to create an Amazon analog before Bezos?
> And "being compensated accordingly" is fine, but nothing says that has to be billions more than someone else doing basically the same amount of work.
The amount of work someone does is irrelevant, it's the value the work adds that matters. I can go outside and dig holes in my backyard for 12 hours, filling them in at the end of the day, for a year straight. That is a lot of work, but it isn't creating much value which is why no one is willing to pay me to do it. Alternatively, if I wrote a program in a few days which could generate more value than 40 people's yearly work output, people would be willing to pay me very large amounts of money for those few days of work. Those few days of work would be worth much more than the entire year of digging holes despite the fact that they required far less work. The average employee isn't doing the same type of value adding work that Bezos is doing, and they couldn't if they tried. That's the point.
Well the government also enforces contracts and your claims to property. The amount this helps you is obviously proportional to your wealth.
So you actually have a lot to pay society/the state back for! I'm very partial to a georgist/mandatory public shares approach because of this.
My friend's gma passed away, giving him $500k inheritance. He invested that money at the bottom of the crash last year and increased it to $1.2m.
In this situation, how did he contribute $700k of value?
Maybe if the company was creating more shares and the investor bought them directly from the company, then the company use the new funding to create value, but I'm not sure that is what actually happened.
This example isn't a problem either. Someone made 700k at the cost of someone else, likely an over-leveraged players who were forced to liquidate because of the threat of the pandemic. The market is far from efficient and the swings in prices are unavoidable. Normal long term investors didn't lose much if anything during this crash. The government got a cut because of money changing hands. If anything one could ask why is the government getting anything if no value was created.
A/ sell time
B/ buy/sell assets
One of these is heavily taxed, the other is not.
One of these produces value to society and the other does not. I acknowledge that some "time sellers" don't produce value, but _on average_ most time sellers are producing something positive.
Only if he's buying an IPO or angel investing or whatnot.
If I buy an Apple share right now, Apple's not getting that money.
1. An educated workforce 2. Enforcement of private property 3. Bailouts and junk bond purchases
Most businesses benefit from a workforce which they do not need to pay to "produce", but merely hire at an hourly rate.
Private property is only really possible in a system that allows it, otherwise might = right, and we would be talking about the 1% with the biggest biceps.
My pet solution is a wealth tax. For those who argue that wealth is hard to trace, see point 2, the system can be designed to allow only declared private wealth.
If you want to tax that why not payroll tax?
>>Enforcement of private property
Land value tax?
>>Bailouts
While they are people benefiting from that it's people in specific industries and/or connections to politicians. Your average 1%'er is not in position to benefit. We can all agree though that bailouts are bad but it's not a tax problem is a problem with a flawed system that induces a lot of short term pain if a given company fails and politicians being able to convince the public bailouts are necessary.
This is a weird set of examples.
To start with - the top 1% is a relatively accessible level of "rich." That's an L5/L6 software engineer at Google, or a mid career doctor. Are offshore tax shelters actually available and economically feasible to these people?
As for pass-through businesses: I had a pass-through LLC when I ran a consultancy. Was I engaged in tax evasion? I'm pretty sure I wasn't - as I understood, this was exactly what I was supposed to be doing. I think you're essentially required to do this if you run businesses where you're the only partner (but I could be wrong).
But even if you're not - that's not a 1% thing. That's basically the best practice pursued by anyone running a single member LLC...which describes a huge number of small businesses. A struggling bakery would realistically have pass-through income.
I don't know what "complex conservation easements" are so I can't speak to that.
I wonder if "1%" is just a number that is repeated when talking about this subject. Another article debated on HN:
https://rantt.com/the-paradise-papers-how-ridiculously-easy-...
also refers to "the 1%".
There's a detailed article on the 1%:
https://dqydj.com/top-one-percent-united-states
EDIT: It seems to me that 1% is beyond accessibility. I think that 10% is a (very generic, rough) threshold that can be reached with effort, but not 1%.
I'm inclined to think it is. Often times I'll see 1% discussed in articles and the threshold is different each time. At this point, I'm certain that 1% is just a rhetorical device used to mean "bad people with money".
This is correct. Since then it's become more of a slogan like "power to the people" than a useful statistic.
In some countries, 1% would include a couple who are both mid level engineers -- that's well off, but not "ultra rich" by any rational standard. The main reason is that the 1% figure often refers to households, rather than single individuals.
It's more a short hand for "ultra rich", rather than an actual measurement of what portion is actually "ultra rich".
It's easy to be angry if you're only looking up the totem pole.
This is useful for scapegoating and hatred.
Source: https://blakemasters.com/post/24578683805/peter-thiels-cs183....Ah but no, they are the victims, poor them.
Of course not everyone can get there, it's 1% after all but you don't need to be born into it or one in a million genius.
11% of Americans will be in the 1% for at least 1 year in their life, 39% will be in the top 10% at some point, 61% in the top 20%[1][2].
94% of those in the top 1% fall out in a year, 99% within a decade[1].
In other words: being a 1%er is a very transient title for the vast majority of even the rich who make it there.
[1]: https://www.cato.org/blog/high-turnover-among-americas-rich [2]: https://www.npr.org/sections/money/2014/05/05/308380342/most...
11% of Americans will make over $500k a year, or have $12M in assets, for one year?
This cannot possibly be true. Oh, Cato Institute? Say no more.
The article's use of $200K is very weird, and the top 1%-5% definitely make much more than that (and they don't depend on an annual income/salary). $200K after taxes is not that much, especially if you have a house, more than one car, children, student loan debt, want to save, etc. I don't know of anyone at $200K or even more to be involved in any sort of offshore tax shelters.
As for pass-through businesses: I had a pass-through LLC when I ran a consultancy. Was I engaged in tax evasion? I'm pretty sure I wasn't - as I understood, this was exactly what I was supposed to be doing.
Pass-through isn't tax evasion, but as an example opposite to yours, I used to know someone who created an LLC and then bought things as LLC expenses (like computers, printers, etc) that were really for personal use.
Edit: I have no idea how to quote text on HN
Top 5% is around $160k/year.
Those are both household numbers. So, the top 1% wouldn't be unusual for a couple in mid-career working for a FAANG on the West Coast. But, definitely not normal or easy, especially anywhere else in the country.
Top 5% would be just about any dual-income, white-collar household in a reasonably sized metro area.
Not necessarily a pass-through technique, but the example that pops to mind is the tax treatment of vehicles over 6500lbs GVWR. It's a major incentive for any business owner to over-spend on luxury SUVs when either a nice sedan (realtor, sales people, etc entertaining clients) or a smaller van/truck (many painters, florists, etc) would be more than sufficient.
I understand your point, particularly if you are referencing a high COL area like SV. But this reads as a bit tone deaf when the median salary in the US is a shade under $40k/yr [1]
[1] https://usafacts.org/data/topics/economy/jobs-and-income/job...
If you make $40k in a small town, you’re doing okay. If you make $80k in a mid-major city like Indianapolis or Raleigh, you’re doing okay. If you make $160k in San Francisco you’re doing okay. From my own life experience, all of those feel like about the same amount of purchasing power after you’ve paid your bills.
However if you’re making $40k in SF your housing situation is borderline desperate. At $80k you’re just scraping by.
The US has really fractured into a few different economies, and it’s as hard to make comparisons of income, wealth, and quality of life between San Francisco and rural Kansas as it is to make comparisons between the rural US and rural Guatemala (or any number of other countries).
In many places in the US $200k is doing really, really well. Sometimes those arguments are still used in those areas, but I think it says more about lifestyle inflation than the ability to live on that income. (E.g., it’s not much IF you get a new car every few years and IF you have a mortgage on a 4K Sqft home and IF you send your kids to private school). The tone deaf comment relates to how those self-imposed lifestyle constraints are out of touch for most people anyway.
Giving the OP the benefit of the doubt, it may be COL dependent. But even in SV, $200k is nearly double the median household income and nearly 4x the median personal income. It reminds me of an article I read during the financial crises of 2007-2009 written by someone who was making the case that being a one-percenter doesn’t mean you have lots of money. She then later described her new Lexus payment, costs of private school, oversized mortgage etc. Both can be true iff that is considered a reasonable lifestyle for the average person. To be generous to the OP, the average way an American lives is probably not the best measuring stick (e.g., something like 60+% can’t meet an unexpected $500 bill. However, just like the OPs statement, I tend to think this is related more to lifestyle choices)
From my experience coming from homelessness type of poverty to making 6 figures, I have access to many things and don’t have to worry about food anymore. But. I still don’t have enough savings to live off of if I lose my job, am still one serious accident away from bankruptcy, etc. the way I’ve explained it is that I now have something to lose, not that I’ve gained all that much outside of benefits (I now have two front teeth!)
Maybe the point I’m trying to make with my anecdote is that making $$$ isn’t the same as having $$$, high CoL or not.
This is very true but I feel like it misses the point. Making $$$ gives you resources to have many things that are outside the grasp of the majority. (Whether you squander that opportunity or not is up to you) There’s nothing wrong with that, but feeling like you are disadvantaged when you have access to more than most comes across as out of touch.
I think there’s probably some hedonic treadmill effects here. Thinking at one point in your life “if I can make $200k a year, I’ll be rich” and “feeling rich” once you get there may not align as often as we’d hope. But you likely live a rather “rich” lifestyle compared to those making $40k/yr. I also think there’s often comparative effects that reduce how it feels. $200k feels low once you realize your neighbor who owns a landscaping company pulls $400k.
I said $200K isn't that much because I was responding to the article saying $200K is in the 1%-5% and those making that much use offshore tax shelters and other practices. $200K immediately becomes what, $140K or less after taxes? My original comment still stands; I don't think someone making $140K is in the top percentages of wealth and hiding their money in offshore schemes.
So to say it isn’t much comes across as oblivious to the way most people live, and potentially not aware of the problems that the average person faces.
I spent a decade working in the nonprofit sector with low-income, homeless, addicts, etc., with my first job at $24K and my last job in the sector at $55K. I think I'm somewhat aware of what the average person faces. You and others on my post have covered things adequately, but I would just add that sometimes things aren't about lifestyle choices/sometimes there are no "good" choices -- If you have to pay $3K for rent in an average apartment because it's close to your new job that pays more, really the only other option besides not taking the job is to move farther out, but then you pay more in transportation, insurance, parking, etc.
I agree, this income doesn't feel indicative of those type of tax avoidance plays. But I think making $200k is still objectively "a lot", if for no other reason than it is statistically proving one to be in the top 5%. I don't know a better way to define it because the subjective scale will always hold true; someone in the top 1% will feel inadequate to someone in top 0.1% who will feel inadequate compared to a Saudi prince.
I guess what I'm trying to get across is that both can be true: 1) a salary of $X amount can objectively be high and 2) somebody earning $X can subjectively not feel like it's enough. The dissonance between the two is created because of the way we're wired to gauge our position relative to those around us.
Just to make the math simple, supposing you made $500k/year and saved every penny that’s 24 years of savings before you crack the top 1% in net worth. Of course in reality you don’t save every penny, and you may have a lot of student loans to pay off, and some of your savings is surely investments that compound so it’s impossible to say how long this would take in practice, but it’s still fair to say at least a decade if not multiple decades.
This is why I think it’s misleading to say that FAANG engineers are all 1%ers. There’s a huge difference in someone who just cracked $500k in income for the first time at age 35 and someone who has been earning that foe their career and has more than $10M net worth at the end of their career. Even more difference with someone who started off with a $5M starter fund from mom and dad.
If you earn $500k and put $300k into a total market index fund that earns you 7% net growth per year over 10 years, after 10 years, your wealth will have grown to $4.4 million[1]. (If you use the $200k the article uses for top 5%, assuming all income could somehow be invested, it'll take a bit over 13 years.)
[0] https://www.businessinsider.com/net-worth-to-be-in-1-percent...
[1] https://www.bankrate.com/calculators/savings/compound-saving...
Sure, if you stuffed your post-tax $500k into a savings account it’d take 2 and half decades to be in the 1%. More realistically, if you simply invested each month with a historical return of 7%, you’d get there 10 years faster.
It just serves to be disingenuous about inequality. Zuck didn’t stuff a big paycheck into a savings account, because he wouldn’t be that rich either if he had. Level the hypothetical playing field so comparisons are actually reasonable.
> But evasion peaks among the richest 5 percent, who have an income of at least $200,000 and who, as a cohort, capture more than one-third of total national earnings. Taxpayers in this group hide more than 20 percent of their income from tax collectors.
Point being, the government can earn its money just like the rest of us; by providing services in the open market which we have the option to purchase or not purchase. If the government provides useful services, people will voluntarily purchase those services. If not, the government will need to provide more valuable services, reduce costs, or go bankrupt. Either way, the citizenry should not be liable for the irresponsible mismanagement, grifting, & mass violence that is made possible by compulsory income tax.
There's quite a bit of research that undermines each assumption, especially in behavior economics.
Even if information is asymmetric & humans don't always make rational decisions, you are running under the assumption that human government officials are somehow immune from these asymmetries, irrational decisions, & bouts of dishonesty. With government having the ultimate monopoly of power & acting "for the greater good", it's not surprising that government officials will always act in their own interests at the expense of the citizenry. Every system is ultimately gamed over time. Even if the government official is 100% benevolent, maintains 100% benevolence over the entire career, & gains sufficient power to make decisions (probably impossible), that official lacks the ability to model every citizen's unique set of preferences & optimizations better than that individual citizen's ability to make their own choices.
I may need you to elaborate a bit on this for me to really understand your point. Am I claiming that politicians are magically immune from cognitive biases? Absolutely not; I'm actually claiming the opposite: nobody is immune from them. That is exactly why laws and regulations exist to provide the guardrails for better decisions. There's certainly a point where overreach happens, but I don't think you've yet made a very concrete argument about how the extreme of no government somehow is an improvement over some government.
Or are you claiming government can't alleviate the asymmetries of information (the actual 'asymmetry' in my OP)? I do think the government is better at this via regulations. See the Sarbanes-Oxley Act about disclosing accurate financial information passed in the wake of Enron as a concrete example.
>official lacks the ability to model every citizen's unique set of preferences & optimizations better than that individual citizen's ability to make their own choices.
Except it's not a case of a lone official. It tends to be a case of groups of officials and experts. And yes, each has their own biases, but with a diverse group there's a lesser chance that a single bias will overrule the decision (unlike at the individual level). With modern society as complicated as it is, do you think an individual has the bandwidth to properly gauge risk in terms of items like public health, transportation, engineering, etc.? The mechanism chosen by citizenry in most Western countries is to choose the constituent politicians and policies via a voting mechanism rather than shoulder the burden of making all those decisions individually.
The utopian ideal you espouse seems better suited to fun though experiments than a large society that must also factor in pragmatism. It's a bit of a privileged indulgence in that sense. I suspect that's why it hasn't ever been implemented in a large, diverse, and complicated society facing tough problems. I understand the seductive allure of libertarianism; it feels like a straightforward and simple way to maximize freedom. Unfortunately, most people in society want to optimize across more domains than just freedom. They want security as well as other objectives that may be in conflict with absolute freedom. You can see this play out in countries that are borderline failed states. Unfortunately, I think the framework you advocate to maximize freedom almost naively over-simplifies the model of the human condition.
I'm giving the argument to remove the income tax, not to remove government completely. I'm aware that power vacuums will be filled one way or another. However, the government has grow unchecked due to self-interested officials (bureaucrats, politicians, contractors, etc.) & lobbyists.
> Or are you claiming government can't alleviate the asymmetries of information (the actual 'asymmetry' in my OP)? I do think the government is better at this via regulations. See the Sarbanes-Oxley Act about disclosing accurate financial information passed in the wake of Enron as a concrete example.
As stated in my other post, you statists are very predictable. Sarbanes-Oxley is simply the same interests that perpetrated the centralization & speculation that led to the stock market crash to be the industry regulators. The same revolving door is in EVERY SINGLE regulatory body. The revolving door between regulator and industry effectively allows the large industry players to regulate the industry, thereby adding undue stress to competitors.
> It tends to be a case of groups of officials and experts. And yes, each has their own biases
That the "officials and experts" have common interests that are at odds with those who they are regulating. The word "political class" means something. Do some research on the implications of the "political class" & it's numerous examples of circling the wagons against any grass-roots citizen oversight.
> The utopian ideal you espouse seems better suited to fun though experiments than a large society that must also factor in pragmatism. It's a bit of a privileged indulgence in that sense. I suspect that's why it hasn't ever been implemented in a large, diverse, and complicated society facing tough problems.
If you study history, the Income tax was introduced to raise money for a war that ultimately killed about 100 Million people. Before the income tax & before the FED, the world had unmatched growth. We are the beneficiaries of this innovation, that occurred BEFORE THE INCOME TAX & BEFORE THE FED. The surplus created by the innovation of the population, not the government, created the "privileged indulgence" of the government to siphon money away from the population to support the income of self-interested parties.
You statists are also predictable, in that you forget who pays the bills of the state. So you justify your theft of the population by claiming that the population is somehow spoiled or privileged. You statists have contempt for the people who support you, which is why the state has a terrible history of perpetrating mass genocide against it's own population many times in history.
Your naively over-simplistic historically revisionist ideal that the state is somehow the source of innovation, ingenuity, & human progress is simply incorrect. People make things happen.
The state is an expense & will almost always do tasks in a more expensive, more bloated, less effective way. Why? Because there is no feedback loop to incentivize good behavior while disincentivizing bad behavior of government officials & processes. Let's be real, the state, despite it's high minded rhetoric, always devolves into an organized criminal enterprise & conquerors siphoning the energy away from the people who do the real work in making the world a better place.
I’d implore you to also not jump to conclusions about what my beliefs are by extrapolating to positions I haven’t explicitly defended. Your posts are coming across like you are actually having an argument with someone else. You seem more inclined to tell me what I think rather than ask
Which begs the question, what is this system, that we call civilization or society, designed for? If it's for the well-being & growth of all people, then it's the government's role to minimize intrusion into peoples' lives & to be be non-permanent; meaning the government should shrink after it grows to respond to a crisis. This is why early government did not have "professional" politicians or bureaucrats. Once it becomes somebody's livelihood to govern others, the teleology will always be a relationship of ever-increasing extraction until collapse. This is also why early government did not have "professional" armies. The "governor" (or political class) becomes the monarchy/aristocracy in a neo-feudalism state. One can see the state of American politics with it's two-tiered justice system as a proto-aristocracy which will eventually lead to a monarchy. Perhaps we should think twice before our celebration of giving James Bond a "license to kill".
If there is a crisis of some type, the government may be useful in theory, though in practicality it's function is restricted by the autopoetic traits of people that run the government not being able to avoid being self-interested and self-selecting to form cartels. See the Stanford Prison Experiment & Milgram Obedience Experiment as references.
Persistently high taxes are a good indicator of the breakdown of feedback loops re: the performance/utility/effectiveness vs the cost of the government.
A small pedantic nit but I think the word "governor" in systems engineering predates cybernetic systems. I think the centrifugal ball governor on steam systems was one of the first implementations. As a literal pressure regulating valve, the term "governor" can be derived from literally regulating a system for a desired outcome.
>meant to ensure that the timing & operation
So from this vantage point, the primary role of government is to facilitate coordination between constituent parts of society? I.e., you don't feel they have a role in terms of a service component? Can you give more concrete examples of exactly how this facilitation would be employed? (e.g., it reads to me that creating and maintaining a coherent monetary policy would fit this definition, but your previous comments lead me to believe you may be against that idea). Going way back to my original post, I'm trying to get an understanding of how this view moves from the theoretical to the practical.
>This is also why early government did not have "professional" armies.
Can you elaborate on which governments you are specifically referencing? Because my understanding of many "early" governments is that they were predicated on standing armies, particularly those governments that used them to protect commerce and/or expand their territory.
>If it's for the well-being & growth of all people
This is probably the biggest area where we diverge in opinion. I don't think the overall utility function is increased by getting rid of programs like Medicaid/Medicare, SNAP, etc. and other quality-of-life programs that are largely funded by the income tax you want to abolish. Is your aim to return back to resorting to charity to solve these problems? If everyone acted ethically, I agree that may work better than the current paradigm but I think we've already agreed we can't count upon everyone to act rationally or morally (leaving out the mental bandwidth necessary to understand the problem effectively to best allocate resources). It would be more useful if you could speak in pragmatic terms; this is the point where I (non-derisively) tried to avoid the "hand-wavy" free-market arguments about how the market will solve it.
One area you haven't touched upon that I would be curious about your opinion is the role of government in fostering the growth of nascent industries, particularly those that have such a high-risk/low-reward that the market's individual players generally aren't willing to fund although the potential to benefit society as a whole is large (I'm thinking of industries like early aircraft or, more recently, the space industry). Do you think the government has a role in tragedy of the commons scenarios? (E.g., is it the governments role to price in externalities, to fund research in problems that are a large societal risk but small individual risk etc.?)
I do agree that a real problem in government is the "self-licking ice cream cone" phenomenon. Although, I think my preference is that citizens correct this at the voting booth. How do you think about the ability of people to make rational decisions in that regard? (I.e., if government isn't working to the people's liking and they have the power to change it, why isn't either a) the change happening or b) the citizenry leaving? c) are we failing because of our individual cognitive biases?)
Cybernetics & systems design is the distillation of patterns common across various engineering & science domains. It still applies as an apt description.
> So from this vantage point, the primary role of government is to facilitate coordination between constituent parts of society? I.e., you don't feel they have a role in terms of a service component?
The government has become insanely bloated, full of grifters & opportunists, pseudoscience, revolving door lobbyists, misinformation, & other self-serving interests that have had a detrimental effect on society. Any "service" or "cure" that the government provides is caused by the government in the first place.
> Can you give more concrete examples of exactly how this facilitation would be employed?
Yes, let humans coordinate their own activities without the income tax & reduce intervention and watch many societal ill including poverty, violence, drug use, & disease decrease.
> Because my understanding of many "early" governments is that they were predicated on standing armies, particularly those governments that used them to protect commerce and/or expand their territory.
The USA did not have a professional army. Most governments, before conscription & the draft, had a small, if any, professional army.
> Medicaid/Medicare, SNAP, etc. and other quality-of-life programs
If these programs worked, why are there so many people who depend on these programs in poor health? Why are unhealthy practices, such as the food pyramid, foisted on the public, encouraging obesity? No, large government programs completely miss the mark & merely act as vehicles to create profit for large pharmaceutical, insurance, & tech companies, at the expense to the public. Just because somebody is insured does not mean they are following an optimal lifestyle of health. There are many doctors who dislike the paperwork caused by Obamacare, because paperwork distracts from caring for their patient.
The "voting booth", or now mail in voting without ids, is probably the sickest joke. The notion of Democracy, where 51% have tyranny over the losing 49% does not represent most people in the county, as most people do not even vote & the choices are between bad & worse.
The only way to escape the madness of this growing government intrusion is to escape to less governed states & nations (currently occurring) & watch the bloated governments collapse under their own weight & greed, while creating systems that work for us, not the top-heavy self-serving technocracy/bureaucracy. The government is going down it's typical autopoetic path & will have a major collapse of some type, probably within this decade. Good luck!
Your problem is you have black & white thinking. Your response my claim that there are broken feedback loops, that taxes are too high, & there is an autopoetic tendency for psychopathy to set into big government systems including mass genocide is "government good", "you must be anarchist".
Your religion of statism blinds you to obvious points that I have already clearly stated. It's you who has a comprehension problem due to your religion. You do seem like you have a semblance in your intelligence, despite your sophistry. It's too bad you are blinded to certain obvious realities due to your ideology.
You bring up the inability to improve health outcomes with specific government programs. I ask you how you would propose to fix that and your answer is “shrink the government and let people choose.” That’s a superficial sound bite and not a real answer. I was hoping for something like
1) Reduce price controls by reducing Medicare and Medicaid 2) To avoid those left out who would previously have been covered, create a health savings program for each individual 3) Expand the HSA benefits to those gainfully employed to reduce tax burdens 4) Create clear quality metrics to objectively measure various health insurance providers and clear, standardized, transparent guidelines to measure health providers to be eligible
This would reduce government to a role of oversight while reducing tax burdens on income. It would also allow individuals to make their own decisions about providers while allow the free market to innovate. It would alleviate some of the information transparency issues.
Instead, all you can advocate is:
Get rid of government + { hand wave + magic } = better outcomes
The latter comes across as a sophomoric understanding of the actual problem. Not unlike your overly simplified model of what you seem to think you can assume about my personal position. You’ve probably had some success in the past your word salad veiling approach without showing much concrete understanding but it’s failed to convince me
Then maybe you shouldn't be calling other people "statists". Especially you shouldn't be using it as a put-down or a condescending dismissal.
> Before the income tax & before the FED, the world had unmatched growth.
It also had unmatched financial crises every decade or so. (Yeah, I know, we had the Great Depression with the Fed existing. We also had the mess in 2008. That's one and a half in a hundred years. That's a far cry from where we were without the Fed.) So maybe don't trumpet how wonderful everything was pre-1913, because it had a downside that destroyed a lot of people.
He started it by trying to put me down as being a Libertarian. Statist is an accurate term. It's only a put-down because when you look at it, it's a self-serving & ultimately abusive position. I don't need to try very hard b/c it's obvious that the statist position is ultimately about a tranfer of wealth from the people who do the real work of making the world better to the people who want to control others.
> It also had unmatched financial crises every decade or so
There was a feedback loop, often based on speculation & financialization.
> That's one and a half in a hundred years
You forgot the S&L crash in 1986, the dot com bust, the housing bust, the neverending & accelerating QE (money printing), etc.
The current fiat petrol-dollar paradigm, that directly perpetuated neverending wars, is crashing around us as we speak.
> So maybe don't trumpet how wonderful everything was pre-1913, because it had a downside that destroyed a lot of people.
I fail to see how the invention & propagation of electricity & sanitation leading to the rapid increase in life expectancy and unprecedented increase in real (as opposed to fiat, which is another blunder of statists) wealth, "destroyed a lot of people".
You have an argument that certain aspects of industralization & centralization had negative effects on the human. However, the positive aspects of our growth & transcendence of previous poverty was due to the spirit of human ingenuity & the collective energy of the population to improve their lives & the lives around them. Governments only (with few exceptions) got in the way of this progress.
Besides the "he started it" being a weak argument, I never claimed you were a Libertarian. There is a world of difference in saying, "the ideas you're talking about fall in line with libertarianism" and saying "you are a Libertarian". The latter treads closely to ad hominem fallacy.
>the housing bust
Is this distinct from the sub-prime crisis they already alluded to in their post?
>neverending & accelerating QE (money printing)
Again, this is almost always phrased in terms of inflation and to reiterate it has not yet happened despite people claiming for the last decade that it was just around the corner. Inflation may still happen but what I'm trying to get at is: if inflation turns out to not be the problem do you have another case against fiat currency?
>propagation of electricity
The early days of this were quite literally a mess which is why the government began instituting regulated monopolies.
>transcendence of previous poverty was due to the spirit of human ingenuity & the collective energy of the population to improve their lives & the lives around them. Governments only (with few exceptions) got in the way of this progress.
Citation rather than glossy overtures are strongly needed here
Perhaps. There have been more than one...
> Inflation may still happen but what I'm trying to get at is: if inflation turns out to not be the problem do you have another case against fiat currency?
Inflation is already here. Cost of living, rent, gas, food, lumber, taxes, etc. are rising today. Coupled with the government mandated shutdown, particularly of select "non-essential" (aka small) business, we saw a large contraction in the economy. The government's official numbers are self-serving & moving goal-posts. http://www.shadowstats.com/ measures the economic numbers according to benchmarks consistent with the past. Inflation is here & has been here for a while.
> The early days of this were quite literally a mess which is why the government began instituting regulated monopolies.
It was even more of a mess before the invention of electricity. The regulation of utilities could be considered a success. At least the government did one thing right. Problem is despite the Trillions going into taxes over the years, we have a grid that is vulnerable to long term blackouts. With the Grand Solar Minimum being here & a geomagnetic excursion occurring, we can expect space weather to create more issues (e.g. Carrington Event). We are also vulnerable to CME attacks caused by foreign governments. Not good.
> Citation rather than glossy overtures are strongly needed here
My citation is the amount of time that people have to spend working to pay taxes & their unhappiness in doing so.
Who makes things happen in everyday life? The citizenry/people, not bureaucrats.
Except John Williams is showing real inflation to be around "9.0% in Aggregate, 16.0% in Goods and 5.6% in Services". Is 9% the target?
> Your citation is that proper don’t like spending their money? Really? That’s exactly my original point about the issue with cognitive biases.
Not sure what you are trying to convey here. It's not like you used any citations. I'm not asking for one anyways. I was hoping to be able to discuss simple logic & simple observations without the need to invoke the "experts" with their narrow fields of expertise. You obviously have cognitive biases as well. I hope you don't think you are some arbiter of truth because you are way off the mark.
>People don’t want to pay and simultaneously don’t want to give up government programs. That is not a rational stance
Government programs are expensive & ultimately don't work. I'd rather have a free(ish) market create solutions. There are few true free markets, since almost every market is regulated (except the "black market"). There are more solutions than the electric grid as it currently stands.
The best solution is for people to be educated on how our climate systems work, our solar cycles, our movement through the cosmos, & the impact of electricity & magnetism on our planetary systems. Not this APGW nonsense that has wasted so much money & time.
You cite biased sources that fit your predetermined worldview. I’ve already conceded inflation has happened, but it tends to be transitory type. Or did you miss that part of the discussion? Even if your source was reliable, it doesn’t display the type of evidence I think you assume it does. It’s fairly clear you start with a conclusion and work backwards, disregarding anything that’s inconvenient from the conversation.
I’ve given you citations elsewhere. But the larger point your statement portrays is that there literally no evidence that can be provided to change your mind. That’s not a productive person to try and maintain a dialogue with.
Sure, we've had "crises" pretty regularly. Those crises are on average much less severe than crises were before the Fed.
@bumpy, it's amusing that you, being the statist, are tag-teaming to downvote my comments like it even matters. It's just pathetic passive-aggressive behavior on your part...
You're being downvoted because you're wrong, and because you're being gratuitously abrasive. And you want to use that as evidence that you're right? As Jane Austen said, "You tell yourself that, if it gives you comfort."
You snipe at me then criticize me for matching your level of in-graciousness.
Growth was unprecedented before the FED, even with the short-lived ramifications of the crashes. 1929 & the 1930's lasted longer than previous downturns. 1971 was a complete failure of Bretton Woods & we were only bailed out by Oil & wars. It was pretty big failure in monetary policy. 2008 was bad. The 2020's are not looking good as well. Record & increasing amounts of money are being printed. Income disparity is increasing. Life expectancy is going down. I'm amazed that the plates have been kept spinning this long...
> You're being downvoted because you're wrong, and because you're being gratuitously abrasive
I've learned a long time ago to not care about silly karma points (distilling karma to a number is a complete misrepresentation of karma anyways) & these sort of passive-aggressive games. I'm not the only one being "gratuitously abrasive" in this conversation. I see myself from your perspective. I also see how I have been treated as well. If you want to call me a troll, then so be it, I'm a troll.
> As Jane Austen said, "You tell yourself that, if it gives you comfort."
I bet you felt all sorts of self-righteous endorphins when your wrote that. Too bad it was not in good faith. You have to dig deeper into your own actions to see the bigger picture here.
I reject your reading of economic history. Your perspective is badly skewed.
And I'm out. I leave you the last word if you want it.
And the longest period of economic contraction in the US happened before the Fed (which isn’t an acronym, so all-capsing it just makes you look like a kook), in the Long Depression.
Even with the contraction, the overall expansion between the Civil War & the creating of the Fed was still unprecedented & has not been matched since. Good thing the Fed was created just in time to finance the World War 1 resulting in over 20 million deaths. Interesting coincidence...
> (which isn’t an acronym, so all-capsing it just makes you look like a kook)
Wow, I look like a "kook" for all-capsing FED? Hah, I'm obviously not fitting in with this crowd. Perhaps you could have picked up on a different detail...
That’s...not surprising given the way postwar expansions tend to work and the impact of the Civil War.
> Good thing the Fed was created just in time to finance the World War 1 resulting in over 20 million deaths. Interesting coincidence...
How is the link you are insinuating between the creation of the Fed and WW1 supposed to work, exactly?
This may need some qualifiers. There are definitely people who are net beneficiaries under the current tax code that i doubt would get nearly as much from the stated stimulus effect
If you are anti-war, how will the government pay for its Neverending wars without taxes?
I know the bogeyman for fiat currency is inflation, but we heard people screaming about that over the bailouts of the financial crisis and yet we arguably suffered from a lack of inflation in the ensuing decade. Only now are we starting to see some inflation in commodities; it's yet to be seen if this is short-lived (as commodity inflation can be) or if we see real inflation hit metrics like wages.
The problem with your assertion that the way to be "anti-war" is to shut the door on taxes is that it also shuts the door on everything else. I do believe there are some things the government does well, and potentially better than the private sector.
You fail to mention that those ~47% are still trapped in poverty & w/ disparities in health despite the government services. If the government services were so good, why are they suffering? Why do families that enter welfare & assisted housing have an abysmal rate of improving their livelihood? Why are there many stories of people escaping poverty before any form of government assistance due to their own ability to create prosperity, free from regulations which only inhibit their growth?
You may mention the 1930's stock market crash, caused by insiders gaming the market combined with financialization created by centralization (enforced by the government). Note that the some of same people responsible for the crash later oversaw the market by creating the SEC & other related entities.
You may have an argument that courts are useful, especially in enforcing contract law, though. Though the increase in the amount of laws has created a top-heavy system where everybody is out of compliance in some way & the choice of what to enforce when is a way to tip the scales of justice, allowing the government officials to have a large influence on who & what activities succeed and who & what does not.
I'd be interested from where you are drawing this conclusion. I was interested but the data I looked up seems to tell the opposite story.
Looking at GDP growth, the average from 1800-1913 (when the Fed was created) the average year-over-year GDP growth was 1.48%. From 1913 onward, the average GDP growth was 2.13%. Moreover, if you plot the 10 year moving average, you see that the post-Fed era tends to be much more stable with less boom/bust cycling. The exception is the Great Depression (trough) and the post-WW2 boom (huge peak).
Likewise, life expectancy increase has pretty much been on the same trajectory (except for WW1) regardless of period[2].
Similarly, innovation measured by the 10-year moving average of patent application year-over-year growth rate shows the levels are similar from 1870s-present[3]. There's a marked dip after the Great Depression but the bounds of the growth rate is between 0-7% cycles, being a little higher during the tech boom of the late 1990s.
>Why do families that enter welfare & assisted housing have an abysmal rate of improving their livelihood?
At least from my experience, most would say what the government is providing does provide a huge improvement in their quality of life. Again, I'm asking what is your alternative? How does getting rid of these programs going to benefit those same people? (Please speak in specifics if possible).
>You may mention the 1930's stock market crash, caused by insiders gaming the market
Not my position. Just like 2008 it was due to excessive leverage and speculation.
Maybe my cursory look is taking the wrong conclusions, but your claims (without supporting evidence) come across as claims "that aren't facts, I just know they're true".
[1]https://www.measuringworth.com/datasets/usgdp/
[2]https://www.statista.com/statistics/1040079/life-expectancy-...
[3]https://www.uspto.gov/web/offices/ac/ido/oeip/taf/h_counts.h...
>The husband appreciates that his uneducated wife can bring in an extra $10k over and above her part-time waitressing job.
sorry, but this narrative falls apart on the misuse of the word 'wealthy'
I mean you're really broadly generalizing "poor people" here. It really sounds like you feel strongly about these. Can you elaborate?
Trust me fella, poor people are not dodging taxes like the wealthy are. The fact you had to invent such a circuitous and baffling story to attempt to illustrate your point should make that that plain.
If 20% of taxes are under-reported, then just set tax rates 20% higher than they should be and move on.
If the number was higher it might be concerning, but 20% isn't such a high number we need drastic measures.
Setting tax rates 25% higher won’t change a thing for complete evaders. It’s not 20% across the board.
https://www.independent.co.uk/news/business/bet-365-denise-c...
I currently reside in the UK, and am in the upper %'s of earners (no idea on the actual %), but my company of which I am the sole shareholder currently does around $450k profit per month.
With the planned corporation tax rises that the government has just announced, it means that the majority of my income will be effectively taxed at > 53% (corporation tax + dividend tax). I also pay the government already around $200,000 per month via VAT on my goods sold. I'll get 47c for every $1 earnt.
I understand that I'm a higher earner, and therefore naturally am going to be paying high taxes, but paying over 50% just seem wrong.
I am in a few circles with other sizable business owners, and after this tax hike many of us are now moving abroad (Malta, Monaco & Italy are the top options).
I'm currently in the process of relocating to Monaco, which although I would prefer to continue to reside in London, I simply am unwilling to pay 7 figures per year to do so.
I do wonder how much tax is lost due to people dodging/hiding or relocating, vs if the tax rates were more "reasonable"?
I understand my opinion here is probably biased, just thought I'd throw in my 2 cents.
The problem is that Monaco exists as a tax haven, and is easily accessibly (at least for Europe's wealthy). 99% of the time I hate that the US taxes citizens' income when they move overseas, but then I hear a story like this and change my mind for a day or two.
I have to agree with you. A huge number of regular (albeit comfortable) people, also pay > 50% in income tax. When they complain about "the 1%", it's because they see people like you having the means to get out of this system. They're angry you're not suffering alongside them.
I tend to doubt OP is suffering at $450k/month profit, even if half of it goes to tax.
It's almost like there's an entire society outside the business to think of.
My goal with this move is to leave for 5 years or so and acquire enough wealth that I will be personally comfortable for the rest of my life.
At which point I would likely to move to wherever I preferred to live in the world (regardless of tax rate), and to work on something more enjoyable and meaningful rather than simply chasing dollars.
I started a couple of small niche SaaS tools over the years from age 18-23) which helped me amass low 6 figures. I then jumped head first into the affiliate marketing space for a few more years which took me to around $1M net worth.
From there, I just leveraged my money to launch a couple of other businesses in gaps I saw in the market, primarily in the ecommerce space. Now I have a few businesses that I continue to run on a daily basis.
It's very tiring if I'm honest, I'm an exceptionally hard worker which has definitely attributed to my success, however I have an extremely hard time delegating which means I still work around 15 hours average per day (and have zero staff). It's something I'm working on.
I've also hit the low six-figures from crypto, now looking to diversify into real estate (a friend is rapidly becoming wealthy and retiring early with low fixed rate mortgages in Germany and is luckily educating me) and building an affiliate site (just dipping my toes in outsourcing and YouTube soon, no way I can grind out content forever). If you'd ever like to shoot the breeze let me know. Email in my profile. I'd love to get in touch.
I think its good value in the UK compared compared to how little social benefit you see in the US yet still pay a massive amount of tax.
I do have to say anecdotally that 40% does “feel” around the upper limit of what’s “fair” to me..
I know myself, and several others I know who are currently moving (mainly in the 7 to low 8 figures per year range) that are currently moving abroad that would likely just stay put at a flat 40% rate.
I know it's entirely psychological, but going over the 50% mark has annoyed several of my peers (and myself) and fueled this move. Something about receiving less than half of what you work for rubs you the wrong way.
One thing that I don't understand why were not discussing/suggesting: If we must have taxes, and we want to go above 40/50%, why not consider giving people more choice in where that money gets spent as a way to offset the "negative" feelings. I think a lot of people would be more okay with large percentage tax-values if they were in control of what that money was being spent on.
https://cdn.theatlantic.com/thumbor/fNk9ykzBXTBck1HJK0pFxYhX...
As soon as it fell below 50%, median income growth stalled and hasn't really budged ever since:
https://en.wikipedia.org/wiki/Causes_of_income_inequality_in...
Compounding is one potential reason why. A 92% top tax rate helps keep a lid on geometric wealth growth via compounding.
Broadly, retail people like you and me, we don't have an opinion of a specific value, like 22% or 44% or whatever, we just feel up and down or whatever. That's fine.
That notwithstanding: your business profits come from somewhere right? Maybe your customer's customers, seeing as it's probably a software business.
How much lower would taxes get until your customers spend money on health insurance / health catastrophes? On cars to replace a worse metro, or on apartments closer to work? On private schooling? On vacations out of the country?
What if people stopped moving to London? If its services got worse and people left, how could that possibly be good for anyone?
I don't really want to generalize why because I don't live there, it is of course an amazing place to live. Is the underlying problem that London and the UK, the way they are, are expensive?
What you wind up not paying in taxes, your customers will pay anyway, and maybe not even in a strict sense of Non Tax Compulsory Payments - the accounting mechanism typically used in the US - but simply to enjoy a high quality of life.
And maybe this is why so many low tax locales have such primitive economies, people are spending on other things besides sophisticated software services.
Ironically this aligns me still with a "right" amount of slightly lower tax. It's probably about 38-44%, and it ought to be simpler. I really don't like people leaving California, especially high earners, but I understand that they also blame tax for other grievances. So maybe the real takeaway is to not generalize, and instead support technocrats who can explain and analyze these issues.
Islam solved this problem a long time ago. Look up Zakat laws. For your cash in the bank that has been sitting for 1 year, it's an extremely reasonable 2.5%.
You don't pay the VAT, the consumers pay the VAT.
Enjoy Monaco. I fear it will just feed your greed even more and won't make you happy, though.
It's simply a place for me to live for a few years until I'm confident that I'll personally have enough funds to live the life I want forever (and provide that life for my family). It's a sacrifice I'm willing to make at 26 years old, so that when I'm 31 me and my family will be good for life.
After that, I will likely relocate to either the south of France, the UK or Canada, subject to change - and work on more meaningful projects.
That said with these new corporation tax hikes, it's approximately the same now (dependent on the amount £££).
That aside I make a comfortable living as a software developer in London. My effective tax rate is around 35%. If I was earning > 10x what I currently earn I don't think I'd be complaining about an extra 18% in tax.
While technically true from the legal and accounting point of view, but from economic point of view one could argue that there would be one market price level without VAT (p0), and current market price level with VAT (p1, p1+vat). Then real effect of VAT on consumers is (p1+vat-p0) and on providers is (p0-p1).
There are other principles you could apply, though. For example, placing even a very small weighting on overall social welfare would probably reverse your position.
How much happier do you think the increase you are pursuing on your extremely large income will make you?
How much happier do you think the same money could make the kinds of people on whom much of your tax receipts would have been spent? For example, state pensioners, or people struggling in the gig economy and relying on food banks to get by?
That said (and this may be unique to me), I am a 1 employee corporation and I still work 15hour+ days. If they keep taking a larger and larger cut, I'm simply going to start working less (and therefore earning less), and I feel like it won't have the impact on tax revenues they are hoping for.
I do however understand that my situation is maybe not "normal".
It's interesting that you mention that higher taxation might lead you to work less hard. In general, it's possible that this would be a good thing for everybody.
You'd get more time for relaxation and other interests. At the same time, everyone else would experience less envy.
I appreciate that this may sound weird. However, there's evidence that people are much more rivalrous about income and consumption than they are about their leisure time.
In the extreme, if people cared only about relative income (i.e. rank), then earning more money would be wholly zero-sum.
In reality, of course, people care partly about relative and partly about absolute income. But that still implies that the socially optimal income tax is non-zero, since that encourages more (non-rivalrous) leisure at the expense of (rivalrous) consumption. The economist Richard Layard has made this argument more formally [1].
[1] e.g. https://core.ac.uk/download/pdf/208274889.pdf
I would absolutely prefer more leisure time in my life right now, the grind is real. However I also have the ability to earn large amounts of money relatively "easy" right now, and that may not be the case in the future.
I think striking while the iron is hot is wise, and will then financially land me in a position whereby I will have more leisure time for the rest of my life, along with being able to provide my family with the same.
My entire upcoming move to Monaco is basically centered around this belief. I am 99% sure I am going to prefer living in London where I currently reside, over Monaco. That said, but just living in Monaco for 5 years, it will put me in a much better position for the next 50 years of my life.
Once I feel I am in that comfortable position, I can choose to reside where I wish almost anywhere in the world, and in theory be the happiest version of my self, regardless of the tax laws where I reside.
Just look at the 70s in the UK. It was 'tax them until the pips squeak', and it had exactly the effect of driving business and high net worth individuals away from the UK.
It doesn't seem wrong, it is outright wrong. It's stealing.
When your income is from equity, dividends, etc, then it becomes much easier to legally avoid taxes on the income.
That should resolve most of the problems. The problems begin when we start saying certain things are virtuous - oh buying a home is a good thing, let's incentive that and allow people to deduct. Donating to charity is good - deduction! Investing in something in the long term is good - lower tax rate! Environment is good! Energy credit.
Enough. Who exactly benefits from all of these deductions? You guessed it! Regardless of how you feel about the actual deductions, if you want to eliminate "tax evasion" (I use quotes because it's not even a bad thing, it's perfectly legal) - that's the only way.
Well there's your first problem; little money actually goes to a person. Bezos is listed as the richest person in the world, but the vast majority of his wealth is in the company.
It reminds me when the Google head honchos humblebragged about only having a wage of $1 a year. Basically admitting they were dodging income taxes.
First because ultra-high earners can and do move abroad to avoid or evade income taxation. So if you kill sales tax/VAT, corporate tax and other taxes, suddenly it is very attractive for people earning millions per year to move their tax residence to Monaco (or indeed London, for "non-dom" taxpayers), where they don't pay income taxes.
Second because there is need for some "fairness" and equivalence between treating employment income and treating small entrepreneurs who do the same. Whether keeping the total percentage of corporate income tax+dividend tax to a similar level as personal income tax, or allowing similar deductions on mortgages for a personal "buy-to-let" rental as for an incorporated rental company, in order to avoid perverse incentives.
And while I agree that mortgage interest deductions are an economically counterproductive and regressive policy, that is besides the point if the point is not tax policy but tax dodging...
Context: I live in a very corrupted country.
Rich or not, what is the right thing to do?
OP is based on a paper[1] which uses and then corrects results from random audits which I wouldn't expect to catch these things. There is some statistical magic called Detection Controlled Estimation done by the IRS that supposedly covers it but I don't know how it works.
[1] very nice of them to provide a direct link: http://gabriel-zucman.eu/files/GLRRZ2021.pdf
They'd still be the richest 1%, right? There wouldn't be any fewer Bentleys and Rolls Royces to go around, so the price would have to come down, but they'd still only be affordable by the richest 1%. Meanwhile poor people might have more 0s in their bank accounts, but there wouldn't be any more food to go around so prices would go up.
So what difference would it make?
That said this article is a bit tough to swallow. It starts by saying how they cant actually be sure how many people are evading taxes because it is too difficult to figure out and then go on to put a plot with explicit percentages around the amount of tax evasion per income bracket and use very specific numbers to back up their points.
(1) It seems like the article is trying paint with a pretty broad brush on a currently well despised class of individuals without much evidence. The argument is -- "their business arrangements are too complex, thus they must be hiding something". It really seems like the kind of headline that reinforces a bias that the system is rigged. Which there is inherent truth too.
(2) Instead of trying to change the tax code - why don't you go arm the IRS to actually pursue tax evaders? The policy that we're just going to change the whole tax code to solve our tax problem ends up in the same place after the fact. New tax code, unarmed IRS.
(3) Seems like Washington post is pushing an article to provide cover for the Dems to change the tax code and foment further anger towards inequality. I am angry about inequality but I am also angry at low quality reporting with a clear axe to grind.
(4) Any Americans who file taxes from abroad know how laborious the reporting requirements are - I would be surprised if most people don't file all the required information which includes all your bank accounts and assets. I highly suspect there isn't nearly as much fraud as in the past - especially with the incredibly painful fines associated with non-disclosure.