
I'm a millionaire who creates zero jobs. Why do I pay less tax than you? - paulpauper
https://www.theguardian.com/commentisfree/2018/apr/17/millionaire-zero-jobs-taxes
======
IkmoIkmo
I mean, there's several answers to this.

The most fundamental one is this: capital is mobile, people are not.

If you increase taxes on capital, it will flow to a lower-tax jurisdiction
relatively quickly. A decent legal system and financial infrastructure is
necessary, but the hurdles aren't as great.

But if you increase taxes on salaries, people will be hesistant to leave for
personal reasons (e.g. friends, family), cultural reasons, security reasons
etc.

As such, tax competition between jurisdictions on capital is much more fierce
than it is on labour. This is typically why you see lower taxes on capital.

The other reason is that labour tends to be viewed by part of the voter base
as a normal tax, and capital as a double tax. i.e., if you earn $100k a year
and save much of it after taxes, you now have capital to invest. And getting
that capital taxed again is sometimes viewed as even less popular, a sort of
tax ontop of tax, particularly as these wealthy people are more mobile and can
more easily choose a lower tax jurisdiction.

As for the notion that his capital doesn't create jobs, I don't know if that
is true. Fact is that if people like him withdrew their capital from the
market, rather than invest it, you'd see many financially-constricted
companies that would bin their expansion plans, cancel their investments in
R&D, withdraw from new products and markets etc, and on the whole, generate
far fewer jobs. It's essentially what the credit crisis looked like. The
notion investments like his aren't creating jobs seems erroneous.

That doesn't mean I'm a fan of low capital taxes, by the way. But tax reform
is incredibly complex because it requires essentially all countries around the
world to work together, to give up some control over an important component of
sovereignty (taxation), to restrict tax competition somewhat. There's been a
lot of decent work in that regard already by the way in the past few years,
with the worst aggressive tax planning and tax havens being dealt with (e.g.
BEPS), which allows countries to implement more sensible taxes on capital
without worry of their tax base shifting abroad.

~~~
sjg007
You have to invest that money somewhere and the place with the best
infrastructure to get what you need built matters more than the taxes you may
pay on the profit.

~~~
ergothus
While your logic seems sound, I feel like the last 10-20 years have involved
simply not investing it.

I have no particular explanation nor suggestion based off of that, but I know
I've read a lot of articles about companies simply sitting in large bankrolls.

------
klausjensen
In 2010 in Denmark there was an initiative done for people wanting to pay more
in taxes - people who claimed in the public debate, that they really wanted to
pay more.

The tax department opened up a bank account, that people could pay in extra
taxes for, if they wanted. If you felt like you should pay more, you could.

Two years later, the initiative was shut down - having accumulated about
15000USD (fifteen THOUSAND) - in a country with 5.5M inhabitants.

A lot of people want OTHERS to pay more in taxes and some people SAY they
should pay more in taxes to score some cheap karma-points. Almost nobody
ACTUALLY want to pay more in taxes.

~~~
lkbm
I don't believe I am able to pay enough to make a difference.

I believe that if all people of my income paid more, we could make a
difference.

I support all people of my income, including me, paying more taxes and opposed
me alone paying more taxes.

The evidence you've provided does not provide significant support to your
conclusion.

Here's what WOULD support your conclusion: If given the choice between someone
who would increase taxes for people of my income or keeping them the
same/lower (ceteris paribus), I voted for the latter. If I'm voting for the
former, that straight up contradicts your position.

Guess how I vote. Guess how the author votes.

~~~
NotAnEconomist
I think your point support theirs, actually.

You don't want to pay more in taxes -- you don't believe it would make a
difference, despite knowing how numbers work, and knowing that it literally
would. I suspect you mean that the marginal difference for the government
doesn't justify the loss for you.

That's fair, but it's exactly GP's point: you don't want to pay more taxes,
because you don't care when there's no reward for you personally; instead, you
want millions of people to pay more taxes for your benefit.

~~~
cecilpl2
If I alone pay more taxes, I do not see enough benefit to justify the cost.

If all people pay more taxes, a large majority of us will see a net benefit
that outweighs our own cost.

I support raising taxes for everyone, including myself. This should not be a
difficult concept to understand.

~~~
davidivadavid
It's actually very difficult to understand because it seems nonsensical on the
face of it. If people paying more taxes is a net good, then certainly any
amount of additional taxes collected would be a net good.

Are you suggesting that there's a magic threshold that needs to be crossed
where individual contributions amount to more than the sum of their parts? If
so, what is it, and why does it exist? And why does that threshold always seem
to be conveniently too high for people who claim they want to contribute more?

~~~
icebraining
Since we're on HN, I'll give you an example of a pretty successful startup
built on those "magic thresholds": Kickstarter.

Yes, of course having more money scales the ROI superlinearly. Lots of
projects can't be done at all without a minimum investment. Others just have
economies of scale (e.g. dilution of fixed overhead).

And considering that the government usually does stuff on very large scales,
it's not strange that a single taxpayer's contribution is too small to be
meaningful. Just creating a government program probably takes more than what I
pay yearly.

~~~
antidesitter
The government is not in the position of a “kickstarter”. It has tons of
revenue already, so your point doesn’t make sense.

------
koolba
> Take it from me: I am an investor. I have not actually worked in years. I
> let my money make me money. Over the past year, do you know how many jobs
> I’ve created? Zero. The only thing that does create jobs is consumer demand
> for products and services that people can make and provide, not my
> investment dollars.

Investing does great jobs because businesses need capital to grow, and growth
leads to more employment. Not employing people directly does not mean the
money didn’t lead to some job creation. It’s just harder to quantify.

------
didgeoridoo
> The only thing that does create jobs is consumer demand for products and
> services that people can make and provide, not my investment dollars.

And what is being “demanded”? Products and services that are the result of
investments made earlier in time. Consumer demand is the inherent PAYOFF of
successful investment. Consumers demand more, faster, cheaper, better. None of
that comes without investment first.

This guy sees investment as leeching off the productive economy. Probably
because he has only ever been on the “money-shuffling” side of things, rather
than standing in the shoes of a business owner who needs to raise capital to
create something new.

That capital comes from either loans or equity, both of which require 1)
substantial sums of latent savings in the economy, and 2) money-shufflers to
find allocation opportunities (capital does not yet, alas, allocate itself).

Investment is the LAST thing we should tax. Consumption (especially of
positional and rivalrous goods) is the first.

~~~
Joeri
That’s one way of looking at it. Here’s another way.

Consumption is what drives the economy, not investment. You can invest all you
want in a giant rubber duck factory, if nobody wants to buy giant rubber ducks
your investment will be worthless. Investors either gamble where demand will
occur or create it artificially through marketing, but in neither of those
circumstances is consumption the direct result of investment.

The last thing you should tax is consumption, since it is the fuel for all
other economic activity. Less consumption, less everything else. Also, taxing
consumption tends to be a regressive tax policy in practice, which leads to
economic inequality and reduced quality of life.

IMHO what should be taxed is income in all forms, whether out of labor or out
of investment, since that’s the most fair. Consumption should not be taxed.
Additionally tax rates should be progressive since there are many engines of
inequality in the economy and we need a bit of counterbalance to that.

~~~
Aunche
> Consumption is what drives the economy, not investment.

That's true, but it's missing the point. Investment allows people to fund
projects that drive up consumption. It may not be "as important" as labor, but
it still helps the economy. If the capital gains tax is too high, rent seekers
will just find a safer alternative to way to park their money that is even
less economically productive, like renting out real estate.

~~~
Joeri
I’m not convinced investment ever drives up consumption, except for the
investment in marketing. I see investment tailing consumption mostly, with
investors preferring safe bets on goods and services that already have a
market. Anyway, it’s just two ways of looking at the same economic
relationship. In practice it’s more a sort of ouroboros.

I’ve also never been convinced by the “big money will flee if we tax it more”
argument. Nobody has ever tried leaving no ground to flee to by leveling the
taxation system so there’s no loopholes. The only way to flee would be to
leave the country entirely, but as long as it remains profitable to stay
(taxes do not exceed profits) it would be foolish to do so.

------
marris
Dear Mr. Millionaire,

As someone with a significant amount of wealth, you have the option to spend
it entirely on yourself. For example, you could have consumed all of it
already, enjoying non-stop parties, expensive toys, buying the temporary,
albeit intense, adoration of an entourage etc. Thank you for not doing those
things.

Instead, you have invested this capital. You have put it into a variety of
investments, each with their own risk-reward profile. I am hopeful that as you
grow wealthier, you will become more charitable, both by donating more wealth
to help others, and also by accepting a lower rate of private return (or
higher private risk) for investments that have a bigger social return (e.g.
biotech investments, space exploration, etc). Even there, I hope you exercise
some prudence and a portfolio approach, since it doesn't help anyone ex post
if you lose all your money developing an invention that doesn't work.

In the meantime, we (society) are grateful for your concern, but would
probably rather that you did not dump more money into our tax coffers. If you
want to give money to the people, give money to the people, Give Directly
style.

And if you still feel that the government is necessary to solve some of the
problems that are bothering you, spend it instead to incentivize better
government, or to design and build a government that allocates each tax dollar
more efficiently as the years go by.

Thank you.

~~~
smileysteve
Both parties and failed research result in jobs and markups going to
externalities, bar tenders, servers (people), researchers, fabrication
materials, whiskey distillers, etc.

------
rayiner
The central premise of the article, that preferencing capital gains doesn’t
create jobs, is hotly debated. Even some pretty liberal economists agree that
capital gains should be taxed lower than ordinary income:
[https://slate.com/business/2012/09/mitt-romney-s-
effective-t...](https://slate.com/business/2012/09/mitt-romney-s-effective-
tax-rate-is-very-low-most-economists-think-it-should-be.html)

Lower capital gains rates are also not an American invention. It’s a feature
of almost every Western European tax code. Sweden’s capital gains tax rate is
half of the top ordinary income rate.

~~~
smileysteve
The tax code could have been rewritten last year to eliminate the corporate
income tax, but require full income taxes on capital gains (potentially with
some discounts or taxes on long term / short term)

Corporate taxes + lower capital gains taxes are double taxation on the same
earnings; but also serve to very much politically obfuscate who pays the
taxes, consumers, businesses, or the profiteers - which, while fungible -
could drastically simplify the tax code.

------
chris_mc
The problem is that every normal person is just a temporarily embarrassed
millionaire, so they don't want to raise taxes on themselves in the future.
This is not more evident elsewhere than here on HN, where everyone is a
possible startup billionaire.

~~~
matte_black
I'm sick and tired of hearing this refrain. It assumes people have no internal
values and just vote for things based on how it will personally benefit them,
which is not true.

People can and _do_ vote for things that give no benefits to them if it aligns
with their concept of fairness. In this case, if you believe a person deserves
to keep as much of their income as possible, you will vote for lower taxes,
because it _feels right_.

------
caymanjim
The author almost certainly pays way more tax than I do. He probably pays a
much lower tax rate (I'll assume 20% long-term capital gains), but because
he's a millionaire and I'm a middle-class wage-earner, his 20% is vastly more
than my 40%. And while he may not create jobs directly, he almost certainly
spends a lot more than I do, and is thus responsible for indirectly creating
far more jobs than I, and that's without even accounting for the jobs created
indirectly by his investments.

~~~
HillaryBriss
> ... the jobs created indirectly by his investments.

but i think this is one of the key issues of the article. the author claims
that investment does not create jobs.

also, in absolute dollar terms the author may spend more than you, but in
percentage-of-income terms he's spending less. and I think maybe that
percentage difference is another key point the author makes, given how much
wealth is tied up in the hands of the rich.

I mean, I think the author believes that wealthy people pouring almost all of
their money into various investments -- as opposed to middle class and poor
people spending all or almost all of their money on goods and services -- is
not a very strong way to create domestic jobs.

IMHO, this is not a complete accounting of the situation. I mean, US people
are spending -- we're spending big time. but where are all the jobs? the US
has this giant trade deficit. a helluva a lot of jobs are in overseas
manufacturing. so, we can force billionaires to spend all of their income
every year on goods and services -- but how many domestic jobs is that going
to create if what they buy is expensive Euromade yachts and New Zealand real
estate?

it's almost like we need more than just tax policy, it's like we need some
kind of domestic _industrial_ policy

------
scarface74
I think there is a role for government, but the last thing I want is to give
the federal government more money. They have enough in tax receipts to take
care of infrastructure, feeding people, providing health care to those who
can’t afford it etc.

Why would anyone suggest giving the federal government _more_ money? The
states in general do more in general to actually help everyday Americans.

~~~
HillaryBriss
> Why would anyone suggest giving the federal government more money?

so government can directly employ people who don't currently have jobs. this
will create a money multiplier effect as those workers go out and spend their
new paychecks, which puts more cash in the hands of other workers in the
economy, who then spend some of it, and so on and so on. in this way, GDP
grows.

that's an answer. i'm not sure it's a great answer, but it's an answer i've
heard an awful lot.

another answer is so the federal government can build large infrastructure
projects (like an interstate highway system or Hoover dam), the theory being
that this will pay off richly for society and the economy later on.

~~~
scarface74
Again, the government has more than enough money to invest in infrastructure.
How much money does the federal government spend on the military that doesn’t
go into helping the people who actually serve/have served and lines the pocket
of the private military industrial complex? How much is it spending on being
“tough on crime” and the “war on drugs”?

Why shouldn’t we make it easier for private industry to compete -for instance
by not making the US the only industrialized country where your insurance is
tied to your company?

Why not increase the earned income tax credit and make it easier to be
distributed during the year. That would encourage work and it was something
that was historically supported by both Republican and Democratic
administrations.

The way things are going lately, I have a lot more trust in private industry
than the federal government.

------
linkmotif
The idea the governments spend money productively is mind bending and against
everything I see every day in the United States. Go figure, maybe it’s
different in Europe, but I can’t imagine that people who can’t make it in the
private sector—and that’s really all government is, people who otherwise can’t
make it in a competitive market environment—would somehow be efficient and
productive in the public sector.

[http://historymatters.gmu.edu/d/5030/](http://historymatters.gmu.edu/d/5030/)

Personally I’d rather the rich hoard wealth than pay taxes and thereby justify
the idea that planned command economies lead to anything good.

~~~
petermcneeley
I think peter thiel tends to see this in quite an open minded way. It might
have worked before but it really doesnt work well Now.
([https://youtu.be/FDkhfm6CYjE](https://youtu.be/FDkhfm6CYjE))

~~~
linkmotif
See what? (Thanks for the link)

------
mc32
If this millionaire is not creating jobs, are they not free to pay more taxes
than the government sets as minimum to pay?

Go ahead, donate it, make it more useful. Don't let the minimum stop you. I
suppose they prefer the government decide where it should be spent. Why not
donate to the gov program they prefer themselves? Or Donate to the efficient
programs, or donate to the one with ornery staff, if you like. No one will
stop them.

~~~
bobbygoodlatte
This particular straw man argument comes up every time taxes are discussed.

Obviously the marginal effect of one person paying more in taxes is close to
zero. There's no hypocrisy in advocating the group pay more collectively
without unilaterally taking it upon oneself first.

~~~
zepto
There absolutely is. The individual is not advocating that the group pay more
collectively. He is advocating that others be forced to pay more.

There is a clear distinction.

If this individual was advocating for people in his position to pay more, he
could simply start a campaign for like-minded millionaires to pay more, and
perhaps build some infrastructure to support this voluntary donation to the
government.

~~~
lern_too_spel
> build some infrastructure to support this voluntary donation to the
> government.

He is not asking for infrastructure to support voluntary donation tobthe
government. That would be stupid and ineffective. He is asking for the
government to change its tax structure to tax people like him more.

~~~
zepto
I’m glad you can tell that’s not what he’s asking for. I agree with you - he’s
not asking for that.

How do you know if it would be stupid and ineffective? Perhaps he’s
representative of rich people who want to pay more tax.

~~~
lern_too_spel
> How do you know if it would be stupid and ineffective?

Because you can already pay more taxes than required in many places, and
(almost) nobody does so.

> Perhaps he’s representative of rich people who want to pay more tax.

He is representative — he doesn't pay more than is required. He is proposing
that the government require people like him to pay more taxes, which would
mean that low income people pay less.

~~~
zepto
> Because you can already pay more taxes than required, and nobody does so.

There are lots of things people can do but don’t until a social movement
encourages them to do so. Charities for example don’t receive donations until
someone makes a case for why they should.

Also, I’m not sure why you think that raising taxes on one group automatically
results in other groups being taxed less. That isn’t typically how it works.

~~~
lern_too_spel
> Also, I’m not sure why you think that raising taxes on one group
> automatically results in other groups being taxed less. That isn’t typically
> how it works.

That is exactly how it works. The state has the same expenses and must fund
them somehow. Reducing taxes for one group doesn't magically make those
expenses go away. When one group pays less, other groups pay more. Similarly,
when one group pays more, others pay less. The state doesn't magically have
more expenses.

~~~
zepto
Nope. I recommend you spend some time researching this. Tax has never worked
the way you describe.

When states take in more tax than their expenses, they run a surplus. When
they take in less, they run a deficit. Usually when they run a surplus, they
find ways to spend it after not too long.

Raising taxes on any particular group or activity has no direct effect on the
other tax rates.

~~~
lern_too_spel
> When states take in more tax than their expenses, they run a surplus. When
> they take in less, they run a deficit. Usually when they run a surplus, they
> find ways to spend it after not too long.

Those ways to spend it typically help the poor, so taxing the rich more helps
the poor. The money doesn't magically disappear.

~~~
zepto
So you agree that what you said before about how taxes work was just plain
wrong.

~~~
lern_too_spel
It was absolutely correct. The state can increase its expenses, but it doesn't
happen automatically when the tax code changes. The main point is that when
one group pays more, other groups benefit more.

~~~
zepto
You said this:

“Similarly, when one group pays more, others pay less. The state doesn't
magically have more expenses.”

And that is absolutely false.

Also, there is certainly no relationship between raising taxes and the poor
benefiting. The money can be wasted or spent on the military, etc.

~~~
lern_too_spel
What I said is absolutely correct. When the money is wasted on the military,
the poor still benefit more than if the money hadn't been taken from the rich
and spent on the military.

You are also still confusing taxes with spending.

------
adolph
The central point is that investment income is treated differently tax-wise
than working-at-a-job income. If you have a large enough kitty you can live
off investment income.

I wonder how a higher tax rate for investment income would change the pools of
money available to startups? Would more of it flow to other asset classes,
like tax-free but lower returning municipal bonds? Would it make no
difference?

------
bassman9000
_Right now, millionaires and billionaires are building luxury bomb shelters
and private islands, high end sanctuaries for the end of days._

Ouch.

~~~
HillaryBriss
I'm not a millionaire or pro-millionaire, but, um, building luxury bomb
shelters is, technically, one way of creating jobs.

------
jeffbax
"…not only is the corporate tax rate on overseas profits just half the normal
rate (10.5% versus 21%)"

Never mind that the US is one of what two? countries that tries to tax their
companies sales (and citizen income) based on activity abroad?

Say what you will about more progressive income tax policy, capital gains, or
tech companies dodging due to the nature of software, but the US has had the
highest effective corporate tax rates in the world and was definitely driving
offshoring.

A corporate tax rate of 0% is very much an increasingly non-fringe goal as
opposed to raising revenue through other means. It's a testament to the US
laws and business health it has as many companies remaining despite the tax
disadvantage.

------
buboard
What's with the old articles?

~~~
tptacek
Ordinarily, reposts of older articles are pretty welcome, but this one would
have been marginal (for HN) even on the day it first ran.

------
matchagaucho
This article is mostly correct as applied to _service_ based businesses. The
"old men" in U.S. power today made their money building tangible things, so
those are the jobs they understand and want to bring back through tariffs.

Companies outsourcing IT functions just happen to be outside the purview of
taxes and tariffs. But that's no guarantee long-term.

------
lsd5you
I'm not really sure why job creation is the appropriate moral metric. At the
end of the day people who get wealthy generally are 'leveraging' (to be
polite) the work of others. i.e. They are taking the profit from the work of
others. If you can do something which is directly wealth creating without
employing anyone then arguably you are more entitled to the money you earn.
Ceteris paribus.

Not an argument that can be settled here, but the moral argument for job
creators has to be that it is not a near zero sum game (i.e. it is not the
case that if you don't create jobs then someone else will) and that they are
systemically important. That is if we remove (magically/without shock) some of
the current crop of job creators we would end up with an economic depression
and as such they are an important societal good.

------
cherrygarcia
What are some arguments against chaneling all forms of taxes into sales tax?
To me that seems the simplest way to ensure everyone is contributing,
regardles of how or where the money is made.

~~~
cheald
The primary argument against consumption taxes is that they're regressive on a
percentage-of-income basis, as your spending as a percentage of total income
tends to drop as your income increases (it's worth noting, though, that
payroll taxes are already functionally regressive, as the percentage of income
from non-payroll sources rises with total income). The other is that you
generally tax things you want to disincentivize, and since aggregate demand is
the primary driver of economic growth, you want to be careful to not dent it
too badly. You could make it progressive by refunding a baseline amount
annually, but people have to effectively carry the outlay until tax time.

The primary argument for them is that the wealthy have a higher marginal
propensity to consume, so it acts as a functional wealth tax, and can't be
easily evaded through income restructuring. It would be strictly progressive
on an absolute basis, and may marginally incentivize investment over
consumption.

