
What to Do About Inequality (2012) - huihuiilly
https://bostonreview.net/testing-tax-policy
======
netcan
Picketty kind of reminds me of Yuval Noah Harari in that they both have
stunning insight and perspective on the past, but get quite bland once the
present comes up.

For YNH, his key points in history really changed my perspective, on people
history and progress. I'm totally sold on the central thesis: human progress
is fundamentally the ability too cooperate in increasingly large groups, and
the quality of that cooperation. The whole thing is mediated by our arsenal of
collective fictions.

But when we get to the present, what we have is fairly generic. He's certainly
an intelligent commenter, but the historical thesis doesn't seem to play into
his current affairs opinions at all, or his futurism.

Picketty is similar (but a lot less readable). He makes a pretty compelling
empirical case for his thesis, growing inequality is a long term trend during
capital accumulatui periods. Wealth disparities are mitigated by big capital
destruction events like big wars. There's a theoretical case but it's simple
and the evidence is in the data, not the theory (r<g). Convincing.

What does this mean for the present? Apparently, something approximating the
current French tax system.

Income tax isn't new. We've had higher and lower high marginal rates than
suggested in this article. The problems within those system are the problems.

Maybe im being harsh.

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_jal
Pretending that rates like these are unheard-of madness is either ignorance or
an attempt to deceive.

[https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...](https://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates)

~~~
ryanworl
This is a distortion of history. No one paid these rates. The Tax Reform Act
of 1986 eliminated, reduced, or modified the deductions the people that
would've paid these rates were previously allowed. Additionally, the
wealthiest individuals typically do not receive much wage income relative to
their capital gains.

There are reasonable arguments to be made about increasing or decreasing
taxes, or adding new types taxes or removing other ones, but this meme of "our
posted tax brackets used to be higher, and everything was fine, therefore we
need that again" is simply untrue.

~~~
_jal
> and everything was fine, therefore we need that again" is simply untrue.

I said nothing of the sort. If you have an argument with someone else, go have
the argument with them; don't put words in my mouth.

~~~
kolbe
Your original statement was a response to no one, too. Not sure why you're
upset when he did the same. I think it's arguably even fairer of him, because
due to your lack of explanation for why you made your comment, he was left to
surmise what the purpose could have been.

~~~
_jal
Uh, what? That person responded to me.

And since it is apparently OK with you to make up stuff that other people
never said, I take serious issue with your immoral pro-puppy-murder stance.

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buro9
Tax assets and not income.

Income = social mobility, and is directly related to "money you earn" and
cannot effectively be inherited (you're dead, you are no longer earning).

Assets = wealth, and is directly related to "money previously earned" and can
be inherited essentially forever ( [https://anarchimedia.com/2019/01/15/rich-
families-in-florenc...](https://anarchimedia.com/2019/01/15/rich-families-in-
florence-today-are-the-same-rich-families-from-600-years-ago/)
[https://www.theguardian.com/money/2019/apr/17/who-owns-
engla...](https://www.theguardian.com/money/2019/apr/17/who-owns-england-
thousand-secret-landowners-author) )

I now believe that the only effective way to end the excesses of inequality is
for effective tax on assets, land being the most obvious but all assets should
be up for taxation.

And as strict as asset taxation should be, so should income taxation be
reduced.

~~~
roywiggins
A real inheritance tax with teeth, or a land tax, would be worth trying.

In the US, an asset tax is _probably_ unconstitutional.

~~~
crazygringo
Property taxes are asset taxes.

What makes you think there's anything unconstitutional about it whatsoever?

~~~
roywiggins
Property taxes as we know them are levied by states and localities... whether
the feds can do the same is the question.

Apparently there are actually decent arguments that it would be constitutional
after all: [https://itep.org/the-u-s-needs-a-federal-wealth-
tax/#constit...](https://itep.org/the-u-s-needs-a-federal-wealth-
tax/#constitutional)

The history of the Federal government's ability to tax is pretty tangled
though. [http://nymag.com/intelligencer/2019/02/constitutional-
concer...](http://nymag.com/intelligencer/2019/02/constitutional-concerns-are-
a-major-risk-for-a-wealth-tax.html)

------
throwaway5752
I can only guess that most people commenting don't understand how tax brackets
work and have not read the article.

I'm certain that at least half of the comments right now are from people
reflexively spouting off without having read it.

------
dougmwne
Adapted from a much better article here:
[https://voxeu.org/article/taxing-1-why-top-tax-rate-could-
be...](https://voxeu.org/article/taxing-1-why-top-tax-rate-could-be-over-80)

The caption on Figure 2 in this article claims that there's zero correlation
between top bracket tax cuts and GPD growth. My eyes must be playing tricks on
me because I see a possible correlation. I think this might be a good example
of conclusions in search of evidence. There must be other ways to break down
the economic data to prove or disprove the hypothesis in an unbiased way, if
anyone cared to do so.

~~~
jquery
Only changes in “effective rates” is meaningful anyway. A correlation between
nominal rates (which no one paid) is almost useless.

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bo1024
I thought most really wealthy people don't earn "income" in the first place?
Don't they generally pay capital gains tax, or no tax by just borrowing money
against their assets rather than selling them?

~~~
TheBeardKing
That's the real problem. Capital gains taxes are at historic lows since the
Bush administration [1]. They should be bracketed like income.
[1][https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite...](https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States)

edit: Downvotes instead of rebuttals. Nice.

~~~
throwaway5752
I think you're being downvoted because capital gains are split between long
and short term gains, and short term gains are already taxed like income.

The division exists to encourage longer term investment, and it's probably a
good policy. I didn't downvote you, because I think that general point that
the spread between long and short term rates is too regressive at higher
income brackets.

------
Bartweiss
Leaving aside the moral arguments, would this actually _work_ to reduce
inequality?

Piketty makes a case that GDP wouldn't suffer with a much higher top marginal
rate, but doesn't demonstrate (here) that it would significantly alter wealth
inequality. There are a number of ways that might not follow: capital flight
or tax avoidance, untaxed fringe benefits saving money, general regressive
flows like "having stock" wiping out the change.

Scheidel ( _The Great Leveler_ ) has argued, I think pretty persuasively, that
mundane domestic policy doesn't undo inequality. It can constrain it, and
sometimes diminish it briefly before wealth catches up to the changes, but
major reversals seem limited to economic crisis, if not actual war or
collapse. Diminishing top-end incomes might slow the worsening of inequality,
but Piketty's own thesis ( _r >g_) suggests that it won't do anything to
actually arrest the trend.

~~~
kolbe
You bring up possible implications of altering the system, but there's really
no way to know without experiments. And with a system as unique as the 2019
United States, we cannot reliably look to other countries or other eras to
give us natural experiments.

~~~
Bartweiss
Certainly the inability to run a test or set a control is a constant problem
for macroeconomics, but I don't think that deprives us of _all_ information.

Piketty, at least, is content to compare the relationship between top marginal
tax rate, pre-tax income share, and GDP in Germany, Denmark, the UK, and the
USA since the 1970s. He finds that higher top marginal tax rate correlates to
(and precedes) decreased top pre-tax incomes, and doesn't correlate with GDP.
Inequality numbers might be distorted by other changes, but it would be
interesting to at least see the naive comparison between top marginal tax rate
and change in wealth inequality for those same countries.

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DannyBee
Remind me again of that time when simply and directly trying to attack very
complex sociopolitical problems has worked?

In fact, trying to directly "solve" complex systems like these with lots of
variables, as if they were just "problems", never works (regardless of area).

So while this may be a good idea or it may be a bad idea, it's definitely not
going to "work" on its own.

(and i get how hard it is to sell people on the idea that no, you will not
just do a thing and have it solve all the problems, instead you are only
trying to get the system moving in the right direction, and then adaptively
try to do things that keep it where you want it. But that's at least got a
chance)

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wazoox
It misses a "2012" in the title.

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hackeraccount
What it says on the tin and what people actually pay may be two different
things. As a hypothetical if the rate is 100% it may be that no one would make
anything in excess of where that rate kicks in.

I doubt very much that no one will be compensated in excess of the rate
though. People will just have to go to the trouble of making sure the
compensation isn't affected by the rate. In effect you're paying people to
make an income inequality statistic look better.

------
boshomi
oh, we had tax rates like this, and it worked realy realy bad.

It was very hard for startup and small companies the earn enough equity, it
was taxed away. Without equity it was hard to get outside capital, so the
can't grow.

At this time Austria had a big state-owned industry, but this sector run into
hard troubles.

In the 1980s the tax was cut, at state-owned industry won efficiency after
privatization. Suddenly a strong medium sized industry could grow. In the
1990s the work productivity grow about 10% per year.

By the way for democracy it is necessary that there a no big tax payers. Big
tax payers get big political influence. Huge political influence results in
protection by laws, and this protections are usually as unfair as hard to
detect. And it is nearly impossible to get rid of them.

The far better strategy is a wide spread tax and social fairness by social
transfers. High profits has to be fight by concurrency and hard executed anti
trust laws.

------
fredgrott
I think it's distorting what Piketty has always stated in his own study...you
really should spend some quality google search time and get the study and
invest some time in reading it and the critics rebuttals

~~~
Bartweiss
Wait, this was written _by_ Piketty. That doesn't mean it's not
misrepresenting his data, researchers do that all the time in popular forums,
but I'd be really interested to hear what specific difference you're pointing
to.

(I did notice that his theory 2, tax avoidance, wasn't actually examined, and
that he argues for a lack of GDP harm but doesn't actually show here that
lowered top income produces lower equality.)

------
ohaideredevs
It would work on killing any motivation I might have to make money.

~~~
psychometry
If that's the only thing that motivates you, I don't think it would be any
great loss to society that you stop doing whatever it is you do.

~~~
jquery
You certainly don’t know that, what an arrogant thing to say. Do you think
garbage truck drivers work for personal edification?

~~~
danaris
I don't think garbage truck workers would throw in the towel and stop working
because income taxes or wealth taxes went up. They're working because they
need to eat.

If ohaideredevs is in such a place that he's able to stop working and not have
to worry about being able to pay for housing, food, clothes, insurance, and
all the other necessities of daily life, then that's great for him, but I
guarantee you absolutely that the vast majority of the people in America would
neither stop trying to make money, nor stop trying to make _more_ money, just
because some taxes went up. More money—even if a higher percentage of it would
go to the government—just makes too much of a difference in the day-to-day
life of most people for those kinds of concerns to be anywhere near strong
enough to make it look unappealing.

So if someone who already has so much money that they don't need to work
another day in their life stops trying to make money...or even if it's someone
who makes so much that making more wouldn't reduce their stress in daily life
no longer trying to increase their income...I don't think that's a net loss to
us in any meaningful way.

~~~
kolbe
You act like everyone is capable of doing everything. If ohaideredevs is a
world class computer scientist, it would be devastating. The economic
contribution of someone who can enrich our knowledge of data science or
algorithms is thousands of times higher than blue collar labor. And you cannot
just ask a worker in sanitation to start developing new deep learning
techniques after you lose someone who can.

------
sleepyhead
Correct title for this submission: "What to Do About Inequality"

------
bmmayer1
I wonder if Piketty would happily give up 83% of his newfound wealth.

~~~
317070
How is that relevant? I would give up 83% of my wealth if all other wealthy
would and it would solve inequality. If it is only me that needs to give up
83%, then not only is it not fair, it also does not solve societal inequality.

~~~
whb07
Then what do you do when you realize you’re not the smartest, or best athlete,
or good looking? There will always be inequality to some degree or another.

~~~
317070
I am neither the smartest, best athlete or best looking by multiple degrees of
magnitude. Why I should be the richest by multiple order magnitudes is a
complete miracle to me.

Yes, there will always be inequality. Yes, that is a good thing. But that is
no excuse to the current level of wealth disparity.

~~~
whb07
There isn’t “extreme” inequality, there is higher inequality though. Btw, if
you were to lookup the root cause for this you’d find the government and the
fed printing money that pushes up equities.

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fopen64
The destination of this money is equally important. Tax and hire a lot of lazy
public servants is a moral hazard as well.

~~~
overthemoon
You're not wrong, but "the government should be well run" is true no matter
what.

~~~
fopen64
Yes but if you are left with less disposable money you don't have any escape
whatsoever if the government is not well run.

~~~
danaris
No one that this proposal would affect would have any trouble escaping if the
government became so poorly run that it started to cause serious problems.

You recognize that this is aimed at higher _marginal_ taxes on those who are
already making very large amounts of money, right?

~~~
fopen64
These people are human beings too. And the middle class is looking: whatever
happens in the top tax bracket, trickles down.

------
jquery
I noticed the study cleverly avoided hard questions like “absolute levels of
income” which the USA largely dominates and instead focused on “rates of
growth” which favor poorer countries such as those in the EU. Where’s the EU’s
Apple, Amazon, Google, Netflix, or Microsoft? All they can do is slap “fines”
(backdoor taxes) on our most successful companies but they seem utterly unable
to build their own. Never mind it looks at the USA shortly after a business
cycle nadir, how would this study look during our long boom cycle?

------
alfl23
Unlike any other organisation of its size, government is never held liable for
efficiency, nobody ever questions government for "return on investment", even
though it's the largest one all of us make.

What this article is suggesting is largely suicidal, taking cash from a far
more efficient business community government by "laws" of competition,
evolution of markets etc, the impact here would be catastrophic at best, I
really don't think you can debate this in the space of one article.

My number one would be move all government money on blockchain, and make that
public, then see if it's really so smart to "give them more", through any
means.

Inequality has always been a constant throughout human history, and it's far
better now than in the middle ages, where we are all entitled to education,
healthcare, and have extremely fast access to information.

I'm not suggesting there isn't a problem, but you haven't found a solution.
"Tax the rich" is something everyone can scream off the top of their lungs,
until it comes to bite them hard the next day when their pay must be cut to
keep the company they work for profitable.

Step 1 would be removing the biggest inefficiency of capital allocation in
most of these "high growth" western economies, measure and publicise return on
investment of public funds, and proceed to realise raising tax "just like
that" is a very very bad idea.

~~~
agentdrtran
only on HN would a completely insane idea like "move all government money on
blockchain" be the top comment.

~~~
baddox
It’s the bottom comment at the time of this comment.

