
A 70 percent marginal rate could help, not hurt, innovation - perfmode
https://www.theatlantic.com/ideas/archive/2019/01/higher-taxes-rich-wont-suffocate-innovation/580642/
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beaconstudios
I'm a business owner and working on a startup, and I'd back a high marginal
rate. But my concern is that governments are terrible at spending tax money
effectively. I'm all for my disposable income being used for the greater good
but I expect that the money would be gobbled up by wasteful bureaucracy and
administration, or doing things I disagree with like sponsoring war or
building surveillance dragnets.

I'm from the UK and the 2018 budget's total public expenditure for the
2019/2020 year is expected to be £842 billion [1]. That's £12,757 per person
[2] - almost half the average salary [3]. I don't think the problem with our
government is a lack of money, and I can only presume the situation in the US
is similar.

[1]
[https://assets.publishing.service.gov.uk/government/uploads/...](https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752202/Budget_2018_red_web.pdf)
page 4

[2]
[https://www.ons.gov.uk/peoplepopulationandcommunity/populati...](https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/november2018)

[3] [https://www.theguardian.com/money/2018/may/12/salary-what-
ge...](https://www.theguardian.com/money/2018/may/12/salary-what-get-paid-
talk-about-it-makes-brits-cringe)

~~~
dbingham
I think enough of the money would go to supporting necessary services that it
would still be worthwhile. And the more we can get the population on firmer
economic footing, the more they'll be able to participate in democracy, hold
the government accountable, and work towards a more efficient government.

But the point of a marginal tax rate that high isn't just to fund the
government. It's to fight wealth concentration. And even if every dollar taxed
is completely wasted, it still serves to keep inequality down and fights the
concentration of wealth (and there for power). That's worthwhile.

~~~
beaconstudios
why do you want to fight wealth concentration though? As far as I'm aware (and
I could totally be wrong, I'm open to changing my opinion on almost
everything) the only symptoms of wealth concentration are related to political
corruption (where we should be preventing external money/gifts from getting to
politicians, not preventing people from having money in the first place) and
the Gini coefficient's effect on crime, which seems to me to be a function of
envy because a high Gini coefficient is correlated with high crime even in
areas with low poverty.

My view of "good" government spending is to raise the lowest living standards
to a place of dignity and security. I don't think the government should be
punishing people for succeeding in the markets if they do so legitimately.

~~~
danaris
Wealth concentration reduces liquidity. When more of the wealth that exists is
in the hands of those with less, they spend it, and it's circulating in the
economy. Indeed, it's circulating in the parts of the economy that need
circulating money the most—the poorest parts.

Inequality leads to large amounts of the money in the economy being locked
away doing very little.

So if we reduce the amount the very richest can siphon out of the active
economy and pack away for a rainy day that'll never come (seriously, when is
it going to be rainy enough for it to matter to someone making $20 million/yr
whether they get to keep $16 million of it or $13 million of it?), we help
stimulate the entire economy, almost by definition.

Furthermore, the more people who have enough money to take opportunities for
education and entrepreneurship, the more likely we are to have good new small
businesses and innovative ideas.

~~~
beaconstudios
this argument rests on the condition that the rich store their wealth in some
Scrooge McDuckian vault, away from the economy. This isn't true - usually,
wealth is either spent on luxury items (so the money goes back into the
economy) or it is invested (funding economic growth). If that weren't the
case, wealth would be eroded via inflation. Now, there's a good argument to be
made that many modern investment vehicles don't actually contribute to growth
- and if that can be proven to be the case, these vehicles should be
delegitimised.

> Furthermore, the more people who have enough money to take opportunities for
> education and entrepreneurship, the more likely we are to have good new
> small businesses and innovative ideas.

This is returning to the argument that we should raise living standards, not
penalise wealth. I'm on board with that.

~~~
IntelMiner
>usually, wealth is either spent on luxury items (so the money goes back into
the economy) or it is invested (funding economic growth).

These are things that don't scale however. A CEO does not eat a thousand meals
a day, or buy a thousand cars a year, or do any of the infinite number of
things that circulate money into the economy on the scale of an equal number
of poor people

~~~
anonuser123456
A CEO might host a 2K dinner per day. Give 1K people 2$ and they will be able
to buy a McBurger.

In case A) you have a chef,sous chef, sommolier etc. all making reasonable
money.

In case B) you have capital investor making 1.95$/ unit and some kid making
7.95/hr.

In aggregate, who spends what does not have a clearly predictable path through
the economy.

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hedora
Fun fact:

The marginal rate if you cash out stock and build a house in the SF bay area
is 51%. With tarrifs and sales tax, the marginal rate on raw materials
averages closer to 67%.

People wonder why there is a housing shortage.

I’d back a higher marginal rate if the brackets were somehow computed over a
multi-year sliding income window.

One possibility would be to compute marginal rates on windfalls based on how
many years it took to earn the windfall payment.

In the current system, startup employees defer income for years, then get
taxed at astronomical levels when N years of income lands all at once.

[edit: Also, most of the tax shelters for the ultra wealthy take multiple
years of sustained high income to establish, so simply juicing the max
marginal rate is mostly hitting new money, as opposed to passive investors.]

That clearly disincentives innovation.

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Kephael
You'd probably get more innovation in the US if you funneled more money to the
top 50 or so engineering schools and forced them to take on more students.
There are too many schools with "impacted" majors in worthwhile degree majors.
The only thing higher taxes would do is potentially discourage me from running
a side business.

Taxes wouldn't even need to be raised, just take the funds from the poor
performing universities and colleges and move to a German educational model.

~~~
alkibiades
i don’t see how some people going to a rank 5 school instead of rank 15 school
would drastically change the US. And trust me, look at the endowments of these
schools. Outside of some public ones, it’s not a money issue. Harvard could
easily 3x their enrollment with their endowment money

~~~
Kephael
I was not referring to rank 15 -> 5, I meant that outcomes of students
attending a rank 2500 school is typically not particularly good. It is
literally impossible to enroll in certain majors at many quality schools
despite being academically qualified for the major.

~~~
alkibiades
give them more money and they’ll hire a thousand more diversity administrators
and not a single spot will open up in those impacted programs.

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jryan49
I would be for such a thing if the money goes directly to people. The
government doesn't spend any of it.

