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To Understand Rising Inequality, Consider Janitors (nytimes.com)
390 points by jessup on Sept 3, 2017 | hide | past | web | favorite | 672 comments

What strikes me the most when looking at many of the comments here is the blatant disregard for human suffering that extreme inequality and the resulting poverty cause. The current economical status quo is accepted as a given and all the harm it causes is dismissed with the shrug of a shoulder.

"It can't be helped, the poor sods should have made better life choices to avoid ending up as janitor" is the attitude by which the matter is dismissed - as if requiring everyone to be a member of the educated elite just to be able earn a decent living.

There is so much wealth out there. This wealth is the product of society's common strive. Why not try to change the world instead of just submitting to the way things are?

As long as we accept the need for people to be janitors, we must accept that becoming a janitor is not a "mistake", it's a useful thing that we all want to see happen for some people. We can't on the one hand say, that we need people to do this job and on the other hand say, "tough luck" to those that do it.

Robots aren't capable of doing everything people can do yet, but as they become more capable, what and how are displaced unskilled workers supposed to do if they can't get any job at all? Starve to death under a bridge? Not everyone can handle social or intellectual labor. I think this is why UBI is essential: prevent riots and meet people's basic needs so they're not pennyless and sleeping rough.

UBI is a bad attempt to patch a broken capitalist system that has no regard for the humans within it. It may delay riots, but people's basic needs still won't be met.

Rome has kept entire population on Universal Basic Income for hundreds of years. Some of best an most peaceful years in the history of Europe.

Wars of I BC century and Roman laws that put people into slavery for debts had brought hundreds of thousands of slaves into economy bringing cost of labour close to zero. Conquest of Egypt and North Africa flooded markets with cheap grain.

That market disruption made artisan shops and small farms unable to sustain/compete on the market with larger enterprises based on slave labour.

Majority of citizens of lower class had been then entitled to free food and free entertainment (bread and circus). It was necessary for keeping their votes and for keeping appearances of the republic. (Even what we call Roman Empire were still nominally a Republic with Senate and elections held for various offices every year at Fields of Mars).

I recommend everyone reading Rubicon by Tom Holland. https://www.amazon.com/Rubicon-Tom-Holland/dp/1400078970

What would you suggest as an alternative if there were only enough jobs to support 20-30% of people .. including professional jobs like doctors/radiologists/lawyers being displaced?

Sounds like it could be great, terrible, or somewhere in between in the future you describe. I'm a socialist by upbringing, hopefully we would be smart enough to organize our society such that we take care of those most vulnerable among us. Currently we make a modicum of effort towards this, and vilify the working poor as lazy, no good scum, despite how they often work much more than those who earn more than them.

Honestly, I look beyond socialism/capitalism/consumerism to something more like the Venus Project or Resource based economy as something we should attain to, though it's a bit utopian to think we'll ever get their in the current political climate...maybe someday...

I voted for Bernie personally -- not a full out socialist... but I do think single payer + ubi + free college makes sense -- take the stress out of living paycheck to paycheck... at least somewhat... Not saying make everyone a millionaire and inflate the crap out of thnigs...but there needs to be some equilibrium...

One good policy might be capped CEO pay at say 200 * average employee salary. In this way - for CEO to get a raise, average salary must go up -- this can happen either by raising across the board or by moving more people to management and increasing upward mobility. Any money the CEO makes over 200* from that company is taxed at 100% including benefits, stocks, etc...

I used to be inspired by the Venus Project years ago. Unfortunately I realized it is extremely utopian and things needs to change in a more practical sense if we want a good chance of succeding.

I'm currently very impressed by the work of Prof. Richard Wolff, an economist that heavily criticizes Capitalism and tries to make actual practical changes in the lives of people starting from their workplaces.

Here is a talk he made in front of Google employees (the irony): https://youtu.be/ynbgMKclWWc

I'll take a look... let me rephrase that the Venus project...which I just heard about a few months ago..intrigues me quite a bit... but I don't see it really being feasible till we're an interplanetary species and even then maybe not...But there are good concepts and maybe when general AI hits, who knows what will change...

I do like UBI though along with (the pragmatist in me) believes gov't should work like agile dev teams... push changes up to a github like interface for bills.. the all bills should be VERY succinct and serve 1 goal, and that they should be repealable pretty easily like reverting a change on github... I think we have WAY too much bloat, and omnibuses just don't make sense at all and should be illegal.

Congressmen make very good money and benefits -- and have lots of perks so they should be required to work as hard as the next guy in America - -40 hours per week IN congress discussing bills and voting - -anything to 'market' themselves for future elections is NOT part of their job and outside their 'paid' duties and should be done on their own time.

I think automation, etc will disrupt the entire fabric of society soon, and honestly I hope we can move back to middle-age work days... they worked maybe 20 hours a week, if that and some weeks not at all - if farming the winter was pretty much just don't freeze to death... While their lives weren't long, I have to think they enjoyed life more than we do today.

>take the stress out of living paycheck to paycheck

If I could live for free (no rent, free food, free electricity, etc), I probably would quit. I don't have much savings and my quality of life would drop a little, but I would probably take 6-12 months vacation and just dick about, playing video games and concentrating on my hobbies.

I'd definitely take a vacation--but then I'd work on sideprojects--and be my own boss, because that's way more fun than working for someone else and I still want fun toys and things... I'm a jr dev and even at 60k/yr money is tight... when we made $30k, we really struggled..I don't think people should have that kind of pain and struggle, i think life could be easier for most people and as a society we could make it so..sure a small fraction might use drugs or something w/ their money -- but you know if they use up all their rent money and get evicted then they don't GET UBI (stipulation is you have to have a home address to receive the check and must live there..i.e. no vagrancy/etc... that's really the only requirement).

Why do people who call out capitalism for being a broken system, fail to acknowledge socialism (in all of its purest forms tried so far) is also broken and doesn't work when you have non-altruistic self interested humans in the mix or at least people who will look out for others but mostly people in their social proximity. I'm all happy for an alternative, and something better than capitalism. but at least suggest a working alternative. Capitalism for all its faults seems to have the highest chance of success, especially when you hybridize it with some socialist policies which is more or less what most western countries have done and even then there are basic issues, but neither extreme capitalism or socialism works. Both have a tendency to encourage different forms of corruption and different levels of inequality, or just short lived gains.

Slightly offtopic, althought maybe not: Is it any political party's goal to close all tax loop holes, so as to virtually eliminate the possibility of another Bill Gates or Steve Jobs or Jeff Bezos, at least on their scale?

What makes you think that Gates and Bezos were created by tax loopholes? And, what do you even mean by tax loopholes? Is postponement of capital gains until a sale event a loophole? Most of Bezos' wealth comes from his ownership of Amazon, which won't be taxed until he sells his shares. Changing that rule would mean Bezos might be less rich, but it would also mean that you would have to pony up tax money every time your house appreciates in value ...

I technically do, it's called property taxes which are directly tied to the assessed value of my house.

That said, I agree with your point, just bad example.

Your statement "not everyone can handle social or intellectual labor" is a larger sociological problem. If we insist that the only people allowed to participate in the labor market are college educated white guys, maybe; I don't see that statusquo continuing.

The hoops some members of this forum will jump through to convince themselves that building CRUD apps is some zenith of intellectual might just continues to astound me.

I'm inclined to agree with that.

Maybe if jobs for all skill-sets were still growing (in availability and compensation) it'd be easier to write off a good portion of the population as mentally inferior, but now that knowledge jobs are gaining a monopoly on living wages/salaries I don't think it's as easy to be that glib.

We need to do better as a society.

We're not that glib when it comes to children and early education, and I don't think we should change attitude just because a person has reached adulthood. Laziness and/or the attribution fallacy seems to get the better of a lot of us on HN.

Seems a strange complaint when janitorial positions (which aren’t often held by college educated white guys) are under discussion.

Presuming we want people to have good lives who aren’t able or inclined to do jobs requiring much higher intellectual demands than janitorial ones (and I certainly do want us to presume that!), we need to figure out how to in the short term allow people doing those jobs to have good lives and in the long term allow them to have good lives while robots do those jobs.

Perhaps I’m misunderstanding your comment.

There are massive economic upheavals occurring right now, and we as a society have decided that most people get to live a hardscrabble existence where an unexpected $500 expense will ruin a person or family financially.

This economic system isn't working for the vast majority of Americans, hence the support for Bernie and Trump.

I mean that's the point. The difference between someone that ends up as a janitor and someone that ends up as a software engineer has a lot more to do with their parent's money and the color of their skin than any variation in intelligence. Pretending differently just leads you to the comforting arms of the "just world fallacy".

I think your position needs to be defended just as much as the position you're arguing against, and right now you're not doing a convincing job of defending it.

As someone above asked: have you spent significant time teaching / tutoring? There are enormous differences in how quickly people learn mathematical concepts, even given varied teaching methods. Becoming a software engineer requires both intelligence and luck (though one might also argue that intelligence, being the result of genes and environment, is also primarily luck).

I'm not a professional educator no. And I do think there's a whole separate discussion to be had about how generally awful most software education is that Im not going to get into.

However, small sample size notwithstanding, I have been involved with mentoring in an outreach program targeted at people with little to no CS experience. And these students were coding circles around "CS" grads in under 6 weeks. Sure the theoretical foundations aren't there yet, but, do you really need that much math to stand up an app, build a website, or do any of the work expected of a junior dev?

I 100% agree with you in that most people don't have the aptitude to become the next John Carmack, but, at least in my experience, that's not where the jobs are anyway. You don't need to be Linus to generate business value using Linux, and you don't need to be James Gosling to working Java enterprise apps. The jobs of the future need an army of people to modernize infrastructure and build using existing tools. These are the middle class anchors of the 21st century; I'd say look no farther than the "analyst" pipelines of the American finance industry to see this happening.

>Your statement "not everyone can handle social or intellectual labor" is a larger sociological problem.

Have you ever been in any kind of teaching role, or observed some students at tutoring labs? Some people are just unteachable/not cut out for it.

"Not everyone can handle social or intellectual labor."

then they can become janitors.


but you're right, ubi is essential. not everyone can handle janitorial work. ;)

Its not just janitors, this happened to me in a highly technical call center.

that's kind of what i'm getting at. there's a presumption that the future will be for tech workers, and everyone else will have to starve or, preferably, be supported. i think that's optimistic. i think the future will be for janitors, and everyone else will have to starve or be supported.

manufacturing went away, agriculture went away, mining went away, all through automation. coincidently, this corresponded to growth in the people working in tech and other intellectual labor. but it's sloppy thinking to say that automation causes growth in intellectual labor, which seems to be the presumption. automation causes whatever it automates to shrink. intellectual labor will be automated-- possibly before janitorial work.

Becoming a janitor is not a mistake. Having so few options that janitor is all you can be, along with many other people (competition), is the mistake.

If everyone had better options, fewer would be willing to be janitors, and the need for janitors would cause janitorial wages to increase.

Basically, society is partly competitive.

In a vacuum, yes -- but societies can enter modalities where returns to labor are very low, relative to capital or real property. This was a phenomenon known to Smith in the 1770s. There are simply not enough alternatives to go around -- and you end up with societies where there is a massive (and unstable) gap between rich and poor.

If a position does not pay well enough for someone to have a family and raise and educate two or three children, it can be said not to pay for itself: which is to say, not to pay for its renewal from generation to generation. This is the real standard by which we must consider the wages paid to those positions, like waiters and teachers and janitors, which are perennial.

> This is the real standard..

Why is it? A job is better than welfare, therefore it has value. The requirement that jobs are 'renewable' is only required of the average job, not every job.

It's worth asking what it means for it to be required by the average job. Being renewable doesn't seem to admit of a lot of variation -- things are or aren't (but we could discuss something more formal for this and that would affect the remaining analysis).

Accepting the idea that renewability is either slightly more than 1.0 or slightly less, if the "average job" is renewable it suggests most of the common jobs have to be renewable in practice.

We could argue this in another way, which is to say that the average "career life course" or let's just say "life course" has to be renewable. This is where we encounter the idea that people should be setting themselves up for promotions -- but most people don't get promotions. It's not how life works. Promotions don't address the concern for the average life course.

The job dynamic are likely a predator-prey style relationship of supply vs demand.

The main features of janitorial work is few barriers to entry. There is fair demand, but there is plentiful supply which is why it is relatively low paid.

If Janitors could only replace Janitors, then being "non-renewable" would reduce supply, increasing wage, and maintaining balance.

In reality, the main feature of Janitorial work is most people otherwise lacking qualifications can do it; i.e. anyone. So it's not true that the renewability of janitorial work has a direct affect on supply.

Instead, it depends on overall supply of unskilled labour.

> The job dynamic are likely a predator-prey style relationship of supply vs demand.

I thought about this for a while after you wrote it.

In a stable setting, where there is not a large and pre-existing supply of prey, prey animals tend to have large broods. Many off their offspring are preyed upon or otherwise unable to reproduce, but just enough make it in each generation and likewise manage to have large broods.

This is not a behaviour that seems plausible with modern people. The amount of time required to educate someone prior to their entering workforce is enormous now -- we can't afford to do something like what prey animals do, with regards to work.

Isn't the question one of the renewability of unskilled labor?

Where does the unskilled labor come from?

Doing janitorial work is not a mistake, but being a janitor for 40 years certainly is.

It's not the core job, it's the fact that there's zero growth or mobility even possible that is the issue.

Life isn't all about getting promoted. Loads of people get far more satisfaction from knowing they're carrying out an important duty than they do from knowing they got promoted from Javascript Ninja to Javascript Assassin.

I don't think you understand what I'm saying. I'm not saying getting promoted. I'm saying getting better at being a janitor, or rotating between different properties, or learning to do a little light maintenance, or operate a lift or clean windows, or anything to break up the 100% identical routine.

If you're a contracted employee, there's zero investment in you as an employee. You come in, do the task, and leave.

You're touching upon a little of something called 'The Growth Mindset' - https://en.wikipedia.org/wiki/Mindset#Fixed_and_growth

In the Bay Area schools my kids attend, they are working hard to emphasize this growth mindset. I think it's huge component in job mobility, whether it be upward or sideways.

>It's not the core job, it's the fact that there's zero growth or mobility even possible that is the issue.

Not everyone is a 'striver.' Some folks just want to pay their bills and enjoy what time they can with their family and friends.

As a society, if we figure out an economic system which doesn't lead to inflation, then all would benefit by not having to grow their net worth, and in turn, have a job that doesn't have any growth prospects.

How are growth prospect and inflation related? You can keep your net worth by investing into assets which have growth above the inflation level which isn't that hard.

By growth, I meant increase in wages to at least keep up with inflation. Janitorial jobs haven't kept up with inflation. Nowadays, rent increases by about 10% YoY. But wages don't increase by that much.

Even those 'non-striver' people would prefer to have growth over time, in their position, wage, and skills. Humans are not static - we like to learn and we get very frustrated when we can't improve over time.

Do you think everybody finds growth and meaning in their job? Many people find it in their family, in sport, in clubs, and work is just a wage.

And yet, the Janitor in this piece can't afford to take a holiday, so is it a stretch to assume she doesn't have much free time either?!?

Maybe the fact that she's a single mom with 4 kids is a factor too. I think a janitor with a single dependent would have a more acceptable standard of living.

Are you making a modest proposal that people should go from four kids to one, post facto?

I think everyone deserves to be able to have vacation time, especially single parents.

I'm not proposing anything. Just suggesting that there are more factors than income that affect 'inequality'.

An article that focusses on inequality due to low income should perhaps pick an example with a more typical family situation.

Rewind 50 years, and it would be highly typical for a janitor to support a wife and 3 kids on HIS salary - families were larger, and mothers didn't work. The fact that a working single mom can't support her four kids today is indicative in and of itself.

Would that janitor have many vacations too? And decent college funds? Healthcare?

Yes, yes, and yes. Janitorial staff at a Ford plant in ~1965 would make enough to own their own house, vacation once a year (probably not by plane but...), and college was percentage-wise ridiculously cheaper - 30x if my calculations are correct, which they probably aren't, but hey. Healthcare would have unquestionably been provided by their employer. And all that on only a single income for a family of four, no less.

... and with a defined-benefit pension as well, meaning no need for 401k contributions out of their salary, and no risk of losing that money due to poor investment decisions.

> I think everyone deserves

To live a life free of consequences? As in have more kids, same quality of life?

How will that work?

> everyone deserves..

And who pays?

>To live a life free of consequences?

To live a fulfilling life without the constant fear of not being able to adequately provide for yourself or your offspring?

>And who pays?

Since it'd be us, collectively, as a society who would benefit it'd make sense for us, collectively, as a society to pay.

> To live a fulfilling life without the constant fear

And this comes, for free, with no obligations? What is the standard for a "fulfilling life"? One child? A hundred? If I think my life will be fulfilled by skydiving, or playing XBox, or hookers and blow - should the state pay for those as well?

> it'd be us, collectively, as a society who would benefit

What you are describing is a market, but with no feedback or control; When someone ends up a burden on society due to a poor upbringing, does "society" get a refund?

If we are paying for people to bring up children, it would make more sense if the we initiated it; rather than people self-select for parenthood and get child welfare as an individual right.

Yes, if she's hourly, because they probably won't pay overtime.

I don't think everybody finds all of their growth and meaning in their job, but I do think that everyone would like to have at least some growth and meaning in their job. Even if all you're doing is getting better at the job itself, people value mastery and expertise.

Why does the growth and change have to come from the job?

It is actually entirely fine, from the perspective of getting the job done, if someone is a janitor for forty years. There is no reason that being useful should net out to a bad life.

Right. I'm saying there's no opportunity, not that there should be a requirement. I'm saying that we're trapping poor people in a world where they are totally powerless and that is fundamentally evil.

As long as there are old, ugly men who want to have sex with young, beautiful women no matter the cost to either party, economic exploitation will remain at the heart of civilization, stunting our growth to the point of deformity.

Interestingly enough I don't think that's actually the warping factor any more. It used to be, certainly, but I think these days we've gone beyond "I would like to own people as chattel property", and all the way to "I want to be the biggest metaphorical genitalia in my particular subregion of the country"

I see your point, though it does seem like these are both extensions of the same underlying instinctual desires present in males, mainly the need for dominance (expressed in only a small percentage of the population for evolutionary reasons) and the need for sexual gratification / production of offspring. Being the biggest metaphorical genitalia around will lead to fulfillment of both of those things.

So, let's make growth and mobility possible for janitors. The whole point of the article is that it used to be, so we should be able to do it again.

That's exactly what I'm saying, and I'm not sure why people in this thread are misunderstanding it.

I thought you were saying that growth or mobility was inherently impossible for a janitor. Maybe because you describe being a janitor for 40 years as a mistake rather than as a failure of the system. Anyway, if you meant it the other way around then consider my reply some extra support for the idea.

I was just using the parent comment verbiage. Perhaps I should have quoted it.

I meant a mistake by society, i.e. it's a mistake to put people in a dead-end job, functionally ever.

Gotcha. Maybe it could have been worded better but I understand what you mean now, so it's all good.

The article describes how contractor culture is creeping up from facilities into the white collar workforce near the end. I think that's a buried lead.

You and I, maybe we made the right decisions. I'm doing pretty well for myself as a software engineer.

But when I see the misfortune of others -- people who saw the bottoms fall out of their careers -- let's just say it makes me hesitant to whistle past graveyards.

> What strikes me the most when looking at many of the comments here is the blatant disregard for human suffering that extreme inequality and the resulting poverty cause.

Apologies to pick on you without addressing your main point, but this sentence is an example of an error I see a lot yet I rarely see addressed.

Specifically, you're claiming a chain of causation where by inequality causes poverty. But in fact the relation between these two isn't causal at all, but rather logical.

(Well, not actually. Inequality is independent of poverty -- you could have no poverty but lots of inequality, or no inequality but lots of poverty. The assumption that inequality and poverty are so closely linked seems to me to be be basically assuming that we live in a zero-sum world. But let's just continue with that assumption right now, because that's not the point I want to address.)

Point is, why put the arrow of causation that way? Why not the other way around? Of course either way you put it's still not actually a causal relation -- but I think putting it the other way around is a much more useful way of thinking (mathematicians still think in terms of things causing things, because it's a useful way of thinking, even though mathematics doesn't actually have causation). I think there's something wrong with the assumption that inequality is somehow primary, and poverty just an effect.

You see this a lot in other contexts too -- people claiming "A causes B" when in fact the correct relation is "B is an example of A". (OK, that's not exactly the same error as here, but it's closely related -- mistaking a logical relation for a causal one, and putting the arrow of "virtual causation" in the wrong direction. As if someone said "all-cause mortality causes accidental deaths"; how silly would that be?) Watch out for this!

Thanks for you thoughtful reply.

>Apologies to pick on you without addressing your main point, but this sentence is an example of an error I see a lot yet I rarely see addressed.

You're not picking on me - you're picking on something I wrote. This is perfectly fine!

Would you think it more appropriate to talk of poverty and inequality being elements in a feedback loop?

If poverty is a relative measure - and as a child who grew up poor, I can assure you that the lived perception of poverty is relative, not absolute - then large inequality implies substantial poverty, for usual income distributions.

This is relating to your parenthetical, not your quibble with causation, of course. But inequality of income is different to inequality of wealth, and there can be a causal link there.

I think we experience it as a relative measure, because for most of us, it generally is.

However, take Monaco. There appears to be significant wealth and income disparity among residents of Monaco and yet nothing that we would reasonably identify as poverty.

Monaco is such a tiny country that I imagine its residents' perception of poverty is relative to a big chunk of France.

The point is that solving "inequality" is easy. Just find all the houses of rich people and burn them all down.

That doesn't mean that this would make the world a better place.

The world should absolutely try and help the poor and solve their problems, but this has nothing at all to do with inequality".

No, removing wealth to create equality is definitely not what anyone would propose as a solution.

But equality of opportunity seems a good idea.

I highly recommend this talk [0] by Kevin Murphy. Rising inequality can be explained by the rising wage premium for higher-skilled workers. In the 60s, a college graduate made only 40% more than a high school graduate; this number climbed and is now more than 80%.

The demand for, and productivity of, high-skilled workers is increasing rapidly, while the supply is not increasing very much. The masses have responded to these price signals by going to college more, but aren't actually coming out the other side with higher skills, or even diplomas, probably due to deficits in K12.

Notably, this is not a story about the top and bottom 1%. The premium has widened enormously across the board, i.e. between the 25th and 75th percentiles.

[0] https://www.youtube.com/embed/KevV_A6N-6o

Part of the issue seems to be that in America people simply don't understand inequality. I've had a fair amount of conversations with coworkers that simply didn't 'get' being poor or living in poverty because they never had that experience. At the same time they had a strong belief that they earned everything and that we live in a meritocracy.

As you said it essentially comes down to 'they should've made better choices and got a better career path!' while having everything handed to them at birth. It's the sort of thing that really made it apparent how different my upbringing was from my coworkers because I experienced that sort of deep poverty.

I agree with you. I see two threads of meritocracy in American life:

1. The meritocracy tied into Christian belief - that person has sinned (whatever you interpret sin to be), therefore of course their life is like that.

2. The ignorance of never having experienced a life where your merit doesn't influence your personal success. One sickness, accident, etc, usually starts to 'cure' this mindset.

It's not surprising that those who have bought into Rand and her ego stroking 'superman' ideology are sociopaths.

These highly individualist supermen don't need society or anyone else for their success. They stand alone. Celebrating themselves while seeing others suffer and blaming them for their suffering is simply the natural order of things. Empathy is completely absent in this impoverished binary world view of success and failure.

But life and human beings cannot just be reduced to a primitive ideology of success and failure, especially when the successful are riding on generations of privilege. It's obscene for those starting a 100M race at 90M to lecture others on achievement.

While these self centred achievers stroke their egos millions if not billions of human brains are wasted just trying to survive, their intellectual output never given the opportunity to shine. And its not just their loss but a social catastrophe because its only leisure and stability that allowed our tryst with science to begin.

I'm a big fan of Rand and truly believe that pure altruism is a fundimentally unsustainable and fruitless endeavor (considering the definition is putting in more than you get out, that's kind of obvious).

Luckily, most of the things we as a society value as being a "good" thing to do are in fact really good things to do as an individual looking out for one's own self interest.

Have you or I benefited greatly from the work of Jobs & Woz, Gates, Einstein, Pasteur, etc? I'd say yes.

Would it stand to reason that we would benefit significantly from future contributions from similar people?

Well, if that is true, we should probably support social programs like good access to education and healthcare, so that those potential innovators have fewer obstacles in their path.

Does a society that revolves around mass production tend to innovate faster when the masses have stronger spending power? Makes sense - so perhaps fiscal policies that mitigate income inequality would be wise - from an innovation standpoint (completely ignoring the moral case).

Yes, there are dumb people out there who read Rand and overlooked (a) that she was reacting to having lived through the awful aftermath of the Russian revolution and (b) was writing fiction in dystopian universes (before she got a bit too cray cray and just started writing philosophy). You can read Orwell and not think there's actually talking animals. And a lot of the proclaimed Randians happen to forget that in her most nuanced work, Atlas Shrugged, the populist movement was the lesser villain to the larger villian of crony capitalism, lobbying, and government intervention on behalf of those interests.

It's actually quite refreshing to look at socialist policies from a perspective of selfishness, because if you ask yourself the question of "will these policies benefit me even if I'm not a direct beneficiary?" - the amazing thing is that the answer is"yes" given a long and broad perspective. We shouldn't as a society make the case for these policies because of moral arguments, but can and should make the case on the basis of their impact on economic growth and the rate of progress.

Most investors prefer reinvestment to dividends for long term holdings. And that's exactly what social programs, and policies addressing income inequality, are. They are a reinvestment into the country instead of a dividend (aka tax cut) paid out annually. Let's make that case using the language and reasoning they already understand.

Also, the Randian superman does not exist and is a juvenile fantasy.

"Also, the Randian superman does not exist and is a juvenile fantasy."

I am not a follower or a fan of Ayn Rand but I really don't see any other category within which to place:

Steve Jobs, Arnold Schwarzenegger, Elon Musk ... perhaps even Donald Trump ? George Lucas ?

They seem to fit the archetype ...

Are they actually super? Do you really think they would have amounted to anything if they happened to grow up in poverty or with a poor education?

Would Superman have amounted to anything if he hadn't been from Krypton, and if his father hadn't been a scientist who was able to put him on a spaceship and send him to Earth?

Very good point. There's quite the level of priviledge to have a spaceship purpose-built to whisk you and only you out of a doomed planet.

The current status quo did amazing in attacking extreme poverty. Don't get deluded into thinking the world has growing poverty and that everything is going into the can, because it isn't.

I think the lament is that the rich is growing richer faster then the l poor is growing out of poverty.

I think this is a structural problem. When your only source of wealth is your own time and labour, there's a limit to wealth creation and accumulation. The rich isn't limited to just their own time or labour, but is able to take many people's time and labour as part of their own.

I agree and it disgusts me. The "fuck you I got mine" attitude is a) sociopathic and b) illogical. It's illogical because someone else getting a leg up doesn't mean you'll be losing ground (the pie is mostly imaginary and we can continue growing it for a long time) and additionally, a society with greater inequality is going to hurt everyone. There's only so long this can go on for. How long will your gated community hold back the rioting horde?

There's a fascinating argument in 'The Lessons of History' that suggests we simply haven't accepted, as a species, that inequality is an inherent characteristic. We are quite purposely endowed with varying capabilities.

One of the essential patterns of history is the vacillation between freedom and equality as societal ideals. A freer society is a more unequal society, and vice versa. It's a fairly paradoxical and nuanced idea because we (particularly Americans) don't tend to think of those principles as existing in tension with one another.

Furthermore, once a civilization reaches a certain threshold, it follows that a great majority of people become unproductive deadweight. Technology accelerates that deterioration.

These aren't terribly inspiring human truths, but I find they do hint at the futility of bemoaning the condition or hoping for emergent and sweeping policy solutions.

Better to empathize where possible, feel eminently thankful for our good fortune, and donate whatever surplus of time and capital we might have to a helpful cause.

Might as well give up trying to earthquake proof buildings as well because earthquakes are just an inherent fact of life.

That's doing some reductio ad absurdum on your argument but you are saying we should just give up trying to fight something that bad and give some minor help when possible, correct? We can try to do better

I'm not saying we shouldn't try. Each individual person willing to help should do so.

I'm saying more broadly that we're all probably at the mercy of an inescapable cycle that may not end until humanity is willing to cooperate perfectly at the global/species level of abstraction.

'The Lessons of History' also comments that competition is also inherent to our biological nature. There's a passage about how we usually only cooperate in order to compete at plural granularities (e.g. families, corporations, nations, religions). This has obvious implications for the tradeoff between freedom and equality.

I agree that there is a trade-off between freedom and equality but the better our technology gets the better we can draw that line. We already have decided that both extremes aren't good so you can't for instance buy someone just because you are rich, and if you become successful we don't take all of your money until you are back to the national average. We have to try and figure out what a good balance is otherwise you are just going to capitulate to whichever group pushes their viewpoint through

I'm sure that inequality is inescapable, but it's pretty obvious just by looking at a few decades of history that current levels of equality are absolutely not a given.

In this respect, I think you should look at history as a function of the maximum potential global throughput of wealth transfer as opposed to a function of time. The past few decades look more like several millennia on that scale.

Why should we look at it that way?

If you articulate this point loud enough, and gain enough support, you will suffer evil. To phrase it from a theological standpoint, "God doesn't have the discipline to overthrow Satan".

there are a lot of posters here who seem to be border line sociopaths, so maybe another thing they should conaider is that when inequality increases to much the proletariat will tend to kill the elite. nobody wins if we get there and there are signs we are headed there.

How do you kill the elite if they have advanced weaponry and can monitor all communications? What happens if they have no use for servants or consumers by virtue of having automated all their production needs? This scenario may sound extreme but it's certainly not implausible.

This reminds me of a passage in a web serial I read the other day [0]:

“Because, if you’re honest with yourself, if you step away and look at what this world is and what it’s becoming… we’re really not far from a reality where everyone is condemned to the pits. Everyone is lost. Maybe not this generation. Maybe not the next. But surely, somehow, if you cherish anyone, anything, any legacy at all, you can’t let them win, destroy it all, and erect some… mockery in its place. Rewritten history, modified, subjugated, and broken people.”

[0] https://twigserial.wordpress.com/2017/08/26/crown-of-thorns-...

This is why Trump is arming police force with military grade weapons--to protect the elite should the lower classes rise up.... That and he's using racism to divide and conquer us--make us hate and fight ourselves poor/middle class vs poor/middleclass -- if we're too busy infighting we'll never join forces and rise up against the elites...

The militarization of the U.S. police force has been going on for decades.

the police force is part of the proletariat. Those guns aren't going to be pointing the direction Trump wants for too long.

This is why the institutional racism is so important. Shooting innocent people is difficult if one hasn't already alienated himself from those people. If he has, it's easier.

Start new religion. Few sermons, overturning few tables in a temple and provoking violent retribution. Chance that elite will reorient it's aspirations from militarism into monasticism and the evil empire will be a toast.

Organize a small band of hardened cadres and wait for your opportunity. Major war not going as well as planned or other crisis, few million frustrated citizens with arms and your small cadre have a chance to take over largest country on Earth.

Combine both - thirty years of exhausting war plus new religion and you can take over everything from Afghanistan to Morocco in just few years.

Refuse violence and keep repeating your arguments despite oppression - it might take shorter then you think - like British leaving India or Soviet Union leaving Central Europe and Central Asia.

Just few examples of impossible and unthinkable happening.

> as if requiring everyone to be a member of the educated elite just to be able earn a decent living

The sad reality is that this is not actually possible. This kind of inequality is a constant and cannot be changed. There is a segment of society that cannot pull themselves up by their bootstraps so to speak, and the way a society treats and cares for these people is the true yardstick of compassion and fairness.

Maybe it isn't so sad. I'm not necessarily saying that we live in the best of all possible worlds. But human existence has been much more brutal for thousands of years.

Not just that, but it's incredibly shortsighted as well.

Human life has positive ROI, as evidenced by the fact that our species has done better in the world over time. The largest returns are highly unpredictable too - the majority of "origin" stories for the greatest contributors to moving our species forward have come from modest beginnings.

So disadvantaging large swaths of the population with poor access to quality education or healthcare biases the system against the masses, and as a result, reduces the productive potential of that population segment. A janitor today may not be the next Steve Jobs. But his kid might, if given access to a good education and not burdened by needing to accept a "safe" work choice to support his parents.

In addition, that janitor is likely putting a much larger portion of his wealth back into the economy directly by purchasing "things." And in a global economy that revolves around mass production, it would make sense that economic policies favoring the spending power of the masses would be a key factor in the pace of innovation and moving industry at large forward.

If only Wall Street can afford 4k TVs, they'll be watching a lot of upscaled 1080p content. It's not until the janitors, electricians, etc (i.e. the masses) can afford the sets that they'll see the majority of content switch over to 4k. (This is a knowingly superficial but illustrative example of a larger principle).

Even in my own case - I have a pre-existing medical condition. If it weren't for Obamacare, I wouldn't have been able to co-found my startup, which last year (first operational year) did $350k in sales, and this year looks like it may hit $700k. I'd have needed a job that provided good group health insurance, and our company simply wouldn't exist.

We like to talk in the entrepreneur community about the need to take risks to be successful. But too often the community turns a blind eye to the fact that if you cut away enough of the public safety nets, the only people that will be taking risks are the people that either (a) have a personal safety net already, or (b) have such poor judgement in risk assessment that they are destined to fail.

Social programs and policies aren't "entitlements" or things we should be doing from simply a moral standpoint - they are economic "growth" programs and make a great deal of sense if you look at the broader picture and with a perspective of 10, 50, 100 years instead of fiscal quarters.

Income inequality unchecked is going to destroy our national competitiveness the same way an executive cutting themselves a massive salary and underfunding corporate reinvestment is going to drive that company into the ground. We're cutting national reinvestment in order to further advantage the previously successful (several generations past in many cases), at the cost of the potentially future successful.

How does inequality in itself cause suffering?

If all super rich people were magically erased from the earth, would the poor have it any better?

And their wealth was distributed evenly? Hell yeah the poor would have it better, is this a trick question?

The rents would increase everywhere the next year to capture all that new cash.

If the hypothetical we're discussing is "kill all the rich", assuming the year after takes place in a capitalist economy doesn't seem like a sure thing.

Then construction would increase, causing rents to fall.

Constructions cannot increase indefinitely. Land is a limited resources.

Neither can human population. At some point everyone would have houses.

You can only distribute it evenly the one time.

No, the hypothetical was if the wealthiest disappeared, along with all their wealth.

What could this mean? For example if some rich person had a few billion in T-bills or Apple stock, when they disappeared what would happen to those? If that ownership just vaporized, the national debt or Apple's shares outstanding would fall. In effect US Citizens or Apple shareholders would be wealthier.

The only other option I can see is that some tiny percentage of the country or of Apple would disappear. But what part, specifically?

This comment to me is characteristic of thinking of ownership in far too simplistic terms. Very rich people don't actually own productive things, they just own rights to income streams.

There are certain exceptions, such as the Koch brothers who do own their companies. If those companies disappeared that would also be a net benefit to US citizens.

We should tax wealth, not income. [1]

The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3]

We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your investment returns (which then gets taxed at 15% instead of 35% for ordinary income). If you don't spend all of that $2M, you'll continue to make more money just by having more money.

By taxing income instead of wealth, we're also essentially penalizing labor and rewarding wealth. We shouldn't penalize something that actually contributes to the economy and instead ask people who have more (not earn more necessarily) to contribute via taxes.

1. http://www.nytimes.com/2012/11/19/opinion/to-reduce-inequali...


3. https://www.forbes.com/sites/robertlenzner/2011/11/20/the-to...

The real problem though isn't wealth inequality, it's income inequality. If someone has a billion dollars that's invested in various stocks, and never tries to withdraw that money, leave him alone. The day he decides to sell his investments and start buying private jets, that's the time to tax him on his income.

The argument against a wealth tax, is that it penalizes savers, and rewards spenders. Which is not what we want as a society. It's better for both the individual and for society if people invested their money into productive enterprises, instead of spending it on luxury goods.

If the goal is to provide a more egalitarian quality of life across society, this can be perfectly achieved through an income tax alone. Specifically, by treating capital gains the same way as salaries, and by increasing the marginal tax rates for high earners.

> The real problem though isn't wealth inequality, it's income inequality.

I disagree. Wealth provides financial security to an even greater degree than high current income. Wealth provides the means to move your family to a place where they will be safe and thrive. Wealth provides a means to start the next generation with a leg up, financially, socially, and academically. High current income can go away next year for most people and is often not portable to a new city or country. High current wealth is far more durable.

I don't think it's the billionaires that are the only "problem". Those with 50+ million USD also live a life essentially devoid of the concerns of financial catastrophe.

I see an incredible amount of logistical challenges in implementing an annual wealth tax (though some countries already do so), but far fewer philosophical problems, even though I am overwhelmingly likely to be one of those targeted by a wealth tax (low single digit millionaire household from 25 years of working, saving, and investing).

I think it good social policy to institute an additional amount of drag on wealth accumulation, preferably by directly taxing it (annually or upon transfer), rather than further penalizing productive income-generating activities that are already taxed at nearly 50%.

> Wealth provides financial security to an even greater degree than high current income.

Yes, but unless you're talking about a wealth tax in excess of 10%, this is not going to change. Someone with multiple millions of dollars in diversified investments will always be financially secure, unless we're considering drastic measures like a communist revolution.

Regarding all the benefits of wealth you mentioned, note how these benefits only arise when the investor liquidates his investment. Hence my point that instead of taxing wealth when it is being productively invested, tax the wealth at the point of liquidation instead.

I'm also in favor of high estate taxes, but that's an entirely different tangent.

I don't seek to eliminate wealth; that's a terrible policy IMO. Moderating its growth and concentration only slightly is far less disruptive or fraught with unintended/unknowable consequences.

An annual wealth tax of 10% would wipe out most wealth concentrations within 50 years. I think such a level is absurdly too high, though.

Looking at Switzerland as an example, I think 0.25% to maybe as much as 1% range is far more reasonable (roughly in range with their wealth taxation today) with a per-household exemption of $1MM or thereabouts [to prevent nuisance calculations over $10 in taxes].

> note how these benefits only arise when the investor liquidates his investment

"essentially devoid of the concerns of financial catastrophe" is a tremendous benefit that confers to the wealth holder without need of spending the wealth.

In the Netherlands there is about 30% tax on financial returns and an additional 1.2% tax on assets (wealth) above a certain threshold.

The 1.2% tax on assets is the 30% tax on financial returns. It's just that at some point the government was like: "math is hard, let's go shopping^w^w assume the average return in 4%".

Consider, for example, that we do exactly the opposite by providing tax shelters for retirement savings, and that this is the only way grandparents get to retire.

Yes, but 25-70 basis points of wealth tax is order of magnitude the same as mutual fund expenses. (I don't say this lightly, as I believe seizing of wealth to be a serious matter, worthy of careful contemplation before implementing such a plan.) I believe a modest wealth tax like this would have a subtle drag on wealth accumulation which is beneficial to society.

You might be interested in an essay I wrote in 2009 which mentions a wealth tax (perhaps with the government insuring and protecting declared wealth): "Basic income from a millionaire's perspective?" http://www.pdfernhout.net/basic-income-from-a-millionaires-p...

We can of course quibble about the details... Mostly just trying to shift the way of thinking and talking about a UBI...

Thanks for the relevant blog post link. My gut feel is that 6% wealth tax destroys retirement savings and that anything over about 2% in fact does so. (I'm planning on a 3.5% withdrawal rate in retirement, so a 2% additional wealth tax increases by >50% the amount of money I need to squirrel away for retirement. $24K in UBI replaces $685K of that savings need, though almost surely brings along inflation with it and I'm projecting to need a substantial multiple of $1MM to retire.)

I also think that UBI in its first version needs to be more like $600/mo/adult. It's going to be austere for sure, but a figure much higher is not supportable (and so DoA when proposed).

I disagree, strongly, with your premise.

First: wealth inequality is the result of persistent and pervasive income inequality.

Second: there are frequently individuals with very-highly-fluctuating incomes. Performing or creative individuals in particular -- actors, writers, filmmakers, musicians, athletes -- may have a few good, and many lean years. Taxing their good periods excessively would actually be counterproductive.

Taxing nonproductive wealth -- withheld or idle capital -- would put it to productive use. That's the fundamental principle of a land tax, as advocated by David Ricardo and Henry George. That concept fails to properly account for the withdrawal or degradation of natural capital, often at tremendous rates relative to the financial profit booked, and a case where natural capital is simply an off-books aspect of activities.

Ensuring that all citizens can meet the fundamental needs of life is crucial -- something Adam Smith, David Ricardo, Robert Malthus, Karl Marx, and John Stuart Mill each advocated for. "A man must live by his work" -- Smith.

> First: wealth inequality is the result of persistent and pervasive income inequality.

"it's not what you earn it's what you keep" - someone on the internet

Could you please expand on why its necessarily better for the average Joe to invest money (without knowing beforehand whats gonna be a "productive enterprise" of course) instead of fuelling the economy directly by buying goods? (honest question)

This doesn't quite go to the substance of your question; but it is relevant. At this point the US debt is pretty staggering at both a personal and national level.

The 'average Joe' is, by the numbers, consuming more than they are producing. There are two ways this can be sustainable:

1) Transfer from economically productive to economically unproductive individuals

2) Net economic consumers become net economic producers. In practice, this would almost certainly look like spending less and investing more.

The argument of my grandparent seems to be that incentivising the _reverse_ of (2), ie net producers to become net consumers, is a terrible idea that will make the fundamentals of the problem worse. That argument is good as a matter of principle. It is particularly relevant in the current context of America.

Investment is what produces more wealth in the long run, and all investment is foregone consumption. If you buy less coffee but invest in a coffee maker, eventually, more coffee will be made in total, which is the real riches of a society.

Saving is paramount to growth in the classic economic model.

Not OP, but I have an idea of what they're getting at.

Another word for savings is "deferred consumption". If I earned 1000 dollars this month, and spent 700, I have 300 in savings, or, put another way, I deferred consuming 300 of those dollars.

Now, 300 in a checking account doesn't do anyone any good but me, but if I took half of that money and invested it w/the bank at a 7%/year interest rate, I'd be investing $150/month, and once I started getting that return back, I'd be getting $160.50 back.

What that does for the bank is gives it capitol to loan out to businesses.

If someone went to the bank and got a loan of $150, with a promise of paying it back at 9% in a year, they'd borrow that $150, pay the bank back $163.50 in a year, and the bank would pay me, the original creator of those funds, $160.50. They'd get a profit of $3.00, which is the difference between loaning that money out at 9%, and paying me back at 7%.

If the bank couldn't create money out of thin air, and doesn't fraudulently loan out customer's deposits, the only way to obtain a loan would be if someone else deferred consumption.

Obviously, banks can create money out of thin air (by loaning out funds on deposit), and when they do so, they don't have to give the money back with any interest, so they do. They can loan out $150 at 5% (cheaper than anyone else, perhaps!) and they can keep all of the profit, or $7.50. (more than twice the earlier profit of a non-fraudulent loan.)

I suspect OP subscribes to a more "savings-based economic growth" theory, in contrast to a "consumption-based economic growth" theory.

I obviously am an advocate of the savings-based approach vs. consumption-based approach.

That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.

The crash is an inevitable response to the boom, and any policy that wants to have booms without crashes is a logical fallacy.

I hope this helps a bit! I can gather some more sources if you're curious, but the basic gist is in accordance to the Austrian school of economics. Read more on that, and you'll encounter much better explanations than mine!


That said, the banks + federal oversight encourage money to be created out of thin air, which makes it easy to spend money, and makes it impossible to incentivize deferred consumption. So, everyone spends money, no limits on it, and we all get to ride the waves between economic booms and economic crashes.

Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?

I'll accept that some of this is tax shenanigans to defer US repatriation... but only some of it.

"Honest question -- how does the Austrian school reconcile the slow growth of the US economy during and immediately after QE with enormous corporate warchests such as Apple's cash stockpile?"

I'm not an Austrian economist but I don't know why it's so far fetched that Apple is simply saving the money for the inevitable fire sale ...

Why buy Disney today when you can buy Disney and Ford tomorrow ?

Why buy Disney today when you can buy Disney and Ford tomorrow?

As a shareholder, because that money could be put to productive use today, rather than waiting for a future which may not come. To my mind, that's why the pressure for Apple to pay a dividend finally built up to the point that Apple now pays dividends.

I'm sure austrian school purist would tell you that a storm is coming quickly to correct that insanity, if it was one.

Thus Apple hoards cash because it believes the bubble will burst? Is that the Austrian explanation for Apple's behavior?

(Still an honest question. I've never understood this about the Austrian school.)

Im no expert on Austrian school, but what little I read is that they have an organic view of economics, and that anything that deviates the natural flow will be corrected eventually. If the money is too cheap, it will eventually become really expensive to correct itself, and Apple might be preparing for that. Or it might be causing it.

To be fair, Austrian school of economics is more occultism than anything else in the field, while Chicago School Economics (Milton Friedman&co) have more accepted models and economic ideas. The 'neoliberal' model as far as I understand can't really explain corporate cash hoarding. The situation today is very unique: historically cheapness of money could easily provoke inflation, which would promptly push any cash hoarder to spend.

If the U.S. had a small spike in inflation the whole thing could change quickly.

"So, everyone spends money, no limits on it". Not true, there are limits (e.g. in the form of leverage ratio caps) and not everything borrowed is immediately injected back into the economy (that might bump inflation too much).

Imagine if banks couldn't 'print their own money', then businesses would depend on people investing to get funding and demand far outstrips supply. So we'd have economic contractions on a massive scale.

How does a regular bank print money?

The parent comment alluded to this. They operate in a trust-based network with other banks. So when they add X to an account (e.g. a loan) and that person tries to spend it by transferring it to another account at another bank, the bank is effectively in debt with another bank. This inter-bank loaning system can run on this virtual cash mechanism as long as the person who borrowed X manages to pay it back over time.

You can probably guess this puts banks in a very privileged position. Hence the high requirements for being able to start a bank of your own, and the government regulation intended to control inflation and fraud.

The argument against income tax is that it penalizes earners, and rewards not working.

Sure, that is a reductionist argument but so was yours.

The real argument against taxing wealth is that it isn't really feasible; you'd just encourage banking in other countries or buying up a lot of land.

I also agree that capital gains being taxed at a lower rate is insane and makes sense only when you realize that's how politicians tend to get wealth.

Assuming wealth is earned, why would you want to tax it? It already was taxed when the individual was working.

Inherited wealth is another matter.

Are returns to capital earned?

Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.

The original capital was. The returns are already taxed. Are you proposing that returns are taxed at some other different rate? At some point the market won't be attractive enough.

The returns to capital (capital gains specifically) are taxed at a much lower rate than income, and they're not taxed at all until they're realized, which means they can be timed to offset losses. Then the government is effectively handing out a subsidy to people with lots of capital, even more so than the lower tax rate.

"The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.


Is there a limit you see in taxes?

Do you have investments yourself? Maybe you donated all of your investments to the government after realizing how little you were being taxed?

I most recently converted my investments into a house deposit. In effect, I propped up inflated house prices. It'll take a while before I have a significant investment position again.

Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.

> But by collectively enforcing mandatory taxes we can make government work.

It's arguable whether giving government more money results in government working better.

By some accounts government is a demonstration of waist and an exercise in excess.

Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".

> At some point the market won't be attractive enough.

We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.

I think the main argument is previous taxation.


That is an argument; I just don't think it is a particularly good one. In particular, I think it muddies the water a bit between various forms of things that are taxed as capital gains.

That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold.

And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains.

It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all.

It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work.

And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.

You can have a tax system by applying it to earned, applying it to accumulated, or by doing a little bit of both.

Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan.

Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends.

As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.

Check your assuption.

Am I understanding -- you're saying it's better for money to sit in an investment account, than spend it on goods/services locally -- thus applying it to local economies? Money doesn't do anyone but the holder any good sitting in an offshore account and even then it's really not doing them any good... do they really need it if it's not being used for something important/worthwhile..literally just collecting dust (and dividends?)....

The real fuel of the economy is money being spent on Apple products, walmart, amazon, --hell even yachts/airplanes (somebody has to build those)..

To fight income inequality, I think we need to tax at the point of investment.. --if you buy anything you're taxed on it..this includes investments/stocks/bonds/etc... just flat consumption taxes... give a UBI to offset the poorer folks...

But have a mandatory flat tax...do away w/ the IRS/income tax. If you're not a U.S. citizen and not getting UBI sorry--but you're sales tax will not be subsidized by UBI--and if you're here illegally/unpapered -- you're now a tax payer congrats we can stop trying to deport everyone since now we make more tax money off of them!

Chicken or the egg? It seems equally intuitive that investment drives the economy. Investment gives companies capital, capital to spend on employees and services or products from other companies (which in turn spend it on employees or other companies). In this way, money makes it way into the pockets of consumers who then spend it on products and services, and the endless cycle of economic activity continues.

But I'm not an economist and am somewhat skeptical of macro-economics in general, which seems a bit like reading tea leaves.

Even if you if you don't buy into supply side economics, I think "Money doesn't do anyone but the holder any good sitting in an offshore account" is somewhat misleading. Savers and investors, through loans and capital, certainly help someone.

It seems equally intuitive that investment drives the economy.

The economic principle you're looking for is "velocity of money". If you think of a GDP in terms of a multiplier in how often/fast money circulates, then you can analyze whether investment or spending is more important.

The second economic principle to look into after that is "marginal propensity to consume".

Investment gives companies capital

The vast majority of money people invest doesn't go into giving companies capital, though.

It goes into people selling pieces of companies to each other. The very first time the share was bought, the company got some capital, and the vast majority of money people invest is not going into initial purchases of shares.

Small nit, but I'm not sure I'd prefer one (or a few) investor(s) over a larger, decentralized group of investors. Those are two very different power dynamics.

A world with a few super-heavy investors may not be as effective as a world with a more distributed (democratic) investor base. Fewer investing eyeballs, more tunnel vision.

For the sake of completeness. Top capital gains rate is 20% + 3.8% medicare surcharge + state tax. In a high tax state like California, you're paying 37.1% on investment income, not 15%. Also, top federal rate is 39.6%, not 35%, plus state income tax, you can pay as high as a statutory rate of 52.9% in CA, or around 47% after deductions.

And more to your point, we already have a defacto wealth tax in the US because inflation is not deductible. If you hold a bond paying 2% per year, and inflation is also 2% per year, you pay tax on those gains even though you've made a post-tax loss in purchasing power. At 2% long term inflation, the defacto wealth tax works out to be the 2% multiplied by your capital gains rate, or from 0.47% to 0.74% for high earners depending on what state they live in.

Nit: That 52.9% number isn’t quite right because you get to deduct your CA income tax against your federal income tax. So in practice even if you made a billion dollars in California, you’d pay $133M to the state then get federally taxed 39.6% on the remaining $867M, giving you an effective tax rate of about 47%.

Good point, updated. It would be further impacted by AMT and the standard deduction thresh-hold, but that's a good estimate I think.

> we already have a defacto wealth tax in the US

We have actual wealth taxes, too, in the form of property taxes.

Maybe we should stop thinking taxes are the solution to inequality. "Cutting all the high trees so the forest looks even".

Taxation is both effective, and far less invasive to markets than many other solutions.(like minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs). So that's why it's brought up so often.

What are some solutions you're aware of that are equally effective and less invasive?

> Taxation is both effective, and far less invasive to markets than many other solutions.

I don't really agree with this. Taxes are distortive and doesn't necesarily help inequality. It might even make it worse. But also, there is taxation as a progressive system of government funding, as there is taxation as in "You will never own more than X, because the government will seize it".

In terms of solutions, I'm not a professional economist, but as I read different authors and books, it really seems like we don't understand why we have inequality in the first place. Even Piketty's Capital feels more like explaining that its going on than why. So I'm jitterish about any solution that doesn't help resolve the core cause, for the which there doesn't seem to be consensus

The CEO's pays is a small but funny example about that: CEO's pays increased enormously after by a law thought to dimishing their returns, made their salaries public, and increased CEO's ambition and bargaining power. The very idea to dock their pay increased it.

But those are small bits at the macro-economic level.

They don't have to be. A "death tax" for example that takes 100% of a persons estate at death would be both simple, non distortive, and in terms of equality level the playing field every generation.

Two arguments against a death tax: the inability to apply it, and the results of an effective one:

In Argentina, the state collects a heft tax on property transfers when the propietor dies. So basically all property is donated from parents to children in-life.

Poorer property owners that cant afford or dont know better, or people stricken with tragedy in an early death are likely the ones that pay the most of that tax.

Conclusion, 'death taxes' are paid by the poorer half and hence worsens inequality.

On results: lets say that I were to tell you that all the money in your bank account is going to be worth 0 tomorrow. Are you going to invest that money in long term capital growth? Are you going to donate it to the government? I'd say the most reasonable reaction is drugs and hookers all the way!

The latter is definitely not great economic policy.

Actually forcing people to spend their money before death would be really good for the economy (despite you picking illegal activities for the negative connotation.)

And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.

Inherited wealth is anathema to meritocracies.

> Actually forcing people to spend their money before death would be really good for the economy (despite you picking illegal activities for the negative connotation.)

Well, this is were we clearly disagree. I am very certain that if i knew that i was going to die in 6 months, id be burning all my money into some kickass 6 months with "Burguers" and "Premium Tinder accounts". Consumption vs Investment is a core battle between Keynesian and Chicago School economics, so it depends on which you subscribe.

> meritocracies.

I actually do wonder who argues in favor of meritocracies. Sure as hell not liberal-economics.

"Get what we deserve? I hope to god we don't get what we deserve" - Milton Friedman.

> And the real solution isn't a 100% tax but 100% tax over some lower amount, say $50,000 along with lowering the yearly gift tax exemption.

This just compromises the original concept of equality of opportunity: if you do that, anyone below 50k will be in an unfavourable position relatively. So what you did with that limit is imposing something on a group, intended to be a minority that wouldnt be able to repeal such rule. The fact that these rules end up like this has been extensively exposed by people like MF.

I'm no Friedman acolyte. Are you actually opposed to meritocracy?

I think the concept of a meritocracy requires someone to decide what is meritocratic and all goes to hell from there.

Its like saying that you are going to base justice on "protecting good people and punishing bad people".

I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.

>Its like saying that you are going to base justice on "protecting good people and punishing bad people".

That's exactly what our justice system is... Sometimes we fail at abstracting our morality to the courts but that's exactly what our goal is.

>I can be swayed otherwise if I was shown what a meritocratic system would look like, but most of the times I heard that word it was as a criticism of laissez-fair capitalism that would rarely claim to be meritocratic.

So your logic is "people usually use meritocracy as a knock against capitalism" and then establish your premise? "meritocracy is bad"? Doesn't make any sense. A perfectly meritocratic system doesn't exist and probably never will but systems which try to promote equality of opportunity are generally good. Our defense of "meritocracy" comes from the Rawlsian veil of ignorance. Behind it, it becomes obvious you would want to live in a society which provides a relatively equal chance for everybody and which, if you seize that chance, will reward you.

Yes, I look forward to being barred from sharing the wealth that I've accumulated with my children and other loved ones. Why should they have any advantage, right? After all, you probably think I didnt do anything myself, right?

Who are you to make that decision for someone?

And, frankly, you're delusional if you think an estate tax is non distortive. The entire meaning of wealth would change for the elderly.

One cannot treat wealth like a zero sum game. More importantly, we need to rid ourselves of this growing crabs in a bucket mentality, because we all suffer when we hold society's best back. Is it "fair" in the sense of absolute wealth? No, but people shouldn't be so focused on their neighbor's plate then theirs is full enough that they can spend hours complaining online about how much more money the 1% have. Perhaps we should redefine fair wealth distribution to rightfully consider merit, which is shockingly absent from the majority view here.

This thought experiment isn't about looking at your neighbors plate, it's about incentives for us as a society. I think the question to answer for yourself is whether you think everyone should start with a fair playing field or not and the implications such a tax would have on how you structure society to ensure that everyone gets the same shots at a good life.

There is substantially more value for all of us in allowing more resources to be distributed to those who are able to do more with them.

And your definition of "fair playing field" is skewed because, again, you treat economics as a zero sum game. You are making the classic mistake of conflating equality of outcome with equality of opportunity.

In any case, this class warfare inspired policy of exhaustively taxing wealth won't fix a mismanaged budget or a broken scholarly culture. You are simply punishing the people who seem to have benefited most in the context of the system while ignoring merit.

Further, it is absolutely absurd to suggest that modern people in poverty dont live "good" lives. They have refrigeration, air conditioning, entertainment, access to the internet, emergency healthcare, they live like kings once did. Once again this is a problem of looking at other peoples' lives and concluding that only in comparison you deserve more for simply existing.

Taxation will not fix what is fundamentally a cultural problem.

Aside: Look at how absurd the entire argument is! We dont question in absolute terms how our poor are living, we focus entirely on the fact that the wealth is distributed unevenly. Like children complaining that their classmates have extra candy. The whole mindset is petty.

> There is substantially more value for all of us in allowing more resources to be distributed to those who are able to do more with them.

Don't you think that inheritance is a pretty bad way of achieving that? After all, traits like intelligence (which probably dominates the ability to use resources efficiently) are only about 50% heritable.

When intelligence is literally the trait which enables development of science and technology, who in their right mind would not spend money on children of intelligent adultst with a 50% success rate? Dont you realize someone on the high end of the IQ curve would be exponentially more beneficial to society if given resources? How much have a couple hundred visionaries shaped our daily lives?

Why dont we spend more federal funds on gifted children? We watch the trainwreck that is our school system as we fail to match pupils in other countries at senior high school level. The issue is, again, not taxation, on the contrary, we are not spending enough where it counts because of the greed of the entitled.

>You are making the classic mistake of conflating equality of outcome with equality of opportunity.

Outcome and opportunity is a false dichotomy. But if we were to go along with it, isn't a tax on inherited wealth a great way to maintain equality of opportunity?

I think you're reading a lot into the comment you're replying to that wasn't there. Sounds more like he's coming from a rawlsian perspective of what constitutes a just society.

I think you are right about leaving something to our children. It's a very natural human (mammal!) instinct, but there are a lot of middle ground between don't leave anything and leave them an empire.

About merit, I think I know about merit. If you take the public transport at 5:30 in the morning you will see a lot of people that go to work for years for a ridiculous small pay and, that if they stopped doing that, society as we know would stop. That, I think, have a lot of merit.

On the other hand, in any standard corporation, you can find people with huge wages, with company car, that never pay a lunch because they put in the expenses account and that employ its time in political movements to try to go up in the ladder.

Of course, if you think that markets give everyone whatever they deserve, or you have not been in the public transport at 5:30, then, what I'm saying doesn't make any sense.

basically, your argument is that you know better than the market. Let me assure you, this isn't so. Source: grew up in the USSR.

Markets are optimization processes, so, very powerful tools.

Leaving the metric to optimize to the optimization process doesn't look a good idea, the same way it's not a good idea to leave the thermostat to choose the temperature.

In my experience, the only people that think that the thermostat it's who should choose the temperature, it's the people that feels very comfortable with the current one and don't care about the comfort of the others in the house. Or, maybe, also the people that grew up in a house without thermostat and thinks, correctly, that anything is better.

I really like your analogy, but what did you mean by "anything is better"?

Yeah, sorry, it was not well done. I mean, anything is better than a house without a thermostat, even a house where the thermostat is the boss.

"Non distortive" You can't imagine a way a tax like that would change people's behavior? People would give their money to their children before they die, or spend it all on themselves, and maybe some would work less because they were previously motivated by building up assets to give to their children.

I never understand why someone working less is considered a bad thing. If a person works less that leaves a vacuum for their services which will then be filled by another market actor.

On an individual level - correct. On a society level - not true anymore as you are reducing the effective size of the workforce.

If you think the economy is a zero-sum game then it's not a bad thing. If you think wealth can be created and that society benefits from a population with a high labor force participation (like Scandinavia for instance), then it's a bad thing.

With the assumption that the State is the best ward for your money. Do you fully trust the State to be willing and able to stamp out inequality?

Why must we 'fully' trust the state? We just have to trust it more than the markets.

We first need to know that the current taxes are fully spent on the right things and that the "pork" spending is not actually larger than the amount needed to satisfy the needs expressed by the current movement.

States have killed many more people than markets have.

This strikes me as too facile to be particularly useful.

First, it's much easier to get a rough idea of how many people states have killed than markets, to be sure. But many wars are fought and nations are conquered (and, for that matter, created) for market-driven reasons: oil, tea, diamonds, slaves, to name a few egregious examples off the top of my head. Millions of people have died throughout history that would not have if states were not acting to protect, expand, or create markets.

Second, while it's probably harder to get a rough idea of how many people states have saved than markets have, the number is not inconsequential. I certainly wouldn't suggest states are forces for unrequited good--there's copious valid criticism of them across the political spectrum--but I would suggest that they're hardly forces for unrequited evil, either.

Why does this get down voted? Even if you don't agree with the idea; it has been proposed in a calm and reasonable manner.

Care to explain?

It's pretty hard to discuss such things without people getting emotional and defensive. I think people look at something like this and say "but that's not fair I earned all my money"[1]. They don't look at it and think about what the world would look like in such a scenario, how they might have lived differently, how they would instead spend their money before death (perhaps making the world a better place), or how they might have less concerns about needing to pass on money to their children because their children would be "just fine" in the society they created under this system.

[1] ignoring the whole subject about luck and what it means to earn something when two equivalent folks just have different dice rolls go their way, etc. Or especially in the context what it means to earn something when you just inherited it. (I have a bunch of friends who have inheritance coming their way and just totally expect it, they lead very different lives because of that than those I know who don't have that.)

It wouldn't actually work. Rich people end up finding loopholes to any tax scheme. Even if that loophole is expatriating.

It would have negative consequences besides that. Many, many people do things for "legacy". It's a powerful motivator. Taking away all wealth would eliminate something that encourages good long-term decision making.

It would hurt people who aren't the rich people. What would happen if Sam Walton's net worth was taxed when he died? Massive disruption to Walmart employees at a minimum. How would the net worth be calculated? Well, given his net worth, he'd be irresponsible not to have an army of lawyers and lobbyists making sure the number is as small as possible.

So, given the above, the idea isn't that simple.

Finally, there are ethical implications to that sort of policy. It implies that citizens earn at the pleasure of the government, not that the government rules by the consent of its citizens.

Hmm... wouldn't that just result in people transferring the assets to their heirs before they died?

Could do. That might be captured sufficiently by the gift tax though. A bigger issue could be evasion through establishing trusts and the like.

The U.S. has a "unified" gift and inheritance tax. If you give away $5M while you're alive and die with an estate of $5M you (1) pay no tax on gifts while alive, and (2) your estate pays tax based on an estate size of $10M at the time of your death. There are a few wrinkles (e.g., (1) annual per-person exempt gifts of $14k/person, and (2) you do start paying tax on gifts while you're alive once total gifts pass a certain value), and gifting during lifetime has some advantages (e.g., getting growing assets out of your estate while they have a lower value), but that's generally the way it works. Gift tax and inheritance tax operate on a "unified" basis.

Then you just donate the money to institutions your progeny would just happen to enjoy: your alma mater, the country club, private schools, etc. Segregation would still be maintained through astronomical real estate prices.

Your position is that increasing the estate tax would do nothing to help segregation? Or that it wouldn't do enough and we should also do more?

I'm not confident enough to make a definite prediction, but it seems plausible that it could make some forms of inequality worse. Attempts to level out education, for example, have resulted in the truly wealthy finding other outlets (private schools, expensive zip codes) to create the educational experience they want for their children.

In education we never actually integrated though. A few locations were integrated but only for a little while. It seems more like that the truly wealthy found those outlets regardless of what else was happening in education. It also seems strange to say: we shouldn't tax rich people because somehow, through a plausible method that I can't explain or predict, it will make rich people better off and poor people worse off.

I was referring to public schooling in general, not racial integration specifically. Integration among social classes is arguably getting worse now. You only go to school with the kids of bank vice presidents if you can afford to live in the same neighborhood.

> Taxation ... minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs

None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.

All of these actions decrease efficiency, and none of them have a significant positive impact on poverty.

I just don't see the point of insisting we "do something!" when none of the similar "solutions" we've tried have made for any positive change, and all of them have measurably cost us in efficiency and growth. The "do something!" model of governance is cruel and deficient; if it would be better, all things considered, to do nothing, then do nothing!

Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality), mostly by truncating the bottom of the income curve with a floor. You can get rid of poverty pretty much by definition if you have sufficient income transfers so that everyone's income is above the povery line. E.g. if your national poverty line is $13k, if you guarantee $13k incomes, no more poverty, at least by that measure. Works a bit better in practice if you also have an integrated social worker system, so you can figure out e.g. if someone is homeless due to purely lack of income or mental health or other illness and direct them appropriately.

> Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality)

Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put on the economy.

Well before any of these programmes became so comprehensive, Norway, Denmark, and Sweden were very productive and comparatively equal.

I think we can agree "when you give poor people money to spend, they don't end up spending more money" is an extraordinary claim. And so should need an extraordinary amount of evidence to back it up. Can you point me in the right direction to some more information about how this could possibly be true?

I don't see anyone upthread making that claim you are challenging. Could you point me to the comment you meant to respond to?

Many of the comments up thread said redistribution doesn't work. Working is defined as reducing poverty levels which is literally measured by how much money they spend. And redistribution is literally giving poor people money.

I.e. giving poor people money doesn't end up with the poor spending more money.

Maybe I'm misunderstanding you, but are you claiming that SS has had no impact on poverty rates?

Funny that comparison with the trees can be applied in a different way - you do need to cut high trees if you want to grow smaller trees in the same place.

This spring I cut very high pine because it shadowed my entire backyard and I want to grow more smaller trees on the perimeter.

Rush, Trees (1978) : https://www.youtube.com/watch?v=8_D0wkLyCXE

  There is unrest in the forest
  There is trouble with the trees
  For the maples want more sunlight
  And the oaks ignore their pleas

  The trouble with the maples
  And they're quite convinced they're right
  They say the oaks are just too lofty
  And they grab up all the light
  But the oaks can't help their feelings
  If they like the way they're made
  And they wonder why the maples
  Can't be happy in their shade?

  There is trouble in the forest
  And the creatures all have fled
  As the maples scream 'oppression!'
  And the oaks, just shake their heads

  So the maples formed a union
  And demanded equal rights
  'The oaks are just too greedy
  We will make them give us light'
  Now there's no more oak oppression
  For they passed a noble law
  And the trees are all kept equal
  By hatchet, axe, and saw

Sure, I should have stated my assumption: there will always be inequality in a capitalist economy.

But you can have varying levels of inequality and the extremes are probably not healthy. My suggestion above wouldn't create perfect equality, it just fixes the broken incentives we currently have that reward us for hoarding wealth and penalize us for earning it.

I would suggest that we currently don't do nearly enough saving as a nation, on average, and probably shouldn't further disincentivize that.

Those who can afford to save do, those who can't don't. There isn't someone out there making $50k/yr raising a family saying "if capital gains rates were just a little lower I would save so much of my paycheck". I on the other hand am going to put my money in the markets whether the capital gains rate is 15% or 30% because I have used up all my tax-advantaged account space and still have extra money.

It's not as simple as "those who can afford to save, do". There are also a huge number of people living well above their means, and the percentage of people with no savings is much, much higher than the percentage of people who don't make enough to save.

The F-150 is the best selling vehicle in the US, and they're certainly not all going to people in the construction industry.

And $50k/yr is more than enough to save money in most parts of the country. That's a good salary.

> ...there will always be inequality in a capitalist economy

What economy doesn't have inequality?

One with a single AI in place of Stalin and every non-prisoner?

I'm all up for reducing any tax, at any point for any reason whatsoever.

This is a very interesting analogy. Because I've learned in ecology that from time to time a forest needs a good fire to allow for new growth.

Its a Marxist Forest.

That's a terrible analogy. Taxes don't destroy wealth.

Taxes might or might not destroy wealth, but government surely does.

Could we rephrase your previous comment as "Maybe we should stop thinking government is the solution to anything"?

Taxes are what give fiat currencies their value. No taxes, no fiat currency. If you don't believe me, consider why the US dollar has value at your local store and the Monopoly dollar doesn't.

The reasons fiat currency has value are far more complicated than just "taxes". If that were true, people would only convert their money to dollars as needed to pay tax, but obviously that's not the case.

There is an inherent value to a currency system, and that value amplified by network effects. The government definitely anchors that network (through many mechanisms, not just taxation), but there's still a lot of inertia there regardless.

> through many mechanisms, not just taxation

What other (governmental) mechanisms do you view as anchoring the currency?

"If you don't believe me, consider why the US dollar has value at your local store and the Monopoly dollar doesn't."

Well, the primary reason is that US dollars are declared by government fiat (hence the term) to be "legal tender for all debts public and private". You can't legally refuse to take US dollars (in the United States, obviously ... other countries give their own currencies a similar status). That seems only tangentially related to whether the dollars come from taxes or printing presses.

> "legal tender for all debts public and private"

Government accepting payment for public debts in legal tender... is taxes. They're the first market maker for a fiat currency. It's certainly possible to just run printing presses, but that typically leads to hyperinflation and the replacement of the currency.

Thats a terrible to reason to have or increase taxes. If you eliminated paper currency altogether in one fell swoop, the next day you would have another one replace it, be it bitcoin, gold or cigarettes.

Something underlies the value of bitcoin (proof of work), gold (rarity, utility, beauty, portability), cigarettes (addiction). Think through what underlies the value of fiat currencies like the US dollar. I'm with the chartalists [0]/Modern Monetary Theorists [1], believing that a government's ability to tax is the anchor for the currency's value.

[0] https://en.wikipedia.org/wiki/Chartalism [1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory

Have barely scanned these articles, but even if I agreed that tax collection is what gives currency most of their circulatory value, thats no reason to have taxes, let alone making them higher.

Something's got to circulate. There's not enough bitcoin+gold+barter-able commodities to go around, so fiat currency is necessary to the economy as it stands. If you agree that taxes give currency most of its circulatory value, you have to figure out what else would give it value if taxes were taken away.

there is more than enough bitcoin/gold/barterable commodities to go around.. they are divisible objects like any other. And any bank could run its own bank notes, as it was in the past.

Having taxes to have circulatory value sounds pretty dumb to me.

If that's true, offshoring and tax havens would have no benefits.

I don't follow your logic. Offshoring has benefits independent of taxation. Tax havens have value in proportion to taxes, independent of the other effects of taxation. How does an effect of taxes on currency value diminish either?

Taxing wealth is a deeply invasive bureaucratic nightmare. Having individuals be legally required to produce a balance sheet of all their assets for the government every year seems quite problematic. This would get into issues of having people be required to re-establish the fair price of all their collectables, etc. It's also a deeply dangerous attack on retirement. Instead of being taxed on the gains from your wealth, being taxed on the wealth itself requires much larger returns to live off the income from an investment. I think it might make sense to have a higher inheritance tax with fewer loopholes to resolve the issues of intergenerational wealth. It's probably very important to protect the mechanisms of retirement.

This is basically the point of the estate tax: people are already producing a balance sheet of all the wealth for the purpose of distrusting it to the heirs. So tax the wealth when the estate changes hands and all the accounting is going to be done anyway.

My parents are going through updating their will. They have a collector car. It might be worth $50K, probably worth $70K, maybe worth $90K. They have a house. Might be worth $350K, probably $450K, maybe $500K.

Provided their estate will not hit the federal exemption (it will clearly not) or state exemption amount (ditto), there is nothing to compel them to prepare a balance sheet with fair market values.

But how do you make a wealth tax fair if there is no need to prepare a reasonably accurate balance sheet? If it's a yearly tax the loopholes allowed without an accurate balance sheet are so extraordinary that it's reasonable to assume they will cause more problems than the tax fixes.

(I'm agreeing with you, by the way.) My response above was addressing/objecting to a claim that accurate balance sheets are already being prepared upon death. There are huge practical issues with valuing illiquid assets.

Much wealth, though is held in relatively liquid assets or in illiquid assets with valuation processes already established in a lot of cases (real estate valuation for property tax assessment as an example). You won't be able to get perfect values on artwork, collector cars, and other one-of-kind collectibles.

That doesn't make a wealth tax entirely unworkable, though, in my estimation.

I think if a loophole exists for a collectible asset class wealth will accumulate there as part of tax planning. This can easily lead to bubbles and unfairness through asymmetric tax avoidance. I think it does pose deep foundational challenges for a wealth tax. Tracking income is far easier and many of the most common abuses defer tax rather than permanently avoid it. Under reporting of a hard to track quantity would result in less taxes permanently in the new system and measures to avoid it would represent a new level of reporting to government that many would find deeply invasive. Given all these flaws are the benefits large enough?

Not once per year. The ongoing balance sheet is highly problematic. Any assets that don't need to be updated would represent giant loopholes and potentially areas where bubbles would be inflated as capital moves into assets that grow whose growth isn't adequately accounted for.

I agree, but how would we enforce a wealth tax? Seems like it'd be really easy for rich people to hide their money in assets.

What about just printing money? Not ideal obviously, but there'd be no way to avoid the inflation "tax".

You can do a wealth tax by targeting the big ticket items. Rather than invade everyone's home with tax collectors to guesstimate how much every couch cushion you have is worth, you can hit probably 98% of wealth by just taxing the calculated value of owned land and buildings (which is already being appraised for property taxes in most states) and stocks, bonds, and options.

So we already invade your privacy to appraise the former, and the later has to be be public because companies need to know who owns what shares and the trading platforms need to associate users to shares they own. Both can be used by government to provide ownership details.

You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already. That way private business executives cannot tax haven their own stuff under an LLC, and companies like Google / FB are punished for hoarding hundreds of billions in offshore accounts they have no intent to spend or bring back into the states.

Of course, this is all saying "government should do X" which is just for entertainment, pretty much. The US is in no condition to act in the will of the people at all right now anyway, so its all speculation - you would have to fix the broken democracy first.

Once you start targeting public market holdings, it would just create an even stronger incentive for companies to remain private. Soon enough you'd have secondary markets for high rollers dealing in shares of private entities, which would be completely inaccessible to the average Joe - and congratulations, you've increased inequality. In fact, this is already the situation in technology investments to a large extent. Companies remain private for longer to avoid post IPO regulations and restrictions, and the only guys who can invest are the insiders who get the opportunity through their network. The companies are only pumped to the public when the ascent in value has pretty much diminished (SNAP, anyone?).

> you can hit probably 98% of wealth by just taxing the calculated value of owned land and buildings (which is already being appraised for property taxes in most states)

Henry George proposed this in the 1800's [0]

[0] https://en.wikipedia.org/wiki/Georgism

And David Ricardo prior to him (George credits Ricardo lavishly, though I seldom see this mentioned).

And Milton Friedman after both of those

> You would also want to wealth tax companies for total global cash-on-hand assets they have as well. Those are also required to be public record already.

I'm not familiar with this being a requirement for foreign, private companies. (Reading between the lines, I'd expect a marked increase in investments in foreign, private companies under such a taxation scheme.)

Inflation harms wage earners farrrr more than capital holders. Capital holders can put it into assets that rise with inflation. IMO it's one of the driving factors of inequality of the past few decades.

Those with capital / assets can leverage up, borrow more money, and then pay it back with lesser inflated dollars.

Unexpected inflation moves money from people with nominal assets to people with nominal debts. Basically the very rich(who hold most nominal assets like bonds) to everyone who has a mortgage.

Also the IMF's stance on inflation and inequality is moving from hyperinflation to sustainable inflation leads to reduced inequality but there aren't advantages to moving to a lower inflation than that.

Most wealthy people don't keep their wealth in currency. Profit generating entities keep on generating profit even with inflation - input prices go up but so do sale prices. Inflation had a bigger affect when it changes, rather than when it is staying steady. If anything a higher inflation rate would mostly hurt homeowners because prices would be less supported by cheaper money.

Avoiding inflation due to printing more cash would look like not holding cash. Your proposal would tax people whose lives involve mostly currency, not other assets. I think it would actually have the opposite of the effect you intend.

There are many ways to protect yourself from inflation. And inflation has also devastating consequences to all assets and incomes.

For starters you could just swap the tax rates: make income tax of 15% and capital gains tax of 35%.

That is such a simplification of income tax though. For example a family of 4 making $50k/yr pays about $40 in federal income taxes. If that same family make $75k it goes up to about $2500. Both of those as a percentage of income are far below 15%. Hell, I made more than the SS max last year and my effective tax rate was below 15%. See Mike Pence as another example, guy made over $100k and had an effective rate of something like 12%.

> Not ideal obviously, but there'd be no way to avoid the inflation "tax".

Buying property?

Wealth tax is a good idea that’s very hard to implement effectively. Many countries have tried it only to give up on it (Germany, Sweden). France has a comprehensive wealth tax but it raises less than 2% of total tax reciepts, suggesting it’s not doing much. It’s very difficult to prevent the wealthy from finding ways to hide wealth.

This is part of the reason some want to tax consumption more aggressively. "Wealth" that isn't used is really just a collection of expensive large numbers. Sooner or later, when that wealth is used, it can be taxed as consumption and/or real property.

Unless "use" includes stock purchases and political donations, you'll just hurt the poor even more. The problem with wealth concentration isn't buying houses and cars, it's buying power.

Except it doesn't work that way because cost basis gets reset during inheritance which is a huge give away to the most wealthy families. It is also the reason for an Estate Tax.

The heirs would presumably be buying homes, cars, vacations, food, night clubs, etc.

I completely agree, but for totally different reasons.

If a major function of government is to protect our property (land, savings, boats, cars, etc...), then it could be said the more property we have the more we benefit from government protection and the more we should pay.

Another function of government is to facilitate trade. For this service, ALL transactions should be taxed (including payroll).

If you look at the totality of this, the actual tax rates would be nominal for every "normal" individual, thus it wouldn't necessarily be regressive. We're talking about a 1% tax rate on property and ALL transactions.

To me this makes sense on so many levels. It captures money from everyone participating in the system and it captures it relative to the person's level of benefit from the system.

The hardest part would be tracking. However, if the tax is nominal and the punishment for cheating is high, then it seems like it wouldn't need outrageously intrusive controls.

Transaction taxes drive vertical integration (as this reduces the number of bites at the apple along the supply chain). I don't think that's always a bad thing, but it does violate a principle of fairness that I hold, which is that substance matters over form.

If Starbucks owns coffee plantations, roasters, logistics, stores, the cup of coffee you get might be untaxed prior to you paying for it. If a competing coffee company performs the exact same steps, except uses third party farmers, logistics, roasters, and rents their storefront, that cup of coffee was taxed 5+ times before you bought it.

I don't see the societal benefit to encourage vertical aggregation like that.

I get what you're saying, but profit creates the same motivation for vertical integration.

If there are two layers in my coffee bean acquisition I'm losing the profit made at every layer, so of course I would want to own those layers and capture that profit before we even add a 1% tax.

But vertical integration comes at a risk, which is why only the biggest players will attempt it.

Now, add a 1% transaction to those two layers. You're now losing 2.01%. But at each layer you're already losing 15% net profit made by your supplier. I'm not sure you would change your perspective on vertical integration for 2% when you're already leaving 15-20% on the table.

Agreed in large part, though it still incents high hurdles for new upstarts to compete with successful incumbents.

I wonder if we wouldn't see a shift in grocery store form with the substance remaining as today.

Rather than buying a bottle of Coke from Star Market, you might be buying a consigned bottle of Coke, with Star Market serving only as the marketplace (avoiding Star buying the bottle from Coke), and where Coke is paid directly by you as part of the transaction. Grocers operate on a terribly thin net margin as it is. They would have a lot of incentive to avoid additional transactions in the supply chain (and there's some societal benefit to keeping grocery prices low).

I'm not so much arguing against [though I do oppose a transaction tax] as I am brainstorming how the implementation of such a tax would create different behaviors in the market to compensate or avoid the tax.

Capital gains tax in the US is lower than income from labor, but it is also worth considering the effects of inflation on the investments. Your 4% return is not really a 4% increase in wealth, you need to also take out the 1.7% your investment lost that year to inflation. In real terms, you wealth only increased 2.3%.

If you want to tax wealth gains as ordinary income there should be an acknowledgment of inflation. In practice you end up with roughly the same amount of money going to taxes and a much more complicated system. In this example it would raise the investment income tax revenue by 33%, not the 233% difference in tax rates. But the index fund 4% and the 1.7% inflation were pulled out of orifices and our predictive capabilities are so reflected.

Easier said than done -- not all wealth is liquid. What if someone has all their wealth in one or two real estate properties? Or a family heirloom gem collection which is worth a lot but which they refuse to sell (and otherwise are not wealthy)?

Easy, you do what is done with senior citizens who owe property taxes. The taxes accumulate without being paid and are collected when the property is transferred to an inheritor or buyer.

Tax land not wealth! You can't move or hide land, unlike other assets.

Rather than tax wealth, tax spending: no taxes on your income, no taxes on anything until you spend it. That way people will have more money to invest in companies allowing the economy to grow and create wealth, and we kill the ludicrous idea that consumption creates wealth, rather than construction. It does have the issue that this hurts poor people, but that is easily solvable with a direct transfer of (electronic) cash.

Your argument hinges on the erroneous belief that more investment is always better. But in order to create value, investment capital needs sound investment opportunities with positive expected ROIs. If there is too much capital and not enough opportunities, supply and demand dynamics cause the ROIs to start to drop until investing becomes value destructive. That's when the market for investment starts to resemble a Ponzi scheme.

At the end of nearly all civilian investments, stands a consumer with their wallet out. Take them out, and you are left with unused infrastructure.

We don't have a capital problem. Capital is available, it's cheap, and it is flowing.

Taxing wealth may be counter-productive. The way our economy should work is that you get rewarded for the wealth you generate. If you cannot store the value for the things you've done, there would be no incentive to produce.

A janitor working as a contractor may not have the chances the people in Kodak had back in the day. But at least he/she still gets to work a shift, gets paid for overtime. There is nothing stopping that person from pursuing their passion and create wealth. The reward of the wealth may be monetary or not.

On the other hand, let's think about the "privileged" workers. The more you get paid, the less life you have. In our current state of capitalism, if the employer pays you a lot, he/she wants to own you and use you until nothing of you is left. The current system doesn't care about long term, it's all about the short term. The people who break are replaced, and because people break, the workload gets heavier. But there is an unlimited demand of new workers fresh out of school willing to work under the same conditions. The work starts in the morning at 9 am, you can't be late, but you can't leave until the work is done. You go home, sleep for a few hours and start again. Sometimes you work on weekends and you definitely take a laptop to your holiday (if you have one).

If you work this hard, generate wealth and you know that if you stop working, all that you've endured would be for nothing, that would be inhumane.

By "park" you mean "invest" in (hopefully) productive participants in the economy. It arguably makes sense to seize wealth that's being invested in ways that are harmful to society and divert it into investments that are good for society, but imposing taxes based simply on the quantity of wealth won't accomplish that.

Wealth, or more generally, rent-producing assets:


Broadly, I see three categories where taxes could be applied:

    * Wealth (accumulated capitol)
    * Income (acquired capitol)
    * Consumption (utilized capitol)
The problems with income and consumption based taxes include:

    * Double taxation (which side is taxed, both?)
    * Inequality / Regressive (generic taxes target the poor/middle)
    * 'sitting on capitol' isn't taxed
A good fresh start is probably necessary.

    * Taxes exist to fund the public good.
    * Taxes should target undesired (by the community) behavior
    * Incentives should target desired behavior
    * You are what you measure and how you react (punish/reward)
With the above in mind, I am entirely for two types of taxes.

Income: A maximum income target and a 'minimum' income target. These two numbers would be plugged in to a single non-linear formula that applies to all. The more someone makes, the more they're taxed (they would always take home more, but for every dollar over they'd take home less of that dollar). B.I.G. could be built in to this formula as a third number (mostly raising the floor); but to me the minimum number already sounds like it is this number.

Wealth: Some savings is a good idea. Having a year or two of runway (disaster preparedness). Saving to move in to a house. Investing* in active things (stocks/bonds/etc) for retirement. Owning your own means of production / transportation / housing (within reason).

Wealth is more static, when wealth suddenly shows up it should be taxed as income. When it's held over time it should be taxed at a much lower rate, but still taxed (every period, IE year). Society should agree on a divisor that is fair, and how much different types of wealth are discounted. 'wealth' (divided down) would thus be figured in to the total tax liability on the compound curve I described in the income section.

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