Are super-rich people just better at making money?(pudding.cool) |
Are super-rich people just better at making money?(pudding.cool) |
haha that's my first thought when I hear about "charities" by the billionaires in the Anglosphere world... sounds like some tax dodging loophole with huge marketing budget and a website. Why don't they just pay their taxes?
If you invest in some stock, and if that stock is moving in your favor, you should increase your bet or leverage more. If your bet is moving against you, cut down your bet size. That's what experienced traders do--just reduce your position by 50 percent; inexperienced/retail traders tend to increase their position, when things go against them.
But the poor vs rich game ended up with the poor person going up to $1000 and the rich person going down below $100.
I recognize it's just chance... but it's funny that the results directly conflicted the author's point.
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
Basically create a society with some high income spread, say 100x. So a low salary would be like 40k as a floor, and 4milliom as a ceiling. Wealth can be capped via a similar scheme.
That way, people are highly incentived via capitolism just as they are now, but wealth is constrained.
Imo it's not that the mechanics are wrong, it's that the parameters are ill-tuned
I’m suggesting that villainizing the rich is silly. Even in a perfectly meritocratic system according to OP, there’s going to be massive inequality.
The issue with applying the yard sale model is when testing against real world markets, almost no market follows the predicted distribution curve, which imo implies that something about the model is incorrect, ergo cant possibly be the reason for continually losing deal on vinyage watches.
Many markets follow pro basketball player distribution, and unless you believe that steph curry is getting lucky on every shot, implies different model.
Coin flip is pure luck, so there’s no accountability in losing the game. Hence, redistributing the wealth sounds like a fair idea.
The catch is that some people actually believe in luck, so they believe accountability doesn’t count.
Plus, taxing the rich will (and rightfully so) make them leave. And then, who will pay the taxes? Who will create jobs? How many people will lose their jobs?
There is hazard game dice where you have 50% chance to win
But people who run those "casinos" figured many years ago that they will use e.g 90 95% payouts
So this way the longer you plsy, the more you lose cuz even if you bet the same amount twice and win once and losr once then youre behind
Money is better at making money. The system is designed to do this.
If you're making money with your labor, you are at a gigantic disadvantage compared to those who are making their money by investing capital.
There are also a lot of bad actors at the upper end that are facilitating a global ponzi scheme at our expense, and they will be bailed out over and over again because they've made it impossible for competing banks to enter the market through lobbied regulation that came as a response to their bad behavior.
Read up about the creation of the fed, what they've done, how many bailouts they've done, how many people were held accountable, you'll find it always ends in their favor. Behaviors that would send individuals to jail for decades are avoided by paying a small piece of the proceeds they get from those frauds disguised as penalties. Its been baked into the system.
Worse, many people immediately jump to something along the lines of "well that's people being greedy and its a downside of capitalism and we have to do something about that".
The problem with those people is, they don't know what they are talking about because its not capitalism, you often get monopolies in socialism, and while capitalistic societies are driven by a division of labor, socialistic economic systems are driven by corruption, and what are our the major issues right now? Corruption.
I used to kinda think along the lines of this post. However, when examining the performance of top investors for example (eg Buffet, Templeton, Marks etc) it is clear it isn’t mainly luck.
That's really all there is to it.
I like that the coin flip game illustrates the concept of compounding interest, but it doesn't model wealth creation at all.
Most new ventures aren't I-win-you-lose, they're we-win-or-I-lose. Wealthy people really can take bigger bets more frequently like the article suggests, but it's not necessarily at the expense of everyone else.
A more accurate illustration would be a game where each round you have a choice: bet 25% of your money or recieve $0.30. After each round, you must pay $0.25 to play again. Some people start the game with no money, some people start with $1.00.
If you think this game through, you'll still end up with super wealthy outliers and bankruptcies, but the players in the game actually have some agency.
Intuitively, it seems like everyone is making a fair bet because you're equally likely to win or lose. If you have an initial net worth of $1000 and flip a coin you're equally like to gain or lose $200 and your expected net worth after the flip is still $1000 (50% chance of $1200 or $800) so it's a wash, right? However their simulation kept having me end up poor which confused me, so I ran the same simulation in a Python script. What I found was as the number of flips increases your net worth approaches zero! I found this surprising because if the expected net worth after a single flip is unchanged, I would expect this to stay true for multiple flips. But based on simulations, against my intuition, it seems like this is actually a bad bet in the long term and you'll always lose money. This is still true even if you start to skew the odds and give them a 51% chance to win the coin flip.
So after some googling I found something called the Kelly Criterion which calculates whether a bet is good or bad based on the gains and losses and chance of each and decided to plug in these numbers: https://en.wikipedia.org/wiki/Kelly_criterion#Proof
For the game in the article, the rules are that the poorer person bets 20% of their net worth on a coin flip, so these are the variables:
f=20%
p=50%
q=50%
a=20%
b=20%
r = (1 + f*b) ^ p * (1 – f*a) ^ q
= (1 + 0.2 * 0.2) ^ 0.5 * (1 – 0.2 * 0.2) ^ 0.5
= 0.99919967974
If you forced a rich person to play this same game of repeatedly betting 20% of their money on a coin flip they would also end up losing all their money! When you frame it like this it's obvious that having a poor person play an unfavored gambling game and deposit their losses to a rich person is going to favor the rich people. This doesn't seem like a critique on capitalism or inequality, it's more analogous gambling at a casino.
----
However I am still confused how you can have a game where the expected gain after a single match is 0%, but when playing multiple rounds your expected gain is negative (this is what plugging numbers into the expected value formula in the Kelly Criterion wiki seems to prove). I find this counterintuitive and hoping someone can explain this.
People don't like this but not only does it work well it's often more efficient in general.
This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
Besides the economy can very well have zero sum game elements to it
You basically admitted that the zero sum property has little bearing on the outcomes we're scrutinizing here, and so the argument is ultimately the same. I'm not sure how the piece is dishonest simply because it dispenses with an apparently irrelevant premise.
I disagree that it's irrelevant. If the game is zero sum, the winners must succeed at the expense of everyone else. The game mechanics themselves produce unfair outcomes since nobody has any agency in their own outcome. Therefore, as this piece argues, the rules should be changed.
On the other hand, my example provides an alternative explanation for wealth inequality in which risk taking and inequality are inextricably linked. In my game, nobody loses because someone else won.
Far fewer people would find these game mechanics unfair, even though the final distribution of wealth is the same. It is not obvious that the rules should be changed.
I could adjust my game mechanics to make them look even more like the real world (as I see it): Every time someone takes a risk and wins, the non-bet reward should go up by a penny (e.g. from $0.30 to $0.31). In that situation, one would expect all the players to encourage risk taking because they know it benefits everyone whether they're taking risks or not. They might even conclude that the risk takers should have a chance at being wealthier than them because of these effects.
Using the zero-sum game leads the reader to a conclusion based on a false premise and I feel that was intellectually dishonest.
Note: one can still argue that the rules should be changed because wealth inequality itself is a problem, but that's not what this article is doing. It's arguing it based on the fictional rules.
It may happen from time to time because people are curious and benevolent. But, in general, if catalyzing that change has a cost, then the society depends on some people sacrificing their own good for everyone else's. In other words, the benefactor will have paid to catalyze it, but they'll only get an "equal" share of the gains to the people who sacrificed nothing.
I think you probably don't mean "equally" though. You probably mean "fairly". And it's probably true that "sacrificing" 20% of a billion dollars is a lot different than 20% of ten thousand dollars. But rates of return do tend to decrease at scale, maybe not enough?
Personally, I think taking from the catalyzers isn't optimal. It's also petty to worry that they benefitted "too much" from their actions. If we must tax, tax land and consumption. I haven't thought it through, but maybe a 100% estate tax, minus some reasonably capped life insurance for spouses and dependents, would reduce some of the feelings of unfairness that people experience.
If we each start with one red and one blue pen, but I prefer red pens and you prefer blue, we (voluntarily) trade the pens and each have two of our favourite colour. Net gain!
Edit: if you run it, I'd love to see and play with it!
When you have concentration of power due to concentration of wealth, the society will become unstable and undemocratic.
So even though wealth isn’t zero sum, wealth inequality is a problem that needs to be addressed for long term stability.
Religious extremism isn’t coming mainly from the wealthy. It’s dominantly a lower-strata southern thing, with notable metastases all around the country, yet it plays strongly in the US system.
That some wealthy co-opt the extremists doesn’t change the above.
So even in this stupid simulation, it just doesn’t work, as people get wealthier they actually risk less.
This whole article is Marxist academic bullshit, eaten up by Marxist upper class tech 20 year olds in this thread.
Rightly, I think. The marginal utility of the next dollar is higher when you have fewer dollars. (I think of it as roughly a 1/x curve, but I have no solid data for this.) This means that, if I bet 50% of my available money on a 50/50 chance, I will lose more utility with a loss than I will gain with a win.
But the more I have, the flatter the curve out where I am. So the richer I am, the more I can make that 50/50 bet, not just because I can take the loss better, but also because in terms of my personal utility, the rewards and losses are more evenly balanced.
Also note that if you have a 20% loss, it takes a 25% gain (on what you have left) to bring you back to even.
Someone with a net worth of $1bn is not going to brazenly bet $500m because hey, who cares it’s only half my net worth. That’s ridiculous.
Just like this entire post and discussion. It’s a frustrated poor intellectuals self explanation for why they are unsuccessful.
It’s also the line of thinking that when taken to the extreme killed around 130m people in the 20th century.
No, you're wrong. Me finding gold or pretty much anything of value does mean that it did materilize from heaven. Many more examples...
If you lived in a sparse, lonely place, with a bad economy, maybe joining a church starts sounding like a good idea.
Instead of judging people consider yourself lucky.
As an example, look at the Global Methodist Church, which is liberating bigoted congregations from the United Methodist church. So far, it’s main (but not exclusive!) strength is in the south.
1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts.
2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome.
As others have pointed out this is really not a good description of the economy as a whole due to its zero-sum assumption.
However I think it’s a relatively useful analogy for the stock market and how other passive investment markets work.
Passive investment is a larger percentage of the economy than ever before and is increasingly how the “rich get richer.”
A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction.
Another solution is to disrupt passive investment markets. The one that comes to mind is rental housing. If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income.
A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.
You're overthinking it. Sweden made renting out apartments unattractive without all this sophistication, they just regulate the prices and keep them low.
Price controls leading to shortages and rationing is basically the microeconomics version of the First Law of Thermodynamics. It has had the same result literally everywhere it has been tried.
The solution lies in the supply. Always. If you want more people to have more of something at an affordable price, you have to make more of that thing.
[0]: https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere.
But it’s not because of “rich people”.
It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.
An even more simpler solution would be to take away the all wealth of rich people and divide it among all people. The calculations would be a lot easier. Taxes are complicated.
Look it up, pretty interesting story. They did have to build a strong border protection force to prevent people from trying to escape the country, but the country still lasted 69 years.
Bezos is wealthy because Amazon investors want to give him money; they don’t want to give you money, so if you had the Amazon shares they simply wouldn’t be worth anything.
Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.
There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0]
The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes.
[0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.
In a normal distribution, the shape of the distribution comes from a "random walk" left and right from a large number of steps of varying size.
In a lognormal distribution, on the other hand, the random steps are not additive but multiplicative: e.g you multiply the previous figure by a (Gaussian) random variable many times.
This seems to reflect economic reality that people make decisions proportional to the scale of their current wealth. If I make 10k, it would take 2k extra to entice me to a different job. If I make (or lose) 10% on an investment, etc. It's all multiplicative.
The lognormal distribution also has a fatter "right tail" than a Gaussian, which is what we see IRL.
> What can the yard sale model tell us?
Literally nothing. It fails to model any part of the actual system. It’s not just lacking complexity, it’s a facetious model lacking in any real aspects of anything involved. There is no choice, no intelligence, no reason. Just random chance.
92% of the US including 86% of people without homes in this country have Internet access. We can all make incredibly informed decisions these days. Better informed decisions than ever possible by all the wealthiest royalty in human history, in literally seconds.
The author could have easily Googled the price for the exorbitant watch before they bought it. That’s entirely on them.
Right now, the middle class is getting slammed with taxes. They make almost all their money through salary and get taxed heavily, while the super rich pay either no tax or a maximum of capital gains, so almost 40% or less than upper middle class in terms of percentage.
Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
Some thoughts
- consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
- something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
If economic activity is valuable, but leads to inequality, then you need some framework to trade off the value created vs. the social benefits of greater equality.
If you make a model like this, for different parameters of speculation vs. value creation you can then test what the most socially beneficial rates of tax are.
More tax will lead to smaller but more equal economies and laissez-faire shouldn’t be optimal.
I would just want the model to acknowledge the non-speculation part, because many of the things I buy are from spectacularly rich companies, but that are genuinely useful to me.
Luck is part of it, but there are so many other factors here. When they converge, we often end up with people extremely good at making money. Under capitalism and in principle, this isn't a bad thing. It means they're generating outsized benefit for society. However problems quickly emerge: with economic power comes market inefficiencies. The wealthy can use their power to buy out competition, under-price them (below profit), out-market them, and leverage their efficiencies of scale and bargaining power to maintain a permanent moat. We are seeing all of this occur to an extreme degree in the modern software space. Frustratingly, anti-competitive laws have been on the books for a century, and are sufficiently broad to use. It's just that U.S. politicians lack the will.
Existentially, I believe that power corrupts. Billionaires are billionaires because they created a lot of value for society. Great. But once they're billionaires, they can control the destiny of countries, and this undermines democracy and greater social outcomes. I believe therefore that a balance must exist between deterrent effect which occurs with aggressive redistribution (and the effect is undeniable), and preventing the emergence of ultra powerful individuals.
Are you forgetting the thousands of employees that are enabling them to become obscenely wealthy?
And I don’t buy the “deterrent effect” argument. IMO discouraging billionaires from acquiring more is a good thing and opens the door for other people to step up.
It really reminds me of Eve Online. It's been a many years, but once upon a time when I did play it, we were looking at different sensor jammers. And the ones that looked like the worst were actually the best, because they couldn't be countered. Most worked like a +1/-1, but one applied as a fraction. So if the jammer cut a value by 50%, the counter to it added 50%. But adding 50% doesn't get you back to where you started, the opposite increase is 100%. 20 - 50% = 10. 10 + 50% = 15, not 20.
Another one is for the property I live in, we're pushing back on the government about losing a subsidy of ~33%. The property management company, managers, accountants kept sending letters saying this will cause prices to go up 33%. And I keep having to explain that the notices are wrong, removal of a 33% subsidy increases prices by 50%, not 33%.
Of course "real world" games, which don't nerf winner-takes-all, wouldn't be much fun to play for the non-winners.
You can become rich by following the rules of expected value and compound interest.
Backtest this against the population and tell me that people today wouldn't be richer if they made sound financial decisions based on the information at the time. I know I would be richer. The kicker is, wealth inequality would rise along with median wealth, because compound interest. This is so unpalatable for some people that they argue against sound decision making and reduce wealth creation to coin flips.
Hard work is worthless, just ask people in the third-world work 18 hours for a pittance to survive.
Of course luck may require certain knowledge, wherewithal and timing. You don't win a lotto without waking up at the right time, driving to the right shop and buying the right ticket.
I'm laying in my sofa all day waiting to get lucky. Still, after all this time, still no luck. Maybe next year.
Without super hard work, you won't get rich.
> However, talent was definitely not sufficient because the most talented individuals were rarely the most successful. In general, mediocre-but-lucky people were much more successful than more-talented-but-unlucky individuals. The most successful agents tended to be those who were only slightly above average in talent but with a lot of luck in their lives.
https://blogs.scientificamerican.com/beautiful-minds/the-rol...
The latter is the elephant in the room, IMO: once you hit 1 million dollars net worth, even a very conservative investment aka government bonds at 1% yields 10.000$ a year, at 5 million dollars it's 50.000$ a year, and at 10 million dollars, it's 100.000$ a year. Basically, once you have reached ~5 million dollars of wealth, you can afford to do whatever the fuck you want (and a bit earlier, if you are willing to risk a bit more and go for stocks). You can choose to not work a day in your life any more and chill out in Costa Rica sipping pina coladas every day, you can go and work for some charity without payment, or you can start up a company and not care how much money you make - as long as you're not actually losing money or spending over the yield of your investments, you literally cannot fail any more. You and your children won't ever experience being poor or homeless.
Super-rich people have it even easier. When you have 100 million dollars or manage to reach billionaire status - why not throw a million or two into some startups each year? Best case, you end up striking a goldmine and making ten times that, worst case you're out of a million dollars but your other conservative investments will make that back in a year.
Returning to the simulation, the coin experiment can be explained using different model: Imagine position X on a line: |A A A A X B B B B B B B B B B B|, X can move either left or right by the amount specified by the rules of the game. But since one person is poorer the boundary | is closer to X. X is doing a random walk, so it will move with exactly the same probability e.g. 5 positions left or 5 positions right. But for the poor player 5 positions to the left means he is left with no money to play again, and for the rich player it means he lost some of his advantage. If the difference is huge like x100 the poor player has basically no change at winning at all. So this game is only fair if A and B have similar amount of money.
I do appreciate an interactive example that doesn't have a canned result :-)
I am not sure I believe the reasoning in the title but the effect they show is interesting. Money is power, even in a heads or tails game
If I have 10€ and I make 1% profit, I've made a whopping 1€. Now I can buy a few potatoes.
Someone with 1M€ makes the same amount of profit, now they have 10 000€. That's a good few months of living expenses for the regular person.
And this is not even taking into account the access to different people and resources you get just with having enough money to get into the right circles.
At low monetary amounts (like 10 euros), it's easy to make 1% profit. At high monetary amounts like 1 million, it's quite hard to get 1% profit - much harder than at 10 euros.
Therefore, to quantify the risks, the absolute amount invested must be compared, not just the return %. At $1 million, they took 100,000 times more risk than the $10 investment.
Who would make better allocation decisions than some arbitrary elite that happens to be rich? Without those riches, where is the surplus money that can be invested into innovations? Right now, the masses could pool some small amounts of money like $10 and have millions and billions to start new companies.
There was 'Ask HN: How might HN build a social network together?'[1]. I am not aware that something has been started, despite all the skills most likely being available. Without somebody fronting the money to make even more money, how can people be motivated to create progress?
Sounds like you're just ill-informed? There are shared washing machine rooms in a lot of apartment complexes, although it is getting more rare in newer apartment complexes. You can usually book a slot and then you do your laundry. There is absolutely no shortage of washing machines though.
They do (with obvious drawbacks of anything illegal). And the black market prices are awfully high.
April 17, 2028.
But hey, internet for you lazy proles, pull yourselves up by your shoelaces etc.
[0] - https://wir2022.wid.world -- The richest 1% captured 38% of all new wealth since '95, the bottom 50% captured 2%.
value is generated using both capital from the already rich, and labour from the poor.
Over time, labour isn't increasing in productivity. It's capital that's increasing productivity, such as by improving labour's efficiency.
With this in mind, why is it that the rich shouldnt be the ones to capture the new/increased productivity? After all, it is their investment that would make such productivity possible. If you had told the rich that their investments would not actually gain them profit (because labour captured the increases that produces the profit), they would not have invested in the first place.
One way to break out of this cycle is for labour to provide something more than unskilled labour and merely using capital to produce goods/services. For example, research and development, knowledge/skill from education, etc.
Good point, but...
> We can all make incredibly informed decisions these days.
You need more than internet access to make good decisions. I cannot imagine living without a house or healthcare, eating food picked out of a dumpster behind a supermarket, and then being criticized because I made "less-informed" decisions even though I nominally have internet access at a library where the patrons scowl every time they see me in their peripheral vision.
People won't be able to magically make better informed decisions even with access to the information if they are too busy working three jobs to afford food, rent, or healthcare.
And yet there were numerous stock investing experiments in which random choice delivered similar or better results than respected investment specialists.
It's almost as if, at the end of the day, we don't actually make "incredibly informed decisions".
the original argument differentiates between "can" and "do".
It is a form of "victim blaming" - they could've made good decisions, but because they didnt, the outcomes they had were "self-inflicted".
So you could extend the yard-sale model and include a rule that after each round, each $ will turn into $1.5 with some probability.
Guess what? Now the rich players can't just risk higher stakes in the coinflip games, they will also have more opportunity to introduce more money into the game through value creation.
So that would make the outcome even more extreme than the standard yard-sale model, not less.
Therefore, the fact that new options exist at the yard sale is itself a form of wealth.
I really like this angle, although the value of 'something' can vary for different people.
Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and beyond the ~40% levels we're already facing...
And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of the groups most likely to be "paper millionaires" and hence screwed by such a system.
Is it worth it, just to live in a shockingly civilized society under a highly functional government?
Don't get mad at average americans trying to make the world a better and more fair place, get mad at google and facebook that make several million dollars off the code that you write and kick back a pittance of a salary, and coordinate with each other to keep your compensation low. Even at $400k a year, you are literally being underpaid.
Did a 70% top-tax bracket force any of the uber-high earners to stop earning money because they didn't want to give 70% to Uncle Sam? No, the super rich will always want more money/property/dividends/etc no matter how burdensome the tax bracket they fall in might be.
"If your income is 30% above the average income for this area or the national average (whichever is lower), that >30% is taxed at this rate..."
So then you can't have rich folks disappearing to less-taxed areas. It could make rich people communities where they all stick together.
looking forward to the future where currency is time (the movie In Time), and we can tax rich people to death.
Additionally they wealth already taxed in a previous era, and is currently taxed in this era any time they spend it via sales tax.
If of course you are spending all your money on personal groceries as a billionaire, then I’m 100% fine with not taxing you.
It has also been spending much more on education over the past decades[1]. With very little to show for it.
[1] https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...
Teacher pay is still abysmal, especially considering the fact they are expected to act as guardians and even security these days. And you'll never get better outcomes if you can't attract smart people to actually teach, no matter how much you pay the superintendent.
US public education should be called what it is, a government sponsored day care.
Looking at historical and present data, I can be absolutely sure that the state will mismanage that money in almost every country.
I’m Portuguese, my government is collecting more ~ 25% taxes than it collected 6 years ago when the current ruling party got into power. Almost everyone (left and right) agrees that public services and administration are much worst. So, it begs the question: why giving the government even more money, will solve anything?
There are only two groups when it comes to economic status: labor and the capital-owning class. Labor is anyone who derives their income from their labor and goes all the way from the janitor to doctors and professional athletes.
Th idea of the middle class was invented to sow division with the “lower classes”. I mean look at your comment. You assert the “middle class” is getting slammed with taxes. Some (not necessarily you) imply the lower classes are somehow getting a free ride or are lazy. This is the propaganda.
We live in the wealthiest nation on earth. People without housing or food security is completely unnecessary. Charging people $1000/month for insulin, without which they would die, is only that way for corporate profits. Think about that.
There's different ways to categorize things - lower-class, middle-class and upper-class is a sort of intuitive way which throughout history has made some sense, somewhat, with different names. However, I get that maybe it's not the most useful currently, because there's such a ridiculous divide between upper-class (rich) and the other two, that we, belonging to the bottom 2, should band together to bring change favorable to us.
Like the phrase "tax the rich" makes people think of their neighbor George who as a nice house or even themselves if they make six figures. Nah man, tax the person who can literally buy the NBA and still be a billionaire.
California has the highest income tax at 13.3%, the highest federal tax rate is 37%.
That makes the top income tax rate 50%.
Imo we are well bellow the Laffer curve.
While interesting data points, I'm not seeing an argument that they are paying enough, which seems to be your implication. Maybe it should be 90%. Maybe it should be even more.
It's funny how they always exist, even in countries like the UK and France which in reality have taxed them out of existence, and payscales are absurdly compressed compared to the US.
Careful what you wish for, you are someone else's "super rich".
You're making it sound like billionaires are an endangered species there. :) Last time I checked there's more than enough billionaires living in the UK and France[1].
FWIW, I think multinational corporations that engage in all manner of legal tax avoidance are probably more of a problem than individual billionaires.
The “tax the rich more” line is a little naive. The world is a different place after the Rothschilds figured out how to shield their wealth from monarchies. It’s easier than ever to offshore wealth, remember the Panama papers that promptly disappeared from the news?
The “solution” of global governments is a cure that’s likely far worse than the disease.
It’s a complicated situation. A progressive VAT tax that is consistent across jurisdictions would be a good start. The tax code (at least in the US) needs to be thrown out and replaced. Monetary policy and taxation via inflation is also primitive and in dire need of reform.
Whine there’s certainly room to address fair taxation rates we should seriously consider how we spend tax revenues today. A 1.5 trillion omnibus is being rushed through Congress that’s full of pork and special interests. We just sent however many billions to a country to fight a war that has nothing to do with us.
So we spend all this money and of course it’s not enough. People say “more! Tax the rich!” Without considering the reality.
The "rich pay the majority of taxes" is an excuse.
Now in the US I probably don’t have to tell you where most of the money goes - hint military - so more rich folks money into the governments coffers - what industry do you think benefits the most from a policy like this?
There is more than a little nuance here:
- governments are notorious for being called out on supposed inefficiencies.
Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson.
- "rich folks are good..."
I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways.
I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.
The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.
It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".
The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos.
Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada.
These two different groups aren't working on the same problems.
If you ask me, and you accept overt governmental control of everything, the best thing to do would be a system of openess about ownership, so that ownership of everything can be seen by everyone - with no murky legal instruments.
If you have the information about who owns what - and everything is owned by people, individuals, even if they hide behind legal and corporate instruments - you can then consider addressing what would be an equitable may to proceed.
My guess would be that something ludicrously minor like a 10% wealth tax on the top 0.01% of wealth owners, would cover us indefinitely.
I feel if it was simple it would be fixed?
It might be helpful if we could construct metrics for social function that more clearly showed when we approach extremes that interfere with business or social functions.
They are two different problems.
Y'all worry about these millionaires and their money, yet here you are, hoping to learn the secrets of success from Y-Combi companies... and become wealthy yourselves.
There are three places that capital can come from:
* the state, but we have voted year in and year out for tax cuts and spending rises, so the state is bankrupt. Not only is it not a source of capital, it is a major customer for it
* normal individuals saving and those small amounts being aggregated by banks etc. But rampant (and government supported) consumerism means most people are also consumers of capital not sources of it. Incidentally an example of the opposite of this is Germany where ordinary people save a lot more and don't have OTT mortgages and credit card debt. Mysteriously they have very few billionares...
* Billionaires. Which given the US (and UK where I live need their capital AND cannot get it elsewhere are able to charge a premium for it and cannot really be taxed etc without pain spreading all over the rest of the economy.
But if you try and tell people to spend less, save more, pay their taxes and accept less services in order to have a better, fairer, more equal, ultimately richer life they bulk...
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
Serious critics aren't suggesting we do away with capitalism, they're suggesting that it has negative externalities that can be corrected by better taxation. The focus on billionaires is exactly right, because as the model in the article shows, taxation can suppress the extreme inequality that results.
(i) it solves the capital accumulation problem (ii) you can accommodate the hoarding by guaranteeing people a job at the living wage, which then injects the right amount of new money, both temporally and spatially, to offset the hoarding.
Tax has nothing to do with raising money. Tax is about reducing the capacity of the private sector to hire people so the public sector can hire them instead. If there is unemployment then the public sector hasn't hired enough people or taxes are too high/ineffective.
It's never about money. It's always about stuff.
Here's how it works[1]
[1]: https://new-wayland.com/blog/how-the-job-guarantee-fixes-mai...
There is (more or less) a fixed amount of power.
Taxes doesn't raise money, but they do redistribute and decentralise power, making it harder for the very rich to dominate economic and social strategy for their own ends.
Jumping to the conclusion that "taxing the rich" could solve anything is completely wrong. You would just make things more expensive and add extra incentives to take jobs abroad. It doesn't matter that the model is too simplistic, the problem is that this model is too far from reality.
A country whose inhabitants have no say in its internal politics is called a tyranny. It's more than time to see the current workplace the same way.
Oh yes, the "they don't know what's good for them" argument.
You are treating the government as if it had even the tiniest bit of fiscal discipline, as if it says, ok, we only have $x coming in, therefore we can only spend $x this year (or alternatively, we plan to spend x, therefore we're obliged to collect x in revenue, but no more than that.)
US government hasn't worked like this in decades. Our debt is out of control and growing exponentially. The government has the green light to spend spend spend without any caution whatsoever. Joe Biden has a 4000-page, $1.7 trillion spending bill working it's way through Congress right now that nobody has read. Do you think any politician actually cares how it's going to be paid for? Do you think there are enough ultra rich people in this country, that even if taxed at 99.9%, will dig us out from a 30+ trillion hole?
That never happened. https://mises.org/library/good-ol-days-when-tax-rates-were-9...
For example:
> According to investment bank Credit Suisse, the fraction of global household wealth held by the richest 1 percent of the world's population increased from 42.5 to 47.2 percent between the financial crisis of 2008 and 2018. To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
https://www.scientificamerican.com/article/is-inequality-ine...
If the entire monetary system is fake, why do they need 40+% of my paycheck?
Funnily enough Britain just demoed that for everyone. the prior pm tried to reduce taxes a ton and everything nearly went to hell in a hand basket.
So at least we can be confident the taxes are actually doing things.
This is known since at least Marx, and still it doesn't change. This makes me very sad.
OP has made a fundamental mistake in their logic. Poverty and earnings aren't based on "coin flips".
A common claim but never accompanied by actual evidence.
You think this because the super rich want you to think this. Actually, it's not hard and there are some good ideas floating around (e.g. more inheritance tax, don't let them get loans without taxes againt their illiquid wealth). Does it require a change of laws? Yes, but that's the whole point of democracy.
Right now, the rich are extremely incentivized to remain "poor on paper", so we should remove those incentives.
Some rich person says “teehee, I actually have no money! It’s all in (some country)!” and the US gov says “oops! Guess you really are poor!”
They take a letter of the law instead of a spirit of the law approach with taxes. If they start seizing mansions because clearly they have no money and the only way they could afford it is through ill-gotten means, people will start paying. Police already take cash from the wallets of random people because they assume it’s illegal—meanwhile the IRS knows full well where your money comes from but they pretend to believe the tricks of the mega rich.
Plus the IRS literally have access to banks around the world. You’re required to give them proof of foreign bank accounts or face imprisonment and other countries comply with IRS requests. They can literally seize wealth and know it’s yours. They choose not to.
Whenever you try making rich people responsible, they move abroad. In Norway, the super rich are becoming Swiss citizens after a recent change in taxation. Unless Switzerland takes social responsibility, they're getting away with it. But if Switzerland does the right thing, the rich will find another safe haven.
However, this is a short term issue. The long term changes require a historical change in culture and policy. Otherwise we're still very much catering to the will of old money and power structures that resembles autocracy.
(I'm just an armchair socialist and no expert by any measure, ymmv.)
And even more importantly, they all live on low interest ELOCs.
There's also no reasonable way of fixing this.
> - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which is why a lot of poor people end up massively underpaid).
> - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
HPSquared said this in another comment [1] and I agree: what matters on this model is that every step is not additive but multiplicative, which is what leads to the inequality.
- people enthusiastically lining up to get the latest sneaker / iPhone.
- mildly enthusiastic grocery shopping.
- overpriced medical drugs due to a monopoly.
- taxation.
- outright theft at gunpoint
2. Insightful, thanks. I think one variable the model doesn’t account for is time (which is not multiplicative and scarce).
Money and power can be multiplicative so maybe most of us are playing the non-multiplicative game of spending our time to make money, while the rich are leveraged time to play multiplicative games where they spend money to make more money and happened to win a bunch of times.
Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice.
Indeed, sandwiches are abundant and affordable.
It's the classic case of using statistics as a method to divert blame onto something else. You learn nothing but a sense of despair from these kinds of analysis.
Betting is a bad deal for everyone in this model (even the rich person) since each coin flip is variance for no expected gain. Kelly betting implies you should bet nothing in this game.
Human minds tend to be biased towards causal explanations. So if we see huge wealth disparities, we're biased towards thinking that these disparities must exist for some deeper reason (often argued to be meritocracy). The model counters that thinking, by showing that, even in a very simple model with rules that seem fair to everyone, huge disparities can appear entirely at random.
It doesn't prove that the disparities we see in the real world are fully random. It invites us to question the assumption that they aren't.
yes, as long as they did not undertake an illegal action to obtain that wealth.
The employees that enabled the wealth creation is surely paid, and not coerced into the deal.
One could argue that most (if not all) of these factors still come down to being lucky
Law enforcement in the US is insanely well funded. The NYPD, for example, has 5 billion dollars of budget for 50k employees and serves about 8.8 million citizens. In contrast, in the German state of Bavaria, a budget of 3.8 billion euros [1] supports 45.000 employees and 13 million people.
And yet, Bavaria has extremely low crime rates (the lowest in Germany with ~3700/100k people [2]), and the police stats could be even better if cops weren't forced to waste time on marijuana bullshit... while in New York, headlines referring to a lack of safety are more or less the norm [3].
The most interesting thing to me is: in absolute numbers, Bavaria had 508.000 crime reports filed in 2021 (cleaned up for cases of being in Germany unlawfully). New York reports 95.000 crimes in 2021... a sixth of the Bavarian absolute case count. What is the cause of this difference, and why is public perception of safety so immensely different?
[1] https://www.stmfh.bayern.de/haushalt/staatshaushalt_2019/hau... (page 5, table E, line "Polizei")
[2] https://www.tvmainfranken.de/auch-dank-wuerzburg-und-aschaff...
[3] https://www.bloomberg.com/graphics/2022-is-nyc-safe-crime-st...
[4] https://www.newsweek.com/new-york-city-most-dangerous-year-c...
$100K per year per employee in NYC sounds about right: around half are probably salaries plus payroll tax on them, resulting in just-over-poverty wage for low level employees and barely-middle-class for the higher ups; and the other half for supplies, building maintenance, etc.
Unless the people with money are the ones that made it themselves, they will keep buying bad watches like everyone else.
The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
It's because they took on more risk. The bigger the risk, the bigger the payout. The safer the investment, the lower the payout.
> do not share fairly the value created between workers and owners.
They do if one considers risk.
If private equity buys a pharma company and cuts research, jacks up prices to extract money from insurance, that might be "clever" but it is not really benefitting anyone, quite the opposite.
Obviously a lot of capital is used to create more value, but it does so by using labour, so it is the creativity of the people working for that capital that is adding the value mostly, while the capital sits back and enjoys it's growth. This is the concept behind public traded companies.
I think it is more a case of the more access to capital they have. People who have demonstrated that they can create a lot of value usually get access to lots of capital, even if that capital is not theirs. It's pretty standard to not fund business ventures by one's self. An indication of a good business plan is buy-in from others.
True, there may be technological innovations in factories, farms, and labs that grow the size of the pie as a whole. But probably those with most market power will have most of the access to those innovations.
And even if the value of technology would be fairly distributed, it does feel to me that the underlying game of coin flips rigs the whole system in favor of the eventual oligarch.
That laborers, both skilled and unskilled, tend to be fungible, is the reason that they typically have no individual leverage to earn their fair share of the value created by their efforts.
Laborers end up having to unionize to gain the leverage to claw some additional fraction of the true value of their efforts.
The value distribution pyramid is upside down. Ideas have no value until laborers produce a sellable product.
Management ought to be far more grateful and gracious to those who labor day after day to produce the goods we want and need.
Indeed. I don't know what our precious Interior Minister has been talking about, chances are he simply once again blasted bullshit towards the press and no one called him out as well... I dug a bit in the government's budget plan and updated the figures. Still, we spend ~1.2 billion (assuming 1:1 exchange rate) less than the US, with five million more citizens that are served by the cops - so there is still a marked difference.
Similarly, (from comment [1]) paraphrasing an idea from Victor Wooten's video. If you grow up around people that do interesting things with money then you'll learn to do interesting things with money too. (He said people who grow up around people who speak music naturally learn to speak music quickly and easily too.)
Tbh even the super-rich feel poor. If you own 10 million, you might have a social network in which there is a guy who owns 100. If you own 100 million, you might know a billionaire. And the billionaire might have met someone like Bezos or Musk. Usually the richer you get, the higher is the wealth differential you are exposed to. You might be proud of your 3 supercar collection, but a guy you know has a hangar full with 200 supercars.
Calling out stupidity is important. In your 'kind' world, every idiot will have his say to the detriment of everyone else.
I mean what a surreal and disturbing thread - people calling for the robbing the rich, via taxes. Robbing is what thugs do, not thoughful, 'kind' people.
They only gave actual objectives for 3 of the 6 proposals - and those objectives where "fairer markets" and "create more jobs".
Reducing inequality was not mentioned anywhere.
Indeed they acknowledge it will hurt lower-income households but handwave that away with some unspecified measures to "minimize" harm to those households.
> Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.
...
> Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
...
> [carbon tax] can be structured to make sure it doesn't disproportionately harm lower-income Americans.
Oh, and of course:
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
Because no wealthy person ever thought of ways to restructure their assets so they are poor on paper...
How does that have anything to do with corporate income tax? CIT is paid by the legal entity, usually on the profit. After that the board decides what to do with it. Pay dividends or not, etc. And capital gains taxes are due on that. (That is it's basically a specialized personal income tax.)
Rich people appearing poor on paper only works if the tax system allows deducting luxury expenses. (Like mortgage payments on second, third and so on properties. Which the US tax system usually does.)
Otherwise you don't actually have power.
That concept is another fallacy of composition.
Taxes are there to reduce the capacity of the private sector to hire by reducing monetary flow. Without that you will get inflation.
LOL, no thanks!
I always laugh at dying European societies that consider themselves "civilized" vis-a-vis the rest of the world and can't help but lecture everyone else about how to structure their society. It reminds of Borrell's "Europe is a garden, the rest of the world is a jungle" remarks, which went live before his recent bribery scandal.
Yes, let the enlightened bureaucrats and their Ivy League-educated advisors make the decisions for the great unwashed masses who clearly cannot think for themselves.
None of the proposed wealth distribution solutions on this page do anything to address the real problems of lack of housing, poor working conditions, and reducing poverty. Punishing the wealthy doesn't actually fix anything. Wealth redistribution could well be the result of implementing policies that make people's lives better. It could be they may become even wealthier. I don't care either way if the actual problems get addressed.
Nothing gets fixed by punishing the winners after the fact. The real solution is to make the conditions of winning dependent upon providing the solutions to poverty and scarcity in the first place. Which they already do a decent job of in many cases.
Ezra Klein: "If progressivism can’t work there, why should the country believe it can work anywhere else?" https://www.nytimes.com/2021/02/11/opinion/california-san-fr...
"Meltdowns Have Brought Progressive Advocacy Groups to a Standstill at a Critical Moment in World History"
https://theintercept.com/2022/06/13/progressive-organizing-i...
https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessne...
https://nationalcenter.org/ncppr/2021/05/27/basecamp-climbs-...
If you look at what is commonly called "economy", more and more of what is done there actually has a negative real economic value, it effectively hurts humans. The reason behind that is how we measure this economic value: It is completely broken. But as long as people strongly believe in this garbage, everything is focused on that, even it is trailed by chaos and destruction.
So capitalism, at least in its current form (neo-liberalism), fails as hard as socialism or communism, for that matter. Reason for that: Humans.
I also don't think anyone expects completely equal distribution of everything, but things are so far off in the other corner by now that something needs to be done, fast.
Do you think it's a bad thing that the letter of the law is enforced over the spirit of the law, whatever the latter means?
Please try this somewhere I don't live and let me know how it works out.
They still need to interact with developed countries economic systems, so still punish them there.
If the billionaires are net negative and worse than the value they provide, ie billionaires are harmful to society, it seems the easiest way to reduce inequality is just to have them leave.
That's win/win for everyone, they keep their money, you get a society without billionires.
Similar story for medical staff.
School board elections are one of the best examples of a local election being able to enact meaningful, visible change in your community.
Assuming that's true, and given that the current situation is also unreasonable, I guess we'll just have to go with an unreasonable way of fixing it.
If you make $400k a year, you are rich/wealthy. If you don't feel it, re-examine your lifestyle and whether you are actually spending your money well, maybe you're buying too much avocado toast /s
1. TC numbers (hypothetically ~$400k as you quoted, which generally agrees with levels.fyi) are not real income. We know what happened to (tech) equity this year --- this (unfavorable) gap between grant price/share and vesting price/share has deflated a lot of the TC, much more so if the grant date happens to be right before the onslaught. (Personally I landed almost square in this territory due to a somewhat forced job switch but that's another can of worms I'm not opening today).
2. Whatever is left from that TC number, tax man takes ~40% of it period. Deductions are for most cases a rounding error.
3. TL;DR housing costs scales with salary over here too. Long version: The kind of housing that (transplanted) SWEs and their families would reasonably consider in SFBay has generally been priced (by "the market") right up to the limit of their income-derived affordability, most of which is calculated (by the underwriters) straight from SWE base salary, which we know is constrained by BigTech paybands (which propagates to startups too).
4. Okay, now an inevitable personal finances bullet point: Educated responsible adults as we are, a significant savings (incl. investments) rate surely sounds prudent eh? Say (temporary) goodbye to another xx% of whatever's left at this point.
5. Adding insult to injury, avocado toasts are now about 1.5x to 2x their price compared to early 2020. I feel compelled to add that this agrees with the larger trend of any kind of prepared food.
6. Elephant in the room: Kids.
-----
I can go on and on, but hopefully I am getting the point across. The "salary man" of today has not only his theoretically big TC "pie" shrink over time, but an increasingly larger slice of it becomes marked as non-disposable. Assuming reasonable (not necessarily optimal) personal finances management and maintaining a reasonably high QotL (nothing excessive), I don't see me or my similarly positioned peers feeling rich / upper-middle-class-y any time soon.
Lots of income may not make you wealthy but it lets you live a rich lifestyle. Move somewhere cheaper if you aren’t meeting your savings goals.
How do you tax someone buying a Congressperson?
How do you tax someone using their wealth as a threat, as a shield, so that they don't have to participate in the same kind of society as the rest of us, and can enjoy "privilege" (lit. "private law")?
Wealth at rest is not immaterial, and taxing profits or consumption will never work to reduce wealth inequality or the disproportionate power the wealthy have over the rest of us.
Basically, I'm fine with paying more taxes, but only if those wealthier than me pay more still.
The government prints whatever money it needs to pay its bills, and does so already with impunity. It also pays interest on money loaned to it (bonds) with printed fiat.
Also, you completely missed the point. Of course taxes “do things”, and ending them would also “do something”. That wasn’t the question.
The question is simple, why pay taxes at all when the government has the ability to print an endless supply of money?
To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"
By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something.
By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
We already see wealthier people fleeing California for Texas and Florida, the same for New York.
It's not the government that produces the wealth in the economy, it's business. Confiscatory taxes will wind up with everyone poorer, including you.
As for wealth flight, it's overblown. First fleeing to another state is very different than fleeing the country. Second people aren't staying in America only because the taxes are lower, there's plenty more to offer.
Edit: I forgot to add that the actual evidence for wealth flight is pretty thin.
And for those corporations or wealthy people that do leave, fuck 'em. They're not special, irreplaceable snowflakes. They beat out their competitors by luck, and local competitors will immediately spring up to fill the void they leave.
> local competitors will immediately spring up
What is your experience starting new businesses? It is a highly difficult and risky endeavor and few people find it more attractive than simply getting a job. It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
Try this dataset instead:
https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
"Easy" is the opposite of "hard".
Reaching a high shelf is very simple. But if you're short, it may be hard.
Calculus is very complicated. But if you're a third-year grad student in mathematics, it may also be very easy for you.
Rather, people know a different set of skills and accumulate a different body of knowledge. It is only if we define "education" as the degree of knowledge in the body of subjects we teach today that one can say people in the past had less of it. But that's only because we have discarded the many bodies of knowledge an educated person needed to have in the past.
For example, one can laugh and say that to earn a doctorate in mathematics during the renaissance you'd need to know algebra only to the level of solving a cubic equation. However you are missing all the archaic geometric ruler and compass constructions, evaluation of various infinite series, and deep knowledge of Latin, Greek, French, German texts, mastery of rhetoric, music theory, and other topics that few learn today. So it is not true that a mathematician of the present could waltz in and get a Doctorate in Philosophy in medieval Paris. He would probably get quickly thrown out for failing to master the many various scholastic topics that were required of a PhD in that time period, and which no one learns today.
As another example, a new worker in 1800 might be expected to know how to deliver a calf, fix a fence, shod a horse, make homemade preserves, skin a rabbit, set a broken bone, paint a barn, as well as know Greek, geography, history, recite the speeches of Cicero, translate the Odes of Horace, navigate the seas by an astrolabe, stain a bookcase, identify the key flood valleys of Europe and know which animals could be hunted in which part of the year in various European forests, or know the biographies of German princes, etc. But you are correct, they wouldn't have MS Office skills or know how to create a webapp.
Once you move past "hunter-gatherer", you very quickly run into complex societies with their own historically developed bodies of knowledge that require lifetime learning, whether that means learning the seasons and details about planting crops and irrigating fields, dealing with pests, where to dig a well, how to tan leather, etc - or whether that means something else, it is still a vast body of knowledge that takes decades to master. The point is, wherever a society is technologically, it will choose different areas to train its workers, and omit other areas that are no longer needed. But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
Yes, but this is increasingly knowledge that needs to be imparted through formal education (for a variety of reasons). Hence it costs more.
>But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
I don't see the logic here. It's fine as long as you can afford it.
>as well as know Greek
Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
Surely that can't be true? Here in Sweden literacy was made mandatory for adults in 1686. It was not permitted to get married without being able to read.
Surely England can't have been that far behind, as late as 1800ed?
Do you think that is easy and just "collecting rent"? What is your experience investing?
In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.
What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
So people should risk their capital for nothing? I'm all for better pay and working conditions but the value from some ventures does not always come from the creativity of the workers. Sometimes it does, sometimes it doesn't so much.
Not outcompete, but intergenerational wealth does play a huge part in class mobility [1].
> The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
The amount of money you have is a very important factor in your options. The more money you have, the more options you have to invest with more expected value. For example, what options does a family that manages to save $500 a year to invest that money in something that brings them a lot of expected value?
1: https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpe... Page 6, figure 3
Richer people don't have access to higher EV else their kids wouldn't have very similar relative mobility, they should be richer than their parents. And it seems that the risk of becoming downwardly mobile (absolute and relative) increases along with income. Which makes sense as some sort of mean reversion. Along with the bottom quintile having higher positive mobility than richer quintiles, EV increasing with income doesn't make sense to me.
The family with $500 should keep it as liquid as possible unless they have enough credit to cover drawdowns in income. Other than that - they get the same EV as everyone else. $500/yr at 7% over 40 years will get you $100k. How many people with $500 actually invest it? Historical lookback on 40 years of the S&P 500 gets you real return of 8.77%.
> To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
This is also completely meaningless, because that figure is largely imaginery and super illiquid. Rest assured, Jeff Bezos can't cash out of Amazon and expect to be paid the current market rate for all of his shares.
It's also completely meaningless because the world's bottom 3.5 billion people control virtually no wealth whatsoever. Makes for a good headline though
Bezos uses it to spend his pile of money, but for one Bezos there are 100 businesses who use the same exact instrument as a perfectly legitimate way to borrow money.
It’ll be extremely hard to draw the line between both use cases in a way Bezos couldn’t exploit it.
One is that you're only considering direct monetary risk. For example, imagine a person that starts a business with X dollars, which will usually be a percentage of their wealth. This person hires an employee at a salary that's barely above their living expenses, but with the idea to ascend as the company grows. If the company goes bust, who loses more? The owner still has money, the person living paycheck to paycheck might not have enough funds to live until they find a new job and they have probably lost money because they didn't go for a higher paying job (with less upside but more safety).
Two, the risk/benefit ratio is not fairly distributed either. If I have a hundred dollars in the bank I cannot really access any investment opportunity, like creating a business, that could multiply that money with the same risk.
Three, thinking only in relative terms is a mistake, even if risk/benefit ratios were evenly distributed, because not all people have the same relative expenses. For example, assume both person A and B get into a stock that after a year gives them a 50% profit. Person A invests their emergency fund, which is $1000 bucks. Person B is far more wealthy and invests $100k, and they still have a lot of money leftover. Here, A is actually taking on more risk because losing that thousand dollars means they might not have enough money to fix their car or pay for health treatment. Person B, if they lose that money, it will hurt but it won't really change their living situation. And when the profits come, A has $500 more, which is not that much and probably goes into the emergency fund again; but B has earned $50k and probably has enough to go on a super nice vacation and still have a lot leftover. In other words, even if the risk/benefit ratio is the same, the actual consequences are not equal. Having more money makes the same ratios far more beneficial in practice.
> If I have a hundred dollars in the bank I cannot really access any investment opportunity
robinhood.com says hello!
> not all people have the same relative expenses
Right. But that's their problem, not the company's problem. If I sell Bob and Ted each a coffee for $10, and Bob is right and Ted is poor, they still each get charged $10. I don't do a background check and pour over their financial statements in order to determine how much to charge them.
"You can just get another job" not that easy for quite a lot of people. Some people lose their job and that leads to losing their homes. If I had to choose, I'd prefer to lose millions of dollars than to lose my house in a vulnerable situation.
> robinhood.com says hello!
Yeah, and the casino exists too, and I bet the casino is safer. What I said is that with less money you don't have the same investment opportunities with the same risk/benefit ratios. Yeah, you can invest in stock and not do any of the crazy options stuff, but that's not really going to give you a lot of profit.
> Right. But that's their problem, not the company's problem.
Never said it's the problem of the company, just that the same amount of dollars has different value to different people. That's one of the mechanisms that makes it easier for people with more money to get even more money for no reason other than having more money: the more you have, the less it matters to lose a certain fixed amount. A $20k investment does not actually have the same risk for someone that has $30k in their account than for someone that has $10M.
won't fix anything
> don't let them get loans without taxes againt their illiquid wealth
You don't want to fix this. It would kill repurchasing agreements as a collateral damage, making access to credit more difficult and expensive for everyone. Not to mention HELOCs. You might say, "ok, exempt HELOCs", but that's just an arbitrary goalpost.
The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
What do you even mean by "organic"? Of course governments can, do and should intervene in the economy. And yes, there should be a range of experts evaluating policies before they are encated. I never stated the opposite.
Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.
OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.
If in cash, they have to get the cash from somewhere, right? Supposedly selling the stocks. That can be taxed then and there.
If they transfer the stocks to the lender, that means the stocks in question are valued at $x, since that's the value of the loan. So tax that value.
For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?
Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.
If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.
Please look up "rent", "dividend" and "capital gains".
OK, but does that include Rowling's Harry Potter sales, or Persson selling Minecraft to Microsoft?
> There's no conceivable reason
How about "someone is offering me a billion to take over the company I founded regardless of if I actually agree to sell"? Or worse, "someone wants to offer me a million for 0.1% of my shares, but if I sold all my shares the market price would crash by 95%, therefore I get all the blame for being rich with only a handful of the benefits"?
I appreciate there are other economic systems besides one-dollar-one-vote, and we may wish to make mega corporations more democratic and less plutocratic-authoritarian, but that kind of change deserves a book rather than a single comment.
Let's say life is a computer game, and once you max out at $1bn in earned wealth (presumably this includes liquid and illiquid assets such as properties, cars etc), you cannot accumulate more wealth.
How does a government enforce this stance? You cannot stop say Bill Gates shorting Tesla and earning millions from the trade, can you?
Can you stop a landlord renting out their properties to block further income from them?
What about interest generated from bonds or savings accounts?
Do you simply tax the shit out of people if they have over £1bn in wealth?
The big challenge I see for all of this is that rich people have the best (and most expensive) accountants/lawyers money can buy. If you try to tax the shit out of them, their accountants and lawyers will find a way around it.
Also, if one government is too heavy handed, they'll just move assets to another more lenient government.
Seems like the obvious answer, though you're probably right in that people will move assets around and do elaborate things to avoid the tax but they already do that now.
Make a hard cap wealth cap at $1B. Oh you made a great investment that made you $400M dollars? oops looks like you're $200M over the cap. You now owe the government $200M. But good news you hit the $1B cap. You "win" capitalism. Have a nice medal maybe.
Seems reasonable to me.
I suppose the argument against it is that you'd be dissuading near billionaires from investing their money in things (eg. starting new companies) though I'm not entirely sure if money is a real motivator for people who have ~$900M. Is it? I don't know any 900 millionaires to ask.
Taxing loans to billionaires is a good law because it closes the “just take out a loan” loophole.
I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people.
[1] https://www.stlouisfed.org/on-the-economy/2017/january/feder...
I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do.
In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.
This already happens. Many people either don't pay tax, or pay less tax than they cost.
> The government doesn't need to handle capitol allocation.
Then who will spend the tax money?
In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.
Took me 5 seconds to Google this:
https://smartasset.com/taxes/5-ways-the-rich-can-avoid-the-e...
Housing: Most voters are homeowners, with the shared incentive to increase the price of housing in their town through restrictive policies. This ignores the interesting conversation about whether NIMBY actually increases property values, but most people believe they do. They don't even have to be explicit about it, nor get 100% cooperation, but the emergent property is clear and shockingly consistent across US
Healthcare: There are many systems at play here, as an example: The AMA restricts the number of doctors who can enter the profession: https://skeptics.stackexchange.com/questions/4561/does-the-a...
Education: Prestige de-facto limits the number of 'desirable' schools in the marketplace, and the high-prestige schools haven't grown nearly as much as overall enrollment.
There's no single top hat wearing, cigar chomping fat cat. Or even a smoke filled back room. But a variety of cultural and regulatory norms keep the dynamics entrenched. Which isn't to say that they can't be changed! But it won't be just the subtle nudge of Adam Smith's invisible hand.
But that competition isn't perfect. Right now, for example, there are very clear indications of price gouging with the excuse of inflation.
And it isn't even just with food. See the renting market for an example. People who had enough money to buy a house to rent it earn more money, and people who didn't spend more money because they need a house to live (and moving is a very high barrier for a lot of people).
But I think the most important example is jobs, mainly jobs with a low barrier of entry, which are mostly taken by poor people. People that don't have enough savings/time to get better education or to find for better jobs have to get whatever they can, so their employers have a lot of power to set low salaries: the employer can deal with an employee leaving or taking more time to fill a position, the employee probably needs a job quickly to pay the bills.
Do you know of people taking out second mortgages on their house or drowning in debt to afford Internet service?
The flip side of the equation is that if a business is to exist, it has to set a price that people are capable of paying. Yes, sometimes with supply constraints they can charge more, but charge too much and nobody will be able to buy, which means $0 revenue for the business.
how did you know that the cost of such a service is not way overpriced compared to the cost of production?
Are there really many ~sandwich providers~ISP that you can compare it to? Or are the prices just taken because there's no alternative, and that ~sandwiches~internet access is needed for living?
In fact, it's an inaccurate objection proven by 1 minute of research: https://www.hurun.net/en-US/Rank/HsRankDetails?pagetype=glob...
I could make the same statements about Forbes and Knight Frank, so that doesn't help explain the 3x disparity between Hunan's figures and the rest.
>it's an inaccurate objection proven by 1 minute of research:
I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
> I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
The raw data is there to help you derive and check Hurun’s claim.
Perhaps you mean you want an easy way to sort and aggregate the information in order to dispute this.
However, the burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
At this point it’s hard to take your objection seriously; nor view it as anything more than cherry picking with an underlying agenda.
There is not a finite amount of wealth. People create new wealth through innovation.
People do not mindlessly continue the same investing strategy when incentives change. If you reduce the expected return from an investment, they stop investing in it.
So any strategies that might be useful for the contrived game described in the article are not relevant to the real world.
I also agree that this is a simplified model. But its simplicity is what makes it elegant: you can see the effect in a model that lacks all of the complexity of real-world economic activity. In the real world the "bets" are more complicated and the odds more variable, but you can't just claim "this effect must go away" without articulating a clear reason that it would.
The reasonable point you do make is that in our current economy the "pie" isn't fixed: new wealth is being created all the time, and this is one reason we don't collapse into permanent inequality the way this model does. This doesn't negate the model, however, it just means there is something counteracting it. Unfortunately the fear is that in the future (or perhaps even the present) new wealth creation will no longer keep up with this underlying concentrating effect, and we'd better think hard about what to do then.
People were interviewed by their local priests to see whether they could read and the results were noted down. From this we know that in the middle of the 1700eds the 70-90% of all people could read.
The law was also clear. You couldn't get married unless you could read. To be married you had to be confirmed, and to be confirmed you had to be able to read.
Which brings the need for inter governmental regulation.
No, mainly because of the risk of capital flight.
> It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
I disagree. If a good or service is truly valuable, someone will provide it. The value of an unmet need will increase until it becomes attractive, and if it never meets that bar, then by definition it wasn't valuable enough.
The only exceptions are goods or services that capitalism isn't effective at solving anyway, either because they are common goods that capitalism would exploit to exhaustion, or because they would yield only natural monopolies that are rife with abuse. A state-run corporation is a good option here, and wealth flight isn't an issue.
It sucked for everybody - without local capital the entrepreneurship was very limited, jobs remained scarce, specialists emigrated and the trade deficit became unmanageable. In the end multinational corporations slowly entered and bought various state-granted monopolies (the only real monopoly entrepreneurship can't solve) on the cheap. But that tiny capital started a snowball effect that eventually raised the living standard to unhoped-for levels. Now we have both billionaires and a wealthy middle-class. It took a long time though.
Careful what you wish for - a country without successful entrepreneurs and local capital(ists) is an easy prey on the international markets.
Life insurance trusts also have no limit.
Finally, even if it were true that it's merely deferring taxes, that means you can essentially time the market to pay less in tax when the rules are more favourable, and you can realize more gains in the interim.
A market like ISPs is subject to natural monopoly because of the physical nature of running wires to houses. A true free market would see any competitor free to run their own wires and offer a service, but we don't allow that. We kind of did in the early days of electricity when people just strung up wires wherever they liked. It led to a lot of people getting electrocuted.
If there is really a large margin available for a competitor to undercut, someone will find a way to do it. And, as predicted, people are with options like Starlink and 5G hotspots becoming viable.
With regard to the first part, the normal examples I give of this are road traffic offences (which if fully enforced would mean the only people allowed to drive would be those who didn't); and drug laws — ignore weed for now, nobody defends heroin, full enforcement of UK heroin laws would treble the UK prison population all by itself, while enforcing the laws on cocaine would more than double the US prison population and increase the British one by a factor of 20.
With regard to the second, look at how confused people get about copyright, trademarks, how they work, what the penalties are for violating them, what counts as "fair use", and so on.
And no. There is not, in fact, a truly "free market" in the world, in the sense that people frequently talk about in terms of "the free market will solve XYZ". Because it's an idealized abstraction used to talk about the theory and philosophy of market economics.
I don't claim to be deeply conversant with the theory, but I do know that a truly free market requires:
1. Commoditization: The products or services need to be effectively interchangeable, aside from features and price on which different vendors can compete
2. Perfect information: The buyers and sellers all need to be perfectly informed about all aspects of the products or services (including things like, "was this made with slave labour?")
3. Unconstrained ability to choose: The buyers must have no constraints on their choice beyond those actively under competition—they can't, for instance, be lying on a gurney with their appendix rupturing while deciding which hospital to give their "business" to. They also can't be so hungry that they must buy food now or risk starvation, or under such tight financial constraints that they must choose the very cheapest option or risk destitution.
If a given market does not exhibit even one of these characteristics, it cannot be considered a "free market" of the type we should expect to arrive at the ideal distribution of resources.
1. https://www.irs.gov/faqs/interest-dividends-other-types-of-i...
After the $12 million (nearly $13 million next year) exemption, the unused portion of which passes to the surviving spouse and increases their tax-free estate exemption.
But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.
For a start, I need the list to include the country of origin of each person.
>he burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
I've pointed out that Hurun don't make public their list of billionaires per country, unlike the other providers of that data. As no-one yet has been able to show otherwise, my point stands.
If the effect is that, all else being equal, people with a lot of money can make more money in an absolute sense than people without a lot of money, then of course it doesn't go away. It's not that that isn't real (it's simply how percentages work) it's that it's not actually a problem because the model is so far removed from reality as to be irrelevant.
The real world is not a 1v1 adversarial game where people are betting against each other. More often they are collaboratively betting together and both benefit if they succeed.
Young, poor* entrepreneur brings an idea, maybe specialized domain knowledge, and time and energy
old, rich investor brings capital, maybe business experience and network, and gives it to entrepreneur to execute.
If all goes well old, rich investor and young, poor entrepreneur both make a lot of money. Young, poor entrepreneur becomes old, rich investor for the next generation.
If the venture fails, old, rich investor loses money (which went to pay some number of employees and vendors, who get to benefit from it), but old, rich investor expects this to happen for some or most investments. Young, poor entrepreneur loses time but gains experience and connections.
Nobody tricked anybody or stole anything from anyone or "lost a bet" like they are playing a rigged game in Vegas.
If you tell old, rich investor they aren't allowed to make any money by investing in young, poor entrepreneur any more, they don't just keep on doing it and allow you to redistribute their profits. They buy T-Bills instead. Young, poor entrepreneur goes to work for some other company (that old, rich investor probably funded in the past and owns) and gets a mediocre salary instead of getting rich and the world is deprived of whatever innovation they might have had.
This is pretty much fine for the old, rich investors, they're already rich. But it screws over the possibility of getting rich for anyone who isn't already. Which, if you were trying to reduce inequality, is the opposite of what you'd want.
* - or more realistically, middle or upper-middle class
Another unrealistic part about the model is that people keep betting a fixed percentage of their net worth. If you have a million dollars, maybe you can invest $100,000 into the seed round of a startup. If you have a billion dollars, it's unlikely you can invest $100 million into one investment. You spread it across multiple investments, maybe hundreds, and the average return is less than what you would get from succeeding on one big investment, because there simply isn't an opportunity that can make use of that much capital at once.
In either case it is useful to understand the underlying concentrating effect even if one believes it is tolerable because other effects dominate.
With its anti-business attitude, tiny high-tech industry and lacking innovation and creativity, Europe’s importance in the world is vanishing fast.
The future is in Asia and Eastern Europe. And US, of course.
There is lots of ways to improve taxes on income and capital gains, but that is really different from a general wealth tax.
Rather, to continue the spirit of the top level comment, what is also now missing is the estate tax, which is/was around 40% (it's graduated too, but it tops out quickly). IIUC, the federal threshold used to be around $1M a few decades ago, and is now $10M - this was the anti "death tax" political issue you might vaguely recall. Furthermore, due to wider use of trusts, it's been basically eliminated unless your family is extremely unlucky.
Fundamentally, I'd rather just tamp down the amount of money given away to the rich - stop the government giving trillions of dollars to the financial industry to prop up the fictitious asset bubble pyramid scheme, and either let natural technological deflation happen or at least spend the money deliberately ala MMT.
But either way, something is required - the system we have right now has the government continually giving away gobs of money to asset holders, while doing very little to collect it back. This is exactly why these personal wealth bubbles continue to grow.
I think you'd be surprised. When the majority of people own nothing, it won't take much for the ruling class to convince them that taking everybody else's wealth for the greater good is the right and moral thing to do.
Not only do we do that which dis-proportionally hurts the less wealthy more, but property taxes are assessed upon assessed valuations of which the homeowner who does not sell or gets loans upon that valuation obtains zero benefit from. So the insurance company (which also uses the valuation) and the property tax jurisdiction(s) obtain yield from the valuations that year, and do not endure a clawback when the valuations ever decline.
LVT is a much better related tax.
Anyway, wealth taxes are probably bad because taxes are supposed to be deflationary, but wealth taxes are inflationary if you collect them in USD, since taxpayers have to sell assets first. Unless the IRS is willing to take a % interest in a collectible painting as the tax.
That means rich people can accumulate generational wealth without ever even paying capital gains taxes. And during one's lifetime, one can get liquidity out of assets by borrowing against them without selling them.
The rule also seems strange from an outside perspective. Either the book value of assets should be kept the same when inheriting (I believe Germany does this), or the book value should be changed to current market value but the difference be taxed as gains (I believe Canada does this).
Step 1. The country creates a law forbidding any financial interactions with "offshore" countries (list is populated manually by lawmakers) and also with companies working with such offshore companies (shell intermediaries) in "good" countries.
Step 2. Country forbids its citizens from owning any assets or be incorporated in the same "offshore" countries.
Step 3. Blanket ban of cryptotokens.
Step 4. Huge inheritance taxes.
Step 5. Incremental tax hikes for second and more houses/apartments owned. Restrictions for corporations owning a lot of residential properties and huge taxation.
Step 6. Ban or restrictions of airbnb-like activities to discourage parking money in the housing market.
Basically look where rich hide money go for that. When they switch tactics you follow.
Step 0. Big independent financial auditor structure, independent from law and judicial branched both (or almost independent). From experience - you can dismantle a lot billionaires even with existing laws, if only someone looked close enough and punished them. This is a huge problem in eastern europe for example.
Switzerland does it and it seems to work pretty well.
Financial institutions report your wealth (to some extent), and the development of wealth is checked against your income, making tax evasion non-trivial. You could hide the money in a shoebox but you'll lose more in opportunity cost (missed investment gains) than you'll save on tax.
The other side of the coin though is that capital gains generally aren't taxed.
Mainly, I don't agree that "it is very difficult to tax wealth". It's basically a box "your wealth: <enter number here>" on the tax declaration, with an extra spreadsheet/list to fill out showing what the wealth consists of, plus proof (e.g. bank/stock account statements).
* except for household and personal common usage goods
It's hard for me to give an argument like "this is difficult" credence when we already have a capital gains tax that's lower than most income taxes. I will buy this is difficult when you raise that number to 50% and we still have the same issues.
I agree that taxing realized capital gains is relatively easy.
It would be trivially easy as well to track and tax the wealth of people hold public equities.
Those two things there are an enormous bulk (majority?) of wealth.
It only gets a bit more complicated with privately held equities this I will grant.
If you start to get into the nitty gritty of assessing assets like ming vases and such it gets complex as well and likely diminishing returns, but at this point, with this stuff, you might as well not even bother because few are going to hold their wealth in ming vases.
At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.
This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0].
> That can be considered income
No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry.
If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10%
[0] https://www.wellsfargo.com/cib/institutional-investing/asset...
So changes can be made, they just did it the wrong way.
But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.
There are downsides to inflation of course, lower economic growth is a big one. But we are entering a higher inflation, higher interest rate environment whether we like it or not, and that will result in lower wealth inequality. Money will have less direct purchasing power, and assets like housing or company equity will decline in value due to higher borrowing costs.
There are many people who will retort that 'inflation hurts the poor'. Yes, it hurts everyone, but it disproportionately hurts the rich. It is no coincidence that wealth inequality increased dramatically during the low inflation, low interest rate period we have experienced over the last two decades.
On to the core question: how much is the stock in the non-public company you work at really worth? I don't know, sell it and we'll find out. A SWE with illiquid stock probably actually has a much shorter timeframe of when they want a liquidity event than the US government has.
The truth is that the reason it's difficult to tax rich people is because the first thing anyone does in this conversation is talk about how hard it would be, without thinking for a second if it actually would be hard. Let's lay aside any talk of real wealth taxes, and just stick to our current tax system, Elon Musk borrowing against his Tesla stock is not a taxable event. Let's change that today. It's specific, easy, would immediately drive revenue, and doesn't require any innovation around true wealth taxes. But... we won't, because it's not difficult, the government just doesn't want to do it. What does that mean? The burden of tax is primarily put on income not wealth, meaning your SWE with non-public stock is already getting absolutely pounded with taxes on their income instead.
If an independent third party has deemed your stock sufficiently valuable (and stable) to lend money against, then you should be taxed on that loan. You can get a credit when you repay the loan (to offset tax on the income you used to repay).
At least in the world of stocks, dark pools help solve exactly this sort of problem.
Once you have enough assets there are many tricks available that are simply inaccessible and unusable by regular salaried employees.
Many of the tricks employed by the wealthiest forcefully remove transparency by a combination of legal and practical methods (e.g., Canada and Delaware share a lot in common).
Disallow opaqueness first, then the solutions will emerge.
Short term stock holdings - pay on the net gain of the sale.
Long term stock holdings - pay on the net value at that point in time. Non public companies are charged based on the last valuation round. Companies without funding aren't charged because the intrinsic value is zero.
Dividends - pay on the dividend amount received
All payments above are in cash, at 2.5% for all.
Yes they're not the super rich.
But still among the top X %.
China has seen how Capitalists have overrun government and have moved to quickly re-educate anyone that steps out of line.
I'm not advocating this, I'm just saying...
Corporations and the wealthy play games and have more resources than our tax departments, and so have found strategies to win that are not available to people who earn an income and work for a living.
When you're a billionaire all of life's basics are effectively free. And there are only so many houses, private jets, and super yachts you can buy.
In any case your first, second, third, and fourth home will be owned by a corporation based in the Cayman Islands and buried under an opaque list of shell companies, all of which you also own via cut-outs, one or two of which may be actual registered and regulated banks, which mortgage the properties back to you so you can play games with interest rate arbitrage.
And all of this will be handled by a small personal mini-corporation employing tens of tax experts, lawyers, creative accountants, and investment managers, so you probably aren't even interested in the details.
It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.
As an analogy, we catch more dumb criminals than smart criminals - but overall it's still worth having police, even if a few bad guys get away.
But what's the point? If they can't get money out then it doesn't matter. The only reason houses are worth holding as an asset is public bodies stopping the creation of more housing, driving the price up. You fix that with less state interference, not more.
Or prevent companies from holding real estate as an investment vehicle?
I'm not naive enough to argue that this is a definitively easy thing, but especially when it comes to housing, the poor and middle class are getting completely fucked right now; it's gotten to the point in the crisis where we absolutely need to do something urgently.
This has the added benefit of injecting a ton of extra transparency and sunlight into corporate dealings.
* in many countries, I don't know about the USA.
I think we should add very steep taxes on second+ homes and "investment properties", but that's to address the housing problem, not to address the massive wealth disparity.
The real problem is their ability to buy things like "lawyers" and "newspaper coverage" and "senators", and it's much harder to effectively tax that sort of thing.
Also corporate ownership of single-family residential property in the US should be forbidden.
If it were the only way to address societal inequalities, is it more heartless than letting those continue?
Sure you can do all that, and that would close some tax loopholes (albeit at a cost), but has nothing to do with taxing wealth instead of income.
They should probably add in an increased capital gains tax as well
Some people have legitiment business interests in tax-haven type countries that are not about avoiding taxes. No country is just purely a tax haven with no other ecconomic activity after all.
In theory a blanket ban on crypto could harm innovation. This was much easier to believe at the beggining of the hype cycle when it seemed like someone might actually do something useful with blockchain tech. Kind of hard to believe at this stage.
I feel like inheritence tax is kind of pointless by itself. Most people dont just suddenly die and have time to distribute their assets pre-death.
Limiting housing investment might make cost of living go up. Its not like houses just appear out of nowhere. lots of people cant afford to just buy/build a house. Rich people buying houses and renting them out helps fill that gap. It doesn't always work out as ideally at that, but the other extreme of severely restricting real estate ownership would probably screw over poor people too who do not have sufficient resources to get a mortgage. They still need somewhere to live.
I dont really know what independent auditors means precisely. IRS/CRA/etc are already pretty independent. They could be better funded though.
> forbidding any financial interactions with "offshore" countries
And what do you think "offshore" means? This is TikTok levels of financial naivety
If I were planning such effort, I would propose do bans in waves, with multiyear intervals. E.g. ban of top10 worst offender countries - Cayman islands, British Virgin islands, Seychelles, etc. Then make a list of 10 next and warn them that they have 2-3 years to adjust or be banned too. Rinse and repeat.
Switzerland has a wealth tax, yet it also has some very rich residents (wealth tax is applied to your worldwide assets/cash, and it includes companies you own, so you have no way to avoid it.)
They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
Anyone can declare assets anywhere but if they're not taxed, or taxed very little, then inequality grows. So does Switzerland do this better or fairer than other countries?
It differs between cantons (states, kinda) and has progressive banding. Someone with 100k in wealth will pay maybe 100-200 or so. If you have 100 million CHF, in Geneva you would pay around 1 million per year in taxes on that wealth.
As the OP stated, it is global assets and wealth, so foreign/offshored investments still attract the tax. Plenty of people choose to be resident in Switzerland even with these taxes.
My understanding is that it's not very effective, because any foreign-held asset is pretty much hidden from Switzerland, unless there's an agreement with the country for this kind of information.
Since you apparently never heard of FATCA and OECD CRS I'll leave it at that
Oh yeah and several US States don't require financial/personal information in a lot of cases (including real estate transactions).
In the world the state builds and owns a lot public housing and this depresses rents and property values.
Countries stop doing this when policy is captured by neoliberal dogma. The UK is a perfect example. Housing was relatively affordable before a disastrous "right to buy" policy in the 70s, with extra enforced restrictions on state house building, destroyed the national housing market.
Now most housing is unfeasibly expensive. And hundreds of thousands of properties stand empty because they're owned solely as investments.
This is excellent for private landlords, property speculators, and older home-owners. It's an utter disaster for everyone under the age of forty because rents are unaffordable and ownerships is unimaginable.
The problem was not building more housing to cope with increased demand. That would've happened regardless of whether the Right to Buyers were renting off the council or had bought their property.
> In the world the state builds and owns a lot public housing and this depresses rents and property values.
Public housing, but not housing. The state controls what can be built where, which can drive up demand enough that property becomes a valuable enough asset to let it stand empty. Giving the state more power on top of that to correct that incompetent use of power seems worth questioning.
It's society enforcing these restrictions, and we absolutely do not want to let go of them. Compromising at all on any of them is considered evil ...
Also, where I live options on shares are taxed at 10%. The government does not have to wait until they are exercised to take a cut.
> debt costs will adjust accordingly and pass on to wealthy still
Let’s think about some the factors that may influence this imaginary debt cost:
- whether asset is an appreciating asset - risk management strategy of the bank - whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal And so on.
How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid.
I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
Second homes being misclassified as non-residential property might be trickier to deal with, but a lot of jurisdictions already have laws around what is and isn't residential...
Bad for families building generational wealth who don't have it yet though, and boy do I hate the idea as a result.
It's the temporarily embarrassed millionaire syndrome. Sorry but it just doesn't happen for most people due to the way the system works
For offshore restrictions - you as a country lose all existing assets already there. A lot of people will move their business to a better countries, providing less restrictions and eventually taxes for them. Probably election loss and further dismantling of all these laws by disgrunted businessmen using their pocket political forces. If will hugely depend on the collective size of economies doing the ban.
For housing - its tourists plus rent seekers vs. regular citizens. You hurt one group and you benefit another and vice versa. There is no win win scenario here, balance must be found. I personally vote for regular citizens, even if tourism industry will be hurt a little bit.
For inheritance taxes - no downsides.
For token ban - no downsides.
2) Likewise, paying a 2022 debt in 2027 dollars makes their effective tax rate even lower.
3) I don’t get to defer my income tax payments until a favourable year of my choosing, neither should the rich
4) that’s what the credit is for.
When railroad and heavy industry did this exact thing in the 19th century we called them robber barons and broke up their obscenely powerful and corrupt monopolies via antitrust legislation.
With government public housing you can lose it if you break the law (hope you never smoke weed) or if the populace elects a racist government and you’re a minority.
Commodifying housing helped black people in the South because they could actually buy prefab houses from Sears.
Ultimately, people as a whole like to work. They dislike working under poor conditions or doing jobs that don't feel rewarding. A law like this would generate a lot of change, but I just don't see that change being disasterous given sufficient adjustment time.
Even then, because we typically lack experience with a variety of ownership models, it will be difficult to dis-entangle the familiarity bias from our conceptualizations.
Another day older and deeper in debt
St. Peter don'cha call me, 'cause I can't go
I owe my soul to the company store
- Merle Travis, "Sixteen Tons"
The TL;DR of why this is bad is that when employees are paying, or are indebted to, their employers, even in a roundabout way, it's really easy for that relationship to become very abusive.
The company towns also often payed in scrip, which was basically credit at the company store, and, gee, wouldn't you know it, the company owns all the land to the horizon, so there are no other stores in reasonable travel distance! And if you need a little credit because your pay's terrible after your rent (to the company) comes out, and the prices at the store are marked way up, why, they'll be happy to extend some....
That's the extreme version, but it's bad enough that even inching that direction is something worthy of concern. One ought be wary any time money's flowing from an employee to an employer.
The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.
Also a significant portion of the country seems to be actively attempting to let it happen again. High school made them read The Great Gatsby and they all imagine themselves as Gatsby and the other obscenely wealthy people instead of the 99% of awful and perpetually dying lives most people experienced.