Countries that have no rich people are never prosperous. You can raise marginal income tax rates from, say, 60% to 70%, and maybe that's a good idea overall, but it doesn't get rid of billionaires. High-tax Sweden has as many billionaires per capita as the US does: https://en.wikipedia.org/wiki/List_of_Swedes_by_net_worth

If you raise the marginal tax rate to 99%, then you get rid of billionaires, but you also kill your economy. There are all the failures of communist countries, of course, but even the UK tried this during the 60s and 70s. The government went bankrupt and had to be bailed out by the IMF. Inflation peaked at 27%, unemployment was through the roof, etc.:

https://en.wikipedia.org/wiki/1976_IMF_Crisis

https://en.wikipedia.org/wiki/Winter_of_Discontent

I agree with you that it isn't practical right now to get rid of billionaires. However, I don't think that it's some kind of economic theorem. The reasons that socialism failed are complex, and pure capitalism failed as well (think Gilded Age), which is why everyone lives in a mixed economy. It is reductionist to say that the 1976 IMF Crisis was caused by the tax rate instead of excess spending, monetary policy, and structural aspects of the economy. As a counterexample, postwar US had a 92% tax rate and did OK: http://www.slate.com/articles/news_and_politics/the_best_pol...

IMHO, most economies aren't able to raise the effective tax rate because the wealthy can add loopholes or shuffle their wealth elsewhere. This isn't an economic problem, but a political problem. Is there a political will to close loopholes and restrict the movement of wealth? Do people frame wealth in terms of freedom or in terms of societal obligations?

The problem is not the existence of rich people. The problem is that some people are getting poorer. The two are not always linked.

In other words, inequality can be a sign of good (upward mobility, vibrant economy) as well as bad (poor people getting poorer).

Fixing the latter is important. "Fixing" the first is harmful.

Any solutions should focus on giving the average and the poor the ability to improve their situation. Reducing the number of rich should never be the goal.

I don't think an income tax that punishes people for making too much money is the right way to go about it. How about instead of punishing people for being rich, discourage the filthy rich from spending money on the frivolous. For instance, set up a luxury tax on expensive cars, private jets and jet fuel, first class transportation and primary residences and hotels that are way above the average value for an area. On the other end, have tax credits (not just a tax deduction) for contributing to charitable causes, or for taking business risks that drive innovation.

I think it might be great to encourage the rich to spend as much as possible. Don't the expensive cars, private jets, and first class transportation support whole networks of businesses, and provide employment?

Yes, but you also need to look at the products of those people's labor and other things that labor could be used for. Do we need more people building and crewing luxury yachts, or building and operating hospitals and sheltered accommodation? In both cases people are paid to do work, but the products of that work are very different.

But in practice much of the wealth of super-wealthy people is actually either tide up in the value of the businesses that they own, which are often doing economically valuable things, or is invested in useful enterprises (shares), or funds useful activities (bonds). It's not as though the net wealth of Warren Buffet is all being thrown on hookers and blow.

There are already ways to direct the spending of the wealthy towards more productive uses, such as consumption taxes on luxury goods. But if they take their wealth to other countries with laxer consumption taxes, there's no a lot we can do about it. So we're back to the libertarian argument. At some point you get into questions of freedom and individual rights.

The problem is not that their are rich people buying nice things.

The problem is when poor or middle class people are unable to improve their situation or lose ground.

The only time rich people are a problem for poor people is when rich people are able to corrupt government to tilt the playing field their way. This is a problem of corrupt politicians and lack of anti-corruption law.

I think people underestimate how many economic difficulties are not caused by economic effects, but by corrupt politicians who are permitted to stack the deck against the average person as a way to fund their campaigns or rack up post-governance favors.

Not that much. For an average rich person, most of their assets are not spend for living/luxury, and they can't realistically be unless said rich are extremely extravagant.

So, unless they are actively invested in some sort of productive scheme, they are just sitting there (e.g. as huge estates, savings etc.).

In any case, it's much better for the economy to have a large middle class, than the equivalent money in fewer rich persons.

The thing about the rich is they can hire people to make loopholes out what you just described and the financal incentive to do so.

>If you raise the marginal tax rate to 99%, then you get rid of billionaires

No, you don't, because billionaires's source of money is almost always capital gains. They don't give a shit about income tax.

> High-tax Sweden has as many billionaires per capita as the US

The first thing they all did was move their incorporations out of Sweden

All the more reason for leveling the playing field.

And that reason is . . .?

Companies and individuals that manage to game the tax system should be subject to an individual tax that also works retroactively, so they don't have an advantage over companies and individuals that went with the system instead of against it. Taxes could be much lower, if only everyone paid his dues.

I don't think it's possible to have a country without rich people, relatively speaking.

In every country we seen have some sort of power hierarchy, therefore unequal distribution of wealth.

To my knowledge, there's been no country that said "no rich people." Yes marginal rates have been very high in the past - sometimes it had no effect (UK example - though it only went up to maximum 50% marginal tax rate), sometimes it coincided with large times of expansion (US had marginal tax rates as high as 94% and hovered around 90% between 1944 and 1964).

Further, there's never been proof it "kills your economy." I've never met a phenomenally wealthy person who said "well, if tax rates go up to x%, that's when I stop working." These folks LIKE working, money is great, but it's not their driver. And, even if they DID stop working, would it be the worst thing in the world? Honestly - do we really think there's only one Gates, Zuckerberg, Ellison, Page, etc?

Calfornia is mismanged to hell. The bay area has some of the worst roads in the nation with very mild weather and a wealthy tax base. It cost $8billion to make 1 or 2 miles of central subway and only €11 billion to make the worlds longest tunnel under the alps. I have the same income tax rate as I did in canada yet there isnt universal healthcare and far more economic inequality. It goes on and on. If you trippled the money base I dont know how much better it would get.

You lost me on your rant about taxation without universal healthcare when the vast apportionment of that tax (and mis-spending like on the Iraq Occupation) is Federal not CA.

The problem is one of regulatory capture - corporate vested interests control the governance process and that means peons are getting less and less each day for their tax revenues.

My rant did not stay at California alone. What makes California mismanaged is a combination of the state itself and the federal government.

And the problem you state is not unique to any government in the world. Germany is better run than Italy and there are many reasons behind it.

> The problem is one of regulatory capture - corporate vested interests control the governance process

The problems with many things, but especially the price of SF Muni's new Central Subway and the like, are more about union interests controlling the governance process than corporate. Remember that they do prevailing-wage construction (which somehow means they pay the highest wage out there, not the average/median) to their construction workers.

The millions/billions spent on environmental-review studies and lawsuits are another matter as well.

> The bay area has some of the worst roads in the nation

You haven't traveled much if you believe this. Try going to the northeast sometime.

SF/Oakland tops the list in worst roads in metros over 500k pop:

http://www.businessinsider.com/the-worst-roads-in-america-20...

That there are bad roads elsewhere? I believe that too :).

The thing is it shouldn't be topping any list like this, with the amount of money and lack of north eastern weather.

They don't give back? Microsoft employs 100k+ people. That's giving back. These people all pay taxes and give back to society because Microsoft gave them a job. Because Gates happened. And in the case of Gates, let's not forget Bill & Melinda Gates Foundation.

What the hell have you done for society?

This story is very similar for most billionaires. They create A LOT of jobs and careers.

I'm a former employee of MSFT, and a great admirer of the Gates' dedication. But let's be clear - the fact that they employee 100k people isn't giving back in the least. They have a business, the business needs functions done, they're getting hours worked for money paid. That's not "giving back to society" in any way shape or form.

His billions of dollars donated to mosquito nets in Africa (among many other things) where he gets nothing back ... that's giving.

Can you explain to me why you think taking all of the wealth of 100 billionaires will help the poor? 100 billion spread over the population of California is less than $3000/person. So you can wipe out all of the billionaires and give everyone $50/week for one year, what is that going to change?

To add some context, California's tax revenue for 2014-2015 was $130bn. So having an extra $100bn would order-of-magnitude double their income for one year.

It's not clear to me whether or not that would make a big difference. I lean no, because my default assumption is that governments are really bad at spending money, but I could see it going either way.

Of course, there are also poor people outside California, and there's no particular reason to focus on the ones inside.

(I also note that 100 billionaires own considerably more than $100bn between them, but that's a minor nitpick.)

$3000/person is around or larger than the world's median individual annual income: https://www.givingwhatwecan.org/post/2016/05/giving-and-glob... .

I'd also expect the total wealth among the 100 billionaires to be well over 100 billion, considering just Ellison + Zuckerberg + Page together have over 100 billion.

In a similar vein to these two figures, the richest 62 people in the world hold as much money as the poorest 50% of the world: https://www.theguardian.com/business/2016/jan/18/richest-62-... . As a direct consequence, if these 62 people gave all of their money (except for a couple million each) away immediately, 50% of the world would have twice as much money.

(edit: I'm not suggesting that billionaires instantly give all their money away as a direct cash transfer. Just providing a counterargument to "billionaires don't have that much power")

>$3000/person is around or larger than the world's median individual annual income

But we're not talking about the world, we're talking about spreading it over the citizens of California in particular, which have one of the highest incomes in the world.

If you want to talk about it in the scope the entire world, divide their wealth by 7 billion instead of 40 million to see what it gets everyone. Also, almost nobody in the US is for taxing the rich in the US to just give to citizens of other countries.

$3K per capita would be an enormous economic stimulus. Or give public schools $3K per student, and you'll see huge changes. It's a lot of money.

> Or give public schools $3K per student, > and you'll see huge changes. It's a lot of money.

Yes, you'll see them spend $3K more per student. You won't actually see any improvements in the students, though.

http://washington.cbslocal.com/2014/04/07/study-no-link-betw...

The public schools have many problems; lack of money is not one of them. Having any idea what to do with it is.

Well, this is kind of a red herring, because it's widely known that schools of all types have been drastically increasing their administrative bodies, ballooning costs without actually doing anything for the students with that extra administration. Plus also it's the CATO Institute.

Think about what you're saying: "It's a red herring! We know that schools spend money they get on dumb things!" Yes, that's my point. :) If we could magically fix that, it might--in principle--become a good idea to give them more money. Giving them money does not actually magically fix that.

It's worth noting that Maciej forgot that the tech barons he hates actually tried this: https://www.washingtonpost.com/opinions/how-newark-schools-p...

What I'm saying is that presenting a report which shows more money getting spent on not the students, but some side thing which doesn't actually benefit the students... That is the red herring. That report isn't actually about money spent on students. It's money schools are spending on "administration". If the money given to schools isn't spent on students, it is useless. Spending money on educating actual students (and not ballooning administrations) actually does improve student education, just ask any teacher and ignore the principal.

I disagree, it's not simply the amount of money that is of concern here, but how it is allocated. Throwing money at problems is not the proper solution.

After $2500 for administration, there's just enough for a new aircraft carrier

It would be essentially cash for clunkers, which wasn't an enormous economic stimulus.

> you can wipe out all of the billionaires and give everyone $50/week for one year, what is that going to change?

well if you put it like that, the world ...

It's only for citizens in California in my calculation, which already make much more than that on average. So it would hardly change anything.