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

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

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

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

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

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

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

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

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

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

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

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

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

The latter is definitely not great economic policy.

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

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

Inherited wealth is anathema to meritocracies.

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

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

> meritocracies.

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

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

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

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

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

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

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

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

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

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

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

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

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

Who are you to make that decision for someone?

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

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

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

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

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

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

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

Taxation will not fix what is fundamentally a cultural problem.

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

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

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

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

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

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

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

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

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

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

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

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

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

Markets are optimization processes, so, very powerful tools.

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

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

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

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

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

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

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

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

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

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

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

States have killed many more people than markets have.

This strikes me as too facile to be particularly useful.

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

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

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

Care to explain?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What economy doesn't have inequality?

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

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

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

Its a Marxist Forest.

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

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

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

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

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

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

> through many mechanisms, not just taxation

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

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

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

> "legal tender for all debts public and private"

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

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

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

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

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

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

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

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

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

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