I suspect the bigger problem isn’t the Bezos’s of the world consolidating money and power generationally, it’s the big corporations getting bigger, with corporate taxation disproportionately hurting the smaller players rather than the bigger players. We would have a much healthier economy if the incentive structures hurt companies more the bigger they get to discourage things like vertical integration. A company doesn’t have to pay taxes on the intermediary steps of production but might have to (sales or B&O tax) if they were to purchase the same goods from a third party. This tends to distort markets away from lots of smaller players to a few big players.
Your understanding is a talking point created by the Republican party and has no real basis in reality.
https://www.factcheck.org/2017/09/death-tax-talking-point-wo... https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa... https://money.cnn.com/2017/10/10/news/economy/farmers-estate... https://www.chicagotribune.com/opinion/commentary/ct-perspec... https://www.tampabay.com/archive/2001/04/09/debunking-the-my...
I will also point out that estates benefit from step-up basis which avoids Capital Gains taxes on unrealized gains, which is hugely beneficial to most estates. This way of taxing is meant as a compromise to allow fairly large estates to pass tax exempt --currently up to $11MM if held by a single person, $22MM for a married couple-- while applying taxes to estates that all but guarantee that you could retire instantly collecting an income that puts you in the top 1% of household earnings in the US with highly favorable capital gains tax treatment. Also, the IRS will work with anyone that has a large illiquid estate and allow taxes to be paid over a decade after an initial grace period, with an appropriate interest rate.
Also, make no mistake, I'm not trying to apologize for people who are already extremely wealthy, who have to deal with this problem. I would love to have the problem of what to do with a company big enough to need to sell it upon my death. I'm merely trying to point out, that estate taxes do have a consolidating effect that feeds mega corporations. What I don't know is if this effect is as big as I suspect it is, or if it's simply dwarfed by other factors, like the general desire to sell out for a big payday.
I'm sorry, but this is just the same talking point reframed.
If you have a business that is large enough to be subject to estate taxes, you should have enough time and resources to talk to an estate attorney and learn how to move the assets into an appropriate corporate governance structure such that it is no longer a real issue.
I would put some limits on estate tax rates at certain thresholds. Like, anything above $50 million, tax at 90%. And hey, the kids will still be rich, just not crazy billionaires. For private companies this gets tricky and for many companies they would be forced sellers, that's one of the big trade offs. Exempt farms if necessary?
but according to law, corporations are "people" arent they?
Similarly, you are wishing that the workers must also provide capital, but again it requires workers to have savings. Now obviously I know you don't think of these things like that, you just have a wishful desire that somehow the profits are distributed to the workers and not to some random individual. But the truth is this is the precise reason why the prophets go to the individual who supplied the production process with their savings (just supplying them with savings isn't enough that would only allow you to earn the original money plus interest, but in order to benefit from the profits you must undertake the risk associated with the productive process).
By separating the people who work in a company and the people who undertake the risk associated with the productive venture, you benefit everyone.
It's not even a fringe idea that government policy is dictated by the wealthy class. What incentive do they have to do this?
The only way that it will happen is by regular people making it policy, and our current system doesn't give us a voice on what happens.
Well, I can say that about anything. Oh... the rate of return on capital is higher than the rate of return on labor? Well that's only true of the past, no study has studied the concrete data of what is going to happen in the future (Hint: it's because there is none).
If we look at history, most of the stuffs that improve human civilization were indeed funded by "VC" of the time, but the core motive is not to earn profit, but to solve problems and satisfy personal interest. Now if you can remove VC from the picture, you pretty much get a society in which everyone is automatically doing things that are beneficial to the collective. Anyone who wants to just be super lazy will get bored easily and will start doing things sooner or later, especially when all of his friends are creating value.
Sounds familiar somehow.
If firms have workers with negative productivity, aren't executives incentivized to fire them?
And if so, why are there negative-productivity workers?
There are also plenty of examples of work that is profitable to a company but that doesn't create value to consumers:
* Campaign Donations / Lobbying for favourable regulations.
* Softbank style monopoly creation (it's just moving investor money to consumers).
* Patent Trolls and lots of semi-patent trolling games. (Think Amazon buying Kiva)
* Misleading / Emotive advertising. (Which I'd argue is the majority of it.)
If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
Who is incentivized to hold executives responsible for the bottom line, board members and shareholders?
> If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
I agree, insomuch that many 'profitable ventures' don't increase the aggregate material wealth of the country.
1. The firm has enough growth to cover it up (downturns can finally bring about layoffs here)
2. Measurement is difficult or not practiced at certain firms vs others
3. Subsidies or contracts from the government specifically cancel out negative productivity and so make it worth it
etc
Many administrative, HR and IT workers are overhead, but still needed.
There's no other reason you could think of to feed a hungry person?
> That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement.
You don't see the irony in saying that a person must volunteer their value or be enslaved?
Free individuals might give something out of benevolence. But a state institution is not a free individual. It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state. Instead, you can employ game theory on such entities, to the extent of making them look completely self-serving and even psychopatic, as proven by Nash.
This is why it is so important to curtail the development of big and monolithic bureaucratic organisations, and instead use such principles as those given by Montesquieu, to make natural powers compete for authority.
> You don't see the irony in saying that a person must volunteer their value or be enslaved?
Do you think the person giving you bread should be forced to give you that bread? Nay, it would be far better if there was some kind of mutual exchange. There is none to be had, when the exchange is merely giving out a resource for "free." Except we know that it's not for free, but in return for your good behaviour. Then the exchange isn't free, but depending on an exchange anyway, except you have little to no say in it. Then the one in power of that resource in turn also have absolute power over you. So there should be a way for you to gain that power for yourself, or in the least make sure the one giving you bread does not have monopoly in doing so, because it will inevitably devolve into abuse of power.
If the state was a dictatorship, then the point might apply. However, democratic states (to lesser or greater degrees) contain some measure of feedback; and that weakens both of the prongs.
Plainly speaking, a democratic state provides its people bread for free because that's what the people want. The state can't take it all away since it is responsible to the people, and the exchange isn't a one-sided forced deal because the people in the state's jurisdiction have collective power on the state itself.
If that power is the power of the ballot, then the mutual exchange could be seen through an adversarial lens to be "good behavior in return for free bread". But the consequence doesn't hold, as the state doesn't have absolute power over its people. The exchange is mutual because if either party reneges, so does the other party.
But the stronger that feedback is, the less the adversarial model works. Consider a community small enough to support a direct democracy along consensus lines. If the tech existed, such a community could create an automated bakery and then hand all of that bread to its members. Here the members govern themselves; there is no external power that arises out of the state and then unilaterally controls the people.
A larger state may be different, but that difference is a matter of degree. "The one in power of that resource" only has "absolute power over you" if you are not part of it.
However, while the price of membership in such a unit decreases with every new participant, the ownership is also diminished with each new owner, until effective control over the unit or process becomes very difficult. This will inevitably lead to frustration and feelings of powerlessness as needed change is slowed more and more.
As the saying goes, more votes, does not necessarily mean more democracy. It simply means that it becomes harder to get anything done. Meanwhile, bureacracies grow and rule uninterrupted under such conditions, since a vote every fourth year, and the meddling of one or two representatives, can only ever make small and incremental changes, instead of giving the organization the far-reaching and overarching reorganization that it actually needs in order to become fair and effective again; a thing that is usually contested and opposed by those making up the bureacracy of that organization in the first place.
Given those points, it is not impossible to imagine a future state deciding to use some of its resources to constructing an automated production system. Its legitimacy is backed up in two ways: once, by the consent of the governed through the democratic process, and the other, by the positive externalities it grants to the people in common.
If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work. The conclusion you reached in your initial post,
>Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove.
no longer holds, because even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
I do, of course, agree that states as they exist today are imperfect, sometimes grossly so. But I disagree that there is a necessary implication that everybody has to work. As long as the people have a say, and as long as the people do not only value labor, the state cannot simply rid itself of its unproductive constituents. If anyone "in their right mind" would remove people that are "extraneous costs", then the people are collectively insane - and they are coherently and strongly insane enough to check those who are not.
Not really. The more people who get to vote, the less individual control you get yourself over the outcome, and so the more powerless you become. More votes do not equate more democracy, only less individual power to influence your own future or leadership through the ballot, especially if your choices are limited. Unless you take a more direct action, and go into politics yourself, that is. But who has the time for that?
This is why people are rioting in the streets now, instead of patiently waiting until the voting booths open. It's because deciding between two candidates wouldn't resolve the matter in any meaningful way. Especially since there are no real candidates to vote for, that would make anything but token change for you. Nevermind an independent candidate, who just wouldn't gain any traction at all, or at least not under the American system.
Call me cynical, but representative democracy only works because it gives people the illusion that they have an individual say in politics, but they really don't. However the illusion keeps them blissfull enough to not want to rise up. If it actually mattered, I'm sure there wouldn't be a discussion on whether the Brexit vote should be respected (many wanted to disregard it entirely), or even that my own country of Norway perhaps shouldn't pursue relations with the EU, since a majority voted against membership. Yet here we are, with a de-facto membership of the EU through the EEA. Voting against it really worked. Yay... /sarcasm. So I can full well understand why some people think rioting is a better choice. I don't condone it, and I think there are better ways to protest, but I still understand it.
> even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
Depends on the system in place. And it would be at the eternal scorn of those who have to work, but still pays the full cost of all those who don't. Because UBI isn't "free." And let's face it, such a machine wouldn't be "free" either, although it stands to reason that if it was made really big, then it would certainly be cost saving enough as to preclude all competition from all those who don't have the means to build such a machine themselves. As such, it would be clearly monopolistic.
In essence, it would be unfair to all those who would otherwise compete by baking bread of their own, because it would make bread-baking entirely unprofitable for everyone, just like slavery made low-end work unprofitable both in Rome and in pre-civil war USA. People somehow forget to mention that the war wasn't just about emancipation, but also because slavery gave slave owners such an unfair advantage that it put a lot of people out of honest work. Thus there would be something in it for every baker to throw a wrench into such a monopolistic machine.
If the only way to build such a machine, is to build it big, then it stands to reason that only big players can build it. So what makes you think they'd do it out of pure benevolence, without anything to gain from it? Surely, giving elites peace from the "rabble" might be a good enough reason? In fact, large swathes of the people would become complacent and dependent on the machine. So anyone who could gain control over it, would also stand to gain untold power for themselves and their group.
I think a fair few people would aspire to such power, and some might even be willing to murder for it. If you were somehow able to defend that coup, either diplomatically or by force, you would in effect gain dictatorial power over anyone it served. And nevermind democracy. You now have the power to decide what people vote, or no bread for you! And so, even if it was made with good intentions and for benevolent reasons, the machine may well come under the control of evil. Worst of all, if evil ever got control over it, many would come to their aid, simply to make sure they would continue to come first in the bread-line.
Now consider a crisis sweeping the world, say, destroying crops around the world; the guys who are getting stuff for free, would be the first to be cut out of the service of that machine. Only those who worked and saved would afford bread in such a time, as everyone would be made to pay. Except those who relied solely on the machine would starve, because they wouldn't have anything saved up to pay for bread. And so you'd have new upheavals.
The only way to alleviate such an extreme amount of power, would be to make sure there is competition for it, so that several machines were made to compete with each other to offer the best bread. And for that to be possible, you need people who also add value by working in various ways.
But without any incentives to do so, one might revert to letting the state do it. And then it would be in the interest of the state to keep that power to themselves, and prohibit anyone else from having it. Good luck saving it from the psychos and sociopaths that usually want to climb to those heights.
> If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work.
If they provide no value, then they are also worthless and expendable. If their worth is only potential, then don't be surprised if they're treated like cattle by those owning or controlling that infrastructure.
> To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
Except it's an inherently unsustainable system unless most people in that country also contributes to it. We're now in a situation where more and more countries cannot afford the welfare states they once created. And now while the coffers are empty, and the jobs are drying up, people want UBI? Who's gonna pay for it? The only reason rich people would pay for it, is to insure safety for themselves. So in essence, they would pay for security against the masses. It's the same reason the patricians of Rome did it. Well, Ok, whatever you say, it did work for a time... For that reason. So that's at least something, I guess. But whatever that was, it wasn't freedom.
There is already solutions that lets people stop working, however: Income based on interest, dividends and rising asset values. This is when the value you add back to society has become intrinsic to the property that you own. But most people have neither the means nor the knowhow for how to get there. Perhaps this is what schools should focus on in the near future, then?
This doesn't have to be the case, only the most nihilistic and privileged view of the world can produce such statements. People are not valuable because of their ability to produce capital, reducing things to these terms is a deficiency in both mental models and morality.
A state is only benevolent if every single citizen is benevolent? That seems like a pointless assertion.
In a democracy, in theory, the majority is what matters.
It's not what you can think of that matters, it's what the people who control the state apparatus can think of.
The vast majority of human beings are capable of empathy. Such people are usually found towards the bottom to middle of most hierarchies, because their empathy makes it painful to fuck over all the other claimants and collateral damage that they need to crawl over to get to the top.
You could look at capitalism is a sociopath-containment vehicle. If there were no sociopaths, there would be no need for capitalism: people would produce what was needed and freely share it with the people who need it most. However, there are sociopaths, and throughout history they've usually just taken all the excess production, enjoyed it, and left the people who produced it destitute. It was a big innovation to be able to channel that selfishness and will to dominate other people into productive uses that make the rest of society more efficient.
Wanting to remove people for being "extraneous costs" is not right-minded. It is extreme sociopathy.
On the other hand, if you were a baker, and someone told you that you must give your bread away for free to a third party, how would you feel about that? The only thing you would get in return, is not being punished by the one forcing you to work, and not killed by the masses for whom you provide your free bread. I don't know about you, but personally I'd hate to live under such a fascist regime.
I mean, I personally think it's all sociopathic, but it's the normal state of 'the state'.
We'll never automate medicine because everyone wants to live even longer.
I would love to not work and just play with my kids.
People should not be required to work to survive. People should be required to work to make the world a better place. Most people work bullshit jobs that do not advance anything but the wealth of the 1%.
What does "be required" mean?
This may not make a lot of sense right now when interest rates are close to zero, but there was also a time when interest rates were 20%.
Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed
Great, then let's open the primary market (which does generate value) up to individual investors. Unfortunately, this value generating mechanism has been legislated away.
That said, I do think this is somewhat beside the point of how capital gains should be taxed. I think that stock appreciation profit should be taxed at least as high as personal income.
I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
> That said, it is worth pointing out that public investors do have access to primary market IPOs.
Not quite, the have access to the resellers of the primary market IPO. The original buyers of the equity are the underwriters plus whoever registered during the road show -- and they must be accredited I believe.
My point is that if you are investing in a secondary market, you are not putting that money to use. It goes into the pocket of whoever sold you the stock and the company doesn't see a dime from the transaction.
If we must have taxes, I would rather have them not come from earned income (like a job), which takes labor and creates value. Income from the secondary market require no labor, and create no value.
If you believe rewarding and incentivizing value creation is more moral and socially desirable. Rewarding individuals for simply possessing assets is at best neutral.
Not sure where you're based, but do the recent economic events in the US change your tune here at all? Given 'too big to fail' how do you prevent organizations from retaining zero earnings and then asking for loans when liquidity dries up? Double taxation is an incentive against this behavior
I'm not sure if ycombinators like the alternative way.
BTW I agree to your idea in general, just want to say that I'd substitute WORK with anything that benefits human being.
But as long as that's true, you're going to get increasing disparities of both wealth and power - because you have a nice tight political and economic engine that cycles by turning one into the other, and back again.
Redefining value as "social value" - of some kind - won't change this on its own, because that process is just the on-ramp to the main cycle.
And unfortunately it's not the only on-ramp - it's just the most obvious one.
Democracy has always been like this, or worse, when it is not judged by money, but by your ancestors. Capitalism smashes Feudalism by bringing power to a lot of people than the Feudal lords agreed with, and then it's pretty much "money buys everything" mode.
I really feel like people need to look into land taxes a la Henry George: https://en.wikipedia.org/wiki/Henry_George
Taxing things like capital gains differently or implementing a generic wealth tax can actually hurt those we want to help to build wealth as well as incentivize things like expatriation of wealth. Can’t expatriate land.
I understand that the financial/business world has been trying to convince people otherwise since the mid 1970s, but they are still as wrong today as they were then.
Tax “fairness” is therefore simple. He who earns the most should pay the most.
You cannot expatriate dollars. The currency is issued by the state and the state can seize it. Chinese factory? Great, tariff on iPhones at the dock. Baseline tax = difference in currency value between country of origin and country of destination on that day. HQ in Ireland? Super, you owe the US the difference between the tax you paid there and the equivalent rate here. Don’t like it? No security sales in US markets. Sell bonds and stock somewhere else.
These aren’t hard problems.
Who is saying taxes shouldn’t exist here? I’m advocating for a specific form of wealth tax. I clearly believe taxes are necessary. As for them not being a punishment, this is clearly a silly semantic argument focused on trying to frame this emotionally. People respond to incentives and change their behavior when faced with incentives. Taxes change incentives. If a tax disincentives a behavior, this behavior will be done less. Get your moral policing out of here.
> Tax “fairness” is therefore simple. He who earns the most should pay the most.
Why earnings? Why should we tax people’s labor? Your definition of fairness is yours, not everyone else’s.
> You cannot expatriate dollars.
Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks. Where does an idea like this even come up? Go see China’s issues with people expatriating capital and their middling success at preventing it with capital controls.
How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind. By the way, concerned with massive disparities in wealth? That’s all from housing which is of course built on what? Land. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r...
Tax the shit out of land. The marginal value to a piece of land from the actions of its owner is minimal at best. People gaining wealth from land is the definition of rent seeking.
> Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks
I don’t think you appreciate how governments already monitor wire transfers, and how they are reversible within a certain timeframe if a legal authority chooses to intercept one.
Again, this is not a complex problem since the tools and authority already exist, it’s a political will problem, in that there are nearly zero elected officials willing to cross a billionaire.
> How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind.
Because I live in a state in the US without income taxes and with a high reliance on land taxes. It makes no difference, corporations bribe their way into temporary (as in decades) exclusions from land taxes, and individuals are left to pay what the chemical plant literally polluting their back yards is exempt from.
There is no logarithm or formula that fixes all of this. What fixes it is 10 years without parole at hard labor for any owner or officer of a business entity who gives anything of value to any employee of the state, whether that employee be elected, appointed, or hired. The same penalty will automatically be applied to the state official who has been paid.
You can't hide land, and if you want the state to enforce your property rights, you can't alter your behavior in a way that lets you avoid paying the tax. That makes the land tax what economist call a "zero-deadweight" tax: it doesn't decrease economic activity or consumer wellbeing at all. There's also an economic theorem [1] that an LVT results in the optimal size of government: investment in public goods increases the value of land (and hence rent that can be charged for it), but also the tax on that land, so citizens have an incentive to vote in only those public works projects that increase rents more than their cost in taxes.
Whereas if you put a tariff on iPhones at the dock, Apple will pass that tariff along to consumers, prices will go up, and fewer people that want an iPhone will be able to afford one. The "HQ in Ireland" trick revolves around avoiding dollars at all: profits from a company's EUs operations are retained as Euros and then used to pay European employees or exchanged directly for RMBs to pay for Chinese goods.
A hefty estate tax is something I can get behind. It's definitely distortionary and has a huge amount of difficulty in implementation but I see almost no societal value to generational wealth.
That said, I see no reason as to why we shouldn't at least experiment with other alternate tax regimen as well, and that may include tax savings at least for the highest earners. To echo others' statements, why shouldn't those at the absolute highest levels of savings endure a little redistribution? It wouldn't matter much to Bezos.
Federal income tax caps out 37% and california income tax caps out out 13%.
If you do that, you would want to increase the rate on OI as well, otherwise people would play games because of the rate differential (take money out of a business as salary instead of CG, for example).
And lurking in the background you have the timing/inflation issue, which is that OI is taxed every year and CG is taxed in nominal terms upon sale. So you end up potentially paying lots of tax on nominal increases in value that are actually just inflation. The fact that CG is not inflation-adjusted is one of the rationale for having a lower CG rate.
I hadn’t considered the inflation issue, which is interesting but seems solvable.
That being said, how do we prevent people from just selling small amounts of capital every year, so as to stay below bracket thresholds?
If the concern is that someone is paying less in tax off $250,000 in capital gains when they realize their wealth than someone who is paid a wage of $250,000, the policy prescription (with which I agree), is to tax $250,000 capital gains like income, I.e. at the top marginal tax rate.
What happens if I liquidate $50,000 at a time over the course of 5 years, and continue to pay a net effective tax of around ~20%, which is what the long term capital gains tax is, today?
This could mean that they have $1 million of unrealized gains that year. You're not really able to tax unrealized gains most of the time because they could disappear or go negative. That would go untaxed until they sell, but it would eventually be taxed.
At the same time, they're not going to be able to enjoy their wealth only taking out a small amount every year, so I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
Very fair point.
> I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
I think I buy this argument. Another commenter had the suggestioin of dividing the actual realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in income for each of those years. I can't think of anything wrong with this approach.
I would argue that millions (if not billions) are injected into corr^Wlobbying to make sure that we never fully have this mindset, indeed.
Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies.
Is this actually true? According to the IRS, in 2018 the top 10% of income earners paid 69.47% of total income tax collected.
Source: https://taxfoundation.org/summary-latest-federal-income-tax-...
That number feels wrong, given it's exactly the same as the tax one, but I couldn't find another source. https://www.statista.com/chart/amp/19635/wealth-distribution...
Therefore we should want a Growth market so that more wealth is produced and risk averse people will still be rich but more people will become as rich as them.
To resolve Inequality we can't just have the mindset of punish the rich for creating wealth. We need to grease up our economy so that everyone else can be rich as well.
Different mindset but this problem is super hard to solve and I don't think anyone has a decent solution for it.