Hacker News Reader

Comment by jflatow | Hacker News Reader

I was about to post the same sentiment re: smoking.

Given that we see this type of behavior in all industries (not just tech), it seems to me it's actually a systemic problem. People / organizations are incentivized universally to optimize for their own selfish interest, because they do not incur the cost of their decisions on everyone else. In this case, designing your product to maximize e.g. addictiveness or time spent per user makes sense if the downside of that is paid by the user.

I think taxing wealth / property instead of (primarily) income actually solves this problem, but that's another story...

View on HN

I'd wholeheartedly support wealth taxes if I trusted the social safety net and health care system in my country. Until then, I'll hoard money out of fear: I don't have anything I'm intending to spend it on and hopefully never will. Fix health care and there'd be a high probability of the chains coming off off, at least for me.

Yeah, I chalk this up to broken feedback loops. A separate but related problem, is that in most places it works roughly like G = TI, with a fixed T (tax rate), so that G (government budget) is a function of I (income). The tax just works like a resistance to accumulating wealth, no matter how much the government actually needs in order to function. It would probably help if we capped G instead, i.e. T = G/I.

The trick to taxes is in getting them right.

Taxes are, to a rough analog, like the vacuum hose system within an automobile engine. (Hrm: I'm thinking that this may be a bad analogy if there aren't many auto gearheads here.)

An internal combustion engine is essentially a self-powered air pump. It has a low-pressure end (intake) and high-pressure end (exhaust). It's got various bits and pieces which need powering. Chains, shafts, and vacuum hoses bleed off some of the energy output of the engine to run systems which can't otherwise be powered. Without the vacuum system, the engine as a whole runs worse.

A vacuum leak, though, worsens performance as you're bleeding off energy and not feeding it back in where it's needed.

In the same sense, taxes modify the function of markets by rasing or lowering costs, and transferring purchasing capability elsewhere. If properly structured, they improve the function of the economy as a whole. If not, they worsen it.

The engine (wealthy) generally perceive the direct costs, but not the indirect benefits of the tax system.

This just begs the question though, what is the right way to tax?

Assuming that you are redistributing wealth (as you describe above), taxing wealth instead of income has a profound effect. It creates an incentive for every individual to increase the total wealth in the system, no matter who creates it, or where it's created. When you tax income, it makes no difference to you whether the income was created wealth, or merely captured.

Whatever you tax becomes more expensive.

Whatever is more expensive, you have less of.

Your question can be restated: what's your overall economic goal?

You tax to achieve that.

I'd tax rent-seeking, and the most effective way to do that is a land value tax.

I'm seeing merits to land tax, inheritence, financial transfers, and either a corporate or corporate transfers tax.

Allowances for that which is reasonable. Disallowances for that which is not.

The economy views taxation as an outage and routes around it. IOW, prices adjust.

The thing that should be taxed is rents, Ricardian rents as written about at length by Adam Smith.

Reply on news.ycombinator.com