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Comment by humanrebar | Hacker News Reader

> ...increasing wealth concentrated in an increasingly tiny percentage of the population, while millions struggle to get by...

I think these discussions are immensely helpful. Mostly because they give us clear criteria for accepting and rejecting proposed solutions. Many people, for example, are for confiscatory taxes on the rich to level the playing field.

Your sentence here, for example, implies that the wealth concentrated in the hands of the tiny percantage of the population would relieve the millions who struggle if it were just redistributed. I don't believe the numbers back that up. As rich as Gates and Bezos are, they can't fund healthcare for everyone. Which is why redistributive tax schemes aren't about using the means of some to fund the needs of others as much as creating fairness (or at least the sense of one).

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it's not about their money. Money is the power to choose. In a very real sense, the profit extracted by enterprises represents opportunities lost by their customers. Had profit generating goods and services been priced at the market clearing, efficient level then the end customers would have kept some of their own money. They could then make new choices with that money. In aggregate on the supplier side, that reaped profit represents choices individuals could have made but now are unable to do so.

You are committing a major logical fallacy here, in assuming the initiative and use of capital to create products and then choosing to extract profits after taking that risk are independent events. Profitable goods often will not exist at all unless they are profitable. (Consider in an extreme example, pharmecuticals.)

You are also mixing up margin and market clearing price. The market clearing price includes profit. Just because a product is profitable that doesn't mean there are any inefficiencies in the market. On the contrary the price a market will bear for a product prices in profit insofar as there is a lack of supply to meet demand. Market inefficiencies come about due to illiquidity, regulation, abusive monopolies, etc, not simply because someone is making a profit.

You can't just imagine up a world where enterprises sell with zero margin -- in many cases the alternative is the products just simply wouldn't exist. This alternative reality is much worse for consumers.

Understand, but that's not exactly what I'm arguing here. Pharmaceuticals definitely need big pocket books to finance medical research. But market forces alone are clearly not the answer for even that market. There are many illnesses not profitable enough to warrant medical research - and people suffer and die as a consequence. In effect, then, the profits pharmaceuticals make on one medication are really then coverage for later costs. That makes them not profit anymore.

I'm not saying the world needs 0 margins. If anything, that's contributing to the problem. Walmart and Amazon are good examples. Their cost structures have annihilatd entire, local economies.

My Sunday morning guess would be to look for ways to lower the entry costs for businesses. Maybe municipal level infrastructure for local consumers? I don't think "trust busting" would work in isolation. Over time, the markets probably re-concentrate.

You cite Amazon and Walmart as bad actors since they have 'annihilated local economies' -- but at the same time, they have delivered untold amounts of value by lowering prices to nearly (or below) cost for millions of consumer goods. Not to mention the time they have freed up from peoples' lives having to spend time purchasing items at various brick and mortar stores. Would it really be better if mom and pop stores were selling the same products at higher costs, wasting immense resources in the process (subsidized by consumers and possibly tax payers) due to lack of efficiency and scale?

How do you speak so confidently that they are "contributing to the problem?" It is a hard sell that they are abusing their market dominance, because of the very fact their margins are so thin. Since there are multiple market leaders, and their margins are thin, this implies they are competing fairly. You seem to take it as a given but it's a hugely complex question. I'm all for trust busting large companies abusing their power -- abuse which usually manifests in large margins.

> Money is the power to choose.

OK. So if it's not about justice broadly but about economic liberty specifically, that's fine. Then the conversation is about which economic liberties are due and how much those would cost.

A popular one is "People shouldn't have to lose wealth or gain debt because of health problems". That's an admirable goal, but taking all the money from the top 1% won't result in free universal health insurance for long. That approach still seems like it's reaching for something else.

You seem to be making a more upstream argument, though. That U.S. (and Western?) markets are structured to favor the wealthy, limiting the power of markets to reward the poor and working class for good choices, hard work, and so on. That's a great point to consider, but what approach would create a level playing field?

Figure out the factors that concentrate markets and counteract them.

Per the IRS, the total income of the top 5% of households is $1685472000000, which, when divided among the 139,960,580 households submitting tax returns, comes out at $12,000 per household. That sounds like it's in the ballpark of what you'd need for healthcare, US idiosyncrasies notwithstanding.

Now, of course nobody is realistically suggesting taking all that money. That would be neither fair nor useful. Because everybody agrees that some reward is necessary to motivate people, and that they should get to enjoy the spoils.

That number just shows why “tax the rich more” isn’t the way to pay for services everyone uses like healthcare. Top 5% isn’t just Bill Gates and Warren Buffet. Bay Area engineers will hit that living alone. So will a couple where e.g. one person is a nurse and another is in IT. It’s a very expansive group.

Total spending at all levels of government in the US is almost $7 trillion. So even if you tax the top 5% at 75%, you’re covering 17% of total expenditures. European countries don’t build their welfare states by heavily taxing the rich. In say Germany, an entry level office worker will pay 30%+ of their income in taxes and mandatory insurance.

> So even if you tax the top 5% at 75%, you’re covering 17% of total expenditures.

And that's assuming a 75% effective rate, which you can't get at the 95th percentile without also charging high effective rates to the majority of people because it's not possible to charge more than a 100% marginal rate on the difference.

> European countries don’t build their welfare states by heavily taxing the rich

Idk according to my swedish coworker, there was a marginal tax rate of 70-80%++ from like 1940-1985 or something.

Sweden taxes everyone heavily: https://taxfoundation.org/how-scandinavian-countries-pay-the.... The top marginal rate kicks in at 1.5 times the average income. Sweden also relies heavily on the 25% VAT, which is disproportionately borne by the lower brackets.

Here is a hypothetical calculation of someone making $120k USD who is married with two kids: https://home.kpmg.com/xx/en/home/insights/2011/12/sweden-inc.... Such a person pays roughly 50% in total taxes. In the US it would be roughly 25% (in Maryland).

In the US it went up to 90% in the early part of that timeframe.

It's important to realize that nobody really paid those rates in the US. At the time the rules for what could be claimed as a deduction were so lax that people were making $80,000 or more in deductions against $100,000 in income.

I've heard this argument a lot, does anyone have any good sources to confirm it?

So don't tax the rich more. Tax the ways by which the inequalities arise. Create counter forces against market concentration. For instance, if there really were alternatives to desktop Windows and Mac desktops (from the hardware through to software levels) then computers would be more affordable and wide spread. That affordability has an income increasing affect on the customer side.

How would this be enforced?

My bet is once you're talking enforcement the markets are already concentrating. Maybe something like UBI? I don't have all the answers.

Maybe the federal government offers lower tax rates based on how many different states the company has a sizeable portion of its labor force. Ie near zero for being spread out everywhere.

I don't think you understand the vast gulf between the top 5% and the top 0.1%. If you hit the top 5% hard you are just going to slam tons of small business owners, software engineers, doctors, lawyers, professors, etc.

yeah, the top 5% includes basically any married professional couple, and any above-average successful individual like a small business owner or lawyer or consultant. they aren't "rich" people, although they likely may be one day.

They aren't rich? Let me get my tiny violin out!

It's not about whether they are rich but about whether they produce income that can be taxed to pay for the needs of the poor.

i didn't say they deserved your sympathy, you projected that onto me because you have a political agenda.

good luck with the taxes thing though.

But why would engineers be excluded? Why should a software engineer make $250k+? S/he is just sitting in a chair typing, while the person who cleans the bathroom or make the food in FB' cafeteria gets nothing.

Isn't that unfair?

I personally recommend that we start in small experimental grounds. The idea of starting in the Bay Area is good because engineers are pushing hard workers into poverty, but they they go around with masks hitting people on the head with sticks just because they speak their minds.

That's just basic supply and demand and it's not unfair. Jobs where demand exceeds supply are paid more and more until people decide to train/retrain for that job.

The unfair part is that the 250k income of the software engineer is increasing demand for housing until it's too expensive for the cleaner although the demand and therefore price are high enough to warrant more housing it's not getting build because of zoning laws.

That's just basic supply and demand and it's not unfair. Jobs where demand exceeds supply are paid more and more until people decide to train/retrain for that job.

You say that's fair, but someone else could say it is unfair. The supply/demand equation you describe suggests how the salaries get decided upon, but that's not the same thing as fair. That's the system we have, but that doesn't make it automatically fair.

Of course it is supply and demand, but they are creating these conglomerates that inefficiently aggregate wealth into a few. All of them are part of the problem. Why are only the top 1% ones the problem? Those are the ones who created the system of unfair enrichment, but share unfair gains to a few to keep the machine working.

I mean, why should someone jump into the 1% simply for being engineer #2? Those gains are unfair, and should be taxed 100% to pay for healthcare for all.

Why are only the top 1% ones the problem? Those are the ones who created the system of unfair enrichment

No, they aren't. The system is older than any person alive today. It's older than people. It's a natural law of the universe. It's game theory and natural selection, ultimately, that plays the fundamental role.

Why should a software engineer make $250k+? S/he is just sitting in a chair typing, while the person who cleans the bathroom or make the food in FB' cafeteria gets nothing.

It isn't about rewards or even about what's fair. It's about the market. You pay an engineer a lot of money because you need an engineer to do the job and the supply of engineers is low. On the other hand, the supply of people who can clean bathrooms is effectively unlimited. There are far more people willing to do the job than there are jobs for them to do.

The market says a CEO deserves $100m per year. Is that wrong?

When you have a company with $20B in profits, a CEO who can increase profits by 0.5% is worth $100M more than one who can't.

> Why should a software engineer make $250k+?

Because people are paid for the value of what they produce, not the effort they spend producing it.

Why should a person make $10m?

If I can produce something that will benefit 10 million people such that they would gladly pay $1 each for it, but I'd just as soon not do it unless I get paid that money, then it's in the interest of those 10 million people that I get $10M for my work.

How much should we tax you, as a 0.1 percenter?

More than 0% and less than 100%.

It's not just about getting to "enjoy the spoils". You would be taxing 100% of income, making working at all meaningless. There would be no money to support the household.

I'd imagine it being more helpful to look at military spending and amounts of money big companies are hoarding (looking at you Apple) to see where the real issues lie.

As long as people are ok with their money going into a mystery box they have no control over, holding no one accountable, how can we have anything BUT inequality?

As long as companies are free to play tax games and suck money out of the economy and then hang on to it for as long as they feel like it - how can we have anything BUT a screwed up volatile economy?

People talk about redistributing money as if there's a million rich people wiping their butts with 100$ bills and if only we could teleport that money outta their toilets, into the hands of those in need, we'd solve something.

Real solutions to real problems come with infrastructure, accountability, transparency.

They start in the mind, then go out into the real world. As long as in your mind it's republican vs democrat, rich vs poor or some other childish false dichotomy, we'll be right where we are, heading for serious social unrest.

How would you tax Apple? Realistically basically all taxes on corporations simply result in added cost the consumer. You may think you're taxing Apple but you're really just taxing the consumer extra.

As long as all their competitors are subject to the same tax, the price simply rises. This is why Apple products cost much more in the EU. Of course, if it were cheaper for a company to be located somewhere where they would not be subject to that tax, then you're simply just motivating them to relocate.

Doesn’t Apple pay some of the highest tax rates?

It's not so much about tax rates and I haven't looked into it too deeply - although I'm sure the big companies hire the best accountants to use every loophole in existence.

I am referring to this: https://www.cnbc.com/2017/05/02/apples-cash-hoard-swells-to-...

Companies should not be allowed to simply hang on to 250 billion dollars.

Imagine what could be done in science, infrastructure, services etc if 10% of that money went towards those things.

There's a great Peter Thiel clip about this that sums it up very well:

https://www.youtube.com/watch?v=2Q26XIKtwXQ

> Conpanies should not be allowed to hang on to 250 billion dollars.

Why? They earned it. And have you seen how much Apple donates to charities? Bill Gates at one point had a net worth of over 100 billion dollars before donating a huge sum to charity. If 250 billion is too much, what is a good amount?

>Now, of course nobody is realistically suggesting taking all that money.

Right, we're suggesting seizing the means of production. Don't redistribute, predistribute!

I think the top 5% is not a complete source to pay for healthcare. But I think the top 15% is. Under some assumptions of incremental tax increases across the board, to distribute better and pay for healthcare needs, taxing the 80% at a flat 80% could do the trick.

For one year...

Ok, take all that wealth and we would spend it in one year on health care.

What do we do year two?

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