American Equity
blog.samaltman.com
blog.samaltman.com
Which is odd because he specifically ask you to give feedback but never follows through on presenting the actual idea.
He does motivate why he thinks a share of the GDP is so he gets the why, but never actually gets into the what, and how.
I mean the GDP isn't just something you can siphon off money from and give it to someone as it's not a thing that anyone owns.
So if you want to give out a portion of the GDP, I think what he really means is pay a universal income that is locked to GDP growth, but he never really says this.
It's useful to try out different metaphors and see what sticks.
NIT is just moving the progressive tax system into negative values, which means you subsidize the poor but once you make enough money you won't get subsidized.
But this is explicitly what the proponents of BI want. It's as much about the optics as who pays for it. I.e. the idea is to create a program that draws its political support from everyone getting paid a check, similar to how Roosevelt enacted social security to include all citizens, even those who were millionaires and had no need for it.
Which is what sets it apart from Negative Income Tax.
Your argument that BI would be revenue neutral for some taxpayers and therefore we should just use NIT to avoid the sillyness of the government taking $1 from you just to give $1 right back to you isn't wrong, but it's missing what BI proponents are trying to achieve.
It's mainly about achieving roughly the same ends with different optics, and the comparison to Social Security is often brought up. Enacting any system like this is going to be politically difficult, and BI proponents believe that "everyone gets the same" is an easier sell than "this is another subsidy for the poor".
1. http://www.econtalk.org/archives/2017/01/michael_munger_3.ht...
UBI is identical to NIT. The names are different framings of the concept, but the policy is identical and widely recognized as such, which is why the experiments frequently referred to tests of UBI are also the ones characterized as tests of NIT.
> NIT is just moving the progressive tax system into negative values
“Progressive” refers to marginal rates, which remain non-negative in NIT; NIT just has a flat personal refundable credit (which is equivalent to a flag annual payment) included. Which is exactly what a UBI is, except the payment in some forms of UBI is outside of the tax system, but that implementation detail is irrelevant: whether it's called a tax credit or a non-tax payment is still the same thing.
But I'd like to elaborate a bit here. UBI is not identical to NIT because the difference is marketing, not math. Most of the electorate's basis for evaluating a given policy is not to perform a mathematical comparison of two systems and checking whether they yield the same results. How something is done is as important in politics as what gets done.
Which is why, as I've pointed out, BI isn't like NIT at all. The difference is how the idea is going to get sold to the public, not what each taxpayer is going to end up contributing to the system as a function of their income.
But it's not even there, as proponents of both have stated that they are equivalent, and alternate names for the same thing, and they are marketed with the same arguments, and are widely acknowledged by their proponents to be names of the same thing. That is, the marketing isn't different, it's the same, both in content and on that the marketing itself recognized the equivalence.
That's still equivalent to an NIT (specifically, it's equivalent to adding the kind of refundable credit that creates an NIT, and reducing the standard deduction by the size of the credit, which may result in a negative standard deduction.)
Consider trying to introduce a universal health care system. You might say why do we need a system that subsidizes Jeff Bezos's health care? He can damn well pay for it himself, he might even agree since it's going to cost him less in terms of his tax contributions.
That's the equivalent of trying to sell NIT. Right out of the gate you have to not say "this is for everyone" but "it's just for the poor, but don't worry because...". That's what I mean by the marketing being different.
Of course with UBI the benefit is literally fungible, it's money. So it's really not like universal health care, but in the minds of a lot of people it is. They find it easier to accept the state providing a service if it's provided to them as well, even though it's a net cost center for them.
Humans.
1. https://mpra.ub.uni-muenchen.de/2052/1/MPRA_paper_2052.pdf
Run for office perhaps. In other words, if you can't discern a plan, maybe the post is more about Sam than it is about a plan.
(NOTE: I do think he has a plan here, just very back of the envelope. I think he's mulling over ways to incrementally roll out UBI, which if you think UBI is a good idea, figuring out an incrementalist approach is hugely crucial, important work. I don't think UBI is a good idea, but I do think this post is about a real thought and not just Sam posing or something. I have faith that there's real intellectual sincerity here.)
Alaska does this [1]. The only problem with the idea is that some things aren't considered GDP while they grow the pie - open source and volunteering being good examples.
This is why research grants and outright government spending is a good tool in the toolbox. People are still paying for it through taxes, but because of the indirect nature we can judge the problem a bit more on its merits ("of course we want cancer research to happen and be funded")
About 60% of all US income (GDI) is compensation for labor (salaries, wages, benefits), 40% compensation for capital (dividends, interest, rents). Both parts are already taxed, at varying rates. The total amount of taxation is about 33% of GDI, while total spending is about 36% (the deficits is filled by borrowing).
Since the entire article looks like a big tax and transfer proposal, it's pretty bizarre to omit almost all basic government accounting, except for a throwaway footnote. The analogy with joint-stock companies or Homestead acts are neither here nor there. The government owned a lot of American land back then. It doesn't not own a large share of of current American corporations, nor many laborers. So the way to pay any significant "citizen's dividend" is boring old taxes.
A much better discussion with concrete numbers and speculation on incentive effects can be found here: https://arstechnica.com/civis/viewtopic.php?f=24&t=1286141&s...
[1] https://en.wikipedia.org/wiki/Socialism "There are many varieties of socialism and there is no single definition encapsulating all of them, though social ownership is the common element shared by its various forms"
and Matt Bruenig here: https://peoplespolicyproject.org/2017/08/17/index-funds-are-...
It seems like it would be difficult to lock an entitlement program to GDP without encountering funding gaps at some point, though I suppose a funding gap hasn't stopped the Social Security program from continuing to pay out.
Reynold's old books from the 1960s and 1970s explore a world where manufacturing produces more than enough stuff and there's a huge excess population. It's not dystopian; he outlines how such a world could work. His world is capitalistic but government plays a very strong role.
This model comes from an era when corporations were about equity and dividends, not debt. Altman may see the world that way because he comes from venture capital, which is an equity world, not a debt world. Larger corporations today tend to be heavily debt financed, because interest payments are deductible while dividends are not. That interest paid is a deductible expense powers the debt-heavy corporate structures of today.
Also, if all of your income comes from dividends, you have to be able to handle considerable volatility, even across the whole market. At least 2x. That's not acceptable as a basic income scheme. People will starve.
Good point -- but if this became a significant problem, then one could imagine purchasing a hedging service to smooth out the peaks and troughs. That would have to be considered when fleshing out this portion of the OP:
> We’d also need to figure out rules about transferability and borrowing against this equity.
https://www.bloomberg.com/view/articles/2016-08-24/are-index... https://www.bloomberg.com/view/articles/2017-10-26/maybe-ind...
The basic observation being that if we can get the benefits of capitalism when most equity is owned by a passive investment fund like an index tracker, then what's the problem with the state owning all the equity in that tracker, and redistributing the proceeds to the population?
Note that there are a few significant questions left unanswered in there, but the fundamental question of "if index trackers work why wouldn't communism" is quite provocative.
Anyways, if you like his writing, I'd encourage subscribing. http://link.mail.bloombergbusiness.com/join/4wm/moneystuff-s...
Hierarchical, centralized corruption of the state is the problem, as evidenced by failed communist implementations. If a more distributed model could be devized, perhaps it could avoid such problems.
That said, I see some strong concerns with this approach:
1) Is this dumb algorithm easy to game by virtue of being so simple?
2) Is it possible for a tyrant that gains power to turn this passive equity into concrete control over the economy organizations?
3) (Probably most germane in the context of the OP), if the majority of the economy is owned by passive investment vehicles, would there be market competition any more? Or would high-risk investment capital dry up, to the detriment of startups and small businesses, and causing the economy to be less efficient overall?
This last concern also applies directly to Altman's American Equity proposal, at least to the strong version where most of the US GDP is tied up in the program. It's possible that the weak version (where a small chunk of the GDP is in the program) would be positive, while the strong version would be harmful.
I don't possess enough Econ expertise to have a strong opinion here, but would be interested to hear others' thoughts on this.
Also, perhaps we should call this concept something other than "Communism", since it only partially overlaps with that ideology; Communism explicitly identifies the "working class" and "capitalist class", and describes the exploitation of one by the other. While the outcome described by American Equity looks like the Communist endgame, in that wealth is collectivized, it is also quite different in many other ways, specifically the preservation of free markets, property, etc.
This is the "fixed amount of wealth" fallacy, wherein the author regards the amount of wealth in the society as an invariant, rather than a variable.
The only reason that equity exists at all is because of the efforts of people who created it (and thus own it). Without those efforts, there would be no equity for the state to own. Without a promise of owning that equity, nobody has a reason to make those efforts. Thus, any state policy to "own all the equity" also removes the reason that equity exists in the first place.
And now you're in the Soviet Union; enjoy eating your two bananas every year, because nobody has a reason to bring you any more.
By calling a basic income system American Equity, Sam shifts the conversation away from the word 'income' because this clearly isn't "income" in the traditional sense, to "shared wealth" which is much closer to the ideas brought along. I think it is a reasonable way to look at it, although I continue to believe that what is the fundamental factor is keeping wealth inequality in check. Extreme wealth inequality is just as unstable a system as extreme wealth equality.
Let's take a company like Google and re-imagine it.
From its public statements we know that the bulk of Google's employees cost Google money and cut into its profit. Nearly all of its profit comes from its search advertising business and everything else mostly loses money. If Google was structured as an "economy" than the 1200 or so people who were responsible for search advertising would be like the world wide 1%. They would enjoy lavish perks, free food, daily massages, etc. While all of the other employees would have to work very hard every day doing what they were doing and hope that something didn't come along and get them fired while living out of their car on a salary that was commensurate with how much they were costing Google.
Instead, everyone at the company benefits from the work of the 10% or so of the employees that make all the money in the company with free food and buses that take them to and from work. And even though they are losing the company money by being there, the environment remains vibrant and energized because the company is so wealthy as a whole that they don't have to worry day to day that they will be fired if they do their job to the best of their abilities and be good corporate citizens.
The US is an amazingly wealthy economy. Many of the richest people in the world are citizens of the US. What I hear Sam proposing is that we create public policy around making the US a great place to live for all of its citizens, just like an Apple or Google make their companies a great place to work for all of their employees, regardless of whether they are entry level or C-suite level.
I don't know if it is possible to pull off but I do think it is worth trying to pull it off.
But they're able to invest in the future because they have the spare resources. Maybe one of these random side projects will become immensely popular. Maybe one of these crazy side projects will become the most popular email interface ever. And even if they don't, the people are still valuable.
I'm not saying that some people won't just coast, but the potential for innovation shouldn't be locked away because "we can't afford it" - we obviously can.
> I think that every adult US citizen should get an annual share of the US GDP.
Sure thing, sama. I hope you saw it[1]: https://medium.com/@simon.sarris/after-universal-basic-incom...
Without addressing these issues, UBI could look like a nightmare even if we're all on board.
I think he's committing the usual assumptions:
1. That what people struggling and suffering in the US need is money, and not some other thing that they've also lost, that may be more important.
> imagine a world in which every American would have their basic needs guaranteed
2. That those struggling would be content if they had the $ part figured out.
3. That such disbursements would ultimately lead to less inequality, and not more.
etc
Just as you can find Silicon Valley techies who think Soylent is the only sustenance a person will need, intellectuals tend to think everyone could be as content as they would be living life in their heads or inventing their own destiny. Most people need to be doing something to feel satisfied and UBI addresses this just as poorly as disability checks. Cue drug epidemics.
> And we should consider eventually replacing some of our current aid programs, which distort incentives and are needlessly complicated and inefficient, with something like this.
Tread very carefully, Sam. As I mention in the anti-UBI article, thinking you can replace case workers who do very real, inefficient, difficult tasks like getting medicaid patients to just sign up and show up at a doctor at all is not easy. You will not eliminate poverty just by giving everyone money, especially if you do it by eliminating the pesky overhead of case workers at the same time. UBI looks great because its easy to explain, but we probably need a basket of hodge podge solutions to meet the needs of the poor. The poor and their needs, I promise you, are much more diverse than the Silicon Valley rich and theirs. Be very careful not to think the poor think precisely like you, just minus money. E.g. what works for a top 1% IQ engineer who lost his job will not work for a senior citizen drug addict who has had trouble holding a conversation with another human for the last 5 years due to his isolation.
[1] Because dang messaged me about it being re-upped on HN so I assume somebody at YC eyeballed it.
There's no reason to assume that anyone at YC sees the posts we re-up. That's just routine moderation. The only reason they'd know about it is if they ran across it on Hacker News like anyone else.
How do you decide which stories are re-upped and which are not?
I would expect something similar to happen to here: this would incentive massive changes in attitude towards national infrastructure and services. Take NASA for example: it's already difficult to convince taxpayers at large to support NASA even to the meager extent that it is; now put NASA into the context of being even perceived as a very minor drag on GDP in a country where citizens expect to get an annual return on GDP, and there's no way NASA would continue to be funded.
Everyone would be willing to forsake long-term goals and returns in exchange for short-term financial incentives -- exactly the problem of so many businesses today.
(Rural areas would also be absolutely gutted by urban centers -- this would become a system that empowers tyranny of the majority.)
I think former President Obama has already replied to this idea more eloquently than I could:
"...government will never run the way Silicon Valley runs because, by definition, democracy is messy. This is a big, diverse country with a lot of interests and a lot of disparate points of view. And part of government’s job, by the way, is dealing with problems that nobody else wants to deal with." ... "...if all I was doing was making a widget or producing an app, and I didn’t have to worry about whether poor people could afford the widget, or I didn’t have to worry about whether the app had some unintended consequences -- setting aside my Syria and Yemen portfolio -- then I think those suggestions are terrific." https://obamawhitehouse.archives.gov/the-press-office/2016/1...
Thats because its very expensive when you don't, from the shareholder lawsuits.
You can try to scale up your worldview without getting sued to oblivion, but it is a parallel fantasy.
Note the vast majority of corporations are not public and their only shareholders are the individual owners. So, maximizing return on their capital and labor is not based on some "mistaken belief", it is a basic existential requirement. Show me someone that doesn't understand that and I'll show you someone that has never run a business.
That is wrong. The existential requirement is to not lose more money over the lifetime of the corporation than the capital.
This appears to be the same idea, but in capitalist language (Americans as stockholders in the US.)
A similar dynamic led to massive pyramid schemes in Albania, which badly eroded public trust in government.
A common thread in Altman's proposals for a better world are their ahistorical presentation, as if no one had ever tried experiments like universal basic income, voucher privatization, planned cities, or the other pet ideas he has backed. If YC wants to experiment with social transformation, it's behind time they hired some adults who know sociology and history, and can put some guard rails around these ideas before they're backed with serious money.
The final thing I’ll say is that government will never run the way Silicon Valley runs because, by definition, democracy is messy. This is a big, diverse country with a lot of interests and a lot of disparate points of view. And part of government’s job, by the way, is dealing with problems that nobody else wants to deal with.
So sometimes I talk to CEOs, they come in and they start telling me about leadership, and here’s how we do things. And I say, well, if all I was doing was making a widget or producing an app, and I didn’t have to worry about whether poor people could afford the widget, or I didn’t have to worry about whether the app had some unintended consequences -- setting aside my Syria and Yemen portfolio -- then I think those suggestions are terrific. (Laughter and applause.) That's not, by the way, to say that there aren't huge efficiencies and improvements that have to be made.
But the reason I say this is sometimes we get, I think, in the scientific community, the tech community, the entrepreneurial community, the sense of we just have to blow up the system, or create this parallel society and culture because government is inherently wrecked. No, it's not inherently wrecked; it's just government has to care for, for example, veterans who come home. That's not on your balance sheet, that's on our collective balance sheet, because we have a sacred duty to take care of those veterans. And that's hard and it's messy, and we're building up legacy systems that we can't just blow up.
Possibilities are "UBI" has been poisoned with negative connotations can you can't talk about it anymore. That's possible but it seems like the overwhelming sentiment on HN and reddit is massive support for it.
As far as I can tell, "UBI" doesn't have negative connotations such as the phrase "welfare queens". UBI is already widely understood. What's the motivation for the neologism "American equity"? (My guess is it's a UBI-indexed-to-GDP.)
More directly relevant to the core point is the short-term/long-term question: as also evident in the stock market, it is not clear that the companies controlled by shareholders are better focused on the long term than the ones where founders have majority control.
It seems what Sam is suggesting is using taxes to redistribute wealth and provide a basic income, which, sure I think a lot of people are already on board with that and more will be as time goes on. But this idea of equity in a country is only confusing the issue.
A government is not a corporation. It does not exist to generate a profit. It should not be run that way. There is no "market" for governmental products or services. A government is necessarily a monopoly over a specific geographic area.
This seems like an extreme case of "If all you have is a hammer...". Sam clearly lives and breaths startups and business, so maybe he sees everything through that lens. It doesn't apply here and I don't think it's very helpful.
I see no reason why companies would do it and no incentive to take a part of the government (is the US government going to pay a dividend?), I'm not certain everyone having a share they couldn't trade would be worth it. I think the ability to trade state monopolies was tried in Russia, how is that looking?
Finally isn't the stated aim of YC to create companies that are monopolies and use network effects to entrench their positions, accumulating wealth into a few hands?
First, the US government would have to turn a profit...
At first it was good. More opportunities for the little men, yay!
Second generation was like: why do I have to work this complicated job? Strive? Mathematicians live no better than janitors. Overcrowded not-so good resorts with bad attitude (remember, no one have incentive to be polite, servicing others, since there is little money to get from eath individual customer. Almost everyone have same wealth)
Third generation is almost total stagnation. Everyone is just sitting in queue of some sort, waiting for hand-out from the almighty government.
Sometimes for years.
Production is forgotten, redistribution rules the world.
I think it is awesome though that influential people are putting forth creative ideas on how to make our country better. We need this
I don’t like the direct results of this policy (taxation, presumably new and higher taxation, specifically to redistribute income and wealth).
However, the second and third order effects are interesting — our immigration policies, assuming the amounts being paid out are meaningful (unlikely at the start) would look a lot more like Canada/NZ — there would be a strong bias toward immigrants who will be net contributors (young, educated, healthy, culturally compatible), vs family unification or politically chosen.
With a correct metric, people would push to reduce military expenditure to the minimum required for actual defense, and to spend the money efficiently; same with other government programs, assuming $300B saved on defense could be turned into direct payments, etc.
While this is obviously risky, in the 2/10 chance where the startup IPOs or gets acquired, everyone stands to benefit a big deal.
I recently heard about the case of a private school which was able to invest $15K in one of $SNAP's funding rounds (the VC partner was a parent at the school). At IPO, the school netted $50M on this investment. This school was already well off but I can imagine what this would do for a lot of public schools if this option were available to them.
VC investing has traditionally been a good ol' boy club, but I think that will change. Openings up investing to everyone will provide more people with an opportunity to prosper.
VC wins are done with primarily other people's money with bets spread in multiple areas and advantages accruing to people who get a larger portion of any potential gains.
So maybe please stop thinking (as I think Sam probably does) that startups are the answer to everything and that in the end everyone wins if they can be a part of that. Keep in mind also that money put into startups (that was not previously there) also takes away from money that would enter the economy and benefit other groups. In other words Uber takes away jobs from taxi drivers and Amazon takes away jobs from companies that would typically be selling if Amazon did not exist. It's not all a net win. Which is why it's laughable when (in this example) Amazon talks about opening a warehouse and creating X jobs.
Sam has a lot of time on his hands and plenty of good fortune to be in a position to ponder issues like this. Certainly tells you all of his financial needs are met and now he can try to answer to a higher calling.
Assuming there was some way of defining an index, and there was enough liquidity to make it trackable by a fund, which are major problems for private companies:
By what definition of startup do 2/10 of them get acquired or achieve an IPO?
How would such a fund be more efficient for pensions and endowments than investing in VCs now?
Also, I think this fund would be a disfavored source of funds for founders. The big VC firms are successful in large part because they have access to the best investing options. Securing them as an investor opens doors for future rounds and for prestigious opportunities.
One basic suggestion is to pool all public education dollars at a larger unit, and distribute across all schools in a given state equitably. Eventually all public schools in a given state will have similar quality, and more importantly, the upper middle classes will now put their considerable resources and energy to improving the whole state system instead of their idyllic town, lifting up the standards across the whole state.
Of course people will be upset about their property values - in fact, that's when you begin to see the true proportions of American social division: People have equity built up in segregation. They bought in to the system.
Many countries have roughly comparable public schools across groups of a couple million people. It is not tiny districts with massive disparities across one another.
Another idea is national health care - the US Government already pays for most of the actual costs: Veterans, active-duty military, Children in need, the poor, and the majority of elderly Americans. These constitute most of the actual costs. The government also pays indirectly through healthcare benefits provided to roughly 1/3rd of America employed via various levels of government (state, fed, local) and government-run entities (like subways, school etc.).
So - the gov pays for the sick people, whereas the healthy working age people pay into insurance. So the costs come out of gov, but the $ goes to private.
We also have massive inefficiency maintaining bureaucracies in hospitals, government, and insurance companies to do billing. Europeans are shocked at just how much of the healthcare $ is spent on this staff, that is more than half of all staff. You can fire every single person doing reimbursements and billing if you had a nationalized healthcare system. You can also remove perverse incentives to docs, who make money by treating you unnecessarily. When Doc has college bills to pay for little junior, you're GETTING that stent, need it or not.
Tiberius Gracchus tried to stop the ancient Roman 1% from stealing the wealth of the 99%. They personally clubbed him and 300 supporters to death, beginning the chain of violence that ended the Roman Republic.
Without rules like that, then all of the safety net programs we have will still need to exist, because people could end up with a net income far below the basic income otherwise.
This is just UBI with a new branding platform, basically. There are tried and true solutions that have an established track record of working, such as universal basic health coverage. It would make more sense for the US to implement those things first, rather than try something experimental.
U.S. health care spending grew 5.8 percent in 2015, reaching $3.2 trillion or $9,990 per person. As a share of the nation's Gross Domestic Product, health spending accounted for 17.8 percent. *
There you go. The $10k per person that is so often bandied about for UBI, and it would do more for the neediest automatically. People with serious health problems would get more out of the system without having incentives to try to game the system or milk it.
* https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...
The USA could be a lot more democratic than it is at present and until that is fixed, you will keep seeing a minority of the population control policies that affect the whole nation.
I can get behind a lot of those but the Senate? What's your problem with it? Seems like the founders had very good reason to create it.
Edit: And since bills must be passed by both the House and the Senate, Wyoming residents have much more power over what becomes law than CA residents do. [1] http://www.enchantedlearning.com/usa/states/population.shtml
>end gerrymandering, and reform campaign financing
I think those are good because they weaken the powerful (the current majority party and the rich) to enable the weak. But I also believe that without the senate the political power of Wyomingers (Wyomans?) is going to be a lot weaker than the political power of Californians so I see the senate as overall good.
Why should we focus so much on the majority and not the relative power of those that compose the majority (or minority?)
I think we talk about it that way all the time, both where I live (which is a lot closer to Wyoming than California) and in places which are closer to California that Wyoming. The common issues of the day are all ones of class division and I think that geographical division really plays into it. When we really split into Wyomingers and Californians though is when we start talking about any common political issue.
>We just think of everyone in the USA as Americans.
Oh lord, how I wish this were true. Do you think Californians treat me like a Californian? Or do you think that maybe they treat me a little bit different? And do you think when a Californian transplants here they get treated like a Wyoman? Or do you think they get treated a bit different? There's a divide there, the hundreds or thousands of miles between the coasts and the middle is more than a physical divide, it's also a cultural and political one.
>It doesn't seem to be working out very well. We need to make sure that the majority of Americans have veto power over things like electing Donald Trump, the current tax bill, the attempts to end Obamacare.
Let's be real here though, the above is completely partisan thinking. Look I'm basically as far left as they come and I live in deep red country - your impulse is totally wrong. Take a look at this map: http://i0.wp.com/metrocosm.com/wp-content/uploads/2016/11/el...
You want to take that map and give even more power to the blue spots? I don't see the fairness. The senate exists because the coastal elites who founded this country were smart enough to realize that coastal city elites would run the whole thing if it weren't for some mechanism to help rural areas balance the scale.
>So why should it be that some Americans (those who live in Wyoming) having outsized voting power over national laws? A minority of Americans is controlling the country via the methods I mentioned.
Because it makes sure they're heard, it's protecting a weak minority from a powerful majority. I can agree with you on all the other things like gerrymandering but the senate exists for a good reason - it forces you to care about all the people who exist in rural areas or "flyover country" instead of writing them off like you'd really like to.
It's the same with the presidential election. If you're the NRA, what's easier for you to influence? A popular vote or our current electoral college system where only a few swing states matter?
If you're saying that the electoral college and the Senate are a means of protecting those in the "flyover states", then I would just you how that's working out? Do you think "Wyomingers" are the ones who are going to benefit from repealing the estate tax? The House, Senate, and Executive branch are all controlled by Republicans who should, in theory, be advocating for "Wyomingers" and yet they seem to only be working on behalf of the interests of the wealthy, special interests, and corporations.
Just abolish the states all together as far as I'm concerned and let's have one unified America, which would be much harder for special interests and corporations to influence.
No, it's a well defined cultural and political divide. Maybe the powerful exploit it but it exists independently of them.
>If you're saying that the electoral college and the Senate are a means of protecting those in the "flyover states",
I am.
>then I would just you how that's working out? Do you think "Wyomingers" are the ones who are going to benefit from repealing the estate tax? The House, Senate, and Executive branch are all controlled by Republicans who should, in theory, be advocating for "Wyomingers" and yet they seem to only be working on behalf of the interests of the wealthy, special interests, and corporations.
Sure because you picked a terrible example. But Wyomingers sure are glad there's a senate when gun control comes up. And they're glad there's a senate when Abortion comes up. And they're glad there's a senate when basically any political issue comes up which divides mostly along geographic boundaries.
You'll sit here and decry the influence corporations have on our country but at the same time want to ignore huge swaths of america.
Middle America exists, it votes and maybe instead of trying to reduce its political power you should try to convince the people in those states.
>If you were the NRA looking to make sure that "bump stocks" don't get banned after a gunman shoots hundreds of people in Vegas using them, where would you focus your resources? On the Senate, of course!
This is the most shit example I can imagine you using. (1) The NRA doesn't care if bump stocks get banned. (2) A bump stock ban is totally meaningless feel-good legislation. Go to youtube and search "rubberband bump fire." A bump stock is just a "cooler" way of doing the same thing you can do with any rubberband or even a shoestring. (3) A bump stock ban is the perfect example of city people with no understanding of an issue trying to legislate it. Maybe next time you should come ask us in flyover land. (;
Instead of merely repeating the questions, you should explain why the answers to those questions are wrong.
I think you're overly consumed with the political dramas of the present and haven't really thought through questions about what a good system of governance looks like.
You might want to understand the existing structure of government before you propose replacing it on a whim.
Here are some questions to get you started:
* Why is there a Constitution?
* Why are there 3 co-equal branches of government? What are they all there for?
* Why is there an electoral college?
* Why are Senators allocated by state while House members are allocated by population?
* Why do House members have 2 year terms and Senators have 6 year terms?
* Why do the courts exist?
* Why does the executive branch exist?
If you think our current system of governance is working well, then please say so. If you think our system isn't working well, then please let me know how you propose to fix it.
Even without demographics taken into account, a country that's not accountable to a base set of unchangeable rules is a scary thing.
And here I thought I was getting a slice of the GDP when I get a paycheck every 2 weeks.
The US government could be considered somewhat analogous to a joint-stock company, but the US GDP does not correspond to the revenue or income or profits of the US government either. The proper analogue would be the US government's revenues from taxes and other sources, but of course that just makes this proposal into universal basic income. It doesn't give anyone "ownership of a share in America".
If you want people to feel ownership of a share in America, then owning land in America is indeed one way to do it (as the Homestead Act did, which the article refers to). Another way would be to own a share in a US company. One could even corporatize the US government and give every US citizen a share in it. But none of those things would correspond to giving out shares of the US GDP.
Frankly, I'm disappointed to see Sam Altman making such an elementary mistake.
As a practical point, you won't get economic equity before political equity and them that have the political equity have no reason to redistribute it fairly.
What if it was as easy to start a private small business in the US as it was in the UK _for the individual_.
What's easier in the UK?
Starting a business for many people who aren't already wealthy is a massive risk in so many ways that aren't just monetary.
For example, let's consider healthcare.
I have to think about healthcare before I plunge into starting a new business. How do I take care of myself and my family? "Then don't do it if you can't afford to take care of yourself" you say. Sure. I won't do it then. But that's one less attempt at a new enterprise in America.
In the UK, it is a different story. If I fall deathly ill, I know that at some basic human level - I will be cared for. So I can go ahead and start that business. That's one more attempt at a new enterprise in the UK.
Now tell me which is better for the world - a world which is quickly being automated at all levels.
Small businesses are one of the only remaining ways in which people can build something great for themselves while leveraging the automation in this brave new world for their benefit (think Shopify, AWS, etc).
My family has 2 cancer survivors in it. We can't get health care without some collective bargaining.
Unlike a lot of folks here, I've actually done a startup from scratch. I used COBRA to cover the spread until we could set up a company plan. It was a major expense, and I was lucky we had access to a lot more capital than is typical for a company with 0 folks.
I had a ton of fortunate scenarios that lined up to make it so for a brief 2 year period I could imagine trying an early stage startup. Most people won't have those.
The problem with UBI is not just logistical, it's also psychological and cultural. It might work in other countries, but it won't work well in US. For many reason, some good some bad, many people here would not accept receiving what they see is a "hand-out". First they won't accept others receiving it but many would not even justify getting it themselves.
So it would have to be a UBI disguised as something else. A share in the GDP is brilliant I think and solves this issue. It is a bit like they have the oil payment in Alaska, people seem to accept that as valid and well earned income. The GDP dividend would be the same in a way.
I think the shares should be equally divided. Everyone gets a share if they are a citizen of the country or lived here for X number of years for example. Sam Altman gets the same number of shares as Steve the Carpenter, Jane the Software Developer, and Irene the Newborn Baby.
Seems like there's two primary considerations when looking at a concept such as this. The first is how to implement within our current political climate. The second is how it aligns incentives moving forwards. The first is an obvious challenge, so let's assume for the moment that it is solved, and only worry about the second.
Ideally we want incentives aligned in such a manner that citizens:
1) focus on long term health over short term benefits. It may be tempting for people to reject immigrants because of the perceived cost of a bigger denominator, without appreciating the long term numerator upside.
2) recognize that all benefit from the success of everyone. Put differently, suddenly I care about the state of the individual with limited opportunities on the other side of the country, because it could impact my own wallet in future years.
3) don't somehow become more disenfranchised or powerless through a secondary market of these "shares".
I think it's wise not to ascribe direct political purpose to the various shares. It would be tempting to try to address power inequality directly via share ownership, but that seems misguided.
I assume there's many more incentive issues to consider, but that's just an initial list. I don't know what the answer is to any of these, but if I were to do a full analysis, I would continue to ask questions about what we wanted to incentivize, and what we wanted to de-incentivize. Then whether this actually addresses/mitigates those considerations in a realistic manner.
It's "a monetary measure of the market value of all final goods and services produced in a period of time," to quote its Wiki definition. That is, we're summing up the value of everything we made that year. It's like a hypothetical number meant to evaluate what we accomplished. It's not like accounts receivable or something. And we already all have a share, by definition....it's the sum of what we all did.
Am I missing something here? Or does Sam not know what GDP is? Seems unlikely, but I really don't get it.
I'm tired of sitting back and seeing companies that I liked but couldn't invest in become > 500m market cap successes. If I spent 4 years at one of these companies I could get _common_ stock, but I can't spend 1k to buy some preferred stock.
The whole startup system is rigged. People are going to start realizing it.
It also seems to give much more credence to luck than statistical evidence (Random Walk) that diverse passive investments outperform active investments, especially when accounting for costs.
Off the top of my head I'm not sure how such a thing could be structured without allocating some non-trivial portion of tax revenue to it, and then figuring out how to sell that to Congress who seem to prefer more targeted things like deductions + pork that let them more actively micromanage where the funds go.
But worth brainstorming about and not ruling out any idea just yet.
My usual objection to basic income applies: Basic income in some form already exists in most European countries. It's just a not-that-big parametric change to our current systems plus a change in mentality and social perception of welfare.
Suggesting that we should implement basic income of x euros is roughly equivalent to suggesting that we should increase the welfare unemployed people get today. If it was politically / economically feasible, we would already have it by now.
If we are open about it, this fight is about an ideal of equality. Altman's fundamental motive is egalitarianism (oppose inequality, promote fairness, undermine white privilege, etc.). He should be sincere and explicit about it.
He's not the first, and he won't be the last. It will never work. People are profoundly, inherently unequal. Individuals are different, by nature, by nurture, and by will. Whether it is in terms of beauty, productive ability, height and weight, intellectual prowess, athletic performance, sexual preferences, leadership, fecundity, musical achievement, what have you -- we humans can be and can do so much in so many different ways, and will always be profoundly individual, different, unequal (unless we are oppressed into conformity by statism, or other forms of collectivism).
Behind the tired ability-needs line lies the notion that since somehow the problem of production has been solved, all we should care about is consumption via the distribution of wealth. This is Marxist nonsense, no matter how much capital (machines and robots) is involved.
This assumes that everyone is cooperating together. I had a discussion with my friend about this and not everyone who plays a game (in this case making the country successful) tries to optimize globally, some optimize locally or just don't care. Ever played a video game and been TK'd?
While this sounds good in theory, I don't think works in reality.
Is Sam proposing that citizens get stock in an actual entity?
If yes, what entity? All public assets are already jointly owned by all citizens so I'm not sure what assets there would be left to distribute.
If no, and it's some kind of virtual entity, how would the proposed dividends be paid? Out of tax money? Why not just adjust the tax laws then (something that has to be done anyway) and make that more fair?
This is an odd way to phrase it. GDP is a measurement of consumption (which is taxed), investment (which isn't taxed until it gains), government expenditure (which is often the action of sharing wealth itself), and net exports (which actually does make sense to share). I think that you want to make more of a direct correlation between a country's wealth and its citizens' wealth, but this is not a great framework for it. I don't know what is, but you should talk with some economists to dive further into this thought.
In general, I'd criticize this for being too vague. The topic you're trying to conquer could maybe be genuinely addressed by Richard Rorty doing a very well funded 5 year research and philosophical study. An investment manager just writing a few words about what is going on in his gut doesn't really do it for me, especially when so much is hand wavy and imprecise, and what is specified (some benchmark to GDP) doesn't really make sense.
I hope that one or more silicon valley billionaires run for national office on this kind of platform.
Sam is smart to point out that one of the main friction points is how this kind of thing pertains to immigration.
What's missing is an updated version of the narrative behind give us your tired, your poor, your huddled masses. Instead we get the vile rhetoric of Donald Trump that blames immigrants and minorities for all sorts of problems.
The American version of this sort of program needs to be fundamentally different from the "stipend" given to Saudi citizens by their elitist monarchs, and it cannot be designed to serve a similar political function (keeping the masses content).
Instead, we must view basic income as a system of positive and negative taxation that preserves the incentives individuals have to work hard to improve their own outcomes.
It must also eliminate the many perverse incentives and psychologically defeating categorizations (welfare, workers comp, etc.) that assault the dignity of those receiving income from the state today.
There are many costs of poverty that are not typically accounted for properly -- the harm done to children whose parents can't manage adequate prenatal or early childhood care, the human capital wasted by those who experience a setback that makes their planned investment in their own skills financially unwise, the time and energy wasted attempting and policing all sorts of major and minor fraud related to state payments, etc.
The biggest enemy to progress in America is the zero-sum mindset that plagues so many people and fuels their resentment toward immigrants. The areas of the nation facing the most decay and the least hope are the ones that seem to have adopted this mindset.
However, doing it at a national level requires a lot of changes, including implementing a national ID (social security numbers already do this but they have no password) and then you are in danger of being tracked by this id and so on, like China does.
However, why do it at the level of a nation? Why not communities small and large, local and virtual? That is what my company's been building since 2011. Well, not necessarily American Equity but a platform that any Community can run, to have its own social network, currency, and so on.
Take a look at these two links:
Equal Is Unfair: America's Misguided Fight Against Income Inequality
https://www.amazon.com/Equal-Unfair-Americas-Misguided-Inequ...
The book I linked to is a couple hundred pages long, explores moral and practical issues, and has almost 20 pages of notes and citations. Far from attempting to "kill the discussion", which is in fact what your blithe comment is attempting, it explores the topic of inequality in a uniquely deep way.
It is a worthwhile book and, even if you disagree with it, I think you'll find it intellectually stimulating. If you think you'll read it, I'll happily buy you a copy, just PM me.
> I believe that a new social contract like what I’m suggesting here—where we agree to a floor and no ceiling
So like...basic income but with limited downside and unlimited upside all the while ignoring income inequality? And Who decides on the payment based on "social contracts"?
> The annual earnings for a full-time minimum-wage worker is $15,080 at the current federal minimum wage of $7.25. Full-time work means working 2,080 hours each year, which is 40 hours each week. [1]
GDP per capita 2016 = 57K [2]
10% GDP per capita = 5.7K
20% GDP per capita = 11.4K
15K - 11.4K = 3.6K
So my options are:
- no work + ubi = Gain 40 hours of personal time per week; lose out on 3.6K if we didn't have UBI.
- work + no ubi = Better off by 3.6K without UBI, but at the cost of 40 hours working a shitty job.
[1]: https://poverty.ucdavis.edu/faq/what-are-annual-earnings-ful...
[2]: https://www.google.de/publicdata/explore?ds=d5bncppjof8f9_&m...
Someone should tell this guy about SPY/SPX.
You're talking here about distributing amounts starting in the hundred-200 billion dollar range and eventually ramping that up to 4-8 trillion. Is this just going to redistribute wealth from income taxes, or is it going to be an incredibly high corporate tax, or what?
I think that part of the reason why the threat of war is much lower now than it was in the past is because patriotism is at an all time low.
Another problem is that this already exists in the form of the US dollar. The better America does economically, the more the US dollar will be worth relative to other currencies. Maybe if the Fed stopped manipulating the money supply, people would actually be able to see the value of the USD increase predictably when the economy does well.
I totally agree with attempts to redistribute USD to its citizens to even things out.
Nonetheless, I think that cryptocurrencies will solve the problem of inequality without the need for government intervention.
But getting there is going to be a huge mess, with the establishment fighting every inch of the way.
So it's nice to see someone whose voice will be heard saying it's the way to go.
I question the sense in developing large stretches of arid wastelands (among other biomes) that feature beautiful, unique and delicate ecologies.
No, it makes far more sense to appropriate all existing developed land and rebuild as extreme density. The original owners can inhabit the top floor of each new building.
We could even graduate the heights of each new building according to existing property values, ensuring the continuity of our arbitrary class system. The taller the building you inhabit and the further up it, the more remarkable you must obviously be as a person.
My modest proposal maintains these unique landscapes held in public trust for future generations while ensuring that the wealthy can continue to look down on the rest of us.
Win-win!
It's everything they hate, stealing money from their worshiped 'supermen job creators' to give unearned handouts to 'lazy others'. These ideologues care about 'society' only in as much as facilitating 'great individuals'.
The kind of hate campaign that will be launched to stop this in its tracks if it becomes anything more than wide-eyed utopianism will be unparalleled in history. Any so called experiments will be sabotaged with prejudice and fail.
Did I fall asleep and wake up back in 1992? Because in 2017, neoliberalism had been in decline for quite some time in the US, losing influence in both the Republican and Democratic parties (not, of course, to the same alternative in each.)
A Senator couldn't make this happen. The President couldn't make this happen. I'm gratified to have thought about this for a moment and don't want to detract from the core idea but it is very much an idle musing. Even for someone in Sam's unique position, this is just a "Wouldn't it be nice if?" post.
Silliness.
That's the biggest misconception about poverty. It isn't about not having access to financial help when you need it (we already have plenty of programs in the US that should - in theory - solve those same problems).
Poverty in America is more about culture and lack of education. Give any amount of money to many of the poorest citizens in the country, and they'll be no better off after a week of frivolous spending.
Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
And it can tell us everything about America except why we are proud that we are Americans.
If this is true here at home, so it is true elsewhere in world.
~ Bobby Kennedy 1968
But here is the challenge to our democracy: In this nation I see tens of millions of its citizens — a substantial part of its whole population — who at this very moment are denied the greater part of what the very lowest standards of today call the necessities of life.
I see millions of families trying to live on incomes so meager that the pall of family disaster hangs over them day by day.
I see millions whose daily lives in city and on farm continue under conditions labeled indecent by a so-called polite society half a century ago.
I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children.
I see millions lacking the means to buy the products of farm and factory and by their poverty denying work and productiveness to many other millions.
I see one-third of a nation ill-housed, ill-clad, ill-nourished.
It is not in despair that I paint you that picture. I paint it for you in hope—because the Nation, seeing and understanding the injustice in it, proposes to paint it out. We are determined to make every American citizen the subject of his country's interest and concern; and we will never regard any faithful law-abiding group within our borders as superfluous. The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.
--
In 2017, around 80 years later, we can perhaps strike ill-clad, and adjust that third a bit, but the rest is still all too true. And some will complain that what we once considered the "lowest standard" has shifted - but a part of decency is accommodation of the worst off within the best of our capability, and our capabilities today have vastly grown compared to our systematic outreach of decency.
Or now maybe
"Machines should work. People should enjoy life."
Or, there is the old
"Machines should work. People should get a guaranteed basic income. If anyone wants more, then they can work for more."
All the ballpark US national arithmetic I did says that we can't yet afford a guaranteed basic income.
E.g., for something simple, supposedly Bezos is now worth $100 billion. But if divide that by the US population of, say, 333 million, then get just $300 per person, just once, and have confiscated all of the Bezos wealth. Point: Not even Bezos is rich enough to provide a guaranteed annual income for everyone in the US, not for a year and not even for just one month just once.
But, maybe when computing is doing enough of the work, then, for a simple solution for the needed revenue, tax the computing, processors and Internet data rates and nothing else. Maybe.
Or, maybe, people should manage computers that manage computers ... that manage computers that do the work for everyone. Okay -- apparently we're not there yet.
For the issue of housing costs, housing is expensive close to where there are good jobs. And there the costs are for the limited real estate close to the jobs and high taxes for K-12 schools, police, roads, etc. And the high housing costs eat up nearly all the income from the jobs because the jobs pay just enough to cover the most important employee expenses, e.g., housing.
But if get out to rural areas, then housing costs can be much lower. If people are going to have a guaranteed income, then they may want to live in areas without much in jobs and with lower housing costs.
But there is a flaw in Sam's proposal: People will still form competing interest groups, e.g., political parties. Then too many of the groups would rather fight for the interests of their group and not join for the good of all. That is, too many groups would rather fight for a bigger piece of the pie they like than for bigger pies for everyone.
In times past, such interest groups could fight in the streets. Then the ancient Greeks invented democracy: Do the fighting at a ballot box. Since a big winner at a ballot box would likely also win in the streets, it's in everyone's interests just to go with the results from the ballot box instead of shedding blood when the outcome is already known.
Basically, democracy is still important and for the same, old reasons.
It's not quite the same but there is extensive existing material to cherry-pick ideas from. E.g. https://socialsecurity.procon.org/
The way you get that income into a shareable pot is via Tax.
So the best way to do this is still good old "Income Tax."
Unfortunately those with the most income don't like to have it taxed. And national policy tends to correlate pretty reliably with whatever those people want. Anything akin to what he's suggesting would help even things out, but that is precisely why they won't permit it. The only way for the masses to assert themselves is through their brute numbers.
If you support UBI, why wouldn't you support reducing the age requirement on social security to 18+? Social security already exists, we don't need to re-invent the wheel. Obviously we'd need to change the eligibility requirements so that you didn't need to pay in. Now we just need a story about where the money will come from to finance it for the long-haul.
The problem that's trying to be solved by this is legitimate, but I don't see much value here beyond it sounding a bit clever. There are ideas out there already that aren't making headway for the same reasons this idea wouldn't.
The US has a technology sector that is as much, if not more, productive than a resource extraction industry. Why not use that sector to raise quality of life for citizens?
Now, do you remember when the FED under Obama printed a trillion dollars a year for five years? Do you know where that money is? Is part of that in your pocket? I don't think so. Well, give that kind of money to 100 million americans in an installment of a thousand dollars a month and that would cover their basic needs while the whole country produces more with all the tax cuts to the producers. Of course much less regulation would do wonders to the economy, like eliminating patents, minimum salary laws, health and education regulations, etc. Go back to letting the individual produce with their own hands and minds without governemnt intervention and that will bring much more prosperity than any other idea. Except politicians won't like it.
So in short, while inflation (money printing) is a kind of taxation, we could easily print money (10% of GDP)to give it to the needy while reducing the size of government and regulations to increase production.
Note, they break out agriculture and animal products into a lot of categories
As a trivial example: GDP goes up if I sneak into a car lot one night and set fire to all the cars.
We need a better measure of "useful" economic production.
Directly, it doesn't change at all. If it results in people being hired to cleanup and the card being replaced, it does if you consider things one step out, but that might not be the result and, in any case, things get more complicated as you consider more distant effects even if the one step out effects would increase GDP.
https://www.investopedia.com/ask/answers/08/broken-window-fa...
Reconstruction after destruction becomes part of GDP if it is performed but this reconstruction usually takes production resources that would have gone elsewhere otherwise. The person to pay for the reconstruction will spend less elsewhere.
Framed any other way, this has been done before. You could argue that Universal Health Care attempted exactly this but instead of providing money back, it went to a universal pool for care. Same for Social Security, Education and other endowment programs.
https://www.amazon.com/Who-Owns-Sky-Common-Capitalism/dp/155...
It would help most of the other 96% of humans, though. Nationalism is fucking disgusting.
I know this is a major issue in CA, NYC, and probably a few other cities, but I'm not really well versed on how much of an issue it is elsewhere. Where could I learn more about this? Preferably sources with data and not just journalistic fluff.
Imagine we lived in a world where labor was unimportant because machines did most things better than humans could. These machines would still required time and natural resources (space, energy and matter) to produce goods and services.
For most people, "working" in this world would consist of going online, buying or trading an amount of energy, buying raw materials or spent matter that is ready to be recycled and pressing a "Start" button. Machines would produce some new goods or services.
Some people may also work on designing new better machines that produce finer goods. This would be mostly creative work as the technical part would mostly be automated. The machines could be specialized for maximum efficiency and quality.
People wouldn't have to go out to work. Machine owners could watch webcam feeds of their machines working in an industrial park somewhere. The finished goods, spent matter (trash) and the machines themselves, would be picked up and delivered by self driving delivery robots.
To get some variety, people would trade the production of different machines and they would trade excess spent matter. They would also trade the machine designs and the land or space to host the machines. The machines would sometimes have to be replaced when worn out or obsolete.
Now assume total energy production was constrained globally to a more or less fixed rate based on what could reasonably be captured from the sun. People would own shares in energy production capacity.
There could be a level of inequality in this society. This depends on how much governments would allow ownership of things to be concentrated, especially ownership of energy, useful space and natural resources.
A good way to prevent too high inequality would be for everyone to be shareholders in global production. Every day, shareholder would receive a dividend, an amount of energy/matter to be spent. They could use it in machines to produce stuff or services, trade it or maybe store it in a battery.
This is better than UBI because it aligns production incentives with consumption incentives and make the system naturally sustainable. If people vote for policies that are inefficient and reduce production, they will simply get a smaller dividend. I'm not making a value judgment either. What people collectively want might not always be a larger dividend. But at least the trade-off will be more explicit and sustainable.
If that's possible, that's probably the right thing to do; if the company is failing, who cares about diluted stock? 0.0075% of $0 is still $0.
A UBI is just a round about way of distributing the wealth generated by automation when the real fix should be having broader societal ownership of those productive assets.
(at least compared to other VCs, you may still disagree with his absolute numbers)
I am going to ask people i work with at my union and non union jobs and get their response to that sentence.
I'll report back what comments i hear.
However, the thing I think you want to do...
Well, do it.
Start ACME Ultra-Automation Inc., hand out shares, and sell widgets.
-----
edit: In case it's not clear, I'm serious. I want to do this, and would, but I lack hustle.
I am not against communism or socialism, it just seems like that’s what Sam is describing here.
Is the US even making a net profit?
Is that because they don't "understand the dynamics of how economies work"?
Which ethics? Which morals? Yours?
This is a terrible idea.
Can't they just wake up and put their mental energy and money on something that actually make sense?
If I were in a similar position I'd likely opt for the most fun-sounding futuristic project that doesn't involve all that pain.
And in fact, perhaps it's better like this.
Edit: that said, their ideas do have real political consequences: keeping the status quo as it is.
They put their money on problems that have a clear path of solving.
Americans cannot agree to use their money on other Americans who have different values than them, westernized social welfare systems occur in homogenous cultures.
In the US, the homogenous elite and majority power cannot agree to use their money on problems that affect a completely different culture in the lower classes. In continental governments such as the EU, you see the same thing.
When thinking of it, I am often convinced that money is a poor solution to the most challenging problems. Sam likes the idea of universal income, but to me that's like supplying extra oxygen/fuel to an engine, but if the engine is broken it won't do anything, for example I won't be surprised that if every citizen gets extra $2K a month, the cost of "healthcare" will magically raise exactly by that same amount.
Money should not be a problem if it's aligned with the reality of our physical world and its limits.
But the resources of the world are being wasted on multiple levels because there's "good money to be made" while important needs are not addressed.
(Also, in reality we all own in a share of the massive debt the federal government has taken on to fund wars and corporate welfare. So much for that.)
+1
Headline: Sam Altman Starts new Murica Token ICO
or maybe he hands them out daily for free given some proof of USA'ism similar to the Universal basic income token
-- Lee, founder https://bitbank.nz
jeez, make a joke and get downvoted right away?
more kids = more shares
I hope you're ready for a wall of text. Had to break this into multiple posts...
I have several comments about what you're proposing, to the extent that I understand it.
> I think that every adult US citizen should get an annual share of the US GDP.
Right of the bat, you're starting with GDP, which is an inherently flawed measure of economic output. Namely, it gets imports and exports backwards. If you want to distribute incomes to people, it would be useful for the amount of the incomes to somehow line up roughly with the amount of stuff they'd able to buy with those incomes. The higher the potential imports, the more people can potentially buy.
As a thought experiment, we can imagine that foreign countries are analogous to firms that don't use any labor to produce what they produce. The output of the firms, of course, adds to total GDP. And the output of the countries subtracts from total GDP. This is despite the fact that the two are the same thing.
I've written a blog post about this: http://www.suncho.com/blog/20170616_gdp_is_wrong.html
> I believe that owning something like a share in America would align all of us in making the country as successful as possible
No. It wouldn't. The problem here is that you run into the tragedy of the commons. Everyone receives the benefit whether they happen to be contributing or not. This creates an incentive not to contribute because you're going to receive the benefit anyway. This is why communism doesn't work.
The good news is that we by and large don't need most people to contribute. So an incentive not to contribute might not be such a bad thing.
> the better the country does, the better everyone does
Yes. But the good news is that you really don't need to incentivize people to be involved in making the country successful. The innovations of the few can benefit the many.
> give more people a fair shot at achieving the life they want.
The idea that people should have to "achieve" the life they want is a little silly. We have to resources to give everyone an amazing life without them having to work for it. We're operating way below our productive capacity.
There's a Buckminster Fuller quote that I really like:
"We must do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest."
Figuring out how to embrace joblessness as a positive force for humanity is probably the most important social challenge we currently face.
I also wrote a blog post about this: http://www.suncho.com/blog/20150326_morality.html
> And we all work together to create the system that generates so much prosperity.
As I've said, we really don't need everyone to be working together. Furthermore, even if you really want people to be working together, your plan to doesn't incentivize us to do that.
> I believe that a new social contract like what I’m suggesting here--where we agree to a floor and no ceiling--would lead to a huge increase in US prosperity and keep us in the global lead.
When we distribute money to people (e.g. through a basic income), there's always going to be an amount that's optimal for social prosperity. I agree with you that it would be a mistake to put a cap on the amount of the basic income that's below what's socially optimal. I cringe every time someone says that the basic income should be exactly equal to the amount that pays for everyone's basic needs.
But it would also be a mistake to put a floor on the basic income that's above what's socially optimal. That being said, I think we have enough available resources that the optimal amount of basic income would be well above what most of the "basic needs" people are calling for.
> Countries that concentrate wealth in a small number of families do worse over the long term--if we don’t take a radical step toward a fair, inclusive system, we will not be the leading country in the world for much longer. This would harm all Americans more than most realize.
I mostly agree. If we flatten out the aggregate demand curve by providing an evenly distributed income to everyone, then that increases quantities demanded of many of the things we produce and allows us to scale up production. This gives more people more access to more wealth.
> Today, the fundamental input to wealth generation isn’t farmland, but money and ideas--you really do need money to make money.
Hmm. Sort of. Even today there are resources we use that are factors of production that aren't farmland, but that are analogous to farmland. And we still have farmland, of course. Technological improvement allows us to use such resources more and more efficiently with time. Our overall productive capacity increases with time. We also have financial resources and we can certainly make money out of money.
But then another important factor is demand. We're not going to generate (i.e. produce) wealth if nobody's going to buy it. Our technology can improve all it wants, and our productive capacity can go through the roof. If people don't have the incomes to pay for all this stuff, it won't matter.
As far as ideas go, I'm not sure how important they are. Ideas are a dime a dozen. There are no new ideas on the face of the planet (except of course for my ideas, which are unique and special). Execution on ideas can be great. Innovation can be great. But as long as we're constrained by demand, none of that is going to help. Demand is our bottleneck. By focusing attention elsewhere, we're prematurely optimizing a part of the code that isn't going improve performance.
> American Equity would also cushion the transition from the jobs of today to the jobs of tomorrow.
Huh? Are you saying that if everyone had an income it would give them the freedom to work on things that are actually going to matter?
> Automation holds the promise of creating more abundance than we ever dreamed possible, but it’s going to significantly change how we think about work.
It depends on us significantly changing how we think about work.
> If everyone benefits more directly from economic growth, then it will be easier to move faster toward this better world.
Yes.
> The default case for automation is to concentrate wealth (and therefore power) in a tiny number of hands.
Yes. If we rely on wages for people's incomes and production is constrained by consumer spending levels, then the result of automation is necessarily a reduction the amount of wealth we produce. And the people who do have access the the wealth are the ones who somehow still have sufficient incomes to purchase it.
> America has repeatedly found ways to challenge this sort of concentration, and we need to do so again.
Yes. But it's been pretty ugly so far. A lot of it involves contorting the labor market in an attempt to get somewhere close providing people with sufficient incomes through wages. I hope we can do better in the future.
> The joint-stock company was one of the most important inventions in human history. It allowed us to align a lot of people in pursuit of a common goal and accomplish things no individual could. Obviously, the US is not a company, but I think a similar model can work for the US as well as it does for companies.
If the joint-stock company actually depended on their shareholders in order to be successful, then you'd have the same problem with the tragedy of the commons. But it doesn't. The shareholders and the workers at the company are different but overlapping sets of people.
What the joint-stock company really did was it allowed you to bet on the success of the company. And it allowed you speculate by betting on the price of the stock, which wasn't always the same thing. Unless you have a really high stake in the company, if you think the stock price is going to drop, the incentive isn't to improve the company. It's to sell the stock.
Your plan feels like it's trying to achieve something different.
> A proposal like this obviously requires a lot of new funding [1] to do at large scale
Depends what you mean by "new funding." There's no reason (except politcal) why we can't fund people's incomes by running higher government deficits.
> [1] It’s time to update our tax system for the way wealth works in the modern world--for example, taxing capital and labor at the same rates.
I'm not sure how useful it is to think of taxation as a way to fund spending. The amount of money the government should spend for optimal benefit to the economy has very little to do with the amount of money they take in through taxes. If you can deficit spend without causing inflation, then you should do it. Taxation just makes things more complicated.
Taxation is useful if you actively need to remove money from the economy to combat inflationary pressure or to conserve resources. But as far as inflationary pressure goes, the Fed still has a ton of room to raise interest rates and shrink the private financial sector, which is where most of our money flow comes from these days anyway.
The private debt that we rely on is also very unstable. It consists of a brittle web of interconnected debt obligations that grows more fragile with time as it builds up. So a deficit-funded basic income can help stabilize the economy and prevent 2008 from happening again. You're replacing unstable money backed by private debt with stable money backed by government debt. The decision to deficit spend is not a choice between debt or no debt. It's a choice between public debt or private debt.
And if you're distributing the new money to everyone evenly, instead of people with money getting more money to spend on stuff they already buy, people without money are getting more money tospend on new stuff. This creates an incentive for producers to produce more rather than to raise prices. Because of this effect, a deficit-funded basic income might not cause very much inflationary pressure in the first place.
> And we should consider eventually replacing some of our current aid programs, which distort incentives and are needlessly complicated and inefficient, with something like this.
Sure. But I think you can introduce the basic income first. Then, we might eventually realize that some of these other programs have become entirely pointless.
> Of course this won’t solve all our problems--we still need serious reform in areas such as housing, education, and healthcare. Without policies that address the cost of living crisis, any sort of redistribution will be far less effective than it otherwise could be.
I'm not so sure about that. A basic income would allow people to live in cheaper places because they don't need to be as close to jobs. That, in itself, can take pressure off housing prices. But it's because housing prices in currently-expensive areas won't really matter as much anymore. It will become far more okay not to live there.
The biggest problem with education is that it's too tied to the labor market. If people don't have to worry about educating themselves in a very specific and restricted way just in order to survive, then that takes the pressure off tuition prices. If people are free to eductate themselves by exploring on their own, following their natural curiosity, and making use of free online resources (which are only getting better and better), then that takes demand away from colleges.
As far as healthcare goes... hmm. Yeah. Healtchare is a problem. I have a lot to say about healtchare, but I won't say it here because this post is already way too long.
> but I think we could start very small--a few hundred dollars per citizen per year--and ramp it up to a long-term target of 10-20% of GDP per year when the GDP per capita doubles.
I like the idea of gradually ramping up a basic income. You'd just keep ramping it up until the additional increases stop providing additional benefit to society. And, of course, as technology improves, the optimal amount of the basic income would increase.
However, we really need to let go of tying it to GDP. Even if we had a more sane metric of economic output than GDP, the basic income necessarily changes the level of economic output. As people get more money, we will produce more stuff for them to buy.
> I have no delusions about the challenges of such a program. There would be difficult consequences for things like immigration policy that will need a lot of discussion.
Immigration is really interesting, at least with respect to a basic income. Because if we opened up immigration and provided all the immigrants with basic income, that would provide a huge boost in demand. Plus we'd have more human minds living right here in America. And the human mind is, of course, the most valuable resource. Basic income plus open immigration is a very powerful combination.
> We’d also need to figure out rules about transferability and borrowing against this equity.
Yeah... This equity thing doesn't really make that much sense. Straight up cash would be a lot simpler.
> And we’d need to set it up in a way that does not exacerbate short-term thinking or favor unsustainable growth.
Yup. This brings us back to resource conservation again. We can achieve resource conservation by taxing the use of those resources we want to conserve.
> However, as the economy grows, we could imagine a world in which every American would have their basic needs guaranteed. Absolute poverty would be eliminated, and we would no longer motivate people through the fear of not being able to eat.
Yes.
> In addition to being the obviously right thing to do, eliminating poverty will increase productivity.
Yes. It would increase productivity primarily by giving people more money to spend, which would induce more production. It might also reduce the total amount of labor we employ. More production and less labor means more labor productivity. But I don't think that labor productivity should be a goal in itself. Higher productivity is merely a consequence of achieving production while also using less labor.
> American Equity would create a society that I believe would work much better than what we have today. It would free Americans to work on what they really care about, improve social cohesion,
Replace "American Equity" with deficit-funded basic income and I'm sold.
> and incentivize everyone to think about ways to grow the whole pie.
Nope. Not this part (for reasons stated above).
So there's your feedback. I hope this was helpful.
Cheers!
https://deanbaker.net/images/stories/documents/Rigged.pdf
Chapter 9 Rewriting the Narrative on Economic Policy
The standard framing of economic debates divides the world into two schools. On the one hand, conservatives want to leave things to the market and have a minimal role for government. Liberals see a large role for government in alleviating poverty, reducing inequality, and correcting other perceived ill-effects of market outcomes. This book argues that this framing is fundamentally wrong. The point is that we don’t have “market outcomes” that we can decide whether to interfere with or not. Government policy shapes market outcomes. It determines aggregate levels of output and employment, which in turn affect the bargaining power of different groups of workers. Government policy structures financial markets, and the policy giving the industry special protections allows for some individuals to get enormously rich. Government policy determines the extent to which individuals can claim ownership of technology and how much they can profit from it. Government policy sets up corporate governance structures that let top management enrich itself at the expense of shareholders. And government policy determines whether highly paid professionals enjoy special protection from foreign and domestic competition.
Pretending that the distribution of income and wealth that results from a long set of policy decisions is somehow the natural workings of the market is not a serious position. It might be politically convenient for conservatives who want to lock inequality in place. It is a more politically compelling position to argue that we should not interfere with market outcomes than to argue for a system that is deliberately structured to make some people very rich while leaving others in poverty. Pretending that distributional outcomes are just the workings of the market is convenient for any beneficiaries of this inequality, even those who consider themselves liberal. They can feel entitled to their prosperity by virtue of being winners in the market, yet sufficiently benevolent to share some of their wealth with the less fortunate. For this reason, they may also find it useful to pretend that we have a set of market outcomes not determined by policy decisions.
But we should not structure our understanding of the economy around political convenience. There is no way of escaping the fact that levels of output and employment are determined by policy, that the length and strength of patent and copyright monopolies are determined by policy, and that the rules of corporate governance are determined by policy. The people who would treat these and other policy decisions determining the distribution of income as somehow given are not being honest. We can debate the merits of a policy, but there is no policy-free option out there.
This may be discomforting to people who want to believe that we have a set of market outcomes that we can fall back upon, but this is the real world. If we want to be serious, we have to get used to it.
Bill Gates' (to name a random American citizen) has a far larger share in the GDP than most other Americans. If you want to solve that raise your taxes on the rich and lift up those that are at the lowest end of the scale. That will have a lot more effect than some fiction where you get to do a bunch of make-believe bookkeeping.
Of course in the current political climate this will not happen, in fact the reverse will happen, tax cuts for the rich at the expense of the poor and the middle class.
Another difference, aside from wording/marketing, is that the UBI is implemented as a progressive redistribution of future wealth generation as opposed to a tax on existing wealth ("as the economy grows...")
"Universal Basic Income" is already a radically capitalist idea. It's often discussed using terminology borrowed from Marxism and socialism, but it couldn't be any more capitalist of a construct. We're just not used to hearing it discussed with that language.
Everyone gets $10k. Obviously not everyone is going to pay $10k in taxes otherwise the system would be pointless and we could instead just eliminate taxes altogether. Those at the bottom would benefit, those at the top would pay more in taxes, and somewhere between is a break even point.
There's only a limited amount of stuff at any one time. Rarity and usage can make its worth different than other things. So it makes sense to track these things. Ideally, recycling allows recoup of most or all the material, which returning should provide the credits back.
It really then matters how much credits people get and thus how much resources and where. But then again, socialism and communism never talked about personal effects - but instead it talked of the machinery to create.
What the UBI enables is a migration that everyone gets the spoils of the machines of creation. The Story of Manna by Marshall Brain discusses more of how this might be possible.
That said, it addresses it structurally, but I still think the result would still be a disastrous political explosion if that ever did happen. UBI seems to be fundamentally predicated on the idea that growth and improvement are inevitable, the only possible way that things will develop going into the future, including any structural or societal changes that may develop as a result of UBI or GDP-sharing itself, and therefore there's no need to ask who starts swinging from trees the first time that UBI or GDP-sharing has to be cut back, and what disastrous decisions will be made on the basis of not wanting to be the one swinging from trees.
You are either not arguing in anything remotely resembling good faith or are not tall enough for this ride. You may have the reply to this unopposed; I'm done here.
The ad hominem shot is surprising, given the straightforwardness of my position. I don’t understand why you are cross. Ah well.
If the situation lasts long enough, the standard of living falls.
Money exists to move goods around. If all the money is in one place, goods cannot move.
Money is not limited. It is an information measure of, variously, debts, or bidding rights to production. What it can bid on is limited, and how currency-denominated asset valuations change as money supply and circulation do, can also change.
But the problem in the case of a national disaster isn't that money cannot be produced. It's that those who would rely on money to address immediate needs (water, food, shelter, medical care, transport) have no bidding rights (currency, credit, grants) to transact purchases. You're balancing the interests of those outside the disaster zone (assuming there is an outside) with those in it. (Though this generally is the case.)
If the disaster is big enough, and rescue or infrastructure needs sufficiently high, those may affect national accounts and economic activity for a time, but it would take an absolutely massive shock for the impairment of raw productive capacity alone to impact the economy. Far more likely that buying power is lacking amongst a segment of the population.
And for that, money is precisely the cure.
the one common response they all have when their plans are revealed for what they are and comparisons made to what others have done is always the same , we will do it right this time.
it is easy to prey on the greed of anyone by simply remaking it into the person having their stuff taken as being the real greedy one.
Or go a step further do what nobody has the balls to do: tax wealth
That's what all these schemes are really trying to do, albeit in roundabout and inefficient ways. Taxing wealth has it's own complexities (unrealized gains and non-cash assets are the big ones) but it'd be saner than a negative tax (i.e. entitlement) calculated off GDP.
Just to clarify, nobody in the US is doing this, but it's not unheard of elsewhere. For example, Norway has a wealth tax of about 0.85% and there are some other examples at https://en.wikipedia.org/wiki/Wealth_tax#Current_examples .
EDIT: Can't comment ("You're posting too fast, blah blah blah"). Here are some replies to the comments bellow:
> It's encouraging people to make their money be productive instead of stashing it under a mattress.
When you have money in the bank, you're effectively lending most of it to other people. Your money is "productive", which is encouraged by the interest.
> Everything distorts markets. The question is how to distort markets into providing the best outcome.
Neutral tax (https://en.wikipedia.org/wiki/Optimal_tax) doesn't. But of course, market distortion is not the only or primary factor in policy decision-making.
Much better to tax consumption.
As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
Not necessarily.
"Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors." [1]
Also, the top 1 percent owns 90 percent of wealth in the US [2].
"First, economic inequality has worsened significantly in the United States and some other countries. The richest 1 percent in the United States now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own as much wealth as the bottom half of humanity.
The situation might be tolerable if a rising tide were lifting all boats. But it’s lifting mostly the yachts. In 2010, 93 percent of the additional income created in America went to the top 1 percent."
> As a practical matter, consumption taxes can be made progressive by combining them with a low-income tax credit or a universal basic income.
I agree that a consumption tax can be combined with other policy to prevent the regressive nature of a consumption tax alone. This requires wealth be taxed in various forms (ownership of investments, land, etc).
[1] https://www.usatoday.com/story/money/markets/2016/05/20/thir...
[2] https://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-...
But the foreign assets issue is a peculiarly US problem, resulting from the US being almost unique in the world in the extent to which it imposes taxes on income earned in other countries. (The other such country is Eritrea, and the US voted in favour of a UN security council resolution condemning the Eritrean tax regime.)
I'm unwilling to wait until the end of civilization while citizens of the richest country in the world go hungry [1], go without shelter [2], and die due to not being able to put $50 together for their insulin [3].
[1] https://www.worldhunger.org/hunger-in-america-2016-united-st...
[2] https://en.wikipedia.org/wiki/Homelessness_in_the_United_Sta...
[3] https://tonic.vice.com/en_us/article/ezwwze/the-high-price-o...
Nobody has a Scrooge McDuck cash vault, not Apple, Microsoft, nor anyone else. It's all invested - even money in a checking account isn't actually there, it's loaned out to someone who spends it.
> the top 1 percent owns 90 percent of wealth in the US
No, the government owns/controls most of it.
Here's even more: http://business.time.com/2013/02/05/the-federal-governments-...
As for how banks work, pretty much any book on how the banking business works will tell you that. Or you could watch that old movie "It's a Wonderful Life" where they give an accurate description at the end how banks work. And frankly, it's just common sense. Why would banks offer free checking? They're not charities. They need the money so they can turn around and loan it out. It's fundamentally how banking works.
I've never heard of a Scrooge McDuck cash vault outside of a comic book. Have you? (There is Fort Knox, but that's the feds, and it's not cash.)
https://money.howstuffworks.com/personal-finance/banking/ban...
But that would run counter to the neo-liberal narrative... After all, the rule of law serves to protect investments, not the peasant forced off his land.
Where was the rule of law to protect said peasants? Perhaps the rule of law isn't actually necessary for industrialization - as long as capital is protected, everything is all well and good. Unless you're a peasant.
I agree that the rule of law didn't protect peasants who were forced off their hereditary lands. You'll note that it wasn't the peasants who led the industrial revolution.
Like several major sectors of the US economy at the time (and later), Britain's "revolution" was utterly dependent on coerced labor, viciously enforced by the power of the government. But some people still like to think of those times as the good old days of "laissez-faire" and government "staying out of the market".
Now, you can argue that this was a "rule of law", just a brutally repressive one which systematically granted special rights to certain classes of people, but then you're on much shakier ground.
IOW you should explain why “market distortions” are inherently a bad thing.
Everything distorts markets. The question is how to distort markets into providing the best outcome.
from [0]: "Harvard targets an annual endowment payout rate of 5.0 to 5.5 percent of market value. The University's actual payout rate has fluctuated over the past 10 years, from a low of 4.2 percent in fiscal year 2006 to a high of 6.1 percent in fiscal year 2010."
[0] https://www.harvard.edu/about-harvard/harvard-glance/endowme...
[1] https://www.irs.gov/charities-non-profits/private-foundation...
We could also take the route of the Federal Reserve purchasing up equities (The Bank Of Japan does this [1]), issuing deposit accounts to citizens directly (trivial for the Federal Reserve to support this [disclaimer: I work in the financial services industry, and feel qualified to make this statement]), and providing UBI to those accounts using the Federal Reserve as an intermediary/conduit (lookout Blackrock and Vanguard! there's a new index fund manager on the block!).
Voilà, Citizen's Dividend.
EDIT: The Federal Reserve operates independently of the US government, and does not require Congressional or Presidential approval to perform this "monetary policy". [2]
"Although an instrument of the U.S. Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."
[1] https://www.bloomberg.com/news/articles/2017-07-18/boj-s-etf...
Are you proposing their equity also be taxed "at rest"? How would that work?
Same way property is taxed. A taxing authority sends you a bill (based on duration of ownership), with the tax rate set by legislation. In this case, the custodian of your equity would send you your bill, with a copy sent to the IRS. I don't believe who accepts the payment needs to be defined at this time (although sending payments directly to the IRS or through your custodian are both trivial matters).
When you have trillions you just need a bigger mattress, like Ireland, for instance.
It is, because storing money under a mattress is equivalent of investing in money itself. As OP said too, it is like you lent your money to all the other investors in the economy (because you taking that money out of the economy reduces the prices of capital goods, which means they can now acquire it for cheaper). This results in wealth creation, which you benefit from when you take the money out from under the mattress.
This of course, can only work as an active investment strategy if you have a fixed or predictable money supply. For an inflationary currency such as any fiat currency, you will just get screwed.
This works great for cryptocurrencies for instance, people keep talking about how nobody has any incentive to invest in Bitcoin projects if just holding it will make it go up. Well, when bitcoin holders hold bitcoin, bitcoin economy still grows, and the purchasing power of their bitcoin goes up.
If you can build wealth around being active rather than just reaping the benefit of interest of interests then that should be encouraged rather than just grabbing and keeping.
Only in the most inefficient way possible. The 'problem' is banks are limited in what they can do with this money which ends up creating investment bubbles and other market distortions which hurt the economy overall. If you slowly transitioned banks so they could not invest this money over say 100 years the net result would not be harmful.
In the end money is not actual wealth, it's simply a representation of wealth. Anything that turns money into more money needs an intermediary where some cash flow is generated. And those intermediary's are often harmful see in excess like pay day loans.
Um, no. The type of investing you suggest includes the risk of losing the money. This doesn't work with commercial banks because they are insured by the federal government, i.e. the taxpayer. When people put money in the bank they expect it to stay safe. That's why the concept of a bank exists in the first place. If there was the risk of it evaporating due to bad investments, that would basically be more of "privatized gains, socialized losses."
I am saying if your raise that percentage to 11% cash on hand not much changes. Then next year that becomes 12% cash on hand... until banks can no longer lend money.
At no point in this process is physical wealth destroyed only shifting how loans are created.
Of the deposit account, they keep 10% in the vault/Fed, and loan out 90%. Of that 90%, they keep 10% in the vault (9%), and re-loan 90% of it (81%). Of that 81%, they keep 10% in the vault (8.1%) and re-loan 90% of it (72.9%). Sum the series, and the effect on the money supply from loans and the reserve requirement is to divide the vault cash by the reserve requirement to get the bank account totals.
Raise the requirement from 10% to 11% and the circulating money supply drops from 10 x vault cash to 9.1 x vault cash. Raise it again to 12% and that drops to 8.3 x vault cash. To keep things steady, you have to print extra money for the express purpose of putting it into reserves.
The de jure impact of the reserve requirement on the money supply isn't "not much"; it's actually huge. But that is only down to the point where it goes below the de facto requirement imposed by normal bank operations. You drop the requirement to 0%, and banks will still keep cash on hand to cover their own needs. It is certainly possible to raise it all the way to 100% (or even higher, by requiring that banks freeze some of their own cash when accepting a deposit). But that would have to be done very slowly and cautiously.
Further, the velocity of money is important which reduce the multiplier in practice.
However, if your taking this seriously yes you need a curve which is why I said 100 years, but only listed 90 years worth of changes.
I simply feel banks have conflicting goals as they need to be 'good at' customer service and making loans. This creates a lot of poor incentives and economic distortions.
The difference is people fronting money for loans would need to take on real risks without FDIC protection or have safe deposits but need to pay for bank services.
Often the capital for many bank issued credit cards does not come from depositors at all.
On the other hand, all the financing needs will be covered by other means. These “non-banks” will have to obtain capital as equity and debt, maybe even loans from other non-banks, but certainly not as deposits.
What was the problem that we where trying to fix anyway?
Risk of financial collapse. Banks are risky because they have a lot of leverage, people more directly loaning money may take a 20% hit after a housing collapse, but that's not such a big deal.
And one of the reasons for the crisis was “shadow banking”, because many home loans were not really given by banks (some were directly created by other institutions, some were first created by banks but then packaged and sold). The subprime crisis would not have happened, at least to the same extent, if loans had been kept in the balance sheets of banks.
Including the United States' largest savings and loan association, until its collapse in 2008: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
I suspect, but can't prove companies that need to demonstrate comptitence in lending to gain access to capital would be better at making loans than companies who gain capital by doing other things and then suddenly have access to a lot of capital and need to find a use for it.
Consider tech companies like Apple/Google/Microsoft have access to vast amounts of Capital yet does not really effectively use it for much.
A world where people don't need loans seems like a pretty good world, honestly. I've been fortunate enough that my parents were able to finance my college education out of their savings, and I rent my apartment because I don't want a big mortgage, and my life is I think better compared to people I know with student loans and mortgages. A world where everyone has the same access to resources that I had is a worthy goal, and if we can fund that by banning loans, seems fine.
(I asked another question here but decided I'm having a hard time reading or composing standard written English today so, some other time!)
They would still make money if they kept them it would just be less beneficial than it is now. No long term capital gains as an example.
People with little money consume everything they have already, they have no choice, no retirements no nothing.
>> You would force people to consume?
That's a complete misreading of the comment
And we know now that the ultra-rich folks tend to take the money,windfall from lower tax, and hide it in Virgin-Island, Panama,Cayman Island and other offshore tax havens.
It's a relatively well known fact that eg it doesn't really matter too much whether officially the employer or the employee is required to pay the employees income tax---the money comes out of the same pot.
Similar things happen for other taxes. Eg VAT in European countries seems to be paid for by the shops, but it wouldn't make a difference (apart from convenience in collection) if you'd levied it directly on the shoppers.
Any discussions about 'trickle-down economics' is incomplete without tax-incidence.
https://en.wikipedia.org/wiki/Trickle-down_economics#Critici...
"Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'"
It feels more honest that way.
Taxing wealth encourages investment because you have to turn a yearly return in excess of the wealth tax to not have your wealth shrink.
The incentives to be wealthy will never disappear. Taxing wealth just makes it harder and makes sure that those who are wealthy work for it.
If the central bank wants banks to have more reserves for loans, it buys assets from banks in exchange for newly created reserves. Money markets are a command economy.
Of course, someone still has to decide whether to consume now or invest. Or whether to invest in economically efficient ways, or in ways that are only economically efficient because of weird tax arrangements (but are actually less productive).
Edit: sorry, wasn't aware of the exact definition of this. Having everyone pass this sort of thing is a great idea imo.
Edit: Thinking about it a bit more. Inflation would also tend to drive up the numerical profits of companies, which will tend to buffer a stock price for example. So I'm not sure how this inflation independently contributes much of a specific tax on the wealth.
So yes salaries go up, but not in concert with people's costs nor with the value that is generated by people's labor.
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
It's right there in plain English: Inflation exists as a policy to screw "workers" out of the value of their wages.
Workers is a nicer way to say lower classes. It doesn't include investors, financial sector, etc, who strongly benefit from inflation.
Investments in real estate, equities, commodities etc all increase in notional value to factor in the devalued currency.
The problem with many "wealth" taxes is that they end up missing the top 1% and hurting the people who are building a business.
Eg inheritance tax does a fantastic job of just screwing over family businesses that on paper are worth say $7mm+ because on paper the kids who inherit the business now owe taxes on maybe $2mm (I think the first $5mm is tax free w/ inheritance), but selling any of the business to pay the taxes would often destroy the business.
And I'm not talking about massive businesses like Walmart - I mean businesses like a large-ish family farm where just the land, equipment, animals, etc are all worth $7mm+ on paper, even if the farm doesn't produce massive profits.
https://americansfortaxfairness.org/tax-fairness-briefing-bo...
Even our current methods of evaluating quantities and distribution of wealth are vague estimates, and that's without people incentivized by taxation to hide or minimize it.
A wealth tax that turns into anything but a buildings-and-cars tax is a fantasy from an enforcement perspective, and significant property taxes have issues of their own.
>Knock Knock Its the United States
With huge boats, with guns, gunboats.
>Open your banks' records, stop having them be closed
and theres not much they can do about.
So they sign a treaty making sure their banks' records are not closed.
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Inspired by this, both historically and in delivery https://youtu.be/Mh5LY4Mz15o?t=4m46s
Is it not a thing for startups to be based out of Delaware for a tax advantage? Would the ships even have to leave the harbor to do this?
And I was under the impression that startups use Delaware because it has a boatload of case law that favors investors.
Very different from tax avoidance schemes that companies use to pay lower taxes by incorporating in low tax jurisdictions or funneling the money through multiple countries.
From the perspective of the tax code as an incentive system, taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade tariffs: they disincentivize exactly the things that help the economy the most.)
Economists are usually more in favor of a land-value tax, because it punishes people for something that doesn't build GDP (investing their wealth into property and then sitting on it as it appreciates), and encourages them to instead do things that do build GDP (like investing their wealth into companies.) A land-value tax is still essentially a luxury tax, but it doesn't have the same problem of unilaterally discouraging GDP creation that taxing wealth does.
Why? As a total layman, wouldn't it be incredibly inefficient? If we tax the wealth of, say, the top 100 richest Americans, wouldn't that cause some pretty terrible downsides? If we force them to sell their holdings, wouldn't that ripple through the economy?
Take Jeff Bezos--if you forced him to sell a significant portion of his stock, wouldn't that depress the Amazon stock price, which affects a significant number of other individuals and businesses?
If you are not aware of what happens in situations like this, I would like to take you to pre-1990s India. Some of the most brightest, brilliant, hard working and industrious people used to leave the country and never to return the moment they attained working age.
The people and money from whom you can take the wealth to fund your socialist schemes shrinks every year. To a point you will have a country full of entitled people, who think they were born with rights to free stuff. And will always be angry at people capable of working who don't spend away their life to make it happen for them.
Quote (by probably Winston Churchill )- Any man who is not a socialist at age 20 has no heart. Any man who is still a socialist at age 30 has no brain.
Please upvote.
(And I can understand the temptation of sarcasm, but it seldom feels as good to the reader as it did to the writer.)
Georgism would be great. I hope Singapore would show the world how to do it.
It's not taxing wealth so much as taxing the mechanisms that create undue inequality that would work: yes, I'm talking about taxing rental income. The number one driver preventing people from building savings is draining their income through rent.
The solution is sort of obvious, but hated by people who love the AirBnB model: https://news.ycombinator.com/item?id=14493769
Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in.
Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles.
That being said, I agree that the pressure of rent is unbearable and growing for most of the population. The rebalance historically happened with wars. Properties ain't worth much when people die and buildings are bombed.
I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The solution I outline would work... if the goal is to empower people with "equity" as Sam's article suggests he wants to.
However, what could happen is that the rental income after tax is lower and not enough anymore to cover the mortgage or the maintenance costs, then the property has to be sold.
More supply of rental property? Rents go down so that landlords aren't stuck with vacancies. More demand for rental property? Rents go up so landlords can maximize their profits.
FYI: Selling a property doesn't take it off the market. It's just owned by a new owner, who's gonna either live in or rent it just like before.
There may be an offsetting overall reduction in the value of all real property, but it seems like reducing or eliminating these deductions[0] would be harmful to renters, not helpful.
[0] - Deductions like this, by the way, are available to all sorts of other profit seeking businesses for the equipment and supplies they use in the conduct of their business and I see no reason why a house should be different from a factory machine or laptop computer or airliner nor a minor repair to a house be different from a pad of paper or other consumable with regards to whether ordinary and necessary business expenses ought to be deductible against gross revenue when computing profit.
Real estate is a great investment for the risk averse (probably the best one too). Housing usually grows at the same rate as inflation if not a bit more and people will always need it. It doesnt drop 10% overnight unlike stocks. What other investments did you have in mind that you would recommend over real estate? (in the same risk spectrum)
You can tell that to the people in Houston who lost their home overnight. Home ownership is not risk free. ;)
I am not familiar with the entirety of the US territory. If you look at properties outside of the major cities, they should be relatively stable, renters have no jobs to sustain ever increasing rent. In the far country side, properties should be deflating because de industrialization.
Agreed that it is great for a diversified portfolio. Especially the primary home, it's self sustaining because you'd have to pay rent anyway. A second home is safe, it can host your child now or yourself after retirement, then it's lower returns.
There are a lot of index funds with various risk profiles. There is no general strategy. It depends on your personal situation, how much there is, where your live, and you family.
Now, that might sound stupid. If you own your home and have some savings, you can basically retire. There aren't much expenses outside of the rent.
And yet how many Houston like situations have happened overnight? Or over the years?
Real estate is easily one of the best savings vehicles you can have.
It's the same with work. If hard work is less likely to pay off, or if you'll have to work harder, or both, you'll be less likely to work harder. Some people will work harder anyways, and many will be discouraged.
Marginal effects matter. This is why dynamic analysis is important.
What does your world look like where you'd be too taxed to bother wanting to be financially independent?
That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m.
What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard?
What if I told you it cost $1500/month for a small studio apartment with no furnishings or anything else?
Both are true, both are real, both require different amounts of money in order to achieve financial independence.
I realise now that I haven't actually answered your question:
> What does your world look like where you'd be too taxed to bother wanting to be financially independent?
Rewriting that to be "What does your world look like where you'd be too taxed to bother generating more wealth?"
There comes a point of diminishing returns. If you work a 40 hour week already and make a decent living at 40-50%, and now get told that anything above that will get taxed at 75%, unless you're going to somehow generate more than double, you're going to spend that time doing more productive things (like spending it with your family).
Arguably, that's a net-positive for society as a whole, but may be a net-negative for the economy/GDP of the country you reside in.
The biggest potential cost of someone in the US, with employer-tied healthcare, seems like medical. You could hit the unlucky jackpot and have a seven-figure+ medical bill over the course of a few years or life. So let's set "able to handle that for yourself and your family" as the baseline for being considered independent, since that's probably bigger risk than, say, "owning but then losing a multimillion-dollar-home to a flood" or somesuch.
But I also don't think this term is generally understood as poorly as you suggest.
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Responding to context complaints aside, you're still talking income tax, not wealth tax. My question was what this hypothetical negative-use wealth tax looks like, since the further-upthread post had suggested taxing wealth instead of using income as one of (several) proxies.
But also, my hours have not increased with my compensation in the manner you suggest. I know that every additional dollar loses 40% or whatever of it, I still would rather have it than not have it. 5%, probably wouldn't care, but would I still want more autonomy and responsibility at work for the sake of more feeling in control? Maybe. Maybe not. There are both financial and non-financial sides there, but if income was the sole basis for choosing our roles, we'd be in a very different-looking world.
So that's why I'm skeptical that a wealth tax would make me give up having big dreams—the personal safety net and toys are still incredibly appealing.
Meanwhile, you're getting taxed on the estate you're trying to build as you build it.
Twice.
Every year.
As someone who's currently attempting to build his own personal empire, I'm incredibly glad I don't have a wealth tax to contend with. It's hard enough as it is, without knowing that if I start to draw close, it'll get harder and harder as I go. I might not have started trying if it didn't seem possible in the first place. Then again, I might have done it anyway. Where's a quantum theorist when you need one?
My only other quibble is that I haven't seen healthcare costs or insurance premiums scale to that 10x factor like housing prices do rural-vs-urban, otherwise I'd personally be perfectly happy with moving and retiring early. Get the right cancer or nasty chronic condition and you're gonna be out some serious bucks.
Over the course of your life, the government will get more of your wealth that you (or those you designate) will. (At 5% CAGR, the government is ahead by year 54. At 3% CAGR, they're ahead at year 56. At 8%, year 52.)
Example: Say I'm worth 1M credits today and my wealth tax is 10K (1%), that means my income gets another 10K added to it. Real income is 50K, + 10K so I pay tax as if I earned 60K. 40% of that works out to 24K worth of taxes.
In a bad year I'd earn maybe 10K, add that 10K (I'm still worth that 1M), and that year would pay 40% of 20K, which works out to about 8K.
Progressive tax scales can further improve the situation in years with low income.
The markets don't have much to do with this, it's a fictive income, not what you actually made.
Always always consider the young.
Europe's fertility rates are a disaster (and post-2008 American fertility rates too were disastrous). In particular they are a disaster because so much of their economies depend on the tax base growing, which means that productivity growth has to be even higher than it would have to have been with a higher fertility rate. The causes of this surely include making the burdens unbearable on the young who might want to start families. Beating up the young because they have good health, is an unspeakable insanity.
Hold up -
1. Why is this about working more hours, instead of working harder / more effectively? There are 168 hours in a week; even if you don't sleep, you cannot maximize your income beyond about 4x just by working more. I am currently making about 15x the lowest hourly rate I ever worked for, and I'm still fairly early in my career and feel like there's a lot of room for my salary to increase as I become more skilled.
2. I'm reading the discussion was about a tax on wealth, not a tax on income (dwealth/dt). If you're making a decent living and want to make more money so you can spend it on things that are not investments (consumer goods like video games, services like vacation travel/hotels, charity, raising more children, sending them to college), a tax on wealth will not affect you, because your wealth stays right where it is. And doing all that is net-positive for the economy.
'majormajor is clearly talking about wealth in the sense of static assets, not change in assets over time: I'm worried about having a single medical emergency, not having one every year. Make enough for your (static) safety net, then stop making more money.
Because they are tightly linked for most people.
I've managed to increase my income ~5x from what it was when I started but to do that I have had to put in 2 hours/day of side study.
The 99th percentile ("top 1%") of wealth by household seems to have been be $8.4M in 2007, according to https://economix.blogs.nytimes.com/2012/01/17/measuring-the-..., the most recent calculation I could find from a quick Google before heading to work - I'd love to see these calculations done with the raw data at https://www.federalreserve.gov/econres/scfindex.htm . From the summary on that page, they surveyed some 116 million households in 2007.
Suppose you tax all holdings at the top 1% of wealth by 1%/year, which is significant but not enough to wipe you out - after 50 years that leaves you with 60% of your original savings, assuming you weren't investing it.
That yields as a minimum $97T in tax revenue per year ($8.4M * 1.16M * 1%), and almost certainly significantly more because there-s a short tail of people with much more than $8.4M net worth. But if you split even this much among the 5% of households with "very low food security", that's $16,800/year. That's a lot of food.
(An actual scheme would have some sort of progressive tax, also, not a discontinuity at a certain dollar value)
Total US GDP for 2016 was ~$18T.
It seems a bit unrealistic to me to think we can get 5x GDP in tax revenue each year.
So what is the catch?
I'm still interested in doing or seeing an analysis with the full Fed dataset.
Now to answer your question, consider say, a prospective engineering student. They could go to school and come out with $150k or more in debt. But if their post-tax income potential goes down (especially initially), thus their ability to pay off that debt goes down, thus making it more crushing than it already would be, why on Earth would they even consider bothering to go to school then?! Of course a lot of potential students would find something else to do! It's utterly obvious. Painfully obvious. So right there you'll have a decrease in the number of people pursuing certain careers -- hard work being avoided.
Even beyond the economic effect on students, there is just a basic personal calculus as well. You might choose to live with a lower income and more free time to enjoy as you wish (if with fewer luxuries than you might like) than work harder and harder for less and less reward. You only have so many prime years for enjoying the one life you have. Everything is a trade-off. You might work harder now if it means you'll be better able to enjoy some free time later, but if working harder will make little difference to your ability to enjoy free time in the future, why work harder?
And beyond that, we know what low incentives did to would-be hard workers' desire to work hard in the U.S.S.R. and such places. Spoilers: they certainly didn't work harder when they didn't have guns to their heads incentivizing them.
By the way, the same sorts who say that increasing income taxes (or otherwise putting a ceiling on incomes) wouldn't have an effect on how hard people work... also tend to argue that higher tobacco taxes will reduce tobacco use. We all know about the prodigious powers of doublethink in some quarters, but don't think for a minute that everyone accepts doublethink, let alone masters it. And sure, you yourself didn't just make that argument, but I bet you do when it comes to topics where that argument is convenient. I, on the other hand, accept that punitive/confiscatory taxes only serve to reduce the amount of activity being taxed regardless of whether it is an activity I appreciate. If you ever find yourself making that argument, please recognize it and choose consistency.
(I mean, I think this is obviously silly, but it seems to hold up by exactly the same argument.)
Some people will work harder, by moving to a different country, where the tax laws are saner and don't punish hard working prime movers for the very value they provide.
Has this effect been shown in the real world? That implies more interest in the odds than their target market demonstrates any interest in (hence the term, "for the math-impaired").
I think this is false in practice, especially with a progressive wealth tax.
Most people don't want money, they want the things money can buy... long, healthy, and generally happier lives. People that keep striving past that point are people that seek to change the world, folks like Gates or Musk. A progressive wealth tax starting at $10M wouldn't really change the incentives at play.
Multiple incentives to be wealthy -- or worse, feedback loops to ensure the children of the wealthy maintain their advantage -- are just redundant.
Citation? I know it feels correct, but is it actually correct in practice? Is there any evidence that the rare person who generates enormous wealth was motivated substantially by wealth (and not a drive to build something substantial or change the world)?
At least in the case of Gates, I suspect he would have built Microsoft even with slightly more onerous (to the wealthy) tax policy.
I don't think it has disincentivated anybody from becoming less wealthy and/or working less. It just incentivizes tax evasion, but even that is not significant.
On the other hand, a large number of social programs have been built around this new tax. Anybody in the country could get cancer and would get free decent healthcare.
If we're talking about how people feel about their tax system, I think we need to talk about how a huge portion of the US misunderstands "tax brackets", and seems to think that paying more taxes when they're "bumped to a higher tax bracket" is a thing, and that there's some strategy in avoiding getting paid marginally more than some threshold. (Since tax brackets apply to marginal income, this is incorrect; you're still taxed at the lower rate for your income up to the threshold.)
This is almost certainly causing people to behave in ways that are economically irrational for themselves far more than any tax on large wealth (let's say, for the purpose of argument, $100M or more) would be. Yet there is no campaign to fix people's understanding of tax brackets so that more people feel incentivized to make more money.
If we're talking about an actual rational response to the tax system, I would much rather have $102M in the bank and get taxed on half my savings over $100M than have $99M in the bank and get taxed on half my savings over $100M.
> and thereby causes fewer GDP-building things to happen!
Why does a tax on wealth cause fewer GDP-building things to happen? The rational thing to do given a tax on wealth is to spend your extra wealth on services you're interested in, donate it to charities you support, etc., all of which seems like it increases GDP more than investing it for yourself would: it produces additional revenue for organizations, which produces jobs, which grows the economy.
I'd believe this argument for a tax on income, since it disincentivizes people from making more money, which means they're not spending that money because they didn't make it, and also they're voluntarily refusing to do profitable work they otherwise would have done. (I don't think I agree with the argument, but at least I understand how it works.)
This is the best distillation of how marginal tax rates works I have ever read.
There still are taxes that don't work like this (usually in the form of benefits that cut off at a certain income range) so unfortunately we still have messed up stuff. The feeling isn't completely unfounded
Another rational thing to do is to create vehicles that store but temporarily impair the market value of that wealth as computed for wealth tax purposes. Put it into a private company and offer minority, non-controlling stakes in that private company to all comers and act surprised when only family members take you up on the offer. It's a minority stake without control rights; it's going to be worth less than the net asset value. Store the wealth there until you're ready to use it, then have the company directors make a distribution, or leave the transfer in place to your heirs, who will receive a controlling interest when their shares (that maybe they bought) are reunited with the shares that you will them upon death. Or invest in something illiquid and very hard to accurately value.
Technically, all of those things create GDP activity for lawyers and accountants as well, but it's hardly good public policy, IMO. (I'm not opposed to a reasonable wealth tax, say 0.25% annually on sums 10M-50M USD and 0.5% annually on sums above that. I don't think it's a tax without lossy consequences though.)
I know engineers that are guilty of the misunderstanding you describe. How does anyone graduate from a university in the United States without at some point having been exposed to the idea of marginal taxation?
Also land is hard to hide, and relatively easy to value. So it's really hard to evade the tax. If you are going to tax wealth, and want that to include assets like equity in private companies, you are going to have to value those assets.
But he starts from a different angle: he's interested in economic efficiency. So he wants a system that moves economic goods into the hands of people who value it most (and compensate the previous owner fairly at market prices).
He proposes a system where people declare the value of their various possessions with two incentives for accuracy:
- You have to sell to any comer at the declared price. Thus guarding against overvaluation. - You have to pay a small percentage of the declared annual price as an annual fee, thus guarding against undervaluation.
That concern about economically efficient allocation is mostly interesting for monopoly goods and rights, because anything else we can just produce more off.
In Georgism it's customary to name these after their most typical representative Land (sometimes with the capital L to emphasis the generalisation). It's not much of a stretch to include eg things like licences for magnetic spectrum.
I'd be wary about mixing things like insurance against theft in here. (It might be possible to give a unified system, but I am not sure it is. Look at http://www.daviddfriedman.com/Academic/Course_Pages/legal_sy... for some source of interesting ideas about legal systems.) My wariness comes mostly from the fact that insurance that pays the declared value encourages people to overdeclare. Better let the market sort that out. (However paying the taxes for a specific declared value for years on end is a pretty good argument to convincing any court or insurance arbiter that you really valued something at that price.)
In the system I sketched above, Hanson described some scenarios were some entrepreneurs might be on the lookout for undervalued properties, buy them, and then just try to resell them to the original owner (or someone else).
As a special case, that scheme is especially lucrative if you are looking to buy a eg a house in a specific area anyway and don't care too much about which one; then the risk of not being able to sell the property you just bought on is not a problem: you just keep it.
I'd be more wary of using such a system of wealth taxation for eg cash. If you have a working central bank with an inflation or nominal GDP target, an individual holding cash even under their mattress is essentially free for society: the central bank just prints more money to make up for the portion you are holding out of circulation. And once you bring it back into circulation, they just print less money for a while. So for society it's great if people are holding cash: they did something for the rest of society to get their hands on the cash, but didn't get anything in return (yet). Very nice of them.
(Even better would be a free banking system, where essentially the same nominal gdp stabilization happens automatically because of market forces. George Selgin has some good stuff on that, see eg https://www.alt-m.org/2017/09/14/did-free-banking-stabilize-... or https://mises.org/library/less-zero-case-falling-price-level... )
The 'you have to sell at the declared value' requirement is somewhat similar to your idea: if you don't declare eg your house, it means you implicitly declare it to be worth 0. Someone stealing something worth 0 from you, will get a slap on the wrist at most in any sane system---or they can even just force-buy it at that price from you!
The other thing to keep in mind is something called 'tax incidence'. It's the study of who actually has to bear the burden of a tax. That's often different from who has to fork over the money. See https://en.wikipedia.org/wiki/Tax_incidence . The other thing is deadweight losses (https://en.wikipedia.org/wiki/Deadweight_loss).
But yeah, I like the basic idea of using a monopoly rent tax to fund a basic income. https://medium.com/basic-income/why-land-value-tax-and-unive... has a similar idea, and some worked numbers. (The author has at least one article for the UK and one for the US.)
Massive rent-seeking, enclosures, network effects, and benefiting by public infrastructure and institutions, without paying back full costs, or by imposing dislocations on other economic sectors, as well.
Aviation accounts for 6% of transportation fuel use. For a small portion of passenger and minuscule fraction of cargo movement.
The details will be difficult: how do you assess wealth with any semblance of accuracy, especially in the face of an increased incentive to hide it? I'd love to hear anybody's clever ideas to tax wealth in a way that catches cheaters. The biggest issue is what you do with wealth held overseas.
But even if the cost of catching cheaters is many billions of dollars of enforcement apparatus, it seems worth it. Of course, you create a new problem: avoiding corruption in a large enforcement apparatus chasing after people with the resources to easily bribe them. (But this problem is not unique to wealth taxes, and I don't think bribing the IRS is actually much of a problem—people just bribe Congress.)
There's another problem: wealth taxes would probably need a constitutional amendment in the U.S. From Article I, Section 2:
"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers..."
There's already an amendment to clarify that federal income taxes are OK. But wealth taxes will need their own amendment.
Conceptually, though, I totally agree: if the problem is unequal wealth, just redistribute the wealth directly to move toward a less catastrophe-prone distribution.
Heard of this before. Have there been any attempts of that before and how did it fare?
It would seem to be as soon as wealth is taxed, wealth will morph or change shape to avoid being taxed. We'd end up with some new arcane tax scheme where wealth is held in a tropical island nation and the owner of the wealth gets a stipend or I don't know, rents all their possessions from that entity.
Obliterate the tax shelters, obliterate the tax havens, bring the money back home under threat of criminal law.
I'm not saying you can't be a fat cat. But at a certain point (fluid and blurry, but distinctly present), it's just morbid obesity that is squishing other citizens.
Elections matter.
Assuming (perhaps incorrectly) you are in the US, you are also reading Hacker News, so you are probably the top 1% of the worlds wealthiest. Again, just a thought experiment, but would you be fine with your government saying that as a 1 percenter in world wealth you can no longer earn anymore, you have hit that certain point, are a fat cat and can grow no more wealth, under threat of criminal law?
Media has done a good job of raising awareness of the problems of wealth disparity, and a lot of people nod along.
But no matter how wealthy someone is, they can always point to the more-rich and say those people are the problem and should be taxed, not themselves.
This is obviously untrue. There isn't an infinite number of people wealthier than Gates or the Waltons or the Rothschilds. At some point there is no one further up the economic ladder in whatever location you're talking about.
"Nobody?" Other countries manage it.
Hmm just checked the Wikipedia and it says that Donald Trump proposed it for the US as well.
The footnote proposes to tax capital the same as labor.
An interesting thing about Bill Gates is what a tiny sliver of GDP he managed to capture over almost 40 years. Something like $0.1 trillion out of several hundred trillion dollars.
I'm not strongly tied to the language I used, I just find the comparison interesting.
Let's say the total GDP over the last 40 years was 300 trillion dollars. Also, let's say Bill Gates's wealth is 100 billion dollars (for ease of calculation).
100B / 300T = 0.003 = .3% of 40 years of GDP
Let's say that the average population of the US during that 40 year period was 170M[0].
170M * 40 years = 6.8B person-years of work (PYoW).
Bill gates contributed 40 PYoW to the GDP, which is 0.000000059% of the GDP.
However, he captured .3% of the GDP as current wealth (not including wealth spent during that 40 years)
That means his wealth capture is 5 million times the "average".
That 'tiny sliver' is anything but.
But that was the point of my post, to compare the captured wealth to consumption. People always talk about how the wealthy are screwing the rest of us over and everything would be great if they weren't taking so much, but it turns out that consumption is also a huge portion of the economy. Total wealth in the US is on the order of $100 trillion (this includes all housing and so on). Consumption of several trillion dollars a year adds up to that pretty quick and seizing it all and turning it into circuses isn't going to go very far.
Which isn't to say I am against programs that result in wealth transfer, it just pays to try to look at things clearly.
I addressed the comment you made, not the comment you didn't make.
I mean, I didn't painstakingly lay out my meaning, but there you go.
GDP is the national income.
Going back to Adam Smith, "Wealth is the annual produce and labour of the nation". Elsewhere he argues that "the sole use of money is to circulate consumable goods". As a man not given to short sentences, I recommend paying attention when he uses them.
https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_II...
Defining, and measuring, and allocating wealth has been a bit of a conundrum for the past 240+ years. And a while before by some reports.
I don't understand why this is something people believe needs "solved". Did you build Microsoft?
In reality, all the laborers at Microsoft built it into what it is today. And it (like most companies) are at a scale of complexity that is far beyond the fiction that workers are acting out CEO’s “visions.”
It offends my sense of "people should enjoy freedom" to see so, so many people who are very much not free because of the economic system that offers them no way out of poverty.
(And I don't believe that poor people are all choosing poverty. I've been poor, and no one wakes up to that and says "this is what I choose.")
And it offends my sense of language when people use phrases like "build Microsoft" as though it was a doghouse that someone assembled in an afternoon and sold for the cost of materials plus $50 profit. Gates no more "built" microsoft than George Washington built America, or whatever. Lots of people were involved, and even if they were compensated well, maybe they weren't compensated fairly. Profits being the unpaid wages of the working class and all...
Everyone, from the CEO to the custodian has an interest in people feeling there is some truth to "The American Dream." Which is not that you might get rich but that you can at least get ahead.
Yes. I purchased several of their products, thereby increasing the capitalization of Microsoft.
I expect you intended the answer to be "No," implying that Bill Gates (and a few others) built Microsoft. However, that rests on a specific understanding of ownership and causality that not everyone shares.
First, it assumes that Bill Gates did in fact work hard. Please define exactly what you mean by "work" and "hard", since I'm not sure there's an obvious thing that he could have done more of, even if he were so inclined.
Second, it assumes there exists some direct relationship between Bill Gates's personal work ethic and Microsoft's outsized success. Maybe all Microsoft needed was a good idea at the right time and would have succeeded about equally well with any minimally competent execution. Maybe they would have done even better had Bill Gates founded the company and then retired at 30.
Finally, it assumes that Bill Gates work ethic had some direct relationship with his financial compensation level. It is quite possible that he would have been more than happy to still give his best possible effort in return for being, say, a mere hundred millionaire. Moreover, plenty of people do hard work for all sorts of other reasons, from duty to boredom to artistic vision. Why do we assume that Bill Gates's internal motivation is predominantly financial in the first place?
None of those premises appear obviously and indisputably true to me. Maybe they are, but it'd be nice to see the case actually made (and made about real humans in the real world, not about perfectly rational actors in an idealized market).
Gates could have sold out to IBM or Apple or whoever and retired as a multimillionaire without taking the chance Microsoft would end up like Wang or Altair or hundreds of other companies.
“Had the technology been proprietary, and in my total control, it would probably not have taken off. You can’t propose that something be a universal space and at the same time keep control of it.”
[1]https://webfoundation.org/about/vision/history-of-the-web/
The guy who sells tables and chairs is likely to make more money than the guy who sells nails and hammers.
And, really, have you never bought something in small part because you liked the seller? That's the sentiment behind the exhortation to "buy local" or to buy Girl Scout cookies or from a local school's fundraiser. I suppose you could say a purchase is a contribution to the extent that the price exceeds the cost of production.
Which is "no". Buying and building are two different things. So I guess you were right about what I intended.
Consider the way Kickstarter projects describe their "backers". On the "Why Kickstarter?" page they say backers are "helping to create something new". Yet, one could easily consider Kickstarter simply a website for pre-orders, no different from buying in any other method.
The line between a buyer and a backer/builder isn't so clear.
It is pretty clear, if you are funding someone'e kickstart project then you did help them build it but if you pay for a product which was built using the creator's(or some other investor's) money then you did not build it.
It's even more fuzzy when you consider beta customers for a software company. Heck, how about when I contribute information to Google Maps? Or give feedback and make feature requests for my accounting software?
(Whether this will actually happen is a separate topic; but there's a reason why Sam Altman doesn't just propose your tax-the-rich scheme.)
"Most"? According to [1] only around 50% of the US citizens do get a paycheck (155 of 322 mio). The others probably mostly are kids, senior people and housewives, but they make up a significant portion.
And whence the money for the share? Taxes. So this is just a UBI.
This, like all UBI proposals, seems like a way to dress up a massive tax hike: "but you'll be getting your share of GDP!". The only way to get me to like a UBI is to have UBI replace absolutely all (and I do mean all) welfare programs so that we can just haggle at every election over one headline UBI number + necessary taxes. And the initial UBI and tax rates would have to be no more burdensome than the current total of welfare it would replace, and preferably significantly less burdensome than that. Many UBI proponents, of course, would not mind this because they'll aim to ratchet up the UBI and taxes for it in a way that becomes culturally irreversible -- and that's a reason to be against UBI.
And incidentally, all instances of "soak the rich" in American history have actually been "soak those who aren't rich but have high incomes". The truly wealthy have no income as such -- instead they have capital. And why don't we just tax capital? Well, because every time it's been tried anywhere it's been a disaster for the overall economy: capital (and wealthy people) flees.
I'm ready for the downvotes, by the way.
Anyway, talk of UBI in the US is pretty silly when you look at how many people would rather not have the government do things like help people access health care.
They've been repealed in countries like Sweden and Austria, not because they were disasters, but because exceedingly wealthy people have a lot of influence. That's the only story.
As such your claim that no such taxes exist is wrong; and your claim that they've been a disaster is also fallacious.
p.s. your "ready for downvotes" nonsense is such immature nonsense. You said an untrue thing that HN audiences wish were true, and then pretended you're being brave. You're a joke.
Near as I can tell Europe has lagged way behind the U.S. in economic growth since the 1980s. I remember back in the 90s when catching up to the U.S. was stated goal of the incipient EU. How did that go? How does that relate to overall tax rates, public spending as a proportion of GDP? Are fertility rates artificially lowered by a high tax burden? Are they improved by the welfare state? Or is something else the matter with Europe?
I think "disaster" is an appropriate adjective for wealth taxes.
Two hours before saying that, you said:
> ...every time it's been tried anywhere it's been a disaster for the overall economy: capital (and wealthy people) flees.
Trust capitalism, but not capitalists.
Did you know the richest 2.7% of all earners pay > 50% of all receipts collected by the government(1)?
Or that -- when asked explicitly whether the rich should pay more -- most (3/4) people, like you, say "yes", but when asked what the tax rate should be for top earners, precisely 3/4 of respondents said it should be 30% or below(2). Again, the top rate is 43% right now.
(1) http://www.pewresearch.org/fact-tank/2016/04/13/high-income-...
That's comparing a question people likely answered with a total effective income tax rate with the current nominal marginal income tax rate.
Of course, this is reinforced by the fact that people don't even generally understand marginal tax rates all that well, but that's secondary.
You could argue that when people say the rich should pay "more", they're talking about effective rates, but a lower marginal income tax rate would be a funny way to raise top earners' effective tax rates.
Yeah but the value of that share doesn't increase when GDP goes up. That's the difference.
> raise your taxes on the rich and lift up those that are at the lowest end
I believe that is what Sam is suggesting. With the caveat the amount of tax collected is again tied to GDP.
> Of course in the current political climate this will not happen
Which is why he is proposing a potentially more palatable variation.
Be more constructive and less defeatist please.
The only thing you will end up achieving is stop the next Microsoft from happening, not the next Bill Gates from happening. The next Bill Gates will happen else where.
The hard part, which barely gets any discussion is:
* How do incentives work? How do you incentivize the production of new wealth?
* How does immigration work? You can't have open borders and mountains of free stuff.
* Does this replace or augment existing welfare programs?
* Does this actually make people's lives better? How do you know? What happens if it doesn't work out?
And so on.
100M people died of socialism in the 20th century. Can we just STOP with this madness please?