What to Do About Inequality (2012)
bostonreview.net
bostonreview.net
For YNH, his key points in history really changed my perspective, on people history and progress. I'm totally sold on the central thesis: human progress is fundamentally the ability too cooperate in increasingly large groups, and the quality of that cooperation. The whole thing is mediated by our arsenal of collective fictions.
But when we get to the present, what we have is fairly generic. He's certainly an intelligent commenter, but the historical thesis doesn't seem to play into his current affairs opinions at all, or his futurism.
Picketty is similar (but a lot less readable). He makes a pretty compelling empirical case for his thesis, growing inequality is a long term trend during capital accumulatui periods. Wealth disparities are mitigated by big capital destruction events like big wars. There's a theoretical case but it's simple and the evidence is in the data, not the theory (r<g). Convincing.
What does this mean for the present? Apparently, something approximating the current French tax system.
Income tax isn't new. We've had higher and lower high marginal rates than suggested in this article. The problems within those system are the problems.
Maybe im being harsh.
https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...
They are in fact unheard of outside of that?
What am i missing?
There are reasonable arguments to be made about increasing or decreasing taxes, or adding new types taxes or removing other ones, but this meme of "our posted tax brackets used to be higher, and everything was fine, therefore we need that again" is simply untrue.
I said nothing of the sort. If you have an argument with someone else, go have the argument with them; don't put words in my mouth.
And since it is apparently OK with you to make up stuff that other people never said, I take serious issue with your immoral pro-puppy-murder stance.
Income = social mobility, and is directly related to "money you earn" and cannot effectively be inherited (you're dead, you are no longer earning).
Assets = wealth, and is directly related to "money previously earned" and can be inherited essentially forever ( https://anarchimedia.com/2019/01/15/rich-families-in-florenc... https://www.theguardian.com/money/2019/apr/17/who-owns-engla... )
I now believe that the only effective way to end the excesses of inequality is for effective tax on assets, land being the most obvious but all assets should be up for taxation.
And as strict as asset taxation should be, so should income taxation be reduced.
In the US, an asset tax is probably unconstitutional.
What makes you think there's anything unconstitutional about it whatsoever?
Apparently there are actually decent arguments that it would be constitutional after all: https://itep.org/the-u-s-needs-a-federal-wealth-tax/#constit...
The history of the Federal government's ability to tax is pretty tangled though. http://nymag.com/intelligencer/2019/02/constitutional-concer...
I'm certain that at least half of the comments right now are from people reflexively spouting off without having read it.
The caption on Figure 2 in this article claims that there's zero correlation between top bracket tax cuts and GPD growth. My eyes must be playing tricks on me because I see a possible correlation. I think this might be a good example of conclusions in search of evidence. There must be other ways to break down the economic data to prove or disprove the hypothesis in an unbiased way, if anyone cared to do so.
edit: Downvotes instead of rebuttals. Nice.
The division exists to encourage longer term investment, and it's probably a good policy. I didn't downvote you, because I think that general point that the spread between long and short term rates is too regressive at higher income brackets.
Piketty makes a case that GDP wouldn't suffer with a much higher top marginal rate, but doesn't demonstrate (here) that it would significantly alter wealth inequality. There are a number of ways that might not follow: capital flight or tax avoidance, untaxed fringe benefits saving money, general regressive flows like "having stock" wiping out the change.
Scheidel (The Great Leveler) has argued, I think pretty persuasively, that mundane domestic policy doesn't undo inequality. It can constrain it, and sometimes diminish it briefly before wealth catches up to the changes, but major reversals seem limited to economic crisis, if not actual war or collapse. Diminishing top-end incomes might slow the worsening of inequality, but Piketty's own thesis (r>g) suggests that it won't do anything to actually arrest the trend.
Piketty, at least, is content to compare the relationship between top marginal tax rate, pre-tax income share, and GDP in Germany, Denmark, the UK, and the USA since the 1970s. He finds that higher top marginal tax rate correlates to (and precedes) decreased top pre-tax incomes, and doesn't correlate with GDP. Inequality numbers might be distorted by other changes, but it would be interesting to at least see the naive comparison between top marginal tax rate and change in wealth inequality for those same countries.
In fact, trying to directly "solve" complex systems like these with lots of variables, as if they were just "problems", never works (regardless of area).
So while this may be a good idea or it may be a bad idea, it's definitely not going to "work" on its own.
(and i get how hard it is to sell people on the idea that no, you will not just do a thing and have it solve all the problems, instead you are only trying to get the system moving in the right direction, and then adaptively try to do things that keep it where you want it. But that's at least got a chance)
I doubt very much that no one will be compensated in excess of the rate though. People will just have to go to the trouble of making sure the compensation isn't affected by the rate. In effect you're paying people to make an income inequality statistic look better.
It was very hard for startup and small companies the earn enough equity, it was taxed away. Without equity it was hard to get outside capital, so the can't grow.
At this time Austria had a big state-owned industry, but this sector run into hard troubles.
In the 1980s the tax was cut, at state-owned industry won efficiency after privatization. Suddenly a strong medium sized industry could grow. In the 1990s the work productivity grow about 10% per year.
By the way for democracy it is necessary that there a no big tax payers. Big tax payers get big political influence. Huge political influence results in protection by laws, and this protections are usually as unfair as hard to detect. And it is nearly impossible to get rid of them.
The far better strategy is a wide spread tax and social fairness by social transfers. High profits has to be fight by concurrency and hard executed anti trust laws.
(I did notice that his theory 2, tax avoidance, wasn't actually examined, and that he argues for a lack of GDP harm but doesn't actually show here that lowered top income produces lower equality.)
If ohaideredevs is in such a place that he's able to stop working and not have to worry about being able to pay for housing, food, clothes, insurance, and all the other necessities of daily life, then that's great for him, but I guarantee you absolutely that the vast majority of the people in America would neither stop trying to make money, nor stop trying to make more money, just because some taxes went up. More money—even if a higher percentage of it would go to the government—just makes too much of a difference in the day-to-day life of most people for those kinds of concerns to be anywhere near strong enough to make it look unappealing.
So if someone who already has so much money that they don't need to work another day in their life stops trying to make money...or even if it's someone who makes so much that making more wouldn't reduce their stress in daily life no longer trying to increase their income...I don't think that's a net loss to us in any meaningful way.
Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all?
Okay. So what?
We're on the ycombinator website, presumably the concept of stock options is not foreign to those here. Taking less salary for years with the potential for an IPO is a lot less lucrative when your payout goes down by 50% due to taxes.
Since we're talking about an increase in the top marginal income tax rates, sacrificing regular income for a chance of a big capital gains payout would actually be more, not less attractive, unless this was pared with treating capital gains as normal income—and even then, would probably remain more attractive if also coupled to provisions allowing spreading income spikes (whether due to one-time capital events or otherwise) out via advance and/or deferred recognition options, which is probably necessary for basic fairness if capital gains are treated as regular income—and actually that helps with fairness for some regular income patterns as well.
So if by "a lot less lucrative" you meant "13% less lucrative," then okay.
Sloppy methodology with a conclusion in search of evidence.
Raising taxes on those already making that much makes it more likely, not less likely, that you will be able to do so.
So, if you want to make that much some day, then it would affect you when you do.
Further - raising rates on high income earners makes it more likely for others to make more? That seems dubious.
Decreasing rent-seeking in top earners will leave more money on the table for everyone else.
People love things, power, sex and connection. Most of the things that lead to those things are exchanged directly or indirectly for money.
You’ll almost certainly always find a personal narrative as to why you want money.
In the past a lot of people have claimed they’d be demotivated about raising taxes, but it’s never stopped someone from being richer. More is still more, even if the government takes a greater share.
That you could finally relax and spend time doing things of value to you instead of acquiring wealth?
Sounds good to me.
Furthermore, your ability to make millions is only possible because of the services provided by government (education, infrastructure, security, financial regulation).
Plenty of people are motivated by much smaller numbers. The average take-home of the top 1% is between $400k and $700k. We're talking about a bigger tax on the 0.1% (>$1M/yr), and a huge tax on the 0.01% (>8M/yr). Again, those brackets are only able to achieve outsized returns because they have educated workers and a stable legal/regulatory system. Because they achieve outsized benefit, they should pay a proportionally higher share.
If those amounts are enough to incentivize 99.99% of the country, and you're still making more than they are, I'm sure you'll survive. If not, someone else will take your place.
That's probably not true of most of the people dedicated enough to making money that they'd be subject to it in the first place, but to the extent it is, that's probably not a social problem; the rich maximizing their own income isn't always socially optimal.
> Our research on eighteen OECD countries shows that, between 1975 and 2008, there was indeed a strong correlation between reductions in top tax rates and increases in top 1 percent pre-tax income shares... higher top tax rates may discourage work effort... the incentives for [executive] rent-seeking are much stronger when top tax rates are low
> there has been no correlation between cuts in top tax rates and average annual real GDP-per-capita growth
Piketty wants to reduce inequality without damaging the economy, not specifically boost tax revenue from the rich. His claim is that raising top tax rates does discourage people from obtaining extremely high pre-tax incomes, but doesn't shrink the economy. There are several possible reasons for that, but the basic question Piketty cares about is whether you would stop being productive. Someone who trades off salary for a shorter commute, or spends less time angling for a raise, or even hides their money from taxes more effectively, is not necessarily producing less value.
If you lost your motivation to seek more than $500,000/year (remember, this is about the top bracket), but continued to do equally GDP-boosting work elsewhere, that counts as success for this system.
I'm not sure how many wealthy people care about inequality.
I used to work with a multi-millionaire who thought everybody that was poor just didn't work as hard as him / wasn't as smart as him. He thought everybody should work 2 jobs and go to school in order to better themselves.
Why not do it? Why does everyone else have to do something first?
I'm not asking everyone else to do it first. I'm asking everyone to do it together.
You'd actually see the difference you're making, instead of feeling helpless about massive issues.
Actually doing something takes effort, and is hard, and is risky.
Yes, there will always be inequality. Yes, that is a good thing. But that is no excuse to the current level of wealth disparity.
Plus, the sheer magnitude of inequality is immense in the area of wealth. It follows an exponential distribution; those other things you mentioned follow a normal distribution.
This is an underrated point; capitalism with billionaires is crony capitalism.
You recognize that this is aimed at higher marginal taxes on those who are already making very large amounts of money, right?
What this article is suggesting is largely suicidal, taking cash from a far more efficient business community government by "laws" of competition, evolution of markets etc, the impact here would be catastrophic at best, I really don't think you can debate this in the space of one article.
My number one would be move all government money on blockchain, and make that public, then see if it's really so smart to "give them more", through any means.
Inequality has always been a constant throughout human history, and it's far better now than in the middle ages, where we are all entitled to education, healthcare, and have extremely fast access to information.
I'm not suggesting there isn't a problem, but you haven't found a solution. "Tax the rich" is something everyone can scream off the top of their lungs, until it comes to bite them hard the next day when their pay must be cut to keep the company they work for profitable.
Step 1 would be removing the biggest inefficiency of capital allocation in most of these "high growth" western economies, measure and publicise return on investment of public funds, and proceed to realise raising tax "just like that" is a very very bad idea.
- How do you know care home providers don't bribe their way through contracts? - How do you know they are not an oligopoly that sets the price under the table, and the government pays 1.5 - 2x contributions for someone to be in a care facility versus what you would pay yourself for an elderly relative going to the exact same facility?
Specific counter examples are not fruitful, people who don't have the means don't understand the economics and don't understand money, that's why they are complaining about the inequality, and they can downvote me here all they want, I truly hope it relieves their frustration even slightly.
If you've ever worked with government directly, you're expected to understand it's one of the most rigged and corrupt institutions by very far. Yes, it exists to perform universally beneficial functions, does it really do that? Hello no, in most cases it spends 2 - 3x the money it really needs to for the same service. I'm not suggesting it should cut off the elderly, just cut the waste in providing those services.
“How do you know that a contract is above-board?”, you ask. You know this because some committee put together an absurdly detailed Request for Proposals, complete with requirements, evaluation metrics, milestones and circles and arrows on the back of each one. Throw in some politically-imposed requirements (can only travel on US Airlines, lest we “waste” money on the British) too for good measure. The winner’s proposal gets turned into a Statement of Work that specifies what’s to be done, when, where, and how. The whole mess gets audited and inspected and archived so it can be reviewed later by more auditors, Congress, and concerned citizens like you.
Hiring is equally bonkers. Managers (mostly) can’t flip through the submitted resumes and pick out someone that seems clever and driven (“What if it’s their cousin?!?”) Instead, there are long questionnaires and fixed experience requirements. The manager can only pick from the top 3(?) candidates and the salary is barely negotiable.
It is a huge pain. It’s slow, it’s expensive, and it’s not always responsive. The complicated process is exclusionary (Raytheon has rooms of staff that know these rules chapter and verse; you don’t). Right now, it feels like the system spends $100 to be sure it saves $1. We would be better off if we relaxed these controls a bit and trusted individuals a bit more (backed up with audits, obviously, lest anyone get ideas), but....here we are.
I'm all for increased transparency but you seem to be additionally advocating a target-based, profit-driven approach. This sort of approach has to my knowledge failed pretty badly in the health, education and prison sectors in the UK. What happens is that as soon as you come up with a way to measure "return on investment" or "level of service", contractors will figure out a way to game those measures whilst providing poorer and poorer actual service.
Seriously? Every time there's an election the right-wing parties promise they're going to balance the books or pay for taxes by cutting the fat from all those inefficient government services. It's their mantra, and they fail to do so every time they get elected.
Profits and higher exec pay, certainly. Consolidated and bought up by someone else's state utility, as profit centre, yep. Removed from being a political football where the parties on the right of centre consistently under-fund something to "prove" it needs the freedom of private enterprise, again, certainly. Just about every effort to "bring the benefits of the market" to the NHS have made it less efficient, or added layers of additional expense.
Governments, of course, often did encourage, and achieve, sometimes remarkable efficiency. Until it became simply dogma to change it, for change's sake. Few services or arms of government got a blank cheque, except periodically the military. Not surprisingly there's considerable inefficiencies around military spending.
It's funny though, it usually turns out to be the privatisation, the socialisation of a private industry's pollution, accident or other abuses after deregulation that wrecks figures. Like, say, a private sector prison performing so poorly it has to be snatched back into state control, banking bailout, or the public private partnerships which prove disastrous for government return on investment. These are the ones castigated in assorted committees, who are constantly questioning efficiency and return on investment.
The rejoinder here is generally that nationalization also has a terrible track record. Even in domains where some governments have performed efficiently and well from the beginning, governments which take over from private owners often do quite poorly.
Of course, that doesn't mean I'm in favor of privatization. It's entirely possible for both transitions to be primarily harmful, and indeed it's fairly likely if both are championed by people who see a personal benefit. There's a bit in Hitchhiker's Guide where a driver thinks the rain is so heavy his wipers aren't helping. When he turns them off, things do get worse, but when he turns them back on they don't get any better. I've heard multiple Brits cite this to explain the way nationalization and privatization of rail has worked: nationalization brought waste and unreliability, privatization brought gouging and line closures, but each left the harms of the other intact.
Dogma on left of centre is as damaging as on the right as it tends to produce more change for change's sake, just to a different destination. Same goes for so many private sector takeovers and buyouts. In each instance it rarely delivers.
> rail ... each left the harms of the other intact
Pretty much true. The biggest issue during the nationalised period was funding. Few post-war state enterprises got to reinvest profit, so investment became a political choice, which led to the ageing rolling stock and unreliability. Waste - not so much, though I'm sure plenty existed. Pre-war approach to public enterprise seemed to work much better - a town or city owned a corporation, that could keep and reinvest its profits, and the city was more like shareholder. I'm not sure why this approach ceased to be - possibly the ever increasing centralisation from both right and left.
The way rail was broken up was utterly bizarre and ridiculous - it was never going to work broken up in such an unnatural way. Yet, if Corbyn had his way and re-nationalised, it might work, briefly - at great expense and disruption - for his first term. First Tory government would bring back under-funding, and off we go again. Nope, never gonna work.
Better stronger QoS regulation than that, though a rethink of the various disjointed bits is looking unavoidable. If only privatisation had gone back to the big 4... or created a medium 8 or something.
Nicely put. I do think it's possible that nationalization and even privatization can produce improvements, but they're obviously not deployed on the strength of detailed, domain-specific evidence. Mostly, someone just gets control of a troubled system falls back on doctrinaire arguments that their preferred solution always works, never mind questions like "does the government have any experience here" or "will this immediately become a private monopoly".
More cynically, your description of rail points to the other side of the game. If you've got a working instance of the approach you don't like, pile on challenges (regulation and unprofitable obligations on one side, funding cuts on the other) until it breaks, then declare the need for your preferred solution. And not coincidentally, the long-term outcome is almost always these batty public-private partnerships or private-consultant-run government programs that are profitable for someone but work horribly.
I should learn more about the national-era history of British rail, it's always sounded like the biggest 'flaw' was simply being vulnerable to Tory funding cuts. The privatization approach was truly absurd - at this point I suppose the best hope available is emulating something like not-a-real-market private utilities?
> until it breaks, then declare the need for your preferred solution
Equally cynically, that does seem to be the way government and regulation works lately. Just look at the Post Office privatisation - take things away from them year on year from counter services, savings, licence renewals to city mail, so it's no wonder they're declining and "need" privatising. Then they wonder why the electorate doesn't trust politicians. Or BBC licencing deals... The stench of where that's heading is getting overpowering.
They may have got plans wrong many times earlier, but it appears former generations were far more genuinely concerned with actually trying to make the country better - whether one-nation Tory or Labour, or administrations elsewhere. I'm sure there's some age-related rose tinting, but I don't think anywhere near all. Where did that ethos go? :)
> the best hope available is emulating something like not-a-real-market private utilities
Private with stronger service obligations - like to permit other companies to run charters, freight or express on the tracks. Hopefully make them more like a real company - where they own the track, buildings and trains. Needing at least three companies involved to reschedule or add a new service is in the interests of no one at all. Yet that starts to look like going back to LMS, LNER, GWR and SR. That almost admits it was organised better in the 1920s. Not sure that's politically possible. :)