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Comment by lionhearted | Hacker News Reader

Fantastic.

I wonder if all these very public proclamations are going to shift people's attitude towards taxes? Most people think of the government as wasteful, inefficient, incompetent, and corrupt to more or less degrees, and I know I'd prefer to see money allocated by smart people like Gates, Buffet, Zuckerberg than by politicians who need to keep constituents happy and win votes.

I committed a while back to giving 10% of my income to charity henceforth, probably for my whole life. I know I've felt much better when I raised money for St. Jude's or Grand Ormond Street children's hospitals than when I wrote a check to the IRS to fund the latest special interest-fueled debacle.

There's a "the evil rich are against us" narrative in movies and stories a lot, but I wonder if the perception will start to change when all the good from these endeavors is realized. I think it's quite likely that smart people allocating resources intelligently will do 10x, 20x, 50x more good with the money than a politician possibly could.

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Sometimes it takes the government (or someone funded by them) to come up with novel solutions for the maladies that have plagued humanity. Norman Borlaug for famine, Jonas Salk for Polio, the research into Avian influenza and H1N1 pandemics, space exploration, etc. have all been either spearheaded, guided or financially encouraged by government agencies.

These are areas which charities (and corporations, for that matter) have sometimes fallen short due to either lack of funding or the mission-critical nature of the moment. Either way, we must agree that it's tough to conclude that governments are completely incompetent and charities aren't, however apt the perception may be.

> Sometimes it takes the government

Hmmm. Not disagreeing that some things funded by government grants have been worthwhile, but almost every scientific discovery before the WW2 period was funded independently of the government -- including big ticket areas involving fundamental research like automobiles, railroads, and aviation.

Well, most railroad expansion was due to a govt act giving tons of land rights and other highly valuable privileges to anyone laying track in the territories - the TransContinental railroad was laid this way.

However, quite true on the rest.

A private company did it the honest way and laid a more efficient track. The government paid per mile of track laid which you can imagine can go wrong all kinds of ways.

A very good point - though as a counter the plank-road mania of the early 1800's was a fully private sector road bubble: http://en.wikipedia.org/wiki/Plank_road

Only after the crash of 1857. Prior to that American railroad networks were quite decentralized and much more competitive (not only with themselves, but also with canal systems). Most were financed by local entrepreneurs and often by the British and American companies that sold track on credit.

BTW: This sub-comment thread is a testament to how good HN still is at bringing together reasonable/thoughtful people - thanks guys.

This might be true in some fields, but there was plenty of government research pre-WW2 in epidemiology and public health. Look up Walter Reed in the Wikipedia for an example of what I'm talking about.

Of course, it should be mentioned that much of that pre-WW2 government research was a) actually sponsored by the military, or by government entities that had strong military roots, and b) was of questionable ethical quality by today's standards.

I don't like estate taxes. Governments are typically terrible financial stewards and bad examples of financial responsibility. Give the government one billion and it will find a way to spend two.

But I also don't like the idea of a permanent aristocratic class where generation after generation are born into opulence because your great grandfather created a great company.

The movement towards philanthropy is a great alternative as long there are clearly defined and applied metrics of success. Gates Foundation does a good job at this. If you claim you're going to change the world, but you can't prove it, you won't get funding again.

I'd argue one of the points of estate taxes (which are heavily favored by Buffet, Gates, et. al) is to encourage you to will your fortunes to philanthropy - so it doesn't end up in the hands of the government.

The biggest lobbies for increased estate taxes are life insurance companies:

http://blogs.forbes.com/hanisarji/2010/12/01/life-insurance-...

“The estate tax is a cash cow for the life insurance industry – and the industry’s lobbyists guard it zealously...[o]nly three industries – pharmaceuticals, electric utilities, and oil and gas – spent more over the same period.”

For more details on WHY the life insurance lobbies aggressively to support the estate tax, see this link from ramanujan's article:

http://www.nodeathtax.org/uploads/view/2313/life_insurance_b...

Excerpt:

"Life insurance is the most basic tool for estate planning. Put simply, inheritance is subject to the estate tax, while life insurance benefits are untaxed. This drives up the demand for life insurance, thus driving up the price. The disparate tax treatment distorts the market so much that a wealthy person could buy a policy knowing he will pay more in premiums than the value of the benefit – and it would still make sense financially.

For example, if someone bought a $20 million whole life policy at age 60, and paid $25 million over the years in premiums, he would still be giving more to heirs (an untaxed $20 million) than if he just bequeathed that $25 million to his children – because after the estate tax, that could be worth less than $20 million."

--This discussion has been really informative. Thanks to all.

Is there anything to stop a person from investing their estate in a company whose sole purpose is to insure their life?

If it hasn't already been tried, the IRS would tie it up in litigation for so long that the principal would be consumed by legal fees.

Of which Buffet owns several. Which may or may not play a role in his support.

I don't think it does. The life insurance contribution to Berkshire Hathaway results is quite small. The bulk of the income is from reinsurance and P/C activities.

How many billions has this guy given away again? I'd wager that he doesn't really care about an extra few million in insurance company profits.

Great point! High estate taxes gives an incentive to the wealthy not to pay estate taxes.

The original intent of my argument was that I don't like the idea of handing over half your estate to the government. I suppose the proponents of the high estate tax wanted avoidance of the tax via philanthropy as an intended side effect.

Thanks, I never looked at it that way.

Another one is to avoid the creation of a plutocracy. Of course, somebody more cynical could argue that it is too late for that.

Or buy expensive life insurance policies.

> Governments are typically terrible financial stewards

Well, no: many governments are far more responsible than most individuals. That's not true in counties were everyone criticize the government as strongly as you do in the United States, but in countries where government positions are prestigious, the most talented people work there. As recently demonstrated, financial incentives are no where as efficient as job safety and support for creative tasks, this is why a system that promote civic dedication has tremendous impact.

What's a country where government positions are prestigious for reasons other than they're an opportunity to participate in bribery and corruption? (Switzerland?)

From what I understand, the government of Singapore keeps corruption low just by paying their officials a lot. The president makes about $3 million.

http://en.wikipedia.org/wiki/President_of_Singapore

It may just be an anecdote but it seems like a reasonable system to me.

EDIT: had the wrong dollar amount.

Germany had the same "strategy". I'm not sure pre-emptively bribing every official up-front really solves the "cost" issue to Joe Sixpack. Corruption might be more affordable in the end...

That wikipedia page says about 3 million, not 300 million.

My mistake: fixed.

Some countries value what you can't buy. Peerage works well in the UK, and is rather cheap. In France, the possibility to spend a career working in central historical buildings makes the best minds cram for decades.

> But I also don't like the idea of a permanent aristocratic class where generation after generation are born into opulence because your great grandfather created a great company.

If you make a ridiculous amount of money, what's wrong with making sure that your family is financially secure for generations?

It cripples upward mobility for the rest of society. You could make an argument that upward mobility is one of Americas greatest strengths. It keeps people motivated and it allows the entire population the chance to contribute to advancement.

> It cripples upward mobility for the rest of society

How?

This is a strange question to me. I know there is probably some similarity in how governments and individuals allocate large amounts of money--for instance, federal spending to curtail HIV/AIDS in Africa compared to Gates' spending to curtail malaria--but the bulk of it doesn't overlap. Gates, Buffett, and Zuckerberg shouldn't hire my town's police force, and can't afford to hire my country's military or even maintain my country's highways.

As long as things like that need to be done, someone needs to pay taxes. And Warren Buffett would be the first to tell you he and his fellow billionaires should be the one paying the taxes.

I don't see why the police, military, and highways need to be funded through government. To the extent that these services provide a benefit, there's no reason to think they couldn't be supplied in a free market.

You don't have a market without a government to protect property rights. You can't have competing entities protecting property rights, because the Marxist gang down the street is going to protect a different set of property rights than the capitalist gang up the street.

Libertarians like to think of private property as some kind of moral essential, and it might be, but that's not enough to make anarcho-capitalism work. While we can probably all agree to outlaw murder, we can't, in fact, all agree on enforcing the same property rights. Plus, there needs to be a way to authoritatively register and adjudicate property claims, not a dozen competing protection rackets[1], each with its own inconsistent rules.

[1] Even actual protection rackets try not to overlap in territory, for exactly this reason.

Not that I'm opposed to private security forces or weapons ownership, but remember BlackWater et al are "private military/police - also known as mercs who are fully motivated by money. Even our police have loyalties to each other and their town - however stupidly they may act, they know they're not easily for hire.

Not sure...

Good for you giving away a significant portion of income.

Firstly,

"I know I'd prefer to see money allocated by smart people like Gates, Buffet, Zuckerberg than by politicians who need to keep constituents happy and win votes."

I feel like you are treating these conditions as being mutually exclusive, and they do not need to be. I want money allocated by intelligent people who need to keep constituents happy. And I want them to have smart constituents, so that they are actually held accountable making bad allocations. This is because I want a large number of problems to be taken care of expediently.

Secondly,

Rich != Smart.

I don't see how it is that being rich makes Gates, Buffet, Zuckerberg better at allocating resources. Sure, they have some business savvy, but there is a certain amount of luck involved as well (as with any statistical out-lier). This doesn't account for others who made their money through inheritance, and are dumb (really dumb).

The point is not that 'the evil rich are against us,' the point is that they benefit exponentially from government protections compared to a normal person and should provide funds accordingly. I don't see how any of these people would be able to hold onto (or even establish) their wealth without the protections (and utilities, and services) afforded by the government (and if they were, it would simply be some sort of Monarchy).

(ex. The rich don't just benefit from their own use of public roads, they benefit from their employees and customers use as well. How do the rich obtain intelligent, educated labor without required public education? How do they plan to hold onto wealth as they accumulate it without the enforcement of various property laws?)

Charity is good, don't give me wrong. But the rich are hardly victims of the government.

>(ex. The rich don't just benefit from their own use of public roads, they benefit from their employees and customers use as well. How do the rich obtain intelligent, educated labor without required public education? How do they plan to hold onto wealth as they accumulate it without the enforcement of various property laws?)

I think this argument is flawed for a couple of reasons. One: that someone offers me something that benefits me does not and should not legally compel me to compensate them in return. Take open source software as an example. It has enabled many companies to make money, but they cannot be compelled to compensate the author. And yet that seems to be the argument. The government does things that benefit people, so they should be compelled to pay the government in return. Well, sorry, I appreciate what you've done but I didn't ask you to do it or make you do it so I'll donate to you if I feel like it, not if you feel like it.

Two: all of the benefits you've listed are individual things which individually cost money. Yes, the rich benefit from their employees being able to drive to work. But they pay their employees and their employees in turn pay taxes and fees on gas and other driving related things to pay for the roads. They benefit from an educated workforce and a police force, but those things are paid for through property taxes and other things. The system is made up of a variety of specific things. To lump them all together and say "You couldn't have accumulated your wealth without the system, so you owe the system a whole bunch of your wealth" seems to me to be somewhat dishonest. Sure, they benefit from the system, but specific parts of the system have costs, and I don't think the government's inability to figure out what those costs are and how to collect them justifies just taking a whole bunch of money from the people who look like they benefit from it and can afford it.

1.) It is called a social contract. You have given up some of your own sovereignty to the government so that it can maintain order. By entering into this contract, you are ensured your civil rights. Social contracts are implicit.

This is much different than a legal contract, and makes very little sense in context of your analogy.

2. Why is point two confusing?

I benefit from public education by having been put through school.

An employer benefits from public education by having been put through public school, and also from having employees (like me) who have been put through school.

It is a problem if he pays proportional to the amount of money that he makes, rather than the amount of utility that he receives from the service. Therefore, his taxes and my taxes should not be the same, because he receives a greater total utility.

> The point is not that 'the evil rich are against us,' the point is that they benefit exponentially from government protections compared to a normal person and should provide funds accordingly.

I think most people would agree with this, but let's remember that taxes are pretty much always based on percentages, which mean that they do scale. 30% of a billion isn't the same as 30% of 50k.

I think this seems to be too often forgotten in the "the wealthy don't pay more taxes than me!" argument.

You should start (or locate) a charity that dedicates itself to decreasing government waste and donate the money to them. You'd probably get more bang for your buck, even if it didn't focus purely on the humanitarian side of government.

> You should start (or locate) a charity that dedicates itself to decreasing government waste and donate the money to them. You'd probably get more bang for your buck, even if it didn't focus purely on the humanitarian side of government.

I think it's a good goal, but a bad use of charitable funds due to the fact that politics has some unfortunately strong zero sum elements about it. I don't categorize any primarily political organizations as charity, even if I agree with their aims.

Although some isolated initiative are great (Zuckerberg's pledge to education is presumably very much needed) most private charities are more expensive to manage and often counter-productive. Government redistribution can have in well-run countries handling cost around 3-5%; too many charities are closer to 15%. Government handles essential concerns, permanent efforts, infrastructure investment, etc. while many private charities browse around, try something but have little follow-through after the first media coverage. Governments can have a more global view of things, that can help isolate massively more efficient efforts, even when they aren't popular, like prevention, half-way homes. A majority of public money is spend on things with little isolated, visible impact, but the marginal impact can be much higher. A lot of local leaders in Africa have criticized the B&M Gates Foundation for being too disruptive for the good of beneficiaries.

I won't diminish the impact of being associated to massively successful people, or simply having spectacularly talented people manage those funds, but please don't confuse the good feeling of being in control with actual marginal impact.

Government redistribution can have in well-run countries handling cost around 3-5%; too many charities are closer to 15%.

The charity costs include publicity and fundraising drives. To make apples-to-apples comparison you'd have to include the cost of the IRS infrastructure and the cost to society of the entire tax collection and avoidance machine.

Government handles essential concerns

That this is not self-evident is, well, self-evident. Much criticism of government spending is around governments focussing on whatever lobby yells loudest, while charities are market driven: i.e. they fill actual needs that someone sees in the community.

A lot of local leaders in Africa have criticized the B&M Gates Foundation for being too disruptive for the good of beneficiaries.

A lot of local leaders in Africa do considerably less well under a privately allocated distribution than they do from government aid.

> include the cost of the IRS infrastructure

Nope: what matters is marginal costs and raising rates isn't nearly as expensive and cash-burning as “awareness” campaign.

> whatever lobby yells loudest, while charities are market driven

That statement appears self-contradictory to me. Lobbies introduce market concerns to a generally one-man-one-vote representative democratic process.

My point about Africa is not about who should be labelled a leader or a government: it is that development doesn't need just money, it needs institutions, education, trust… Things that take time; things with massive externalities. Throwing billions like fastballs won't help anyone from benefitting from those. Do you think that William Kamkwamba (the heavily publicized boy who couldn't go to school, yet made a windmill himself) needs 10k$ or 100M$, or does he need roads, electricity, running water to his village? Of all the hundreds of charities that offered to help him, none suggested infrastructure. Local government are deeply corrupted, but all state-sponsored projects seem far more relevant for me, albeit less photogenic.

Yeah, given that a lot of Africa's "local leaders" are a major part of Africa's problems I'm disinclined to believe what they say.

all the benefits delivered to mankind by the efforts of the innovators hasn't stopped the demonization of the rich. giving away what they've been paid to deliver those benefits probably won't either.

Rich are not demonized.

People who use their wealth to feel superior and annoy others, who are wealthy enough to set up tax-evasion scheme, who behave as if they can pay to be above the law are demonized.

As long as wealth is earned without coercion by providing goods and services to others, why should you care if someone is using their wealth to "feel superior"? What moral justification is there to take away (through taxes or otherwise) the wealth of someone who has earned it through voluntary exchange? If you choose to work harder than me in providing things of value to others and you grow richer than me as a result, why should I (or a democratic government) then have a claim on your wealth?

Most people who are richer became so because they employed others. They wealth did not just come from their talent, but the quality of the education that the government helped these workers obtain, the fact that they could arrive safety to work; they wouldn't be so rich if no fire brigade stopped the stocks from burning to the ground — that's the reason why wealthier people should be more taxed.

My initial answer was about resentment, not tax rates. You strike me as a libertarian: Everyone is free of their opinion, so who are you criticizing them for being jealous? ;) No, seriously: some people, often not those who made their fortune by being nice to their clients, but their self-entitled heir, behave like pricks. I see it all the time when I go to fancy restaurants, and it actually bothers me.

From anecdotal declaration from wealthy individuals, I'm assuming the original entrepreneur would prefer that their children behave, because they know the importance of being nice, but until recently, social rules have prevent them from disenfranchising them. Before Warren Buffet set an acceptable voluntary roof for inheritance, forcing heirs to behave was a social conundrum, resolved by guilt.

absolutely. you have the right to the work of your own hands and mind. Your rights don't evaporate just because of a show of hands.

I'm pretty sure no one has argued against the right for anyone to work for two centuries. (There were laws against that before.)

What is discussed is what kind of property rules make society better, just like for copyright: absolutes don't work so well. Even if a man should be able to “do what he pleases” with his money, he can't buy nuclear warheads, or his last competitors. In some context, letting one person owns too much can be damaging; whether its his responsibility to do good, or society's role to enforce better ownership should depend on the cultural context and innovation. The economists who lead the study of how those interact won the Nobel Prize in Economics in 2008. Liberal property rights like what you advocate works best in extensive context like the original rural USA; within cities, evergetic rules seem preferable; when there are decisive, irreplaceable common goods like irrigation or seaport, more inclusive system, that let a community influence individual decisions are preferable.

You need to make sense of the context that gave you the values that you care about, otherwise you end up either defending inappropriate non-sense, and forcing it onto others (case in point: Acta) or, lost (like all my fellow countrymen who wonder why our national anthem is so hateful).

I disagree. The rich are often demonized, at least to the extent that the non-rich feel the rich have an obligation to give their wealth away in order to subsidize the less fortunate. Those that don't, like Gates in his early career, were often treated with disdain.

If I recall correctly, Gates was disdained first, when he wasn't so rich, and because he went against the doxa of the time that was that code was a fun thing to do (see Dan Ariely's work on introducing commercial elements in social pursuits) ; most actually had no idea what he wanted to do, and those who did knew he sold an OS that he didn't write himself. Now that his work is behind him and he is left with just his fortune, his popularity seems to have raised.

Probably because "rich" and "innovators" isn't really the same thing, and there was even less overlap in the past.

well, I prefer people be demonized for their crimes, not for what they have.

"Ten men in our country could buy the whole world and ten million can't buy enough to eat." --Will Rogers

People demonize the wealthy because they see people acting selfishly and it creating, or at least ignoring, the basic injustices of the world. If I had fallen down, would you not ask me if I was okay? Would you not offer to help me up?

Transforming Facebook from a website to a profitable business is a great business accomplishment. Transforming the wealth acquired in such an endeavor into educations, scholarships, and other decency-of-life improvements is simply a great accomplishment.

fortunately, most wealth is invested in ventures that hire people.

The economic disasters that impoverish so many are not caused by the rich who've worked to create their wealth but by those who mismanage economies and abuse others to benefit themselves and their friends. These thieves are rich to be sure, but a distinction should be made between the two groups.

Not sure how this should shift people's attitudes towards taxes. Do we increase them to encourage charitable giving or decrease them so the rich have more to give?

At some level this type of thinking lets government off the hook. Philanthropy by the ultra rich is not a solution to government waste and won't solve the fundamental problems in the US government.

Agreed - who hear has found how generous other founders are of their time, connections, etc.? Ever try to get a favor from ever a local politician? If you do, you get far less for far more - in my experience...

Don't you mean "Great Ormond Street children's hospitals" ? You gave money to them but don't even remember their name properly?

> Don't you mean "Great Ormond Street children's hospitals" ?

Correct - I'm not a native Londoner and I've spent less than a year there across my life. I also organized two small charity events, and asked a friend of mine what the equivalent of St. Jude's is in London, and he said Great Ormond Street.

> You gave money to them but don't even remember their name properly?

Unnecessarily dickish comment. But yes, I swapped "Great" and "Grand" in my comment incorrectly, good catch there.

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