Comment by emeerson | Hacker News Reader

Comment by emeerson | Hacker News Reader

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PG, this is a thoughtful essay. Yet I'll point out a flaw in this thinking below.

Intellectually Honest merits here: - you want to incentivize people to create value for society and optimize globally by raising the quality of life of (most) humans. - Wealth creation itself is not by default at the cost of others.

Intellectually Dishonest: - That startups and wealth creation converge on a quality of life optimization function for humanity.

In other words: startups and wealth creation operate within the randomness of free market. And most software technology in the last 30 years has not unlocked some kind of massive step function value in global problems.

If we could align more Venture Capital funding and R&D output to solve fundamental problems (in other words: can we solve access to affordable nutritious food, reduction of common disease, reducing cost of housing ahead of 5-minute media formats or SaaS Invoicing Applications?)

Housing has continued to become less affordable and poverty still prevalent in the US.

- That there is a binary debate: "should there be wealth or not?"

Social Programs, funded by government, funded by taxes on higher earners and large capital gains, are one lever to address this.

The reason the inequality gap matters is less that its a metric of the _delta in absolute wealth_ but more that opportunity and livability of average Americans has a worse outlook in the last 20 years, not a better one.

I agree with your overall sentiment, but want to expand on a few points.

Housing: It seems this is largely a policy issue rather than an economic one. Restrictive zoning and a misaligned incentive structure come to mind. Places like SF are the face of the housing shortage, but it’s a problem of supply and demand. To make affordable housing, you need a lot more housing. First, you have to satisfy the needs of all of the wealthy buyers, and this isn’t even clearly achieved. Even with subsidies, there isn’t a financial interest for developers to sell affordable housing. We need to build a ton of housing to meet demand. Policy is the inhibitor here.

Food: Food deserts exist entirely because of sprawl. The suburbanization of America means lowered density in certain Urban cores. (The Midwest and south especially) Lower density, particularly among lower income residents makes traditional grocery stores unviable. To sell produce you need sufficient traffic or else your stock will go bad. To make things worse, low income residents have less access to transportation. Thus, lower traffic. It’s not profitable to run a grocery store in the middle of urban sprawl, especially given the lack of access to transportation. Transportation is a matter of policy, again.

Healthcare: The problems here are directly correlated with housing and food, but extend to education. There is significant over—utilization of emergency services for non-critical medical services. I believe some universal access to healthcare should exist, but not if we don’t first address the inefficiencies that exist due to a lack of health education. Education is again, largely the fault of policy.

It’s not lost on me that wealth increases access to all of these things, but I don’t think we can blame venture capital and founders. These are deeply societal issues, given poor policy decisions in our history. They aren’t attractive investments because you cannot change them in a matter of a couple of years.

A higher tax on the wealthy would incentivize focusing on these issues, but it would also slow the pace of economic growth. It’s a matter of compromise.

If we are to assume per average per capita GDP, and standardized GDP year over year growth rate for the OECD countries, there is no indication of a higher tax rate slowing the pace of economic growth, it is actually the opposite for some of the countries.

Norway, Switzerland, Ireland, Luxembourg all have much higher per capita GDP and overall GDP growth YOY [1] versus the United States, yet these 4 countries have wildly higher overall tax rates. [2]

Germany, Australia, Denmark, Netherlands, and Iceland are all within 5% of the USA per capita GDP, yet, their taxation is also much higher than the average tax burden of the USA.

This is a wildly polarizing topic because of the sheer number of statistics available to everyone, and the amount of cherry picking everyone does to prove or argue their point. There are facts, and then there is misrepresentation of the facts. I'm not an expert but the raw data truly does not suggest a higher tax rate will lead to a slower pace of economic growth.

Where have I gone wrong in my analysis (if I have done so?)

[1] https://data.oecd.org/gdp/gross-domestic-product-gdp.htm

[2] https://www.oecd.org/tax/tax-policy/revenue-statistics-highl...

[3] https://www.epi.org/publication/ib364-corporate-tax-rates-an...

Edit:

I utilized the 2015-2018 data available from source [1], however, it can be backdated to 1960 but I didn't have the time to tinker around with it much.

Source [3] provides a somewhat reasonable analysis of US corporate tax rates and economic growth since 1947 but not a comparison to the OECD countries.

Thanks, I appreciate this. I didn’t really have data to support my conclusions, but echoing rhetoric I’ve heard before. Glad to know I was wrong. It’s not surprising that it’s polarizing when the end result is taking money from people.

That said, I’m really curious of the causation of higher tax rates on economic growth. Like, if you want to still be just as rich, you have to work even harder.

Personally I think slightly higher taxes would be acceptable, but I don’t at all trust the economic efficiency of the federal government right now. We need food, transit, houses, healthcare and education... but I don’t think these would be spending priorities.

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