Hacker News Reader

Comment by lifeisstillgood | Hacker News Reader

There are two approaches to this - one says something like "they have too much money, tax it and spend it on the poor / shaping society". The other is "if you stop people from earning bazillions you won't get innovation.

I am not a fan of either particularly (well of course we want to tax people and spend it to create a better society, it's just that sentence is basically all politics ever, not a specific policy to enact)

I prefer the idea that a billionaire is a market failure. It's not like there are no millionaires looking up and going, well that guy deserves his wealth and I am just going to accept my lot in life"

If we see a billionaire in a given industry - let's ask "what regulations will they really really hate to see removed or created?"

View on HN

> I prefer the idea that a billionaire is a market failure.

Not at all -- the market is working exactly as intended (as long as it's not coming from externalities, like pollution that's not being paid for).

What's failing isn't the market, but taxation. We should be celebrating billionaires because they've succeeded in delivering better, cheaper products than other people. But we should also be taxing them at 90+% by that point.

Again -- it's not market failure. It's taxation failure.

> the market is working exactly as intended

I'm not saying that's what you're saying, but a lot of people tend to treat the market as intrinsically morally correct. As in, if something is the outcome of the market working correctly, then that thing is the "correct" outcome.

So, if billionaires appear as a result of the market doing its thing, then billionaries are morally entitled to their money.

I'm not sure I buy that argument.

I definitely don't buy it either.

The market has nothing to do with morality. It's simply a question of efficiency: are people as a whole better off, utility wise? But as long as everyone is making voluntary, non-coerced trades (labor for $, $ for products), then by definition they are better off. There's no moral aspect to it, just economic efficiency/"progress".

But that doesn't mean you get to keep everything you make. The market is a tool, not an end. If you kept everything, there'd be no taxation, no government, no education, nothing else, and it would be a moral disaster. The moral element comes into play with taxation: because you (as a billionaire) benefit extraordinarily from the country's systems put into place -- contract enforcement, courts, roads, education of your workers, everything -- you are morally obligated to pay your "fair share" of that back.

The only people who claim people are entitled to 100% of the money they make are a subset of libertarians/anarchists. It's not a very popular opinion, since it makes society pretty much unworkable.

> But as long as everyone is making voluntary, non-coerced trades (labor for $, $ for products), then by definition they are better off.

Add "correctly informed" and "able to understand the consequences" to that list.

Examples:

1. Financial consultants propose to invest in high interest securities, "trust me they are safe", people invest and lose the money.

2. People lost years of life and tons of money commuting, then suddenly discovered that they can work from home. Many businesses benefitted from that, they are in trouble now. This at least was a common belief, shared by almost everybody. Most of us were wrong though.

Did businesses really benefit from people not working remotely? It seems more to me like the problem was inertia rather than any zero-sum mechanic. Switching to predominantly remote is benefiting everybody.

I agree that it isn't a moral issue, but here is a perspective that goes hand in hand with the issues:

Billionaires have by and large demonstrated the ability to take resources with millions of dollars and transform them into resources worth billions of dollars. That is evidence that they should have disproportionate power. They're obviously competent at creating wealth if given power.

They compare favourably to their closest competitors in the social arena, politicians. When dealing with big name politicians they are doing well if they don't cause excess deaths in their tenures, don't accidental destroy the economy and they generally siphon wealth and opportunity to unimpressive insiders.

There might be an equilibrium that is better, but there are a lot of equilibriums that are worse. If an Amazon-like entity is going to exist at all it makes sense for someone like Bezos to be running it. There are literally billions of people out there who would do a worse job than him. He does deserve some acknowledgement and support.

>as long as it's not coming from externalities, like pollution that's not being paid for

When it comes to crazy wealth, most of it comes from externalities - from environmental to paying workers poorly.

> But we should also be taxing them at 90+% by that point.

Many (most?) billionaire's wealth is tied up in the stock of companies they own. Presumably they should be required to sell their stock to give money to the government. What group of people do you expect to have the hundreds of billions, if not trillions, of dollars necessary to buy stock from company founders over the first decade?

If I'm being honest that sounds like a great way to force American owned companies to sell control of their companies to foreign individuals and institutions.

This is already a solved problem, we tax income rather than wealth. I assumed it was clear from context the 90+% tax is an income tax. It only applies when they sell (or die, as inheritance tax).

So none of your concerns over who would have the money, or whether foreigners would gain ownership, would have any relevance.

But since you seem interested in wealth taxes, for people who advocate that instead, the strategy there is very different -- generally something like ~2% per year (2% yearly would add up to 70% after 60 years), which for public companies presents zero problem since the stock market is constantly purchasing shares anyways. And just like many companies have non-voting shares, selling those would prevent dilution of control.

A 90% tax rate doesn’t actually mean the government collects that money. It just forces the money to be spent in different ways. Which is maybe a good idea! But that’s the actual end result.

People love to quote US income tax rates of the past. But tax revenue to GDP has been almost perfectly flat since WW2. Despite huge fluctuations in personal income tax rates. https://en.wikipedia.org/wiki/Hauser%27s_law

The fact that tax revenue to GDP has been flat doesn't really matter, because that masks the fact of progressive taxation.

The whole point of taxing billionaires 90% is so we can tax the lower class close to 0%, or even spend more on them than we collect (through education, social services, health care, etc.). It's totally fine if the overall tax revenue to GDP remains unchanged. The point isn't necessarily to raise more money, it's to address inequality by creating a level playing field for each new generation of citizens.

And yes, taxation pretty much necessarily distorts spending. But loopholes are not actually that hard to fix, if we want to fix them. If we tax income and inheritance, and close taxation loopholes around things like setting up trusts/charities, then that billionaire's wealth is going to end up being collected one way or another.

This seems like a strange issue to get hung up on. In the event that the government is receiving hundreds of billions in tax revenue, that can just give money to the public so that they can buy the stock, or just accept the stock as tax payment.

This would help with the inequality problem of ~10% of the richest Americans owning 90% of all stock.

You could even have a baby bonds program where isn’t of cash sitting in a trust there’s an ETF with a bunch of stock from taxed billionaires.

Ok so Bezos gives X% of his stock to the government per year. So either we’re actually socialists at that point or the US sells it to... somebody; so that cash can be given to or spent in the benefit of people who need actual money and not imaginary money. At some point you have to convert stock to cash.

> This would help with the inequality problem of ~10% of the richest Americans owning 90% of all stock.

Reducing the value of stock is certainly one way to reduce inequality. Of course that doesn’t _actually_ help anybody. Inequality is mostly, although not entirely, a second-order metric.

> The other is "if you stop people from earning bazillions you won't get innovation.

A lot of innovation comes from someone precisely because they have no money. Sure funding helps do a lot of research, but necessity is the mother of all invention.

There's a big thing missing from this picture: If you have $ 1 billion, then you will eventually have $ 10 billion (40 yrs of 6 % returns), and your kid could easily end their life with $ 100 billion (add 40 more yrs). Is that ok?

Why wouldn’t it be OK? They pay their income tax every year, legally, why should the government get even more of their money? The whole estate tax thing has always bothered me, the government double dipping on your money and acting like someone looking to profit from people’s death.

Well, there is nothing bad/good necessarily, but it doesn't really feel right imo. How is it fair for somebody to benefit from something without having worked for it? There is a baseline level of providing for children, providing education, providing housing, caring, etc. but such high levels of wealth being passed on makes no sense and is just obscene. The estate tax doesn't really effect many people, only an extremely small subset (some quick googling shows that over 11 million has to be passed down). Also, the estate tax also exists to prevent things like landed gentries. Nobody wants a society of rent seekers.

The whole stock market is built on the premise that you don’t have to work for the company to benefit from its success. Why is a family’s success any different? If a parent works hard, makes money, pays his taxes and wants to give that money to a child, it seems obscene to me that the government steps in and takes yet another cut of the money.

The parent paid their income taxes on the money already. I believe in his death he owes capital gains on his stock holdings. So all the money that’s passed down has been taxed fairly already.

I don't know if the stock market comparison holds because when investing, there is a large amount of risk. Inheriting a lot of money is riskless on the person receiving the inheritance.

>* The other is "if you stop people from earning bazillions you won't get innovation.*

We had tons of innovation in the past (even more important things than today) when people didn't earn bazillions from them...

And now we have global reach. Windows can be sold everywhere for no extra cost. That was never the case before software. Spotting a trend is not as good as understanding a trend.

When? We’ve had more innovation in the last 200 years than any era before, and billionaires have been a fact of life during this period.

A lot of the innovations come from funding from the government. Things like green energy, the internet, and soon self driving cars all come from funding for the government, either through incentives (like the DARPA self driving challenges a few years ago) or just straight up state sponsored research. You don't need billionaires to make things happen. Also, I will ask, where are all the billionaires who actually spend their money to do good once they've amassed their wealth? Bill Gates has done this, but lots of these people are abject failures at actually using their money directly to do good. They might have innovated in while they were acquiring their money, but once they get it they don't seem so innovative anymore.

>"where are all the billionaires who actually spend their money to do good once they've amassed their wealth?"

You mean like these people? "40 of America's wealthiest people"

https://givingpledge.org/About.aspx

Most of that innovation was from government funding, regularly paid researchers (remember XEROC PARC?), regular scientists and professors, and so on.

Hardly any of that was funded by billionaires...

the innovation part is false. A lot of Enlightenment innovation come from people who had little to do in their life and science/engineering was their hobby. A lot of nobility, monks, etc.

Similar in Germany a lot of voices say: Billionaires are immoral and shouldn’t exist.

Kind of terrifying that success is made evil. What would be the consequences? Well you wouldn’t have tesla or spacex. As far as I see a self made billionaire is much more capable spending money then the government. In my opinion that is the main point.

Success is not being made evil. That is a highly perverse twisting of the idea.

Nearly all success in the world involves no billionaire. SpaceX’s achievements are at least partially the credit of Elon, and it is a possibility that his billionaire status was necessary for getting SpaceX off the ground, but a massive government loan was also involved.

Also, man went to the moon 60 years ago with no billionaire involved. A massive success.

It's insane how this mythology persists. SpaceX would not exist without two things:

1. All the space race era research NASA published openly with no strings.

2. US Gov as SpaceX's anchor customer.

I mean Elon is currently going after 16 billion in government grants related to this stuff. His success story IS LITERALLY THE OPPOSITE of this "government sucks entrepreneurs rule" nonsense cheerleading.

Still it is true: Without Elon no Spacex. Without Elon no Tesla. That is a fact.

Would Elon not be billionaire I would bet both companies would have never existed.

The companies as formed probably not, but some company occupying those opportunities? Inevitable imo. Both were strongly supported by the underlying trends and context.

There was gonna be an explosion in EVs based on the trajectory of lion pricing alone. Making an aspirational/braggart product is a fairly straightforward strategy to tap into that moving top to bottom.

SpaceX is competing with a deliberately created government monopoly. Those fat margins would have attracted someone sooner or later. What mattered was the willingness to push through the legal challenge to get a seat at the table.

Reply on news.ycombinator.com