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Comment by yayr | Hacker News Reader

This may be unpopular, but the hard thing in this discussion is to differentiate between consumption and investment. It does not help much to take wealth in terms of equity paper money away from people who know how to invest it efficiently and distribute it. On the other hand, there are minimum basic needs for consumption of food, health services, shelter, education etc. I agree that the system to finance those services is broken. But then fix the system and don't only focus on punishing people when they build economically viable organisations that even help to support the economy in such a crisis.

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"It does not help much to take wealth in terms of equity paper money away from people who know how to invest it efficiently and distribute it."

This assumes what needs to be proven. Namely, the degree to which the wealth of billionaries under the status quo regulatory, financial, and tax regime reflects their outsized contributions to welfare.

If we make a number of assumptions (e.g. perfect information, perfect competition, equal initial endowments, etc.) it's tautologically true that great wealth would reflect outsized contribution to preference satisfaction. But these assumptions are wildly unrealistic, and conflict with both everyday experience and historical reflection.

More to the point, we all want our economic system to do more than merely satisfy preferences. Opioid manufacturers cultivated and satisfied preferences to the tune of billions of dollars. The impacts on well-being of users and their communities were, to put it lightly, mixed.

agreed. However, what alternatives to preference satisfaction do we have to steer an economy? Is the issue here not the miseducation and misculturization of harmful preferences?

>This assumes what needs to be proven.

I think it has been, dramatically, over the last 120 years. Plenty of countries have tried radical appropriation and redistribution, and it failed spectacularly every time. Meanwhile a prominent Marxist country, China, turned to capitalism and within a generation has raised hundreds of millions of people out of poverty and into urban middle class lives. Meanwhile Cuba, Venezuela and North Korea.

Of course Capitalism has failure modes, because people are imperfect. All the flaws levelled at Capitalism are also found in spades in alternate economic systems because they are flaws in us. That's where accountability through liberal democracy and a decent system of laws come in. Yes that's always a work in progress and no it's not perfect, but it does work.

This is a radical oversimplification of what has happened and is happening in China, conflating several things into one.

China is still very much a communist country, and the raising of many people out of poverty is in large part a result of the government distributing the gains that have come from "special economic zones" into rural areas on a scale that would make a "tax on billionaires" seem like a quaint half-step.

Allowing people to own and control private enterprises is a big step for China, but the gains from those private enterprises are still very much under the control of the Chinese government.

The vast majority of the cash flowing into rural areas is actually remittances from sons and daughters that went to work in the special economic zones, or the main urban centres to mainly work for private enterprises.

Anyway the hundreds of millions of people I'm taking about are the urban middle class. Their wealth almost entirely flows from the capitalist sector, in fact the majority of the wealth in the state sector comes from the capitalist sector one way or another. Source, my wife is Chinese and we have extensive family connections over there.

China is a single party state with a command economy, but is in no way shape or form Communist or even Marxist. It's social security system is barely existant; it's public health care is radically fee based to a degree that even makes the US system look socialist; many tens of millions of urban residents get zero public support or even schooling for their children because their families come from the countryside.

It’s not like the only alternative is Communism, seems like several Northern European countries are redistributive and don’t have 5 Year Everybody Must Die plans. Also I take the OP’s comments more as an indictment against trickle down economics which has been proven to not to have the claimed impact https://en.wikipedia.org/wiki/Trickle-down_economics

> I think it has been, dramatically, over the last 120 years. Plenty of countries have tried radical appropriation and redistribution, and it failed spectacularly every time.

How about non-radical redistribution?

In Capital in the Twenty-First Century, Piketty puts forward the idea of a (net) wealth tax on the order of something like:

* 0-10M net worth: 0%

* 10-100M: 0.1%

* 100M-1000M: 1%

* >1000M: 2%

This would allow two things: first the documentation of people's assets (and liabilities) to find their net worth for the tax regime, and second the skimming off the top of a not ridiculous amount of the assets of those that have a lot.

So if you have a $1B portfolio, and manage to grow it 8% in a year, then you end up with "only" 6% growth. This still allows for incentives for people to acquire wealth, but tamps down on some of the compounding that the largest estates end up getting (there's often only so much that can be spend, so a lot of the previous year's gains just end up sitting and accumulating).

The key would be for the US to get onside: by some measures it is one of the largest tax havens out there.

* https://fsi.taxjustice.net/en/introduction/fsi-results

* https://en.wikipedia.org/wiki/Financial_Secrecy_Index

It has global reach which would probably change a lot of international behaviour. Just look at FACTA:

* https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...

> How about non-radical redistribution?

We arguably already have a weak form of this in capital gains. Invested wealth remains untaxed, since it's already working. Good. Liquidated investments are taxed on gains. Good. But I'd also support stronger forms of redistribution such as yearly re-taxation on uninvested wealth above a threshold, non-gains percentage tax on all liquidated investments above a threshold, a land value tax, and closing of tax loopholes. Just let invested wealth do its job!

Sure, it’s radical but not excessively. The US had a %90 tax bracket in the post war decades (not that I’m suggesting bringing it back) and the country and economy somehow managed to survive. There are countries in Europe that have wealth taxes.

I don’t think taxing more is an effective way of solving social and economic problems though and doing so doesn’t have to be cripplingly expensive. For example the US spends twice as much, per person, on health care than other OECD countries. You spend as much on health per person through the government, funded by your taxes, as Europe does just funding Medicare, Medicaid, CHIPS, etc, and then spend the same again through private health insurance. Why? Because the health insurance system drives costs across the board up through the roof. All you people with company plans you contribute thousands to, you already paid enough for a full first world health system in your taxes and got nothing for it, so you have to pay again for yourselves.

Why that isn’t issue number 1 for every American tax payer is beyond understanding. So don’t take my up thread comment to mean I’m some libertarian extremist, or this comment to mean I’m a radical socialist. It’s just a matter of looking at what works.

Is a 100% tax on (eg) assets over $1bn a punishment?

I'm not suggesting that exactly but I'm not against a wealth cap. I'm not sure what sort of person thinks they realise genuine benefit from spending time trying to spend it. Build a hospital. Subsidise public transport in your area. Do some good.

Along the points you bring up, John Cochrane had a fantastic series about why wealth taxes are such a terribly economic inefficient mechanism to raise revenue and why virtually no economists support them.

https://johnhcochrane.blogspot.com/2020/01/wealth-and-taxes-...

virtually no economists in a particular school.

if you take a more literal view and see federal taxation as destruction of money rather than a means of raising revenue, its applications become clearer.

> […] and why virtually no economists support them.

You mean besides Piketty, Stiglitz (Nobel), and Krugman (Nobel)?

* https://www.cnbc.com/2020/09/17/economists-stiglitz-and-pike...

* https://twitter.com/paulkrugman/status/1088529094478872578

While I'm sure he's good in his specialty, it seems like Cochrane does not understand macroeconomics and how debt-financed government spending works:

* http://krugman.blogs.nytimes.com/2009/01/27/a-dark-age-of-ma...

* http://krugman.blogs.nytimes.com/2010/02/23/brad-delongs-foo...

Further, I'm curious to know if he did a survey of economists to substantiate his claim of "no economists". Besides the three prominent ones mentioned above, there seems to be ongoing research on the subject and so it is hardly a settled matter:

* https://www.brookings.edu/blog/up-front/2019/09/05/estimatin...

* https://www.nytimes.com/2020/02/21/us/politics/the-liberal-e...

Only 7% of surveyed top economists disagreed with the statement that a wealth tax would be much more difficult to enforce than the existing tax code.

https://www.igmchicago.org/surveys/wealth-taxes/

> We invited our US panel to express their views on three separate issues related to the wealth tax: […]

And how was the criteria for this panel chosen? What would a random sampling of, say, NBER affiliated scholars give?

Given previous surveys from Chicago Booth were done, it seems that there's an ideological slant to those they ask for advice:

* https://krugman.blogs.nytimes.com/2013/01/05/ideology-and-ec...

Further, given how wrong the Chicago school has been on macroeconomics for the last few decades, I would question anything coming out of there. Fama and French for example have done good work on markets, but they are and were wrong on deficit spending and stimulus since 2009.

dont know anything about the economics panel/survey but citing Krugman on HN is pretty weak given his most infamous quote:

"The Internet's effect on the economy is no greater than the fax machine's.

https://www.snopes.com/fact-check/paul-krugman-internets-eff...

> "the hard thing in this discussion is to differentiate between consumption and investment" Indeed. Even harder is to acknowledge our government already has enough tax money, and further tax revenue will not be used prudently, in the best interest of our country.

Citation needed.

Citation also needed for the opposite position - that the government will use the money well.

Sure. But here is the thing: what consequences to billionaires face if they use their wealth in stupid and unproductive ways? At least for the government we have some recourse (elections, protests, public hearings).

But to the degree that the reason for doing this is "the rich shouldn't have that much money", to that degree there's no pressure on the government to use the money wisely.

And I don't like your question. Sure, billionaires can use their wealth badly. Why should they face consequences (other than no longer having what they have wasted)? That someone could misuse something is not a reason to take it from them and give it to someone else who could also misuse it. That is, I don't like your question because it implies that they should only be allowed to keep it if they are using it "properly". I think that the rule of law calls for a higher bar than that before taking peoples' stuff.

The original proposition was that essentially an oligarchy is more efficient than our current system: billionaires will waste less money than the government on inefficiencies. In that light I don’t mean consequences as punishment but rather incentive. Why should a billionaire spend money on socially useful project vs a self-serving or a socially harmful one?

> what consequences to billionaires face if they use their wealth in stupid and unproductive ways?

Well this one's easy at least. They lose the wealth.

The difference is that governments don't spend their wealth in stupid and unproductive ways. They spend our wealth in stupid and unproductive ways.

Note: This was 5min of google search and reading abstracts/ overviews. Unfortunately I can't commit the amount of time necessary to provide a full rebuttal right now.

From Representatives:

  - https://posey.house.gov/wasteful-spending/
  - https://www.paul.senate.gov/wastereport
  - https://www.govinfo.gov/content/pkg/CHRG-114shrg95798/html/CHRG-114shrg95798.htm

From the Media:

  - https://www.rd.com/list/wasteful-government-spending/
  - https://www.forbes.com/sites/adamandrzejewski/2020/09/30/wheres-the-pork-us-taxpayers-funded-a-lot-of-wasteful-spending-2017-2019/?sh=4563d5523dc0
  - https://www.scientificamerican.com/article/its-time-to-rein-in-inflated-military-budgets/
  - https://www.nationalreview.com/news/rand-paul-outlines-54-billion-in-outlandish-government-waste-in-annual-festivus-report/

From Acadamia

  - https://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2020.305865
  - https://www.sciencedirect.com/science/article/abs/pii/S003043871200004X

Right. Waste happens in the government. None of this compares it to how wasteful an oligarchy would be, which was the original comparison.

And more money to billionaires will?

While I think you hit the nail on the head, I think what we're seeing is a belief that the money being invested by billionaires is not doing anything useful, that's why people are calling for it to be taken by the government and redistributed.

Probably because people view billionaires as mustache-twirling villains and have absolutely no idea what they do with their time or money.

Rather we do have some idea what they do with their time and money: influence politics, lobby for regulatory capture, lobby against societally beneficial regulation, bust unions, rent-seek, astroturf, form monopolies and oligopolies, have outsized carbon footprints, avoid paying anything back to society, commit crimes and get away with them, etc.

We see them as mustache-twirling villains because, well, they act like mustache-twirling villains.

They also form dynasties of generations of extremely wealthy children, grand-children, and grand-grand-children, etc.

It's arguable whether the people who originally accumulated all this wealth "earned" it (when many of them in large part merely took the wealth their employees made), but their descendants who just inherit their money certainly have in no way earned it. So should they get to keep it?

For an insightful look in to the world of inherited wealth, see the documentary Born Rich[1], made by the heir to the Johnson & Johnson fortune, where he interviews all his other friends, who, like him, were born in to enormously wealthy families.

[1] - https://www.youtube.com/watch?v=1sD3pG74Wv8

Anyone who has amassed a fortune in the billions has necessarily done so through one of only two ways: exploiting the labour of very large numbers of poorly-paid people, or receiving it from those who have done so.

Meanwhile, they have seen the plight of the billions of human beings who live in poverty and want, and chosen to use their vast resources almost purely to make more for themselves, rather than dedicate to alleviating such suffering even enough that their lifestyle is the slightest bit inconvenienced.

The sanctity of "property ownership" is not so sacred a principle that it should take priority over wholly preventable widespread suffering and death. There is no moral argument that could possibly support this much of humanity's productive output being hoarded by so few, rather than going to improve the world in a myriad of ways.

That is because every good investment causes deflation, which in other words is increased economic efficiency. Capital must be misallocated in order to create inflation.

It's a huge misconception that inflation is good for the economy. What actually happens, is that the economy on the whole gets more inefficient and wealth concentrates.

Inflation does not cause wealth concentration. Inflation acts as a tax on hoarding money and reduces wealth concentration.

Wealthy don't hoard money. They hoard assets which appreciate with inflation, and they can get cheap debt against their assets. Inflation affects the poor the most, because their net worth is in cash, and they are dependent on their wage which doesn't increase hand in hand with asset prices.

> I think what we're seeing is a belief that the money being invested by billionaires is not doing anything useful

I mean, is it doing anything useful?

"Money Invested" is basically a number sitting in a giant key-value store at a brokerage, associated with a stock ticker or some other ownership totem. If I buy 100 shares of Walmart, it's not like Walmart suddenly has an extra $15,000 in their bank account they can suddenly use to improve the world. Those 100 shares or $15,000 are not really doing anything useful. They're ones and zeros in a database associating my name with a number and the string "WMT".

Not only that but there's a whole industry around just redistributing these shares, fake jobs for fake valued assets ... it's all just a circus to keep us busy...

I did not mean for my statement to suggest that it is doing something useful, just that the belief (either way) is what matters here.

Traditional investing doesn’t make billionaires, they needed to be good at running a business, inherit it, etc. Which doesn’t correlate to being a great investor.

So when you actually look at investments made by billionaires they tend to underperform. Part of this is simply seeking low risk diversification, but another part is many people assuming that because past risk taking worked so will future risk taking.

This becomes really obvious when you start looking into former billionaires. Vast fortunes regularly evaporate.

but they apparently still have built a useful organisation. So why take away their power over their organisation if the share price increases?

Nothing about what I said was tax policy, I am simply trying to counter a common misconception.

Good god, man. This is slavish. And - I'll note - not unpopular, which is distressing.

Tax isn't punishment. Ever. Especially when tax rate is already so low that the proposed "emergency tax" is still less than historical income tax rates.

Tax is part of the social contract that allowed those billionaires the stability, educated workforce, infrastructure, safety from theft, etc, etc, etc, needed to build and maintain their wealth.

The idea that billionaires "invest [their wealth] efficiently and distribute it" is laughably sophomoric, a parody of the Gilded Age's self-serving justification for robber barons. Billionaires invest efficiently _for the preservation of their wealth across generations of their family_, only the most credulously optimistic model of capitalism supposes that this aligns with "distribution" (whatever that means - trickling down, eh?) or with the best investments for society at large.

you should read again - systems for redistribution of wealth can be good if they are not broken. Income taxes e.g. are imo a great way to do this, if they cannot be avoided. However, to tax an increase in share price without any transaction is often counterproductive.

You're absolutely right. Once I saw you characterize a tax as a punishment, billionaires as "people who know how to invest [wealth] efficiently and distribute it," and wealth as solely the result of "build[ing] economically viable organisations," I dismissed the details of your argument.

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