Comment by jerfelix | Hacker News Reader

Comment by jerfelix | Hacker News Reader

I had a spirited debate yesterday with my 22 year old son about "Occupy" and increasing taxes on the 1%. Since this puts Louis CK firmly in the 1% (if he wasn't there already), it will be interesting to look at him as a case study.

At the risk of down votes, and converting this to a political argument...

According to my son, in order for the 1% to "win", many of the 99% had to "lose". This seems like a clear case where we (collectively, mostly 99%-ers) decided to "reward" Louis CK with a million dollars, and none of us "lost" in the transaction. We decided willingly to fork over $5 for great comedy (arguably worth more!). The only potential losers are the traditional distribution outlets - which got zero from the transaction (so neutral, not a loss).

So, Son, what do you think of that? Explain again why you think we should penalize Louis CK for this?

Don't vote me down, kid. (My son will probably read this. I suspect there are probably few father-son combos on HN.)

Edit: My son said he's not going to answer me publicly. However, he says "I reserve the right to vote on the comment".

So your son won't answer publicly, but here's my perspective:

It's not about penalizing him, or anyone else who are wealthy.

I don't consider myself rich - I live in a normal terraced house in a London suburb the same size as my decidedly working class neighbors, and I don't have huge piles of cash anywhere, though I do have some investments

But I'm well enough off to have it nice and comfortable, and I make several times what most of my neighbors do with according benefits in terms of how I lead my life.

Yet despite paying significantly higher taxes (about 10% points more than someone on an average UK salary), the net effect of the reduction in my spending ability from taxes is far less than the effect on my neighbors.

I won't even notice a 1% difference in my tax rate. I don't even know how much I spend on groceries each month - it doesn't matter and isn't worth my attention; I waste more than 1% each month on stuff from Amazon I probably don't really need. A 5% difference would be noticeable, but not painful.

For my neighbors, a 1% difference can easily mean the difference between making rent next month, or wait longer before fixing the car they depend on to get to work, or having to count the coins and watch every penny to even be able to make the paycheck last the whole month. A 5% tax hike for most of my neighbors would mean they'd be in big, serious trouble.

This is one large reason why many people believe higher taxes on top earners is justified. Whether in the US or UK, or most other places, the current tax bands most places means the burden of tax in terms of the effect it actually has on peoples lives is far greater on those who makes least to start with.

Yet people argued the economy would collapse with a new 10% higher tax band for people making even far more than I do..

Any argument about what's "fair" is arbitrary and based on personal value systems anyway. Why is a specific function of income to tax rate more fair than another? It boils down to your values. Personally I don't consider it fair that many of those who take all the shitty jobs I don't want to do, and who struggle to keep things afloat, carry a heavier burden than me. After all - without a well functioning society around me, there would have been no basis for me to achieve the relative wealth I do have.

In another vein, I'd also prefer to have less misery around me. I can pay to move somewhere where it's better hidden behind fences, or I can support changes that actually helps make life better for others, whether in terms of the tax system or others. The latter seems like a better investment.

This is what has always struck me as unfair and somewhat crude about a flat tax as well. A flat tax is only "fair" if you assume that everyone allocates their funds in relatively congruent proportions, e.g. that everyone spends about 10% of their income on groceries.

But past a certain point, groceries are more or less a fixed-dollar expense, and so the more you make, the less you pay for groceries as a proportion of your income. You can extrapolate this same idea to other critical expenses.

Thus, from the perspective of personal income alone, a flat tax--or a mildly "progressive" tax--is actually regressive, because although it affects all in equal proportion, the effect on the poorest is to forgo life's necessities, whereas the effect on the richest is to forgo some measure of luxury.

Of course, the use of personal income to fund investments and businesses muddies the issue, but the argument still remains, especially since the poorer masses far exceed the richer few in number.

Well it should be a flat tax with a rebate. Say $5k to everyone.

That does not address his problem. He is suggesting that a fair tax would have everyone taxed to the same marginal value, that is, where the last dollar the government taxes is worth the same amount to each person.

There is nothing inherently fair about a flat tax any more than there is something magical about round numbers. It just appeals to our irrational love for symmetry.

I think there is a different angle to look at this whole "99% vs 1%" thing. One must be careful not to take the 1%v99% too literally. I think much of the Occupy anger is (or at least should be) directed towards people who have used questionable methods to obtain and maintain their wealth (more on that in a minute.) The disparity isn't against the creators, individuals like Louis C.K. who have produced something of value and has earned profit because many others have been willing to trade money for the entertainment he provides. That's pure capitalism, exactly how it should work, and he shouldn't be excessively taxed. Also one must keep in mind that income tax (which is how Louis will be taxed) and capital gains tax are two very different beasts.

Now on to the "1%" Occupy is mad about. Now the problem we have here with some of the larger corporations and individuals, is that they are in a position to better be able to "game" the system. Using the "double Irish"and the "Dutch sandwich" to bring the corporate tax rate to effectively 0%. Bankers making, well, bank. I recommend reading this rather enlightening article about Goldman: http://www.rollingstone.com/politics/news/the-great-american...

We as people on both sides of the 99% vs. the 1% debate, must develop an understanding of Capitalism vs. Corporatism, as I believe there are many many people with an over simplified view of capitalism, who are duped into supporting whole heatedly "corporatism", under that guise that what you are supporting is, in fact, capitalism. Capitalism=good, corporatism=bad, but don't let somebody sell you corporatism under the guise of sweet sweet capitalism. Capitalism is what Louis C.K. does. Corporatism is what Goldman Sachs does.

About the wall street traders. They say the service the provide to society is making the markets more liquid. To a degree they are right, but if taken too far, it can spiral out of hand, and lead to a tragedy of the commons if no-one keeps them in check. allow me to explain. Many day traders don't make money by "investing" as you or I would in our 401k or what have you. We like to pick companies, hope they grow long term, and make some profit for us. If you're a sell side day trader, you make money on trades, not investments. Your profit is in the margins, the fractions of pennies of made by the banks when trades take place. This means you profit the most when lots of trades happen. When do lots of trades happen? When the market goes up real fast, and down real fast. I think traders have systematically (if unconsciously) learned this, and make money by skimming pennies off our investments. This should allowable (to a degree) as it goes back to the providing liquidity to the markets thing. But it can often go too far. Now, are they providing something of value, or just taking our value, and should they be taxed accordingly? Not to mention the seemingly revolving door between wall street and it's govt regulators. There is clearly something afoot, and we the people are left in the dark.

Actually, that doesn't put him in the 1%. That number isn't "income"; he will be able to deduct all his business expenses and donations on his taxes. He's in the top 96%, and will be paying a higher tax rate on that $220,000 than the 1% pays on their billions because it was earned through legitimate effort rather than off capital gains.

Paying taxes isn't a penalty. If we charged 105% tax rate, it would be a punishment, but at any rate less than that it's not. He still pays no taxes on the first couple thousand, 15% on the first bit and so forth up the marginal tax rate chart, just like everyone else. And this makes sense, because each dollar you earn is worth less to you than the one before (declining marginal value is one of the fundamental principles of capitalism, after all.) Taking away an extra 1% of the income of someone on the edge means they stop having a house, or go hungry, or can't get to work and then loose far more than 1%. It is why the multiplier on money given to poor people is greater than 1; they will spend more extra money than you give them because they don't have enough money to be able to make the money they could make in the first place. If the government took an extra 1% of Louis CK's money above $250,000, he wouldn't even notice.

If your son were, say, unemployed and living in your basement and you didn't charge him rent because he had no money, would you assume that when he got a job you wouldn't start charging him rent? Would failing to let him live rent-free for the rest of his life be "punishing" him for getting a job? While at the same time insisting that he pay you rent when he has no money and the alternative is that your son would end up out on the street also makes no sense, especially if the only reason you were doing so was because otherwise it would be unfair to his future self who would be punished by paying rent when his former self didn't have to.

But you keep telling yourself whatever you need to to justify historically low taxes that allow all the money to collect at the top to people who don't work while letting our infrastructure crumble.

The primary purpose of income tax (unlike, say, the cigarette tax), isn't to reward or penalize people for making less or more money. It's to generate revenue for the government.

I absolutely agree.

In last night's debate, my son's stance was that financial transactions were win-lose, and that in order for the 1% to get rich, the 99% had to be worse off. Therefore it is right to "penalize the 1%".

Louis CK seems to pose a counter-case to that logic. I'd argue that most, if not all, voluntary financial transactions are win-win. So "penalizing" is not appropriate. The 1% aren't inherently evil just because they are in the top 1%.

I agree with you about most/all voluntary transactions being win-win (it seems almost tautological), but the question then becomes, "How many transactions involving both the very rich and the poor are truly voluntary and non-coercive?"

That's only true if the monetary supply remains tightly constrained. As long as we are willing to tolerate inflation the 1% can become richer and the 99% can also still have access to money. Otherwise, in order for the rich to accumulate more wealth, it has to come from somewhere.

The 1% is fine as long as they provide things that make people feel good, like providing entertainment, producing well designed gadgets or make beer. If they do things that aren't fun, like delivering fuel, sell food in a supermarket, run pension funds or making medicine, and make money doing so, they are evil and need to share their wealth . That's why Steve Jobs and Louis CK are good guys, and it's fun when Charlie Sheen brags about the money he is making and it would lead to death threats if Bob Diamond did the same.

The resentment discrepancy is not so much about "funness" as it is about choice. Fuel, food, and medicine are essential to modern life; I have to buy them whether I want to or not, and from a few suppliers, and at unresponsive prices. When I turn on a light I ship some money to David Koch, whether I want to or not. Financiers with whom I have no direct relationship get bailed out by my tax dollars, whether I want it or not.

Of course I actually have some choice in the matter. I'm still a rational agent, deciding it's worth my money to turn on the light. And I could forgo medicine. But Louis, Jobs, and Bieber are pretty pure entertainment expenses; their houses were built by the elective consumerism of little people who had a lot of choice. Society chose to bestow wealth on its Biebers.

The titans of industry and finance built their fortunes by understanding the system and playing the game well. (And, depending on your level of cynicism, by rigging the regulatory, legal, and fiscal systems.) So some of the 99% feel like a slow, massive wealth transfer has taken place without their say.

Whether you think the little people are justified or just naive, whether you feel Louis is a more or less respectable capitalist than Bob Diamond, you gotta recognize there's more to the 99%'s ire than whether a rich person is fun or not.

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