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Comment by atwrk | Hacker News Reader

Tax systems create wealthy people in two ways:

a) by disproportionally tax the poor vs. the rich. In the United States, "42 states tax the top 1 percent at a lower rate than the bottom 20 percent, while 46 states tax the top 1 percent less than the middle 60 percent of earners." https://media.itep.org/ITEP-Who-Pays-7th-edition.pdf

b) by using the taxes to disproportionately benefit the upper income brackets, e.g. by investing more in universities than schools, or infrastructure in wealthy neighborhoods than poor neighborhoods (both true for the US).

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I guess I was just thinking about federal taxes. As long as I can remember, even when I wasn’t making much, I remembered state being less and I didn’t may much attention to it.

Looking into it more, I was ignoring sales tax and some of those other, as they are more indirect, but consumption taxes will hit harder for those with less… it’s just not as easy to quantify.

Looking at big more it seems like the split between federal/state taxes for the bottom 20% may be 20/80, while for the rich it’s flipped at 90/10.

While all this is interesting, and has opened my eyes a little in this area… I would still stand by the latter half my original statement. The wealth is created elsewhere before taxes even come into the picture. The local taxes can hit a point of being very low impact long before someone hits the 1% or is considered wealthy, and that isn’t turning anyone into a billionaire.

In the spirit of engaging in open conversation to try and broaden my mind and understanding, may I say that I feel your statement "The tax systems doesn’t create wealthy people, it just doesn’t cut their legs out from under them" begs a question: What is it that creates wealthy people?

I think that there are a few things that are needed for lots people to become wealthy (of course, the ability to exact physical violence on others can enable a few to become very very wealthy as well).

1) Property rights that are equally enforced. That you have important friends shouldn't give you the ability to take my business.

2) Liquidity. There needs to be mechanisms that enable investment.

3) Civil infrastructure & some sort of safety net. People who are frightened of what awaits their children, or them in their old age, or of sickness, are reluctant to invest. They will be happy to work themselves half to death, but even if they have enough money, they will be very very risk averse.

Is this what you think, or are there other mechanisms that you have in your mind?

Those things can create an environment to help create, grow, and maintain wealth. I'd say actually creating it requires producing something of value to society with enough scale and margin to make a profit. Typically it requires doing this consistently for decades. There are a few exceptions to this, but by and large, it seems to be how things work, at least under capitalism.

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