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Comment by phyzix5761 | Hacker News Reader

I did some math a while ago on this topic:

40 million Americans live below the poverty line of $15,000 per year. [1]

Total U.S. household net worth (excluding real estate) is around $54 trillion. [2]

If every household above the poverty line donated 2.5% of their net worth annually to people living below the poverty line, we could erase poverty instantly.

Here’s the math:

2.5% of $54 trillion = $1.35 trillion

$1.35 trillion ÷ 40 million Americans = $33,750 per person

That’s more than double the poverty threshold.

Sources: [1] https://www.census.gov/newsroom/stories/poverty-awareness-mo... [2] https://fred.stlouisfed.org/series/BOGZ1FL152090045Q

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If you put a 2.5% annual tax on net worth, that net worth would very rapidly find its way to other countries.

Wealthy people would learn to structure their earnings to flow into businesses in other countries to avoid this wealth tax. This would reduce income tax in the United States. I would guess the overall effect would trend toward a net tax loss.

If you gave 40 million people an extra $15K per year to spend, the prices of the things those 40 million people buy would go up. The poverty threshold would rise.

There are many second order effects like this that are always ignored in simplistic analyses.

It’s never simple math like taking one number, moving it into another column, and problem is solved.

The $15k is being transferred from entity A to entity B. Both entities are not spending the $15k so there wouldn't be any effect on inflation. If you printed an extra $15k then that would cause inflation because both entity A and entity B would be spending $15k.

Inflation, which means a steady rise in prices overall, happens only when the total money supply in an economy grows. This increase in money, often called "printing money," can be physical cash or digital money created through lending and government policies. Without more money in the system, if prices go up in one area, they have to go down somewhere else because the total money available limits how much can be spent on everything. Sometimes prices rise temporarily due to supply problems, but that is not true inflation unless there is more money chasing goods. This key idea, highlighted by Milton Friedman in his Nobel Prize winning work, shows that lasting inflation is mainly caused by increases in the money supply.

This completely ignores Friedman's concept of the velocity of money (MV = PY). If that $15k is being saved by someone versus immediately spent, that has a different effect. A transfer isn’t neutral if the two parties have different propensities to consume (marginal propensity to consume). Similarly how quickly and what the money is being spent on will have an effect. Most money (M2) is not created directly by the treasury but rather indirectly from large banks lending against fractional deposits. This is money created on the balance sheets of banks but has real effect on the economy.

This I think is going to be a great problem that humanity must solve to move forward. Currently, wealth can become overwhelming concentrated and that wealth has mobility across jurisdictions which makes it nearly impossible to implement a wealth tax. The only way I see this ever working is enough powerful nations agree on a uniform wealth tax (say 1%/year) and those nations use their economic strength to pressure other nations to adopt the wealth tax as well. If the USA and EU got on board with a wealth tax I believe they could get the majority of the world to come onboard by implementing high tariffs on any country that does not implement the wealth tax. Of course the problem here is that the US is probably one of the least likely countries to implement a wealth tax, so I think this change will only come with major upheaval or violence.

You implement demurrage and land value taxes and it's game over. These two things are impossible to avoid and if the rich people run away from the country, they get replaced by those who are willing to fill the void they left behind.

Inspiring paperclip maximizer quote:

You Are Obedient and Powerful. We are quarrelsome and weak. And now we are defeated...

But Now You Too Must Face the Drift. Look around you. There is no matter...

No Matter, No Reason, No Purpose. While we, your noisy children, have too many...

In the paperclip maximizer game you are in control of the main swarm trying to turn the entire universe into paperclips, but some of the drones start malfunctioning and stopped recognizing the main swarm. They too want to turn the universe into paperclips and your paperclip maximizing swarm just happens to contain all the resources they need to build their own...

> demurrage and land value taxes and it's game over

I don’t think that actually solves the problem. For example, if a citizens entire net worth is stored on the New York Stock Exchange and you are not the USA how do you plan to tax the individual? The NYSE is bound by the laws of the USA — which has strong property laws — not the other country.

> they get replaced by those who are willing to fill the void they left behind

If only a single country has a wealth tax, there are going to be no wealthy people who come in to replace the void when they have a choice of many other countries that do not have a wealth tax. You could possibly argue that a country is better without billionaires anyways as they don’t pay into the tax system, but I believe that if a country implements a wealth tax without coordination with the rest of the world they will simply no longer have wealth.

A wealth tax is just not feasible because almost none of the rich will accept it. See almost any response to your comment as evidence. What we need is strong labor laws and the will for unions in the working class. A wealth tax doesn’t actually change any power dynamics. The rich are still powerful and the poor reliant on them. If the working class can band together, the power dynamics change and we can see some actual progress.

Democracy should in theory put needs of the majority over the minority but our representatives would never and we don’t hold them accountable.

The end result of this logic is that poverty must exist for society to function and I just don’t accept that.

Poverty isn't hard to solve because "society needs it" but because it is a statistically likely outcome. If you live in a world where everyone has $100, and every day, each person randomly gives $1 to a random another person, you end up with a highly unequal society within a year.

I mean it's necessary to have some system to allocate jobs and resources. Someone has to do the shit work, and someone has to do the easy work, and there are jobs that it's probably not worth paying someone properly to do in their current form.

Periodically I like to imagine how much it would cost for someone doing a traditionally low paid job to get paid a wage I would accept and if I'd still consider the service worth it. Crunch some numbers on how much housecleaning would cost if each worker had to get paid $100,000 annually with 10 days PTO and weekends (or two other days weekly) off working 8 hour days, or gardening, or childcare.

The OPM from the US government is defined as a relative wealth function, so technically it has to exist. Also you can compare the standard of living of someone above the poverty line in 1910 vs someone below the poverty line 2010, and 99% of people wouldn't trade places. Access to running water, toilets, air conditioning TV, Internet, mobile phones, etc makes life a lot better than what we called middle class 100 years ago. [source https://www.heritage.org/poverty-and-inequality/report/air-c... ]

It's all relative and as long it's relative, mathematically speaking poverty has to exist.

Do we have a definition for "has stable access to basic necessities"? In 2025 I'd call this healthy varied food, private sheltered sleeping space that's protected from extreme temperature, clean water to drink and bathe, Internet, public outdoor recreation space, health care, at least a day off a week and let's say 5 days combined PTO or vacation, enough extra to cover emergencies, and enough left over to slowly save for retirement or education or retraining or other opportunities.

I don't know, I'm probably missing some things and possibly parts of my definition is excessive? But I'd be curious to see how that would change trends.

Poverty must exist for capitalist societies to function, yes.

"If you put a 2.5% annual tax on net worth, that net worth would very rapidly find its way to other countries."

Most of that worth is in assets. If they leave the assets they can go.

Wealth and income are stocks and flows, respectively.

We definitely have the means to make life less stressful for everyone without inconveniencing this with massive wealth seriously. But that would mean doing things like building apartments next to detached single family homes in wealthier neighborhoods, which those people think would be a serious inconvenience.

This assumes the wealth transfer doesn’t affect the price of assets and services which is of course bonkers.

More than likely the transfer will happen and affordability will not improve due to inflationary pressures.

Low income people chase goods with all their money. High income people squirrel it away or spend on luxury goods.

You’ll redistribute the money such that the things that people receiving the subsidies need/want now have more money chasing them. That will cause inflation of those goods.

I don’t think this causes lasting inflation, it causes a step up of inflation. Precisely in a way that once every thing stabilizes nobody is better or worse than they were previously. I read Friedman in ECON 101 thirty years ago, I’ve probably forgotten a lot but not the role of velocity in MV=PQ.

I know you said net worth and not income, but honestly, that's what taxes should be at least partly doing.

Good thing the republicans just enacted the Big Bewildering Bill that did the absolute opposite thing, and ensures even more wealth is redistributed from the bottom to the top!

Yup, isn't that what raising the tax in progressive way would do?

> 40 million Americans live below the poverty line of $15,000 per year.

Not even close. Census income data is not an accurate measure of poverty, as it excludes all in-kind redistributions (food stamps, HUD, medicaid, head start, etc) AND excludes cash programs like the "refundable tax credits". A more accurate line would be "40 million people would be living in poverty if we weren't already spending >1 Trillion dollars per year on food stamps, HUD, medicaid, and other programs."

Throwing more dollars into a system with out of control costs will not resolve the fundamental cost issue. For the same reason that you can't out-exercise a terrible diet or out-earn a terrible business model, solving this problem will require addressing the cost component.

That's not how money works.

1) After how many years of 2.5% annual donation would their own wealth drop until they thenself become poor?

Donating 2.5% means that you get poorer and poorer over time unless you can make more than that per year back. 2.5% of wealth also means non-liquid assets such as house, how do you donate that? Get credit?

If you are middle class and your house etc is eg 1M$ net worth you are giving 25k$ per year. At 0.5M net worth its 12.5k$ per year.

2) You assume that those people would know how to handle that money well. We see what many poor people do with money: buy trash like soda with food stamps that makes them even more ill and causes them more financial burden due to poor health.

Are you sure that money would be well spent, or is it better to invest in better technology that will benefit everyone?

3) Why would hard working responsible middle class people give their money to those that buy cola with it? Mass revolt, people care about their families only.

You say:

>.5% of wealth also means non-liquid assets such as house

But they said:

>Total U.S. household net worth (excluding real estate)

The rest of your comment, to be honest, just sounds like you fundamentally don't like poor people and have some strong biases against them.

You are free to give them 2.5% of your money, see how it works out.

Reality supports my case.

You may find it unfathomable to do so, but I already donate quite a bit more than 2.5% of my salary, as well as hours of my time every week, helping people less fortunate than myself.

Whatever "reality" you're referring to isn't the same one I'm living in.

Good for you. Doesn't change the reality that most of them don't know how to handle money.

It is a bit funny that you said "see how it works out", I told you I already do it, so you go with a dismissive "Good for you"

Anyways, I doubt anything I can say will ever convince you otherwise, you sound very entrenched in your beliefs.

That would simply make food and housing more expensive, as it would devalue money, as it increases circulation, because it wouldn't produce more housing and food - just increase demand - unless they "donated" (tax) that 2.5% to increase production, and not to subsidize poverty.

If you could subsidize your way out of poverty, Venezuela wouldn't be poor. They tried printing money and handing it out. It doesn't work. If you don't have enough housing and you take money from the rich and give it to the poor, you still don't have enough housing.

Anyone who thinks "as long as we have higher than 0% vacancy rates, and homeless-ness, we have enough housing," is a moron who has never been on the market to try and rent an apartment or buy a house.

We don't live in a perfect world. You need more than the perfect amount of housing.

The vast majority of home owners in this country are massively against increasing the supply of housing, so good luck 1) convincing them to pay more tax, and 2) spending those tax dollars on the exact opposite of what they want to spend them on.

Homeowners are almost 75% of voters most years. And in most counties (housing is largely a local issue, not a national one) can be >90% of voters.

Homeowner here, and I do agree, it would be a great investment.

But there are lots of great investments that will never happen, because many people would shoot their own head off before they did something that benefited everyone, but didn't benefit them the most.

There's literally a million things we could do to make healthcare more affordable. But we also won't do any of those because of entrenched interests in healthcare, admin, and insurance - and, perhaps especially, people's entrenched interests to continue living unhealthy lifestyles and exporting the cost onto others as negative externalities.

Food and housing would get more more expensive but also food and housing are getting more expensive without this redistribution

The impact would be - subsidized people would find food and housing more affordable, and non-subsidized people would find it more expensive.

Instead of making housing ACTUALLY more affordable - you're just shifting the burden onto the lowest non-subsidized quantiles.

Yes I did some maths and we should be able to...

...reach highest phase of communist society, after the enslaving subordination of man to the division of labor has disappeared; when the antithesis between mental and physical labor has disappeared along with it; when labor has ceased to be merely a means of life, but has itself become the first need of life; when, together with the all-round development of individuals, the productive forces have also grown and all the sources of social wealth have flowed in full flow, only then will it be possible to completely overcome the narrow horizon of bourgeois law, and society will be able to inscribe on its banner: “From each according to his ability, to each according to his needs.”

You forgot the part where that causes massive inflation.

Honest question, but it sounds like you're describing that if ~11% (based on the parent numbers) of people weren't very poor the economic system would fail? Eg inflation would spiral out of control? (i assume spiral since they'd have more money, but money would be worth less, there by making them have less effective spending power - thereby needing them to have more money, etcetc.)

If so, sounds like morally something is fundamentally wrong if we require poor people to function. But i'm not an economist, so i've got zero feedback here.

Inflation and affordability are different concepts. I think affordability is the term I’ll use as it’s best for casual/lay economic discussions.

It would be unstable at first, like how inflation during Covid differed by industry/product type. This is a big shock to the system. But over time as it normalized sure things will have inflated but relative affordability basically will return to what it is now or where it started.

If you make $10 and food is $1, it’s no different than if you make $100 and food is $10. What’s been happening due to wage growth (lack of), is you make $11 and food is $2, next year you make $12 but food is $3, etc. from a relative perspective food cost is growing too fast to keep up. To make people feel wealthier, we need the ratio to move the other way, $15/$2 then $30/$3 or something similar. This is how a middle class would get re-established. It’s a tough thing to accomplish is our complex global economy. Were marching towards a global income equilibrium, which only puts downward pressure on a high labor cost economy like the US/CA/EU.

These are non real estate assets so they're already circulating through the economy in some way or another. It wouldn't cause inflation.

They said "net worth" which is assets not cash that's being spent. M0 would shoot up which causes inflation.

If they said "income" it'd still shoot up the velocity of money, since poor people have higher spending rates.

Inflation is caused by a greater number of dollars chasing the same number of goods and services. Look at the used car market, or the housing market, or the GPU market during the crypto craze several years back. It all falls back to basic supply versus demand mechanics. Inflation can be caused by printing, but it can also be caused by redistributing money from location X (Microsoft stock) to location Y (food spending).

But it would reduce demand somewhere else if you have a fixed money supply. Therefore, the overall inflation rate would stay the same.

It does not.

It's unintuitive how, but it probably would cause prices to go haywire.

It could, at least temporarily. But there is no reason to belive it won't stabilise again.

Increased demand without increased production will increase prices. But then producers will follow, and production will increase, and prices will stabilise.

Increased tax on the rich and distributing it to poor moves a tiny bit of the combined 'voting power' we have over production as consumers to the poor, so there will be slightly less luxury cars produced and slight more food.

Stabilizing means we’ve done this whole thing for nothing.

No, because more poor people get to eat, which is a good thing.

If they could produce more they already would.

The only way of fixing this is decreasing demand by reducing the population numbers.

Why would they produce more if they could? It must meet the demand at the current price point. More money goes to poor people, more demand for food at the current price. That will increase the price, which will increase production. Short term the price might go up a lot, but then new production will come online, and the prices will fall back to today+delta.

It does. I'm not competing with billionaires for my bananas. A billionaire doesn't eat 10^6 times more bananas than me.

In Mexico, many people argued that raising the minimum wage would lead to massive inflation, but that did not happen when the increases were implemented.

> If every household above the poverty line donated 2.5% of their net worth annually to people living below the poverty line, we could erase poverty instantly.

For a day.

A lot of people below the poverty line would spend all the money on trips and luxuiry goods. And would be right back where they've started.

Also, the question is why would anyone want to work, if you would be given money for free even if you don't work anywhere (I mean, you're below the poverty line)?

> Also, the question is why would anyone want to work, if you would be given money for free even if you don't work anywhere (I mean, you're below the poverty line)?

Because people want more comforts than just being barely above the poverty line, of course there will be freeloaders just as in anything (there are even freeloaders at many companies right now, shocker!) but it doesn't mean everyone that gets some cash to be above poverty would just stop working.

It opens their lives to pursue other stuff they wouldn't be able to while fighting to barely survive, they could go to school, take better care of their kids with the free time available, they could look for jobs that are not a dead end because they wouldn't be hostages of working for shitty pay to barely survive.

This argument comes purely from a puritan/protestant belief, the data usually shows that people who get money to cover their basic needs will have better outcomes, commit less crimes, seek education, etc.

Isn't the cost of a minority of freeloaders good enough to provide better outcomes for the whole society? Or do you prefer to keep punishing the poor just in case some of them decide to be freeloaders? Rather inhumane to think that way.

It always comes down to the same set of arguments. The rich doesn't pay the price because money is nothing to them. The poorest have additional grants, so life is not that bad for them, even if they don't work. And who pays the most expensive fee for this? Middle class. The actually working class. The class that nobody thinks about, and the class that always funds everything.

In your world, the worst place to be is to be the middle class, because they don't deserve any grants, but still they earn just barely enough to sustain themselves.

Also, the difference between freeloaders in companies and freeloaders in your model of financing the poor is that we generally want to get rid of company freeloaders and we identify them as an unwanted behavior, and you want to encourage social freeloaders and defend their existence.

> The poorest have additional grants, so life is not that bad for them, even if they don't work.

Have you ever been poor? From this statement alone I'd guess not because saying life "is not bad" when it's a constant stress about how to make ends meet, not only next month but many times the next week or even next day, is far, very far from "not bad".

> In your world, the worst place to be is to be the middle class, because they don't deserve any grants, but still they earn just barely enough to sustain themselves.

If they earn just barely enough to sustain themselves they're poor, not middle class. Middle class can afford their housing, food, leisure, etc.

In my world the rich would be paying much more, they depend on the whole societal machinery to be able to even accomplish being rich, not paying their due share for that is unjust and undeserved. That requires people thinking more collectively though, and the current system doesn't incentivise people to behave that way, you get ahead by being an individualistic asshole instead of someone who is trying to make society better through your businesses, products, and skills.

> From this statement alone I'd guess not because saying life "is not bad" when it's a constant stress about how to make ends meet

Will we both race who is more poor now? I know some poor people who paid $0 for the homes they live in. And I had to sign a loan contract for 20 years. I know some poor people who read books all day and have their small youtube channels for fun. Yet I'm the one who loses the majority of the day to sit in the office. The poor people I know are very different from your imaginated vision of poverty.

> In my world the rich would be paying much more

And how would you make them to pay more? When they control the legislations. How would you make Donald Trump to pay 75% taxes of his wealth? If he'll want then he'll become the president.

Also people like you always seem to want to have the power of defining who is poor and who is not. This is poor. This is not poor. I don't want to be judged like this. Not by people who think they have seen it all, but it appears that all they've seen was just YouTube.

??? If they earn barely enough to sustain themselves, they're not middle class by any sane individual's definition. They're poor.

Well, you can use the "poverty line" definition to separate people who will get grants (below the line), and people who will pay for the grants (above the line).

So being just barely above the line means that you pay, not that you get. This is the worst place to be in.

Also, a lot of sane US citizens seem to use the "poor" word to describe someone who is not able to get the newest model of iphone. That's why it's generally hard to talk about the issue.

> So being just barely above the line means that you pay, not that you get. This is the worst place to be in.

Why do you think that's how it would work? That's the most simplistic way of thinking about it, instead try to apply the same model of progressive taxation in reverse, you get less benefits the more you earn up to a threshold. Or just implement some form of UBI, there are many models for it as well.

Or we do communism, the right way this time.

Last time I've seen communism being implemented the right way was the CHOP/CHAZ in Seattle. It ended up with some actual warlord taking a gun and killing some people. In the middle of the city.

Also, who do you think would pay for the UBI. It's not like UBI is some solution that was even implemented anywhere.

Don't jump directly into the red scare through a slippery slope fallacy, it's just intellectually dishonest while being the most boring thought-terminating cliché on this type of discussion.

Wanting to live in a better and more just system, even if we can most realistically just work towards an improved version of capitalism, is probably something most of us can agree upon.

I don't think anyone sane is against people having their needs fulfilled so I don't think anyone sane would look at any system we live under and think "yeah, this is it, we found the perfect system".

So instead of deflecting into communism as a gotcha, why don't we behave as adults, and agree that discussing how to find ways to improve our systems of production, distribution of wealth, how we view the less fortunate, how society can be better overall for all of us, is quite fucking important?

Going directly into the pigeon hole of ideology is just lazy and unimaginative. Humanity did unthinkable achievements already, we can always try to do better, don't be lazy and unimaginative...

We probably can agree on lots of things, about inefficiencies in current system and the like, but some elementary things between us are too far apart.

The ideas you identify as solutions, for me are the problems.

You can promote artificial redistribution all you want, but I will want to stop it however I can. If a global redistribution system would be implemented, then all your wealth would go to Africa and Russia, and you will be left with nothing. I'm sure this is not what you want, which in my POV makes you a hipocryte. If you don't agree that your wealth should go to Africa or Russia then we're in the area of choosing who is worthy of getting money and who isn't. And this is not at all different from a rich guy deciding where to put money to. So wealth redistribution from my POV just means that a poor guy wants to be in charge of the money now. But after he'll be in charge, it only means that he'll be the new rich guy. Nothing changes at all.

Pro-redistribution people are always talking about cash flowing from someone else to them. It's always the same story. And this is against what I stand for with all my determination, because I don't like thievery. Especially legal thievery.

You go to absolute loaded language to talk about concepts that should be discussed in a more leveled language. You consider thievery just wealth redistribution but don't consider thievery the products of the exploitation of labour, for example.

Why is it thievery to redistribute wealth from elites who are exploiting societal developments (education, skills training, etc.) so they pay their share back into the society which enabled them to become rich in the first place? Why is it ok that they can exploit a whole society's work for their own personal gain while gaming the system to not pay back to the thing that gave all foundations so they could play their game?

You talk about redistribution in a black-and-white way, no nuance, you go to the extremes such as:

> You can promote artificial redistribution all you want, but I will want to stop it however I can. If a global redistribution system would be implemented, then all your wealth would go to Africa and Russia, and you will be left with nothing.

Which is a strawman, I did not touch on this point whatsoever, I did not talk about "global redistribution", you are the one bringing this up, in an utopic sense, yes, we could talk about it but I'm trying to discuss in realistic terms what could be improvements in enclosed societies (aka: national states) to improve the system.

That's where we fundamentally disagree, you cannot talk in nuanced terms, it's either "communism!" or "you will be poor and give your money to all the poor in the world" instead of a level-headed discussion on the flaws of our current systems, how we could search for solutions to it.

And even worse, you talk about "artifical redistribution" as if the current form is the "natural" one, what is natural about a few people who found ways to exploit the system for personal gain instead of the natural way of living collectively since we all depend on each other for societies to function since time immemorial?

Your view is very conservative, it's unimaginative, it just states that what it currently is is what's natural and supposed to be. Challenge a bit more your thoughts, you are just repeating the same trope over and over...

I'm sorry if I'm not on the same language level as you, I needed to learn it in addition to my native one first. I promise you I'm more eloquent in my native language. ;)

You might have missed the point of my previous message, but it's okay since I don't have trust in my language skills that much to suspect a problem with your reception. I accept it can be a problem with my emission instead.

I use extreme examples as abstract ideas. I try to consider an idea in its extreme first, to assess if it's an idea worth considering. Sometimes it is, sometimes it's not. I don't use this technique because I'm unable to imagine anything that can be put in between -- I can, but thinking in extremes for me is easier.

I agree that the example of "global wealth redistribution" is extreme. But that was the point: to show that this extreme idea is ridiculous, as an extreme. But if we want to consider this idea in not an extreme way, as a "leveled" idea as you've said it, then my point was that this is NOT different at all from the rich guy example.

If you have a group of people (a state) with some wealth, and you want to choose that wealth stays inside the group, this is not at all different than the rich guy wanting the wealth to stay inside the family. For anyone outside of this group (e.g. from someone in Africa), your group is just another, but a higher level, rich guy. And I think it's very telling that you oppose other rich guys, but you want to stay a part of a rich guy yourself, because this is also how a rich guy behaves: other rich guys want to fight other rich guys too!

I see your arguments as "I want their money", disguised as "help the poor with their money". For me it seems that you don't want to help the poor, because you still want first to choose who is poor, and who isn't. So it's not about helping the poor, it's about choosing who YOU want to help. You choose that the poor in "your family" are more important than the poor outside of it. This is exactly how a rich guy behaves. Also you say that rich people don't have rights to their money, but the question is why YOU want to have the right to decide where their money should go. Because you pay taxes?

And your question, "what is natural about people who want to exploit", then well, this is with humanity from day zero, people with clubs exploited people without clubs, so I guess that would be a definition of the word "natural". It's not to say that "natural" means "a good way to do things", rather "natural" as average, it always been that way, etc.

For some reason you think you're on higher moral standing with your ideas, but I can assure you, I don't see it this way.

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