Debate: Should the rich pay higher taxes?
economist.com
economist.com
I'm all for an incentive-based economy, but at a certain point, an incentive-based economy becomes luck-based. Bill Gates didn't become so rich based off of hard work. I'm sure he worked hard, I'm sure he had long hours, I'm sure he had skill. But all of those things might get you to multi-millionare's club. They don't make you a multi-billionare. He lucked out that software became so important and that the industry standardized on his software.
How often do we see winner-take-all economies in our business where the winner isn't necessarily the hardest working? Is it that hard to imagine that being successful is hard work, but that being the winner of a winner-take-all (or winner-take-most) economy is partly luck? And I don't think it's unreasonable to highly tax the portion that is luck. Plus, would you chase a goal less knowing that it was a hundred-million-dollar goal than a ten-billion-dollar goal? Remember, we're talking about individual money, not corporations here and I doubt any of us would cough at $100M.
The key piece in his luck came from the IBM deal that put the standard of PC's OS into Microsoft's lap.
http://prospectingprofessor.blogs.com/prospecting_professor/...
"IBM president John Opel served on United Way's national board...as did Mrs. Gates. In 1980, when someone mentioned Microsoft to John Opel, he responded, "Oh, that's run by Bill Gates, Mary Gates' son." Behind the scenes, Mary Gates had spoken with John Opel about the new breed of small companies in the computer industry, which she felt were under-appreciated competitors of the larger firms with which IBM traditionally partnered."
Why do we pay taxes? We pay taxes so that government can be funded, and in exchange government provides certain public services. Services like firefighters, police, hospitals, etc. If you think about it, these are services that everybody should receive equally, thus they should be services that everyone pays for equally. Currently we have a system where the rich pay a disproportionate amount of the costs for these services, and intentional or otherwise, what has happened is that the rich gain a disproportionately better use of these services, like the police are more likely to protect the rich than the poor, etc.
Bigger houses are more expensive to protect from fires than smaller houses, so real estate taxes should be proportional to the value of the property. Sales tax applies to everyone equally but those who consume more pay for more, which makes sense since those who consume more are making more use out of consumer protection agencies, like the FDA. Bigger companies are more expensive to regulate, so proportional corporate taxes make sense too.
But a human life is a human life. When one person pays more taxes than another person, the implication is that person deserves a larger share of the same essential services we are paying for than those who paid less. That seems a perversion of justice to me.
When I'm making $75 an hour as a programmer today I remember when I was making $8 an hour at McDonalds 6 years ago. When 90% of your income is going towards food, rent, shelter and then the government comes in and takes 30% it would effectively leave you with zero. No money to save, no money to pay for education etc.
But for me at $75 an hour, necessities are a small part. Now I'm saving and investing and have no debt and all this great stuff. So your saying it is a huge burden on me to pay 40% tax now so that people trying to get ahead like I was 5 years ago don't have to? Absolutely not. I still have plenty of money for everything I want.
It is more unethical to subsidize your personal discretionary spending at the expensive of somebody's necessities because you are simply greedy. That's the reason why the tax code has always been and will always be progressive - even in schemes like the flat tax system there is a credit for the bare necessities.
Is that really the best language to use? Is it subsidizing people to NOT take their money? Given that you support increased taxation for the wealthy, can I ask why you aren't voluntarily sending extra money to the government?
In any event-- governments are good at certain things that require huge scale to work-- national defense, highways, trips to the moon, etc. What they are really freakin' lousy at is redistributing wealth efficiently. For every taxed dollar, how much actually finds its way to deserving poor? How good is the government at deciding between those who deserves it and those who made a bunch or stupid decisions and should live with the consequences?
On the other side of the coin, what does "rich" mean? What about a family that pulls down $300k a year but has fabulously expensive medical bills for a dying parent/grandparent? Or a sick kid? Or a big extended family that's actually pretty poor that they want to set up college funds for?
I agree that we have a responsibility to help those who are deserving and in need. As someone who's on the high side of the scale by many standards, I'm happy to take that responsibility. But why, exactly, should I be forced to hand the responsibility (and then wealth I've generated) to a government who is horrible at distributing wealth and pretty bad at filtering out people who aren't really deserving?
There are organizations that rate charities on how efficiently they distribute donated dollars. How do you think the US government would fare on this scale?
If you have a flat tax as the OP proposes (in fact declares as the only "ethical" way) then some people get hammered more than others simply based on the fact that we all must eat and we all much live somewhere.
The right solution to lowering taxes is cutting spending to match. But even if you did that and all we had were programs libertarians agreed on - you will still have progressive taxes. Even if the top bracket was 15% - the bottom bracket should be lower to be fair. To say that progressive taxes are unethical is to not understand what those at the bottom are fighting to get ahead.
There is something inherently unfair in making people pay taxes at a higher rate, just because you arbitrarily determine that they can afford it
Why would it feel any different than doing so when making $20 or $40 or $60 an hour, other than being obviously easier when making $75 an hour?
At the same time, they benefits from services provided by the less fortunate. Owners of large businesses can't be that rich if they don't have enough customers. (If you sell in a small country and don't export, you can never be nearly as rich as Bill Gates.)
Is it fair that they should share some of that luck and wealth back to help the underprivileged and their customers/employees?
Taxation, as I see it though, is more than that. Sure, you're paying for the fire department, but you're also paying for "civilization", for lack of a better word. You're paying for things like the food stamp program, which (if this question applies to you) you would be nowhere near. It's accepting that in order to have a somewhat decent society for all involved, we need more money than would come if everyone was charged at the same rate, and as such, you charge more to the people who can afford it.
A counter-argument is that too high a marginal tax rate will greatly reduce an important incentive to work and therefore makes everyone worse off, especially from the lack of new inventions (see, e.g., http://en.wikipedia.org/wiki/Atlas_Shrugged).
A question very relevant to us is "Will it?".
If you face, say, 70% marginal tax rate, will you still work as hard or be as ambitious as you are?
Erm. Whoa there. This seems to me to be fundamentally flawed in no less than two respects...
1) $1 may be less valuable to a rich man than a poor man but that -does-not- imply that it is of less value to society for it to be in the rich mans hands than in the poor mans hands. In fact, it's quite easy to argue (and is often done) that it's substantially more valuable, to society as a whole, in the rich mans hands than in the poor man's hands.
2) More broadly, and the first point follows from this point, this is a false dichotomy. Society doesn't have a fixed number of wealth and it is not a zero sum game. You cannot trade dollars 1:1 and ignore the economic impact.
> A question very relevant to us is "Will it?".
I find it interesting that you take the first proposition at face value as "self-evidently" true but feel the need to question this second proposition. I find the first one substantially more controversial than the second.
Of course increasing the marginal tax rate is going to have some quantifiable effect on the people's habits. Let's say I have a private medical practice and I have the choice between working fridays and getting taxed 70%, or I can have the practice closed up on Fridays so I can play golf, what would I do? What % of doctors would close up shop on Friday?
Whatever the answer is, it's not zero.
This is a popular argument. I've never seen any reasonable proof of it. I take the argument as wishful thinking in that most with wealth agree with it and most without disagree.
"Let's say I have a private medical practice and I have the choice between working fridays and getting taxed 70%, or I can have the practice closed up on Fridays so I can play golf, what would I do? What % of doctors would close up shop on Friday?"
This is also a popular argument. As for doctors, my feeling is there are not enough M.D.s. The M.D. system is rigged to keep doctors in less supply (in the U.S.). It might be a good idea for doctors to make a little less and also work less and produce more doctors to make up for the shortfall. This argument is most likely unique to doctors though.
If that $1 is invested, rather than consumed by the rich, then, it could potentially be more beneficial to the society.
In exactly the same way that no one needs 5 personal cars, no one needs 5 sets of clothes. I challenge you to come up with an argument for having 5 sets of clothes that isn't merely a wealth-displaced* version of the argument for 5 cars.
* Wealth-displaced meaning that the only difference is our collective wealth, so that the cars argument is the same as the clothes argument would have been 200 years ago.
I'm pretty sure that the folks who built said house and cars appreciate the work.
And, I'm pretty sure that I'm going to like some of the technology used in that $100M house. It was nice of the rich guy to pay for the prototypes.
Excellent point and very well written response.
In the short-run, consuming helps that same dollar get spent over and over. In the long-run, creating wealth and jobs is more valuable, IMO.
When raising taxes drives capital to locales which are more capital-friendly (chiefly via lower taxes), then it inevitably takes job creation with it.
We had 80% tax rates in the 30s.
We had 90% tax rates in the 50s.
We had 70% tax rates in the 60s & 70s.
We had 50% tax rates in the 80s
We had 40% tax rates in the 90s.
Strangely enough, noone quit making money, no matter what tax rate they had to pay
http://www.theneweditor.com/index.php?/archives/8036-You-Can...
A man makes $10 (granted it may be his millionth $10 for the year) and we take away $9 from him.
Do you honestly think this is right and just?
The second (more debateable) point is that the rich, in the end, receive greater benefit from society than the poor. The poor man receives (say) an education, income support, roads, etc. The rich entrepreneur benefits from the fact that each of his employees received an education thanks to society. The rich man benefits to the tune of many millions because society protects his property (both intellectual and physical), and provides him with a stable environment to do business in. The benefits the rich receive are not just personal, but also present in terms of the affiliations that help make them rich.
Sure, there's the question of whether this tax rate is too high, but it's also hard to argue that when someone is earning many millions per year that it's just for them to have all that money, rather than it being distributed a bit more evenly to their workers. Capitalist society does seem to favour income concentrating ever more tightly at the top, and mechanisms need to be in place to address that.
I did note that by saying "granted it may be his millionth $10 for the year"
>Sure, there's the question of whether this tax rate is too high
That was my question. Do you feel it is just to take away 90% of a person's marginal income?
When it's over that many millions, then yes, I think it's reasonable. It's highly questionable whether any individual is actually worth, say, 100 million a year. There's virtually always someone who could take their place - if Bill Gates hadn't made his fortune on MS, a different, perfectly adequate OS vendor would have succeeded, and the PC landscape probably wouldn't be so vastly different from what it is today. Ditto Ellison, etc. If the individual isn't totally irreplaceable, it's a bit hard to justify their having the income of 2000 average households - so it's fair to tax that income as a correction of the unfair inequalities that a capitalist system naturally leads to. The truly irreplaceable people - the once in a generation brilliant minds - tend not to be vastly wealthy anyway.
A further point is that few people become entrepreneurs in order to become stellar-level rich. Sure, they want to be wealthy, and I think we all know that a tax system that discourages people from wanting to become millionaires is a mistake, but it's unlikely that massive taxes on people earning more than 50 million a year is going to discourage entrepreneurship.
I'm not, however, arguing that a 90% tax rate is necessarily sensible. In the modern world, people will likely just move out of the country to avoid the taxation.
Is 90% tax rate optimal? Maybe not, but it just goes to show you that even with a 90% tax rate, it wasn't the end of the world.
Funny, during the red scare, 90% tax rate was still considered capitalism, and now a 39% instead of 35% is considered communism.
Another tricky thing with the tax brackets is that it only applies to income tax. Once you're making over a certain amount most of your money will come in other forms such as stocks and dividends.
But, let's ask a question that Obama was asked during the campaign. Would you raise a given tax rate if the result was less revenue collected? He said yes. Do you? If so, why?
The real question here is who do you want to invest your money? An elected official who has never created any value in a marketplace or a wealthy individual who built their fortune by building something that people wanted?
Extending this argument: a $1 product is worth much less to the rich than it is to the poor.
Based on this argument, should the rich be charged more for products?
I think if we taxed items appropriately, we would not need income tax on the low and middle classes - they are the ones who can use extra cash to pay for their kids' education (high ROI for the kids), better housing (high ROI for society) and higher quality food (high ROI on $$ saved on health care costs).
Rich people (the kind we want), after a certain point, are not motivated by money - they just want to win and make a difference and that can be done in a high tax society as much much as a low one.
My original question posed to the parent poster was questioning if prices of goods should be based on the income/worth of the individual.
People will always try and avoid taxes, thus, taxes should be kept simple to avoid loopholes. This is why I really like consumption taxes as opposed to income tax.
I think that their should be higher estate taxes, people should not be able to inherit massive fortunes. Some money is ok, but I like the saying, "You should leave enough money for your kids to do whatever they want, but not enough for them to do nothing at all"
I know I changed the subject, sorry.
I think anything other than a flat tax is immoral. I think a national sales tax and elimination of income taxes is a great idea.
I merely posed my original response as a thought experiment.
At super high tax rates I'd be doing less lucrative, but more fun work. If I ended up doing charity work or something, society might be better off (though I'd have less money to spend doing it). If I worked at a bar, society probably wouldn't be better off.
there are some hidden assumptions there, particularly surrounding externalities. But I think that those only affect edge cases and on the whole, still allow us to do relative comparisons.
Does coke or Apple or Toyota charge its rich customers more and poor customers less? Then why should a Government?
I realize that an implementation of such a project would be insanely complex, but that's another discussion.
40 Income, 10 NI, 12 Employer's NI, 15 VAT. (NI is National Insurance similar to Social Security and VAT is sales tax).
Mortgages aren't tax deductible and capital gains starts at 50% (decreasing over 10 years).
Insanely enough the services people actually use come from separate council tax (a local authority tax). It was about 1000GBP pa last time I was in the UK.
You can't simply add VAT like you have, because you obviously can't spend money you don't receive: clearly if you're only receiving 38% of your income, a 15% VAT rate at most can be a smaller percentage of that you do receive, or 5.7% of your total.
My figure for council tax is low as it was sharing and was not in London. The "rich" living in London will be paying a lot more.
Progressive income tax would have only minor effects on the "rich". It is obviously a big help for those just above but people in the middle earning say 100K are already only about 5% and the difference only declines.
How you define "the rich" would be a big part of the debate. I would argue that a max rate at 35K is far to low. Most more modern tax systems go up in much smaller steps and max out much higher (Singapore maxes out at ~150,000GBP (20%) for example). Piketty's attempt to define the rich as top 1% isn't borne out in at least the UK's tax code.
I was originally making a point that the amount of tax we pay is quite a bit more than the headline rate. A minimum of 52% of everyone's money is going to the government.
If people really though about just how much of their money this is and how badly they could do with it they would probably find someone better than "the rich" to be angry with.
If I was to earn $100mm net this year I could sit on my ass for the rest of my life, effectively taking me out of the motivated labor pool.
That much money would probably take my kids out of the pool too even though the hypothetical lazy brats would grow up spoiled and highly undeserving.
A wealth tax rate of 10% per year (halving my wealth every ~7 years) would encourage me to carry on thinking of new things, and make sure that my descendants wouldn't get a free ride.
For comparison: Wealth tax 10%, 100mm in year 0, 50mm left in year 7, incentive to keep working to stop the pile shrinking. Income tax 50%, 50mm in year 0, 50mm left in year 7, no incentive to work.
Second, retirement would have to be looked at entirely differently. I assume the retired would only be taxed at a much lower rate, or not at all. But assigning any wealth tax on the retired implies a government mandated death age, just like a government mandated retirement. See: 'The Giver'
Finally, if you knew that your liquid wealth would be taxed at a certain rate, wouldn't you spend it on something? Houses, cars, stocks? What if Mark Zuckerberg was taxed on his artificial wealth? He can't really sell his FB shares to pay for it. If people knew that they HAD to keep 10% of their millions liquid for the rest of their life they would be less likely to invest it, since eventually they would need it.
I like the unique way of looking at the issue, but I think it's ultimately unworkable.
When I have more money, I am more careless, and I start to lose sight of the value of a dollar. I am more out of touch with where my money goes ($1 ATM fees unnoticed), and I tend to not spend as much time looking for values when I shop. Heck, I even see myself doing this in "fake" economies, such as World of Warcraft. The tendency to be reckless when economically "safe", is very real.
If money is spent recklessly anyway, and is barely noticed when it's gone, why not put it into a pot where it at least stands a chance of benefiting more of society?
People living paycheck to paycheck are much more in tune with what their lives are costing them. They could tell you instantly what $1000 more in taxes would mean, and having to pay it would completely change their lives. Whereas, someone with millions of dollars would have no clue what $1000 is worth. (Actually, they would; see the $1000 pizza: "http://www.reuters.com/article/oddlyEnoughNews/idUSN14298520...)
There is also Hauser's Law to consider (see http://tinyurl.com/6fnjml).
You could certainly argue that the first problem to solve is not where the money comes from, or the amount of money, but rather how it is spent (and ensuring every penny is spent responsibly). The whole tax question would go away if we discovered that the government can actually do the same job with half the money it had been using.
But your argument doesn't work anyway. You're really only pointed out the truism of decreasing marginal utility while assuming that the spending that can be positively identified is more efficient than whatever the other guy can't remember. You've provided no argument for why that would actually be true.
If those having higher income are spending their money less efficiently than those who have less, then how do the former group achieve and maintain those high incomes?
The question is, where in the economy does that money usually go? In a lot of cases, employees do not directly see the benefits of their company's success, other than to continue having a job. The money would seem to directly benefit shareholders, who are largely rich people who decided to "risk" buying a piece of a company.
Yes, the people who invest should see some of the return. And yes, the company probably wouldn't exist (along with all its jobs) without these investors. But the gains from the company are likely only to benefit other rich people, other shareholders. And investments are going to concentrate on ventures that are likely to be profitable, not in things that are more basic, such as building roads.
Tax money tends to favor the stuff like building roads. The money has to be there, though arguably the government may need to become more efficient than it is.
I answered in a different post how people become rich...sometimes it definitely is hard work, but a lot of times it is just luck and opportunity.
Because it's my money that I earned that represents my hard work and the risks I've taken to generate that wealth. Part of my freedom is to spend the fruits of my effort as I wish. Who are you to decide that spending recklessly is an unnecessary freedom?
I don't disagree with taxes, but this notion of increasing our taxing of the rich every time WE'VE spent OUR money recklessly seems somewhat like thieving to me now (I'm halfway through Atlas Shrugged).
In a capitalist society you don't own my work and my effort, I do. If you would rather the community own my work, then please convert to a communist society so I can leave forthwith.
However, consider a few things.
Opportunities and luck have really played a role in the wealth of many people, and some have barely lifted a finger to become rich.
There are people who make far, far too little money for the effort they put in, even in Western countries. These people have sacrificed enough. There is no point making them destroy their income to pay for a road, when a rich man could cover the whole thing without even blinking an eye.
On the subject of risk. While becoming rich can definitely require serious risks, it takes far less risk to remain rich, or become ridiculously richer. Is it really a "risk" anymore to bet a million dollars on something, when you have a billion? These "risks" are widely available to rich people, and would be considered insane for even the middle class to invest in. The super-wealthy simply reach a point where risk is not really required to continue living comfortably. Whereas, some people making $25,000 are doing really dangerous jobs, risking their families' futures, only to stay afloat.
First off: It's still their money. If someone has 100 cars and I lost mine is it ok for me to steal one of his? Damn tempting sure, but not ok.
2nd: Working my butt off != productive. My ex-father-in-law owns his own pool care business. He works his ass to the bone. He's coming up near retirement and he's in a position where he could take on new workers but instead he just chooses to work. He doesn't want to hassle with employees. I think it's a lot of extra work and he's the greatest guy in the world but he's not being as productive as he could be.
When it's time for him to retire he will probably have little to no money to live off of due to his and his wife's poor spending habits. I love them both, but do they deserve to take my money or someone else's? No. Does that mean I wouldn't help them out if I could? No, of course I would... but that's my choice.
RE: These people have sacrificed enough. If that road doesn't improve their overall quality of life then maybe it shouldn't be built. That's a whole other topic of debate. It's almost as though generating wealth makes people feel guilty. I think it's wrong that I should be made to feel compelled to give my money away since I earned it and since I can always choose for myself whether or not I will do that. I'm all for charities because those are completely optional. Just don't have the government come to my door and demand I give more money to help so and so or else I will be taken to jail (tax evasion).
RE: Risk
Just having money does not beget more money. You still do need to know how to use it wisely. There are many wolves who would love for you to piddle your money away on their worthless services.
Also, "betting" a million dollars is a risk because that's my money! And for 99.99% of people it's a pretty big risk to boot.
I'm not saying it's fair. I'm still digesting these ideas and deciding how far I believe in them but I'm not sure whether it being fair has anything to do with it. If someone inherits money and they're rich for that reason, then I really am not sure what is ideal and I'd default to if that's what the person who earned the wealth wanted then shrug.
Interesting. I, for one, am reticent to take credit for having been conceived by a pair of white, upper-middle-class, nurturing people. Nor do I wish to take credit for living in a society in which every one of my medical needs are accounted for without any effort on my part. Nor do I take credit for finding myself in an economy that values my particular skill set (for now, at least).
Some of my friends are less fortunate and I worry about them, but that doesn't mean that I feel that they have some right to mine or anyone else's money. They've spent their money somewhat poorly, while I've racked up credit card debt to teach myself new skills and get equipment to afford further learning (said debt is now repaid and long gone).
I make the money I do because I have and still do work my ass off. I have never been a "privileged" kid so I know for a fact that where there is a will there is a way. If you don't want to put in that effort I'm cool with that. Seriously, it takes all kinds. Just don't fool yourself into thinking you have a right to be carried on someone else's back. (not you specifically of course :) )
Not exactly the same productivity level from me.
Presumably you realize the 80% would only be taken from a fraction of your income, right? That's how tax brackets work generally.
Say the top marginal bracket is >250k, and I made 350k. Under a 40% marginal rate I would still get 60k for my extra effort - that is a new car or part of a boat or vacation house, but under 80% I would only get 20k extra for all my trouble.
The difference between someone getting paid 250k and 350k is a lot of work, but the 20k you get to show for it is basically nothing - <10% increase in take home money for a >25% increase in work. I could cut my spending by some amount and invested it and had a lot more hours with my family.
Numbers aside, the main point I was trying to make is that there is a point at which the marginal tax rate becomes too burdensome, and in my opinion 40% is not it, but 80% is.
80 percent. The scary thing is, in middle school I would probably have agreed with him. Hell, pure communism sounded ok back then. I think it takes a fairly naive view of human nature and society to think that policies like this can lead to economic growth.
I wonder if it's because you are natural problem solvers, and see taxes as a way to solve problems. With taxes you can reward behavior you like and punish behavior you don't like (social engineering). You can attempt to address the logarithmic nature of wealth and the perceived unfairness of that. For a hacker, taxes are seductive, I suppose.
We've come to a point where taxes are so accepted that your moral right to take money from your neighbor at the point of a gun is not even questioned anymore. The debate has moved from whether you are morally right to do so, to whether it is economically optimal to do so. This is a shame.
To me, the Laffer curve is ignored at your peril when contemplating raising taxes. If that stops your enthusiasm for this course of action, I'll take what I can get, but it's like having you refrain from killing me because prison would be inconvenient for you. I'd really rather you didn't kill me because you felt it was morally wrong to do so.
There are other ways for governments to raise revenue besides income taxes, but they lack the social engineering and individual control that income taxes provide. I understand why governments like income taxes. What I am struggling to understand is why you do.
As an example, if you had this same generic conversation -- government controlling what you can and cannot possess -- and apply it to pot, a lot of these same commenters would be yelling about government interference with private property rights. If you were on a site that favored the drug war, say a religious site, these commenters would be arguing that government can only be involved in people's lives so much, and that past that point it's immoral. Some of the religious folks would counter-argue that it's in society's best interest, and that no good comes from pot. The other side would say you can't enforce it anyway. The religious side would say well you need tighter drug laws. We need to show folks we're serious about this!
Now take the same crowd and talk about progressive taxes, and everybody changes seats. It's like cognitive musical chairs. The music stops and everybody argues the opposite viewpoint and takes up their opponent's reasoning.
It's great. People are wonderfully irrational.
Reality is more complicated than either/or, and the devil is always in the details.
As an example, some made the case that in every major war we've been in, we've run up the debt and then raised taxes to pay for it. "The rich doing their patriotic duty" as some describe.
Problem is, I must have missed the war that raised the debt to the $10 Trillion mark and am somewhat astonished that we're planning to double that in the next ten years with new programs.
So obviously, to me at least, war is one thing and the decay of democracy by folks voting themselves programs we can't afford is something else entirely.
So yes, absolutely it's more complicated. But when you say it's more complicated, then the onus is on you to explain where you draw the line -- where is the foundational principle that socialism violates and that progressive taxation does not (to use your example)
But in a nutshell, I think the $10 trillion debt is not a problem of public will run amok; rather, it is a reflection of how little influence public will has over the lumbering behemoth that is our government, compared to banks, military contractors, privatized prisons, industry lobbies, large unions, et al. It's a failure of our particular democratic process, not our system of taxation.
Ultimately, I don't think there is a clear distinction between progressive taxation and socialism, in the same sense that there is no clear distinction between a fetus and a human. It's a spectrum, and there is no "correct" solution, but rather a large panoply of potential solutions, some of which are less bad than others.
In my personal opinion, the progressive tax system we have right now is actually a pretty good one (corporate loopholes notwithstanding), and the changes that have been proposed are pretty damn minor (yes, it could be a slippery slope, but so can absolutely anything). What matters more to me is that the money raised by taxation of whatever kind is spent on smart things (education, infrastructure, technology R&D), and not dumb things (resource wars, policing of victimless hobbies, "too big to fail" bailouts).
I'm very sorry that you feel that data always trumps principle. I suspect if I changed the conversation to eugenics or honesty, you would claim that principle is more important than data.
In fact, principle is an overriding concern with you, despite your protestations to the contrary. I wonder if I could ever get you to acknowledge that fact? Look at what you said.
> not dumb things (resource wars, policing of victimless hobbies, "too big to fail" bailouts)
All three of these things have substantial data to show why they are important. If you think that resources are not worth going to war for, than you have no idea what any war in the history of mankind has been about. Resources are the only thing worth fighting for, and indeed, are the only thing we do fight for. As for victimless hobbies, I assume you mean drugs. There's a lot of data that says it's harmful. How many meth users do you know? I know some. I agree that drugs should not be illegal, but I do that based on my principles of freedom, not data. The data actually supports the status quo. As for the "too big to fail" bailouts, I'm told there is substantial data on this as well, but again, in principle, I'd still let them fail.
Your blanket statements prove that principle is more important to you than data. Principles are important, and as much as you claim otherwise, you and I are in the same camp on that one.
I suppose I should clarify, in that I don't mean solely data, which is subject to interpretation, but rather using engineering principles instead of making decisions based on gut-felt, emotionally charged belief systems. In each of the cases I mentioned, I think that the "principled" and the smart thing are synonymous:
- Resource wars (and wars in general) often cost more than they benefit, particularly over the long-term. Burning oil to get more oil, resulting in diminishing the world's dwindling oil reserves even faster. Far more profitable to invest the peace dividend elsewhere.
- Data consistently shows that drug usage goes down with decriminalization and treatment programs. It'd be an interesting philosophical debate of society-vs-individual if prohibition resulted in lower use, but it simply doesn't. It's harmful, expensive, and counter-productive.
- The bailouts are admittedly more nebulous, but in short, we might have been better off if we had paid the cost of letting decrepit and irrelevant institutions fail. Paying their ransom may be the more practical choice right now, but we lose a large opportunity to clean our slate and reboot, even though the short-term cost might be high. (Okay, I confess, that one's 99% subjective opinion.) ;)
Anyway, my original point was that principles are guides, not universal constraints, and one can believe in both social justice and rugged individualism. At the end of the day, there are no answers, only trade-offs.
My sentiments exactly. The US government can achieve efficiency when it gets its act together, but right now it seems kind of corrupt.
Complex systems must be closed-loop in order to be efficient, else, even if they magically were engineered optimally as open-loop, some non-linearity in the system will eventually undo that miracle. Governments are open loop.
I like the circularity of your statement though. As soon as it's working well, then it will be working well!
Fannie Mae?
> Governments do not achieve efficiency because they have no feedback mechanism to allow them to.
Elections? Defaults?
> I like the circularity of your statement though. As soon as it's working well, then it will be working well!
I merely meant to point out that the government has the potential for greater efficiency.
hmmmm.
I must be taking that quote out of context. Greater efficiency than what? Perhaps you meant that it has a potential for greater efficiency than something with no feedback loop at all?
My fault. Didn't read far enough back in the chain. Apologies.
Greater efficiency than it has now. I guess my point is that there are many worthy government projects, but increasing the tax base won't help, since the extra money will just end up being captured by the same interests that capture it now.
It's one thing to say "we have some extraordinary needs, is it right that those with the greatest means should contribute far more to satisfy those needs?"
It's another thing altogether to simply ask "should we demand that those with lots of money give more of it up?" without accompanying that with any argument about the need.
It seems as if the rich are to be punished simply for being rich. And the fact that I wish that I had more money gives me some moral right to extract some of that wish from those that have managed to achieve that wish on their own.
I'm not in favor of "wealth redistribution" or taxing the rich a priori, but I think an evidence-based, non-punitive progressive tax is quite reasonable, particularly if the benefit goes to shared infrastructure that enables class mobility (public transportation, education, etc).
That seems to be an admission that they're not trying to improve society overall, but just to keep the rich fettered.
More commentary on the topic here: http://www.reason.com/blog/show/132843.html
(sorry for replying to myself)
So if you robbed a bank because you needed the money, that would be different than if you robbed it because you hate bankers?
My point was that absent any further discussion, a "yes" answer to the question seems to imply that we should take more money from the rich simply because it's there. I imagine some Congresscritters saying "oh cool, we got another billionaire; let's see if we can find something else to spend this guy's money on".
Contrast this with "we've got a war on our hands, and need to pay for our defenses somehow; if we absolutely must have that money, perhaps it should come from the rich". (note that I'm not supporting, or even referring to, any particular war here, this is a thought experiment)
I personally do not believe that having a need makes it OK. But framing the question next to a need changes the nature of the question. As it was stated, it appears to be purely envy and class warfare; with a balancing need in the equation it changes to the philosophical question of moral relativism -- which I disagree with, but it is a defensible position.
http://online.wsj.com/article/SB121124460502305693.html
http://usbudget.blogspot.com/2008/05/you-cant-soak-rich-resp...
The former was posted earlier. the latter, it just came up on google when I was looking for the wsj article.
This is a moral question, along the lines of "How much money do I think you should have?" or better, "How much money do you owe the rest of us for helping create your riches?"
Well, how much does active environmental public expenditures lead to the creation of riches? If anything, we've seen riches being created throughout history with very little governmental help. In fact, it seems just the opposite -- we need government to help monopolies from running the markets.
So maybe the question is "Now that you're rich, how much money should we take from you to protect us from rich people in general?"
But then again, taking money away from rich people doesn't actively solve the monopoly problem. In fact, it just makes it worse -- by putting the power of market distribution into the government's hands you just trade one monopoly for another.
So no, I don't think you morally owe more to the rest of us because you're rich, and I don't think we need to take your money to prevent some evil from happening to the rest of us -- we can manage just fine with other legal remedies. I'm left with where we started: "How much money do I think you should have?"
Some people are very happy to answer this question. They'll bring up Bill Gates or other billionaires and beat us about the head and shoulders with what "should" be their appropriate contribution. In the numbers game, however, I'm much more interested in the corner store owner who manages to make and save enough to give his family $10 or $20 million -- enough for his kids and grandkids to live comfortably. So aside from people who have so much money it wastes their time to stop and pick up a $100 bill, I find the entire question of my judging what other people should own to be morally repugnant.
A good chunk. What business can you create that doesn't use the roads, the internet, or the public school educated in this country? Look back into the 20th century at the top marginal bracket, realize that all the infrastructure that we use today was built on the backs of people paying significantly higher taxes than our selfish generation pays today.
And what corner store owner leaves 20 million to their grand kids? I don't think you know much about local small businesses. My uncle is a mechanic, and worked for several years at a small gas station, and then when the owner retired he bought the business. The land was still rented from the gas supplier, and after about 30 years of that he just bought his own plot down the road for $2 million. He now has a half dozen guys working for him and business is great, but to get that $2 million he had to drain out his IRA and all of his retirement to sink into the business. At the end of 40-50 years of owning this business and working 6 days a week, he will probably have a net worth of 4-5 million dollars.
And that is a business with 6 guys charging $50 an hour for car repairs 6 days a week, I don't think selling bubble gum and newspapers yields 20 million bucks.
Substitute "chain of local stores" for local store. Thanks for sharing your story.
Actually, if I understand correctly, although the tax brackets were high, nobody actually paid that much. It was all a shell game. Politicians set the rate high for political purposes, and then left in loopholes so that the rich got away without paying much. In fact, I'm thinking they actually paid much less in those days than they do now. (sorry, no link)
Go read a book on the railroads - that is a prime example of exactly what I'm talking about. Nothing Like it In The World by Stephan Ambrose is a quick read and covers my point.
The railroads were granted the land tracts by the government - they didn't buy it. That was in the 19th century, what about the 20th century resurection of Conrail in the northeast? We wouldn't have railroads around NYC at all if it wasn't for a government bailout.
The internet was invented by the federal government. It was largely expanded by universities - funded by state governments.
The toll roads utterly failed in this country, thats why they were nationalized. The interstate highway system was entirely federally funded. Who built the bridges that I commute over everyday to work? Not private investors, in fact even if they were profitable in their own right and people wanted to build them - they never could because land had to be TAKEN from people against their will in order to build something for the common good. NYC would not be what it is today without the tunnels and bridges - but when neighbor hoods were getting cleared for the port authority building, do you think people like you thought it was a good idea?
Yes, there were bailouts. But that hardly makes modern railroads a function of government intervention. Aside from eminent domain, railroads have been very capable of operating and turning a profit on their own, at least when it comes to freight. Even then, it was deregulation of the industry that brought Conrail back to life (1980 Staggers Act) http://en.wikipedia.org/wiki/Penn_Central#Bankruptcy_and_Con... Even now, passenger rail is a money-sink, one that government continues to find worthwhile but the market does not.
The internet was "invented" by DARPA as a means to make research more effective. Unless you were at a federally-sponsored university, you didn't have internet access. But the rollout of the internet was very much a commercial thing. Delphi, America Online, UUNet, etc were all commercial players and they were the ones who brought internet to the masses. University participation was great in the early 80s when a small percentage of the population used it, but the "real" internet as we know it today runs on Cisco routers over Verizon cable to a local ISP owned by Sixpack Bob. It has grown and done just fine _without_ government help.
Lastly, toll roads are making a come-back, if you haven't noticed. On a recent trip to Florida we saw them everywhere. http://www.orlandosentinel.com/community/news/apopka/orl-lid... Privatization is a current trend, with some commentators worry about the effects on low income drivers http://www.businessweek.com/magazine/content/07_19/b4033001....
History is a great thing. You can take some event, like the building of the trans-continental railroad, and focus just on government involvement. Then you can look down another layer and see lots of private sector involvement. Push down yet another layer and you'll find legislators pandering to businesses. Push down yet another and you'll find some businesses trying to build something to make a buck. If you're not seeing the entire depth, it can appear to be anything from government saving the day to free market euphoria. In fact, it's a complex mix of interaction that makes things work. Part of that reason is because of the driving factors: politicians are always looking to make things more complicated and businesses are always looking to create something to make more money.
If a startup had invented the internet we would trumpet that as the crowning achievement of free enterprise. If a small company had come up with the idea for a transcontinental railroad, we would give them all the credit even if many others profited in their wake. But the government spawns both of these things and you minimize their importance as "just" the seed for it.
It was a lot more than land in the case of the railroads: http://en.wikipedia.org/wiki/Pacific_Railway_Act
It was a lot more than just a few networks at DARPA for the internet, and privatizing a road that the government already built isn't all that hard - you are privatizing maintenance not the initial hard part of construction.
When a private company can build a new bridge over the hudson I'll eat my words, but I don't believe they ever will do something like that.
The bottom line is that the private sector is not good at some things, and our taxes pay for those things. And to say that the government has no impact on the money that you have made or the success you have had is flat BS. All of the people at my startup came through public schools, all of them are of the age where they grew up in those schools when taxes were significantly higher. We shortchange our kids today for our own greed even though we grew up during a time of higher taxes. Thats the bottom line.
The private sector is NOT good at some things. Point taken and agreed. However, we have rich people and private sector profitable work all over the globe, in all sorts of governmental conditions. We have businesses that operate without roads or electricity, businesses that work under onerous governmental regulations and no regulations at all. Your thesis -- that rich folks owe the government "a good chunk" is not supported by your examples. Furthermore, countless counter-examples exist. You just can't wave your arms around and say "infrastructure" a bunch of times and make an argument. Infrastructure is not a prerequisite for people to get rich. Even if it was, people should not be indebted to nations for things that their great grandparents did -- the social contract is about here and now, not 50 years ago. Rich people are in no way morally indebted, at least as far as I can tell.
Your case is thus: Infrastructure helps people get rich. Rich people live in a environment with infrastructure. The government is the sole provider of said infrastructure. Therefore, rich people owe the government more.
If I'm not understanding please correct me, but you're not making any sense at all to me. It sounds like just a slogan you're repeating over and over. I'm going to bow out unless you have something truly useful. It's beginning to sound like we're talking past each other.
But here's how we can tax them more.
We make a tax of $100 a year for a simple car for example (a Ford fiesta) and a tax of $1000 for a hummer. This will be good in my point of view. However taxing the rich more for the same product is wrong.
I mean Hummer mean more comfort that is not really needed. So it's more for the appearance not the transport itself and then you have to pay for it
We always get the knee-jerk "But that's not HN" when stuff like this comes up, but where else do people rationally, objectively, and maturely discuss interesting questions like this? I was wondering if anybody had comments on this format and whether it is worthwhile.
1. Ignore, for a second, the diminishing marginal utility argument. What do most poor people spend their money on? Food, household items, and rent in low-COL areas. Mostly, these are commodity goods. What do most rich people spend their money on? Trophy properties, expensive wines, and brand-name art-- in other words, items whose value is indexed to the status they confer. If you give the poor more money, their standard of living will improve. If you give the rich more money, the things they buy just become more expensive, and their standard of living doesn't change that much. The same argument holds when taxes are increased.
2. The rich get more, even on a percentage basis, from the government. If the government builds a road to a factory, each worker is a stakeholder in the project, using the road to get to work every day. However, the factory owner is a much bigger stakeholder; not only does the road enable him to get to work every day, but it also enables his workforce to do so. He's getting a lot more out of that road.
3. Money is the world's first AI algorithm-- an algorithm to allocate resources and manage society. Like many crude algorithms put to complex problems, it does a terrible job of this if left to its own devices, making improvements for a few iterations but later diverging to a degenerate state, and needs constant correction through means such as progressive taxation.