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Comment by ctdonath | Hacker News Reader

Except you'll have increasing encroachment on motivation of the productive.

When Ronald Reagan was a top-billed Hollywood actor, he faced a ~90% tax bracket. Rather than work hard only to see most of his earnings confiscated, he'd make just a few movies and then enjoy those profits instead of spending time on diminishing returns. Same for plenty of us motivated ones: if 80% are living off the 20%, that will require taking so much from the 20% that most of those will opt for doing something interesting and untaxable. The "seriously productive" ones you're expecting to leech off MUST have lots of less-but-still-productive people working for them - and you're tearing out the incentive to do so. Raise my taxes enough (only to "redistribute" to those opting to not work) and I'll switch to untaxable yet satisfying "off the grid" living.

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> Raise my taxes enough (only to "redistribute" to those opting to not work) and I'll switch to untaxable yet satisfying "off the grid" living.

That's actually not a harm, and its exactly why you aren't tearing out the incentive for productive activity; when you devote more of your time to that because you've hit a high-enough marginal tax rate that the marginal benefit post-tax from additional gain through taxable activity is not sufficient to meet your marginal opportunity cost from that activity, simple supply and demand increases the incentive for others for whom that balance works out differently -- perhaps because they are lower on the progressive tax scale so that the marginal realized net monetary return is greater, or perhaps because they are at a similar place to where you are but weigh the costs differently -- to engage in the activity you are forgoing. In fact, a net upward (on the wealth/income) scale shift in tax burden increases the incentive for productive activity at the lower end of the scale.

I understand this issue of maintaining motivation under conditions of artificial full employment was a problem under the Soviet system, but I'm not sure it is necessarily a problem in a post-scarcity economy. For one thing employment can be increased by reducing the work week. After all we went from 60 hour work weeks to 40 hour, even less in Europe where there are longer vacations than in the US. Education over the past century has gone from mostly primary only to mostly college, absorbing excess labor capacity.

I think the idea of 80% leeches living off the 20% productive is just wrong headed. What we will see is the general quality of life improved for everyone. Sure there will some that need to be entirely supported by the rest of us: the homeless, the mentally ill, the infirm, the elderly. The real danger is that the increases in productivity are being siphoned off by the rich and not being equitably distributed. Capitalism is inherently an unstable system tending towards monopoly and the destruction of the commons (pollution and the like) and must be reasonably constrained.

> I understand this issue of maintaining motivation under conditions of artificial full employment was a problem under the Soviet system, but I'm not sure it is necessarily a problem in a post-scarcity economy.

Post-scarcity economy is a contradiction in terms, and if post-scarcity conditions existed, one wouldn't have any need to worry about economy -- which is, after all, nothing but the system by which scarce resources are allocated.

But we're not really discussing post-scarcity conditions, we're talking about managing conditions where the rewards from production are increasingly concentrated in the holders of capital and the returns to labor are mostly extremely low with a (proportionally) very small set of high-value labor positions available.

I think the point (in the context of this discussion) is that we don't need everyone to be maximally productive - machines and automation can do so much that we could all enjoy a very nice standard of living if everyone worked ~2 hours/day.

I'm a little skeptical of basic income as well, just like I'd be skeptical of any untested widespread social policy, but the orthodox reasons why it doesn't work are based on a model of reality that's ~3 generations and 70+ years old. I suspect that if it doesn't work, it'll be because of some problem we haven't thought of yet, not the old "tax on the productive". The top candidate, IMHO, is that we're outcompeted by some other society that doesn't have basic income.

> Rather than work hard only to see most of his earnings confiscated, he'd make just a few movies and then enjoy those profits instead of spending time on diminishing returns.

Sounds good to me. More actors, more variety. Maybe we wouldn't see every single sci-fi/action movie star Tom Cruise.

>The "seriously productive" ones you're expecting to leech off MUST have lots of less-but-still-productive people working for them - and you're tearing out the incentive to do so.

The situation UBI applies to is in a more post-labor world. One where a McDonald's only needs 2 people working instead of 16. At this point it's not going to be taxing those 2 workers but the company itself.

If you want to earn more money than your UBI check (which you would still get if you work), you will still have an incentive to earn more money.

Movie stars aren't a very good example. Ronald Reagan was not 100X times better actor than the next guy. He could command a big salary because he won a tournament market based on name recognition. If he works less, someone just as good gets a chance and there is the same output.

Where a 90% tax really hurts is entrepreneurship and risk taking. If that 90% tax includes taxes on capital gains, then I have no incentive to start a business or invest in a business. If it fails I lose my money and sweat equity. If it succeeds, I get taxed so much I barely make more money than if I had just worked.

One of the reasons the economy was good in the 50's despite the high taxes was that those high taxes only applied to salaries, not capital gains. Also, there were lots and lots of loopholes so a lot of people didn't end up paying that 90%.

That all said. Americans already pay a ton of taxes. There is plenty of money for UBI already. It just needs to be reallocated from failed programs and bureaucracies - such as 90% of the educational system.

"If he works less, someone just as good gets a chance and there is the same output."

Given the pay disparity, if he works less there's probably more output.

(... note that this is considering his decision to work less, in isolation - not the effect of the tax level that purportedly motivated that as a whole, which would take a much deeper analysis...)

> Raise my taxes enough (only to "redistribute" to those opting to not work) and I'll switch to untaxable yet satisfying "off the grid" living.

You're assuming what you do can't be automated. I want to automate what you do so you can live "off the grid" if you want.

Capitalism only entitles you to profits on your labor capital until it has no value.

The problem is, labor capital is the only thing that everyone has. And most people don't have the other form of capital. So if their labor capital has no value, then they're probably going to starve.

Correct me if I'm wrong, but your example seems to imply the existence of a marginal propensity to consume. I don't think this is commonly accepted in light of work by Friedman and others on the permanent income hypothesis, which puts to question relatively simplistic supply-side and "Going Galt" scenarios.

"When Ronald Reagan was a top-billed Hollywood actor, he faced a ~90% tax bracket. Rather than work hard only to see most of his earnings confiscated, he'd make just a few movies and then enjoy those profits instead of spending time on diminishing returns."

Is that what happened? Or did he simply realize that he had enough, and he didn't need to work himself to death to have all the money? Seriously, what's wrong with people realizing they have enough, and don't need to overwork themselves just to have more?

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