Are super-rich people just better at making money?(pudding.cool)
pudding.cool
Are super-rich people just better at making money?
https://pudding.cool/2022/12/yard-sale/
581 comments
> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction.
A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.
A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.
That, and economists broadly agree that taxing businesses and investment is a bad idea, and that the most efficient thing is a consumption tax: https://www.npr.org/sections/money/2012/07/19/157047211/six-.... Note that this article is from NPR of all things.
Most efficient in archieving what exactly?
They only gave actual objectives for 3 of the 6 proposals - and those objectives where "fairer markets" and "create more jobs".
Reducing inequality was not mentioned anywhere.
Indeed they acknowledge it will hurt lower-income households but handwave that away with some unspecified measures to "minimize" harm to those households.
> Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.
...
> Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
...
> [carbon tax] can be structured to make sure it doesn't disproportionately harm lower-income Americans.
Oh, and of course:
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
Because no wealthy person ever thought of ways to restructure their assets so they are poor on paper...
They only gave actual objectives for 3 of the 6 proposals - and those objectives where "fairer markets" and "create more jobs".
Reducing inequality was not mentioned anywhere.
Indeed they acknowledge it will hurt lower-income households but handwave that away with some unspecified measures to "minimize" harm to those households.
> Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.
...
> Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
...
> [carbon tax] can be structured to make sure it doesn't disproportionately harm lower-income Americans.
Oh, and of course:
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
Because no wealthy person ever thought of ways to restructure their assets so they are poor on paper...
> poor on paper
How does that have anything to do with corporate income tax? CIT is paid by the legal entity, usually on the profit. After that the board decides what to do with it. Pay dividends or not, etc. And capital gains taxes are due on that. (That is it's basically a specialized personal income tax.)
Rich people appearing poor on paper only works if the tax system allows deducting luxury expenses. (Like mortgage payments on second, third and so on properties. Which the US tax system usually does.)
How does that have anything to do with corporate income tax? CIT is paid by the legal entity, usually on the profit. After that the board decides what to do with it. Pay dividends or not, etc. And capital gains taxes are due on that. (That is it's basically a specialized personal income tax.)
Rich people appearing poor on paper only works if the tax system allows deducting luxury expenses. (Like mortgage payments on second, third and so on properties. Which the US tax system usually does.)
I remain convinced that unbridled capitalism is incompatible with democracy in the long term, particularly when buying political influence is legitimized.
> If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income.
You're overthinking it. Sweden made renting out apartments unattractive without all this sophistication, they just regulate the prices and keep them low.
You're overthinking it. Sweden made renting out apartments unattractive without all this sophistication, they just regulate the prices and keep them low.
…and has consequently created a housing shortage so severe that their decade-plus waiting list was at one time being considered for the Guinness Book of World Records[0].
Price controls leading to shortages and rationing is basically the microeconomics version of the First Law of Thermodynamics. It has had the same result literally everywhere it has been tried.
The solution lies in the supply. Always. If you want more people to have more of something at an affordable price, you have to make more of that thing.
[0]: https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
Price controls leading to shortages and rationing is basically the microeconomics version of the First Law of Thermodynamics. It has had the same result literally everywhere it has been tried.
The solution lies in the supply. Always. If you want more people to have more of something at an affordable price, you have to make more of that thing.
[0]: https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
Totally agree. My previous comment was sarcastic, of course.
Don’t Swedes just rent them out on the black market instead?
They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
> They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
Sounds like you're just ill-informed? There are shared washing machine rooms in a lot of apartment complexes, although it is getting more rare in newer apartment complexes. You can usually book a slot and then you do your laundry. There is absolutely no shortage of washing machines though.
Sounds like you're just ill-informed? There are shared washing machine rooms in a lot of apartment complexes, although it is getting more rare in newer apartment complexes. You can usually book a slot and then you do your laundry. There is absolutely no shortage of washing machines though.
> Don’t Swedes just rent them out on the black market instead?
They do (with obvious drawbacks of anything illegal). And the black market prices are awfully high.
They do (with obvious drawbacks of anything illegal). And the black market prices are awfully high.
[deleted]
Another solution is for the fed to stop pumping the stock market for the last 14 years like crazy and offering free money to the finance sector.
Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere.
But it’s not because of “rich people”.
It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.
Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere.
But it’s not because of “rich people”.
It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.
The other part is the stock market basically became a government-enforced ponzi scheme through 401ks, 403ba, HSAs, IRAs and other tax advantaged accounts. Of course stock prices will go up as long as people are forced to use arbitrary stock funds for retirement to avoid crippling taxes.
>A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally.
An even more simpler solution would be to take away the all wealth of rich people and divide it among all people. The calculations would be a lot easier. Taxes are complicated.
An even more simpler solution would be to take away the all wealth of rich people and divide it among all people. The calculations would be a lot easier. Taxes are complicated.
Someone tried this, it was called "USSR" (a.k.a. Soviet Union)! They started by nationalizing all businesses, and had all sort of interesting laws, like jail time for people without "real" jobs (to prevent people living off passive income). Or jail time for people who were trying to get rich by selling stuff for too high of a price.
Look it up, pretty interesting story. They did have to build a strong border protection force to prevent people from trying to escape the country, but the country still lasted 69 years.
Look it up, pretty interesting story. They did have to build a strong border protection force to prevent people from trying to escape the country, but the country still lasted 69 years.
while i agree that "taking away the all wealth of rich people and divide it among all people" is simply unrealistic, wrong and unpractical, i do believe we could ask the wealthier more "effort" than the actual one, without having to recreate a "ussr 2.0" or worst go again for that awful original "experience".
It wouldn’t exist anymore then.
Bezos is wealthy because Amazon investors want to give him money; they don’t want to give you money, so if you had the Amazon shares they simply wouldn’t be worth anything.
Bezos is wealthy because Amazon investors want to give him money; they don’t want to give you money, so if you had the Amazon shares they simply wouldn’t be worth anything.
Had 2 people fall for this already, fellow HNers, my above statement was said in sarcasm. Of course there are people here who are stupid enough to suggest it for real.
You should be aware then that HN is a place for sincere and kind discussion. If you're going to speak sarcasm you must mark it, that's how it goes here. You shouldn't come here calling people stupid because you're not following proper social etiquette. In case you aren't aware, placing a \s at the end of your comment is enough to properly denote sarcasm. Communicating intentions is very important and I think you'd be surprised who might say what you said genuinely. A healthy and kind discussion has no place for denigrating those who take you at your word or for trolling people into "falling for it". This place trusts you to properly communicate your ideas.
If you are the admin/owner of HN I'll buy your argument. I'll even go away. If you are not, bugger off.
Calling out stupidity is important. In your 'kind' world, every idiot will have his say to the detriment of everyone else.
I mean what a surreal and disturbing thread - people calling for the robbing the rich, via taxes. Robbing is what thugs do, not thoughful, 'kind' people.
Calling out stupidity is important. In your 'kind' world, every idiot will have his say to the detriment of everyone else.
I mean what a surreal and disturbing thread - people calling for the robbing the rich, via taxes. Robbing is what thugs do, not thoughful, 'kind' people.
Of course, when you become a dictator, you can do that. When will that happen?
>When will that happen?
April 17, 2028.
April 17, 2028.
Something to keep in mind is that Capital gains are not as privileged as they appear in most places because people making that claim are usually not comparing earning a dollar as a person vs earning a dollar in a corp and flowing it through to the individual, they are comparing earning a dollar as a person to earning a dividend or selling a business. There is still a net positive if you hold in the corp for a long time and avoid the personal dividend tax for years and there are some capital gains exemptions for selling corps but they are smaller than most claims on the subject espouse. If you want to harmonize you have to be cognizant of this and not switch to overtaxing earning through corps
> wealth can afford bigger bets and expect bigger payouts
Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.
Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.
[deleted]
> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction.
There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0]
The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes.
[0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.
There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0]
The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes.
[0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.
This yard-sale model isn't really how the economy works though, people don't continuously bet 20% of their net worth. It's something similar going on though, I think a lot of these variables would seem to be explained by considering the lognormal distribution for personal wealth.
In a normal distribution, the shape of the distribution comes from a "random walk" left and right from a large number of steps of varying size.
In a lognormal distribution, on the other hand, the random steps are not additive but multiplicative: e.g you multiply the previous figure by a (Gaussian) random variable many times.
This seems to reflect economic reality that people make decisions proportional to the scale of their current wealth. If I make 10k, it would take 2k extra to entice me to a different job. If I make (or lose) 10% on an investment, etc. It's all multiplicative.
The lognormal distribution also has a fatter "right tail" than a Gaussian, which is what we see IRL.
In a normal distribution, the shape of the distribution comes from a "random walk" left and right from a large number of steps of varying size.
In a lognormal distribution, on the other hand, the random steps are not additive but multiplicative: e.g you multiply the previous figure by a (Gaussian) random variable many times.
This seems to reflect economic reality that people make decisions proportional to the scale of their current wealth. If I make 10k, it would take 2k extra to entice me to a different job. If I make (or lose) 10% on an investment, etc. It's all multiplicative.
The lognormal distribution also has a fatter "right tail" than a Gaussian, which is what we see IRL.
I'm not sure it's intended to reflect the real economy. It's a useful model that shows how success and wealth inequality can arise for reasons of pure luck, and can have nothing to do with meritocracy. I'm not sure any of the points you raise really change the fundamental dynamics of what's shown here.
The whole yard sale model suffers from the fallacy that there is a predefined amount of wealth. If that were true, we’d have exactly as much wealth as our cavemen brethren did, which is clearly not the case. Every time anyone creates something more valuable than the sum of its parts, value is added to the system. A bow is far more valuable than the wood used to build it. A hammer and nails far more valuable than the raw iron in stone.
> What can the yard sale model tell us?
Literally nothing. It fails to model any part of the actual system. It’s not just lacking complexity, it’s a facetious model lacking in any real aspects of anything involved. There is no choice, no intelligence, no reason. Just random chance.
92% of the US including 86% of people without homes in this country have Internet access. We can all make incredibly informed decisions these days. Better informed decisions than ever possible by all the wealthiest royalty in human history, in literally seconds.
The author could have easily Googled the price for the exorbitant watch before they bought it. That’s entirely on them.
> What can the yard sale model tell us?
Literally nothing. It fails to model any part of the actual system. It’s not just lacking complexity, it’s a facetious model lacking in any real aspects of anything involved. There is no choice, no intelligence, no reason. Just random chance.
92% of the US including 86% of people without homes in this country have Internet access. We can all make incredibly informed decisions these days. Better informed decisions than ever possible by all the wealthiest royalty in human history, in literally seconds.
The author could have easily Googled the price for the exorbitant watch before they bought it. That’s entirely on them.
Nonsense. It doesn't have to be a perfect model to still be a useful one. It's precisely because it's so unintuitive that it's interesting. Your introduction of a positive sum mechanic doesn't invalidate the model. Introducing a $new_value component still begs questions around who gets access to that value - and if the yard sale model holds, even perfectly equal distribution of that $new_value suffers from exponential outcome drift for anything except ridiculously high ratios of $new:$old - and in the real world, value is disproportionately captured by the already wealthy [0].
But hey, internet for you lazy proles, pull yourselves up by your shoelaces etc.
[0] - https://wir2022.wid.world -- The richest 1% captured 38% of all new wealth since '95, the bottom 50% captured 2%.
But hey, internet for you lazy proles, pull yourselves up by your shoelaces etc.
[0] - https://wir2022.wid.world -- The richest 1% captured 38% of all new wealth since '95, the bottom 50% captured 2%.
> value is disproportionately captured by the already wealthy
value is generated using both capital from the already rich, and labour from the poor.
Over time, labour isn't increasing in productivity. It's capital that's increasing productivity, such as by improving labour's efficiency.
With this in mind, why is it that the rich shouldnt be the ones to capture the new/increased productivity? After all, it is their investment that would make such productivity possible. If you had told the rich that their investments would not actually gain them profit (because labour captured the increases that produces the profit), they would not have invested in the first place.
One way to break out of this cycle is for labour to provide something more than unskilled labour and merely using capital to produce goods/services. For example, research and development, knowledge/skill from education, etc.
value is generated using both capital from the already rich, and labour from the poor.
Over time, labour isn't increasing in productivity. It's capital that's increasing productivity, such as by improving labour's efficiency.
With this in mind, why is it that the rich shouldnt be the ones to capture the new/increased productivity? After all, it is their investment that would make such productivity possible. If you had told the rich that their investments would not actually gain them profit (because labour captured the increases that produces the profit), they would not have invested in the first place.
One way to break out of this cycle is for labour to provide something more than unskilled labour and merely using capital to produce goods/services. For example, research and development, knowledge/skill from education, etc.
Labor, both unskilled and skilled, drives all economic growth. Ideas have no value until labor creates the tangible embodiments of those ideas.
That laborers, both skilled and unskilled, tend to be fungible, is the reason that they typically have no individual leverage to earn their fair share of the value created by their efforts.
Laborers end up having to unionize to gain the leverage to claw some additional fraction of the true value of their efforts.
The value distribution pyramid is upside down. Ideas have no value until laborers produce a sellable product.
Management ought to be far more grateful and gracious to those who labor day after day to produce the goods we want and need.
That laborers, both skilled and unskilled, tend to be fungible, is the reason that they typically have no individual leverage to earn their fair share of the value created by their efforts.
Laborers end up having to unionize to gain the leverage to claw some additional fraction of the true value of their efforts.
The value distribution pyramid is upside down. Ideas have no value until laborers produce a sellable product.
Management ought to be far more grateful and gracious to those who labor day after day to produce the goods we want and need.
> 92% of the US including 86% of people without homes in this country have Internet access.
Good point, but...
> We can all make incredibly informed decisions these days.
You need more than internet access to make good decisions. I cannot imagine living without a house or healthcare, eating food picked out of a dumpster behind a supermarket, and then being criticized because I made "less-informed" decisions even though I nominally have internet access at a library where the patrons scowl every time they see me in their peripheral vision.
People won't be able to magically make better informed decisions even with access to the information if they are too busy working three jobs to afford food, rent, or healthcare.
Good point, but...
> We can all make incredibly informed decisions these days.
You need more than internet access to make good decisions. I cannot imagine living without a house or healthcare, eating food picked out of a dumpster behind a supermarket, and then being criticized because I made "less-informed" decisions even though I nominally have internet access at a library where the patrons scowl every time they see me in their peripheral vision.
People won't be able to magically make better informed decisions even with access to the information if they are too busy working three jobs to afford food, rent, or healthcare.
> We can all make incredibly informed decisions these day. Better informed decisions than ever possible by all the wealthiest royalty in human history, in literally seconds.
And yet there were numerous stock investing experiments in which random choice delivered similar or better results than respected investment specialists.
It's almost as if, at the end of the day, we don't actually make "incredibly informed decisions".
And yet there were numerous stock investing experiments in which random choice delivered similar or better results than respected investment specialists.
It's almost as if, at the end of the day, we don't actually make "incredibly informed decisions".
> we don't actually make "incredibly informed decisions".
the original argument differentiates between "can" and "do".
It is a form of "victim blaming" - they could've made good decisions, but because they didnt, the outcomes they had were "self-inflicted".
the original argument differentiates between "can" and "do".
It is a form of "victim blaming" - they could've made good decisions, but because they didnt, the outcomes they had were "self-inflicted".
Yes, but value is not created out of thin air, you need capital to create value, i.e. you need to be wealthy.
So you could extend the yard-sale model and include a rule that after each round, each $ will turn into $1.5 with some probability.
Guess what? Now the rich players can't just risk higher stakes in the coinflip games, they will also have more opportunity to introduce more money into the game through value creation.
So that would make the outcome even more extreme than the standard yard-sale model, not less.
So you could extend the yard-sale model and include a rule that after each round, each $ will turn into $1.5 with some probability.
Guess what? Now the rich players can't just risk higher stakes in the coinflip games, they will also have more opportunity to introduce more money into the game through value creation.
So that would make the outcome even more extreme than the standard yard-sale model, not less.
However, the outcome of such a system would be that there's more stuff than ever at the yard sale. Things that didn't previously exist.
Therefore, the fact that new options exist at the yard sale is itself a form of wealth.
Therefore, the fact that new options exist at the yard sale is itself a form of wealth.
did you read the article or did you just read the first paragraph? it considers some of the criticisms later in the article.
I think there is a problem with using money to measure wealth. Maybe a better question may be to check how land or housing is distributed among people? If 10% wealthiest decided one day to e.g. purchase land, the effect would be: 1) equity/bonds or whatever they are using to store their wealth would plummet and crash 2) land price would skyrocket. So suddenly they would not be that rich. I think much of the wealth is overvalued currently, it is like with Bitcoin, the price is crazy because not much people are willing to sell.
> Every time anyone creates something more valuable than the sum of its parts, value is added to the system.
I really like this angle, although the value of 'something' can vary for different people.
I really like this angle, although the value of 'something' can vary for different people.
Does it apply better to land/housing or other limited resources?
To solve all this, it's pretty simple, and the U.S. actually used to do it: heavily tax the super rich. Heavy taxation and then appropriate use of those funds for education, R&D funding, infrastructure, etc. is actual trickle-down economics. And mega corporations should be heavily taxed instead of holding the country economically hostage. They jumpstart their companies off of government funding and R&D and then act abused when asked to help give back.
Right now, the middle class is getting slammed with taxes. They make almost all their money through salary and get taxed heavily, while the super rich pay either no tax or a maximum of capital gains, so almost 40% or less than upper middle class in terms of percentage.
Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
Right now, the middle class is getting slammed with taxes. They make almost all their money through salary and get taxed heavily, while the super rich pay either no tax or a maximum of capital gains, so almost 40% or less than upper middle class in terms of percentage.
Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income.
Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and beyond the ~40% levels we're already facing...
Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and beyond the ~40% levels we're already facing...
As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.) I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate.
And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of the groups most likely to be "paper millionaires" and hence screwed by such a system.
And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of the groups most likely to be "paper millionaires" and hence screwed by such a system.
It’s hard problem that can only be solved through attempts and iteration. The fact that a wealth tax is difficult is not a good enough reason to not try, because the problem of wealth inequality is so severe now.
There are also some things that do work decently well that we don't do anymore for political reasons, such as estate taxes.
The problem with this hollowing out of the regulations government used to have, is that people react by jumping for extreme, impractical things like "wealth tax". Nobody is going to go for the idea that the government comes around and explicitly collects a significant percentage of everything you own every year. (And they already do much of what they can get away with through inflation and real estate taxes).
Rather, to continue the spirit of the top level comment, what is also now missing is the estate tax, which is/was around 40% (it's graduated too, but it tops out quickly). IIUC, the federal threshold used to be around $1M a few decades ago, and is now $10M - this was the anti "death tax" political issue you might vaguely recall. Furthermore, due to wider use of trusts, it's been basically eliminated unless your family is extremely unlucky.
Fundamentally, I'd rather just tamp down the amount of money given away to the rich - stop the government giving trillions of dollars to the financial industry to prop up the fictitious asset bubble pyramid scheme, and either let natural technological deflation happen or at least spend the money deliberately ala MMT.
But either way, something is required - the system we have right now has the government continually giving away gobs of money to asset holders, while doing very little to collect it back. This is exactly why these personal wealth bubbles continue to grow.
Rather, to continue the spirit of the top level comment, what is also now missing is the estate tax, which is/was around 40% (it's graduated too, but it tops out quickly). IIUC, the federal threshold used to be around $1M a few decades ago, and is now $10M - this was the anti "death tax" political issue you might vaguely recall. Furthermore, due to wider use of trusts, it's been basically eliminated unless your family is extremely unlucky.
Fundamentally, I'd rather just tamp down the amount of money given away to the rich - stop the government giving trillions of dollars to the financial industry to prop up the fictitious asset bubble pyramid scheme, and either let natural technological deflation happen or at least spend the money deliberately ala MMT.
But either way, something is required - the system we have right now has the government continually giving away gobs of money to asset holders, while doing very little to collect it back. This is exactly why these personal wealth bubbles continue to grow.
> Nobody is going to go for the idea that the government comes around and explicitly collects a significant percentage of everything you own every year.
I think you'd be surprised. When the majority of people own nothing, it won't take much for the ruling class to convince them that taking everybody else's wealth for the greater good is the right and moral thing to do.
I think you'd be surprised. When the majority of people own nothing, it won't take much for the ruling class to convince them that taking everybody else's wealth for the greater good is the right and moral thing to do.
Bingo
The rich buy stuff, do they not? Tax those things to force realization and thus tax of unrealized wealth. Buying a second, third, fourth home? Here's your increasingly high tax and interest rate penalty. Instead of throwing up our hands with "they don't have cash", force them to realize investments into cash and deincentivize being able to keep everything hidden being investments and purchasing things with unrealized wealth.
The rich don't buy much stuff relatively to their wealth.
When you're a billionaire all of life's basics are effectively free. And there are only so many houses, private jets, and super yachts you can buy.
In any case your first, second, third, and fourth home will be owned by a corporation based in the Cayman Islands and buried under an opaque list of shell companies, all of which you also own via cut-outs, one or two of which may be actual registered and regulated banks, which mortgage the properties back to you so you can play games with interest rate arbitrage.
And all of this will be handled by a small personal mini-corporation employing tens of tax experts, lawyers, creative accountants, and investment managers, so you probably aren't even interested in the details.
When you're a billionaire all of life's basics are effectively free. And there are only so many houses, private jets, and super yachts you can buy.
In any case your first, second, third, and fourth home will be owned by a corporation based in the Cayman Islands and buried under an opaque list of shell companies, all of which you also own via cut-outs, one or two of which may be actual registered and regulated banks, which mortgage the properties back to you so you can play games with interest rate arbitrage.
And all of this will be handled by a small personal mini-corporation employing tens of tax experts, lawyers, creative accountants, and investment managers, so you probably aren't even interested in the details.
> Buying a second, third, fourth home?
It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.
It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.
Why should corporations be allowed to purchase homes in the first place? Remove that or heavily tax it.
I don't think its that unreasonable that big apartment complexes are owned by corporations.
I have a friend who buys apartment complexes and houses on the company for his employees to live in; that seems not to be reasonable. In fact, it became more reasonable with wfh; now his colleagues living farther away, who he wants in the office 3 months a year, can live for cheap for both sides and without any long term contracts. Definitely cheaper and more convenient than hotels in his area.
>I have a friend who buys apartment complexes and houses on the company for his employees to live in
When railroad and heavy industry did this exact thing in the 19th century we called them robber barons and broke up their obscenely powerful and corrupt monopolies via antitrust legislation.
When railroad and heavy industry did this exact thing in the 19th century we called them robber barons and broke up their obscenely powerful and corrupt monopolies via antitrust legislation.
Anything can be abused, but I don't know the history; I have heard of robber barons, but not in the context of housing and Google doesn't seem to give me more than just their own enormous mansions. It would depend on if it's abused or not, wouldn't it?
Quick PBS summary of company towns: https://www.youtube.com/watch?v=F7AOWLOOT-U
https://en.wikipedia.org/wiki/Sixteen_Tons
https://en.wikipedia.org/wiki/Sixteen_Tons
You can look up the history of company towns
You load sixteen tons, whattaya get?
Another day older and deeper in debt
St. Peter don'cha call me, 'cause I can't go
I owe my soul to the company store
- Merle Travis, "Sixteen Tons"
The TL;DR of why this is bad is that when employees are paying, or are indebted to, their employers, even in a roundabout way, it's really easy for that relationship to become very abusive.
The company towns also often payed in scrip, which was basically credit at the company store, and, gee, wouldn't you know it, the company owns all the land to the horizon, so there are no other stores in reasonable travel distance! And if you need a little credit because your pay's terrible after your rent (to the company) comes out, and the prices at the store are marked way up, why, they'll be happy to extend some....
That's the extreme version, but it's bad enough that even inching that direction is something worthy of concern. One ought be wary any time money's flowing from an employee to an employer.
The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.
Another day older and deeper in debt
St. Peter don'cha call me, 'cause I can't go
I owe my soul to the company store
- Merle Travis, "Sixteen Tons"
The TL;DR of why this is bad is that when employees are paying, or are indebted to, their employers, even in a roundabout way, it's really easy for that relationship to become very abusive.
The company towns also often payed in scrip, which was basically credit at the company store, and, gee, wouldn't you know it, the company owns all the land to the horizon, so there are no other stores in reasonable travel distance! And if you need a little credit because your pay's terrible after your rent (to the company) comes out, and the prices at the store are marked way up, why, they'll be happy to extend some....
That's the extreme version, but it's bad enough that even inching that direction is something worthy of concern. One ought be wary any time money's flowing from an employee to an employer.
The robber-baron version is basically the thing you see in capitalist-dystopia sci fi like The Outer Worlds, but it actually happened.
Is a large apartment complex considered a home? I've never lived in an entire complex, only one unit
I am trying to imagine how such a proscription would work. Would there be a list of things corporations are disallowed ownership? Who would the seller be required to determine if the entity is appropriate? Or would the local property tax clerk just not allow registration by a non-human entity?
There are lists of chemicals people cannot own, why can there not be lists of things corporations cannot own?
I am wondering about the details. Would you prohibit anything that could be used as a residence? Office buildings would be permitted? I live in an apartment unit in a 24 story tower. It is owned by a corporation and I lease it. Would only condos owned by humans be permitted?
Me, personally? I don't know -- there are smarter people than I who can come up with lists. I was remarking about the idea itself.
These details seem to make the idea unworkable to me.
Until someone comes up with a proposal I guess we will never know.
Do you suppose laws and the legal system provide the social infrastructure to support the corporate ownership of housing as property? If so, that - outside of political will - can be modified, deleted even. Without legal support, it will collapse.
I currently lease my apartment unit in a 24 story tower from a corporation. My friend leases a single family home in a suburb from a corporation. Should both of these use cases be eliminated?
Does it matter that you lease it specifically from a corporation? I'm just going to guess that you are more interested in where any how you live than what the ownership model is of the place your living. For example given two properties in all ways equal except ownership models, you would take the corporate-owned one? I find that a bit far fetched.
Even then, because we typically lack experience with a variety of ownership models, it will be difficult to dis-entangle the familiarity bias from our conceptualizations.
Even then, because we typically lack experience with a variety of ownership models, it will be difficult to dis-entangle the familiarity bias from our conceptualizations.
No, I don’t want a corporation. I am trying to imagine how renting would work in dense cities with restrictions on ownership. It seems it would be a less liquid market.
How would apartment complexes be sold then?
Sell them to land trusts, co-operatives, and housing unions. There are creative and viable alternatives.
Most of those are bad; at least if a landlord is only interested in money they’ll take your money. In the “decommodified” forms, you can’t live there unless the manager personally likes you.
With government public housing you can lose it if you break the law (hope you never smoke weed) or if the populace elects a racist government and you’re a minority.
Commodifying housing helped black people in the South because they could actually buy prefab houses from Sears.
With government public housing you can lose it if you break the law (hope you never smoke weed) or if the populace elects a racist government and you’re a minority.
Commodifying housing helped black people in the South because they could actually buy prefab houses from Sears.
Sorry, but I'm not sure where you got government housing from. I specifically omitted it to avoid that dialog option.
That’s the one people usually want. Co-ops of course are much more racist than that.
Yes, there will always be workarounds, but those come with prices of their own (such as time spent getting around them, people to hire, etc.)
As an analogy, we catch more dumb criminals than smart criminals - but overall it's still worth having police, even if a few bad guys get away.
As an analogy, we catch more dumb criminals than smart criminals - but overall it's still worth having police, even if a few bad guys get away.
The cost of hiring people to get around regulations so you don't have to waste your own time doing it is trivial to someone extremely wealthy. Those things really are not deterrents at all. They'd only work on the upper middle class, meaning we'd end up in the exact same situation we're in right now. If you can pay someone to make a problem go away then the very rich are going to do that almost 100% of the time.
> Just an investment in a corporation that happens to home a bunch of houses.
But what's the point? If they can't get money out then it doesn't matter. The only reason houses are worth holding as an asset is public bodies stopping the creation of more housing, driving the price up. You fix that with less state interference, not more.
But what's the point? If they can't get money out then it doesn't matter. The only reason houses are worth holding as an asset is public bodies stopping the creation of more housing, driving the price up. You fix that with less state interference, not more.
That's the exact opposite of what happens in the real world.
In the world the state builds and owns a lot public housing and this depresses rents and property values.
Countries stop doing this when policy is captured by neoliberal dogma. The UK is a perfect example. Housing was relatively affordable before a disastrous "right to buy" policy in the 70s, with extra enforced restrictions on state house building, destroyed the national housing market.
Now most housing is unfeasibly expensive. And hundreds of thousands of properties stand empty because they're owned solely as investments.
This is excellent for private landlords, property speculators, and older home-owners. It's an utter disaster for everyone under the age of forty because rents are unaffordable and ownerships is unimaginable.
In the world the state builds and owns a lot public housing and this depresses rents and property values.
Countries stop doing this when policy is captured by neoliberal dogma. The UK is a perfect example. Housing was relatively affordable before a disastrous "right to buy" policy in the 70s, with extra enforced restrictions on state house building, destroyed the national housing market.
Now most housing is unfeasibly expensive. And hundreds of thousands of properties stand empty because they're owned solely as investments.
This is excellent for private landlords, property speculators, and older home-owners. It's an utter disaster for everyone under the age of forty because rents are unaffordable and ownerships is unimaginable.
Right to Buy didn't destroy the housing market. The same people who lived in council housing bought it under Right to Buy.
The problem was not building more housing to cope with increased demand. That would've happened regardless of whether the Right to Buyers were renting off the council or had bought their property.
> In the world the state builds and owns a lot public housing and this depresses rents and property values.
Public housing, but not housing. The state controls what can be built where, which can drive up demand enough that property becomes a valuable enough asset to let it stand empty. Giving the state more power on top of that to correct that incompetent use of power seems worth questioning.
The problem was not building more housing to cope with increased demand. That would've happened regardless of whether the Right to Buyers were renting off the council or had bought their property.
> In the world the state builds and owns a lot public housing and this depresses rents and property values.
Public housing, but not housing. The state controls what can be built where, which can drive up demand enough that property becomes a valuable enough asset to let it stand empty. Giving the state more power on top of that to correct that incompetent use of power seems worth questioning.
But you can't keep building ... that's not good for the environment!
It's society enforcing these restrictions, and we absolutely do not want to let go of them. Compromising at all on any of them is considered evil ...
It's society enforcing these restrictions, and we absolutely do not want to let go of them. Compromising at all on any of them is considered evil ...
....what?
Would it not be possible to then tax them on their ownership on that corporate entity, which gets assessed based on its holdings (including, yes, property)?
Or prevent companies from holding real estate as an investment vehicle?
I'm not naive enough to argue that this is a definitively easy thing, but especially when it comes to housing, the poor and middle class are getting completely fucked right now; it's gotten to the point in the crisis where we absolutely need to do something urgently.
Or prevent companies from holding real estate as an investment vehicle?
I'm not naive enough to argue that this is a definitively easy thing, but especially when it comes to housing, the poor and middle class are getting completely fucked right now; it's gotten to the point in the crisis where we absolutely need to do something urgently.
There's always the next trick. What if that corporation is also saddled with a bunch of debt, such that its net holdings is roughly zero? What if it bought those houses for very little money (from some other friendly corporation) so that, on paper, their value is very low? etc.
Make prohibitively expensive for corporations to own residential properties (cut off by square meters or land use type).
They would create a separated business for each property
I see this loophole brought up a lot. Is there really no way to prevent it?
Taxing businesses which own residential property at the same rate as second homes stops that particular wheeze entirely. If you wish to exempt certain types of business you believe have valid reasons to own residential property at low/no property tax rates then that becomes an exemption they have to demonstrate eligibility for, not the default.
Second homes being misclassified as non-residential property might be trickier to deal with, but a lot of jurisdictions already have laws around what is and isn't residential...
Second homes being misclassified as non-residential property might be trickier to deal with, but a lot of jurisdictions already have laws around what is and isn't residential...
[deleted]
This is solved by a beneficial owner registry where you must register the actual human who owns and benefits from the assets of the corporation.
This has the added benefit of injecting a ton of extra transparency and sunlight into corporate dealings.
This has the added benefit of injecting a ton of extra transparency and sunlight into corporate dealings.
KYC plus as people said, no/very limited corporate ownership of residential properties.
Those loopholes are trivial to eliminate, because those laws are already in place* for restrictions on foreign ownership.
* in many countries, I don't know about the USA.
* in many countries, I don't know about the USA.
The rich buy stuff, yes, but they spend a much lower percentage of their wealth (or income) on "buying stuff" than the middle-class or merely-well-off do.
I think we should add very steep taxes on second+ homes and "investment properties", but that's to address the housing problem, not to address the massive wealth disparity.
The real problem is their ability to buy things like "lawyers" and "newspaper coverage" and "senators", and it's much harder to effectively tax that sort of thing.
I think we should add very steep taxes on second+ homes and "investment properties", but that's to address the housing problem, not to address the massive wealth disparity.
The real problem is their ability to buy things like "lawyers" and "newspaper coverage" and "senators", and it's much harder to effectively tax that sort of thing.
The tax/bankruptcy laws for homes, for example, are absolutely crazy. 2nd+ homes in the US can be written off but the first one cannot. Absolutely bizarre world policy that only makes sense if it were written by/for the wealthy.
Also corporate ownership of single-family residential property in the US should be forbidden.
Also corporate ownership of single-family residential property in the US should be forbidden.
I agree. Taxing unrealized capital gains is just not a good idea at all. What's more problematic than people having huge sums of unrealized book value, is that in the current system they're allowed to live a lavish lifestyle by taking out loans against those assets (which effectively is an income for them) without paying any taxes at all. That is what should be taxed in some form.
We tax property without realizing a gain. We even tax bonds on deferred interest (eg zero coupon bonds). We can and should do this for stocks. The ultra-rich already borrow money to avoid realizing gains (and thus paying taxes). If they want to keep their stocks let them borrow to pay their tax bills.
> We tax property without realizing a gain.
Not only do we do that which dis-proportionally hurts the less wealthy more, but property taxes are assessed upon assessed valuations of which the homeowner who does not sell or gets loans upon that valuation obtains zero benefit from. So the insurance company (which also uses the valuation) and the property tax jurisdiction(s) obtain yield from the valuations that year, and do not endure a clawback when the valuations ever decline.
Not only do we do that which dis-proportionally hurts the less wealthy more, but property taxes are assessed upon assessed valuations of which the homeowner who does not sell or gets loans upon that valuation obtains zero benefit from. So the insurance company (which also uses the valuation) and the property tax jurisdiction(s) obtain yield from the valuations that year, and do not endure a clawback when the valuations ever decline.
Property taxes are pretty bad! Everyone hates paying them, retirees can’t afford them, and they tax building improvement which motivates owners to tear down their buildings.
LVT is a much better related tax.
Anyway, wealth taxes are probably bad because taxes are supposed to be deflationary, but wealth taxes are inflationary if you collect them in USD, since taxpayers have to sell assets first. Unless the IRS is willing to take a % interest in a collectible painting as the tax.
LVT is a much better related tax.
Anyway, wealth taxes are probably bad because taxes are supposed to be deflationary, but wealth taxes are inflationary if you collect them in USD, since taxpayers have to sell assets first. Unless the IRS is willing to take a % interest in a collectible painting as the tax.
I guess LVT is better, though I find it almost a pendantic thing at this point given that in so many places where property is expensive the property tax is effectively a land value tax already as the land dominates the assessed value so strongly.
Maybe start by not allowing this "stepping up" of the book value of asssets without paying taxes when assets are inherited:https://en.wikipedia.org/wiki/Stepped-up_basis
That means rich people can accumulate generational wealth without ever even paying capital gains taxes. And during one's lifetime, one can get liquidity out of assets by borrowing against them without selling them.
The rule also seems strange from an outside perspective. Either the book value of assets should be kept the same when inheriting (I believe Germany does this), or the book value should be changed to current market value but the difference be taxed as gains (I believe Canada does this).
That means rich people can accumulate generational wealth without ever even paying capital gains taxes. And during one's lifetime, one can get liquidity out of assets by borrowing against them without selling them.
The rule also seems strange from an outside perspective. Either the book value of assets should be kept the same when inheriting (I believe Germany does this), or the book value should be changed to current market value but the difference be taxed as gains (I believe Canada does this).
It is reasonably easy.
Step 1. The country creates a law forbidding any financial interactions with "offshore" countries (list is populated manually by lawmakers) and also with companies working with such offshore companies (shell intermediaries) in "good" countries.
Step 2. Country forbids its citizens from owning any assets or be incorporated in the same "offshore" countries.
Step 3. Blanket ban of cryptotokens.
Step 4. Huge inheritance taxes.
Step 5. Incremental tax hikes for second and more houses/apartments owned. Restrictions for corporations owning a lot of residential properties and huge taxation.
Step 6. Ban or restrictions of airbnb-like activities to discourage parking money in the housing market.
Basically look where rich hide money go for that. When they switch tactics you follow.
Step 0. Big independent financial auditor structure, independent from law and judicial branched both (or almost independent). From experience - you can dismantle a lot billionaires even with existing laws, if only someone looked close enough and punished them. This is a huge problem in eastern europe for example.
Step 1. The country creates a law forbidding any financial interactions with "offshore" countries (list is populated manually by lawmakers) and also with companies working with such offshore companies (shell intermediaries) in "good" countries.
Step 2. Country forbids its citizens from owning any assets or be incorporated in the same "offshore" countries.
Step 3. Blanket ban of cryptotokens.
Step 4. Huge inheritance taxes.
Step 5. Incremental tax hikes for second and more houses/apartments owned. Restrictions for corporations owning a lot of residential properties and huge taxation.
Step 6. Ban or restrictions of airbnb-like activities to discourage parking money in the housing market.
Basically look where rich hide money go for that. When they switch tactics you follow.
Step 0. Big independent financial auditor structure, independent from law and judicial branched both (or almost independent). From experience - you can dismantle a lot billionaires even with existing laws, if only someone looked close enough and punished them. This is a huge problem in eastern europe for example.
You lost me at step 1. Punishing people because their families live in what some people deem "offshore" is heartless. Also, forget modern technology like smartphones if you only can do trade with "good" countries.
I should have clarified - I don't propose to "ban" half the planet because they the not optimal with their laws or prosecution. Offshore usually means tax heavens, usually the tiny island countries with small native population and incredibly lax financial regulation or none at all. Those are the primary targets.
Surprisingly, people do live in those places too. I was born on one and still have a lot of family there, and none of us are wealthy.
Start with Delaware.
Exactly this. How can such arrangement exist in the USA is strange for me.
don't forget South Dakota - it will be put most tax havens to shame.
https://www.theguardian.com/world/2019/nov/14/the-great-amer...
> 1. Punishing people because their families live in what some people deem "offshore" is heartless.
If it were the only way to address societal inequalities, is it more heartless than letting those continue?
If it were the only way to address societal inequalities, is it more heartless than letting those continue?
How do I know that it would not even worsen the situation, as it clearly would introduce other inequalities?
Well that's a different argument than saying it's heartless. The point I'm making is that it being heartless is not an argument against an evidence-based policy that would help more people.
So your plan to tax wealth instead of income doesn't involve taxing wealth?
Sure you can do all that, and that would close some tax loopholes (albeit at a cost), but has nothing to do with taxing wealth instead of income.
Sure you can do all that, and that would close some tax loopholes (albeit at a cost), but has nothing to do with taxing wealth instead of income.
See step 4?
They should probably add in an increased capital gains tax as well
They should probably add in an increased capital gains tax as well
Step 4 does little but hurt upper middle families. They effectively lose the ability to pass on anything of value to their children while the truly rich we’ll still be able to pass on something of value to their children. And the cycle continues, and inequality increases.
what's to prevent a wealthy parent from gifting wealth to their children while alive? This seems like the easiest thing of all for someone with a competent accountant to circumvent.
Bad for families building generational wealth who don't have it yet though, and boy do I hate the idea as a result.
Bad for families building generational wealth who don't have it yet though, and boy do I hate the idea as a result.
In the current system 95% of families can't build generational wealth so the point seems moot
It's the temporarily embarrassed millionaire syndrome. Sorry but it just doesn't happen for most people due to the way the system works
It's the temporarily embarrassed millionaire syndrome. Sorry but it just doesn't happen for most people due to the way the system works
The problem seems to be education. Plenty of immigrants are able to give their children better lives.
What will be the downsides of these moves?
Well the obvious ones:
Some people have legitiment business interests in tax-haven type countries that are not about avoiding taxes. No country is just purely a tax haven with no other ecconomic activity after all.
In theory a blanket ban on crypto could harm innovation. This was much easier to believe at the beggining of the hype cycle when it seemed like someone might actually do something useful with blockchain tech. Kind of hard to believe at this stage.
I feel like inheritence tax is kind of pointless by itself. Most people dont just suddenly die and have time to distribute their assets pre-death.
Limiting housing investment might make cost of living go up. Its not like houses just appear out of nowhere. lots of people cant afford to just buy/build a house. Rich people buying houses and renting them out helps fill that gap. It doesn't always work out as ideally at that, but the other extreme of severely restricting real estate ownership would probably screw over poor people too who do not have sufficient resources to get a mortgage. They still need somewhere to live.
I dont really know what independent auditors means precisely. IRS/CRA/etc are already pretty independent. They could be better funded though.
Some people have legitiment business interests in tax-haven type countries that are not about avoiding taxes. No country is just purely a tax haven with no other ecconomic activity after all.
In theory a blanket ban on crypto could harm innovation. This was much easier to believe at the beggining of the hype cycle when it seemed like someone might actually do something useful with blockchain tech. Kind of hard to believe at this stage.
I feel like inheritence tax is kind of pointless by itself. Most people dont just suddenly die and have time to distribute their assets pre-death.
Limiting housing investment might make cost of living go up. Its not like houses just appear out of nowhere. lots of people cant afford to just buy/build a house. Rich people buying houses and renting them out helps fill that gap. It doesn't always work out as ideally at that, but the other extreme of severely restricting real estate ownership would probably screw over poor people too who do not have sufficient resources to get a mortgage. They still need somewhere to live.
I dont really know what independent auditors means precisely. IRS/CRA/etc are already pretty independent. They could be better funded though.
If any single country will try this alone - devastating. For the country :) . If USA alone will try it - maybe it will work, idk. If USA plus EU plus major Asian economies will do it collectively - it will work.
Sorry, I wasn't clear. Assuming you get what you want, what will be the downsides?
For independent financial auditor - none that I can think of.
For offshore restrictions - you as a country lose all existing assets already there. A lot of people will move their business to a better countries, providing less restrictions and eventually taxes for them. Probably election loss and further dismantling of all these laws by disgrunted businessmen using their pocket political forces. If will hugely depend on the collective size of economies doing the ban.
For housing - its tourists plus rent seekers vs. regular citizens. You hurt one group and you benefit another and vice versa. There is no win win scenario here, balance must be found. I personally vote for regular citizens, even if tourism industry will be hurt a little bit.
For inheritance taxes - no downsides.
For token ban - no downsides.
For offshore restrictions - you as a country lose all existing assets already there. A lot of people will move their business to a better countries, providing less restrictions and eventually taxes for them. Probably election loss and further dismantling of all these laws by disgrunted businessmen using their pocket political forces. If will hugely depend on the collective size of economies doing the ban.
For housing - its tourists plus rent seekers vs. regular citizens. You hurt one group and you benefit another and vice versa. There is no win win scenario here, balance must be found. I personally vote for regular citizens, even if tourism industry will be hurt a little bit.
For inheritance taxes - no downsides.
For token ban - no downsides.
I think inheritance tax has huge downsides. Past a certain age, if you've done reasonably well, and are thus most likely to make a huge impact for the better in your latter working years, why do that most useful useful work if you can't pass it on?
We can do it incrementally, so that majority op population is not affected much. And if a billionaire is discouraged from earning additional billions and retire - well, that was the point? He stops working (hypothetically) but his place will be immediately replaced by less wealthy successor (or by more wealthy opponent, but that problem need be analyzed separately). His kids won't become billionaires, but will be a mere millionaires, requiring them to contribute if they want to keep up expenses. All in all I think it is possible to set up such inheritance taxes so that majority will have positive result.
If you're thinking about billionaires, I think you're doing it wrong. Billionaires don't have billions in the bank. They generally have shares in companies which need to be sold to get money out. And the price changes the more you sell. Billionaire "net worth"s are almost useless because they assume each share they sell is worth the same as the last share traded, which would not be the case if they were all dumped on the market, and even less so if the government made a habit of seizing your shares when you die.
Do the work because it's enjoyable. If it's no longer enjoyable, enjoy your wealth while you have it, and retire.
This is what I mean. It's likely dangerous to disincentivise so many people in their most expert years from working.
Perhaps - I would think in many cases, an equilibrium would be reached. Comparatively few people in any industry are wholly irreplaceable. Still, should something like this just pop into law tomorrow, one could expect a large group of experienced specialists at the top of a wide array of fields to decide to retire, to disasterous effect. Given time to settle in though, I'd wager it likely that talent would filter up to replace any losses at an equivalent rate.
Ultimately, people as a whole like to work. They dislike working under poor conditions or doing jobs that don't feel rewarding. A law like this would generate a lot of change, but I just don't see that change being disasterous given sufficient adjustment time.
Ultimately, people as a whole like to work. They dislike working under poor conditions or doing jobs that don't feel rewarding. A law like this would generate a lot of change, but I just don't see that change being disasterous given sufficient adjustment time.
Our goal as a society should be to maximize happiness, not maximize the number of people who are working.
You can pass it on, but you have to pay taxes on it
We have that today. For some people it's not worth working, and they might as well retire and stop contributing. As we raise the inheritance tax rate, that number will drastically increase, and we get to raid some one-off money in exchange for much less productive work.
But what are the downsides?
Yeah, that's a very easy way... Of making all your modestly rich people close shop and leave
> forbidding any financial interactions with "offshore" countries
And what do you think "offshore" means? This is TikTok levels of financial naivety
> forbidding any financial interactions with "offshore" countries
And what do you think "offshore" means? This is TikTok levels of financial naivety
Offshore is common term. Its collectively all those small countries which have minuscule corporate tax, zero financial rules and refusal to cooperate with big countries about financial tax evasion. Basically everyone from Ireland, Switzerland (sorry guys, just business) to Bahamas and Panama (and ban flags of convenience while we are at it). Definitely all countries refusing to disclose financial records for international law enforcement.
If I were planning such effort, I would propose do bans in waves, with multiyear intervals. E.g. ban of top10 worst offender countries - Cayman islands, British Virgin islands, Seychelles, etc. Then make a list of 10 next and warn them that they have 2-3 years to adjust or be banned too. Rinse and repeat.
If I were planning such effort, I would propose do bans in waves, with multiyear intervals. E.g. ban of top10 worst offender countries - Cayman islands, British Virgin islands, Seychelles, etc. Then make a list of 10 next and warn them that they have 2-3 years to adjust or be banned too. Rinse and repeat.
> Definitely all countries refusing to disclose financial records for international law enforcement.
Since you apparently never heard of FATCA and OECD CRS I'll leave it at that
Oh yeah and several US States don't require financial/personal information in a lot of cases (including real estate transactions).
Since you apparently never heard of FATCA and OECD CRS I'll leave it at that
Oh yeah and several US States don't require financial/personal information in a lot of cases (including real estate transactions).
I'm aware that there are a lot of legal frameworks about this issue. So what? In the end they are either impotent or not sufficient. The problem is global and doesn't show any signs of abating.
This is in Dickens - Bleak House, I think, when he refers to all the under-taxed industrialists promising to 'pitch' their acumen into the Atlantic (i.e., move to the United States) if any government dares to restrict their income through increased taxation.
> Of making all your modestly rich people close shop and leave
Switzerland has a wealth tax, yet it also has some very rich residents (wealth tax is applied to your worldwide assets/cash, and it includes companies you own, so you have no way to avoid it.)
Switzerland has a wealth tax, yet it also has some very rich residents (wealth tax is applied to your worldwide assets/cash, and it includes companies you own, so you have no way to avoid it.)
What if, while grappling with these complex issues, we institute a land tax as the obvious easy part? That is easy, hard to dodge and all but breaks inter-generational wealth transfers as a matter of practice. It is hard to get wealth from grandparent to grandchild in anything other than land; everything decays and you just need one idiot in the chain to lose everything with no chance to recover. The way the market intended.
> As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.)
Switzerland does it and it seems to work pretty well.
Switzerland does it and it seems to work pretty well.
Can you give some details for the non initiated?
You pay a (progressive) % of your wealth in tax every year, based on your declaration.
Financial institutions report your wealth (to some extent), and the development of wealth is checked against your income, making tax evasion non-trivial. You could hide the money in a shoebox but you'll lose more in opportunity cost (missed investment gains) than you'll save on tax.
The other side of the coin though is that capital gains generally aren't taxed.
Mainly, I don't agree that "it is very difficult to tax wealth". It's basically a box "your wealth: <enter number here>" on the tax declaration, with an extra spreadsheet/list to fill out showing what the wealth consists of, plus proof (e.g. bank/stock account statements).
Financial institutions report your wealth (to some extent), and the development of wealth is checked against your income, making tax evasion non-trivial. You could hide the money in a shoebox but you'll lose more in opportunity cost (missed investment gains) than you'll save on tax.
The other side of the coin though is that capital gains generally aren't taxed.
Mainly, I don't agree that "it is very difficult to tax wealth". It's basically a box "your wealth: <enter number here>" on the tax declaration, with an extra spreadsheet/list to fill out showing what the wealth consists of, plus proof (e.g. bank/stock account statements).
[deleted]
You declare all the assets you own* in your tax declaration (bank accounts, properties, art, cars, equity, ...), even if abroad. You also declare your debts.
I don't know how they enforce/check that, especially for foreign-based assets though.
* except for household and personal common usage goods
* except for household and personal common usage goods
OK, cool, but you didn't explain how does that fix wealth inequality in Switzerland or make wealth taxation fair? You just described a tax declaration system, not a taxation system.
Anyone can declare assets anywhere but if they're not taxed, or taxed very little, then inequality grows. So does Switzerland do this better or fairer than other countries?
Anyone can declare assets anywhere but if they're not taxed, or taxed very little, then inequality grows. So does Switzerland do this better or fairer than other countries?
Because you pay a percentage of your total wealth in annual taxes every year (in addition to your usual income taxes).
It differs between cantons (states, kinda) and has progressive banding. Someone with 100k in wealth will pay maybe 100-200 or so. If you have 100 million CHF, in Geneva you would pay around 1 million per year in taxes on that wealth.
As the OP stated, it is global assets and wealth, so foreign/offshored investments still attract the tax. Plenty of people choose to be resident in Switzerland even with these taxes.
It differs between cantons (states, kinda) and has progressive banding. Someone with 100k in wealth will pay maybe 100-200 or so. If you have 100 million CHF, in Geneva you would pay around 1 million per year in taxes on that wealth.
As the OP stated, it is global assets and wealth, so foreign/offshored investments still attract the tax. Plenty of people choose to be resident in Switzerland even with these taxes.
Well, you asked how it worked, not whether it was effective at fighting inequality.
My understanding is that it's not very effective, because any foreign-held asset is pretty much hidden from Switzerland, unless there's an agreement with the country for this kind of information.
My understanding is that it's not very effective, because any foreign-held asset is pretty much hidden from Switzerland, unless there's an agreement with the country for this kind of information.
I mean... you could start by taxing realized capital gains at >20%
It's hard for me to give an argument like "this is difficult" credence when we already have a capital gains tax that's lower than most income taxes. I will buy this is difficult when you raise that number to 50% and we still have the same issues.
It's hard for me to give an argument like "this is difficult" credence when we already have a capital gains tax that's lower than most income taxes. I will buy this is difficult when you raise that number to 50% and we still have the same issues.
Taxing realized capital gains would be what i consider taxing income not wealth.
I agree that taxing realized capital gains is relatively easy.
I agree that taxing realized capital gains is relatively easy.
I don't think it's very difficult at all. We already have an elaborate system to measure and tax wealth with our system of property taxes on real estate. That's already in place.
It would be trivially easy as well to track and tax the wealth of people hold public equities.
Those two things there are an enormous bulk (majority?) of wealth.
It only gets a bit more complicated with privately held equities this I will grant.
If you start to get into the nitty gritty of assessing assets like ming vases and such it gets complex as well and likely diminishing returns, but at this point, with this stuff, you might as well not even bother because few are going to hold their wealth in ming vases.
It would be trivially easy as well to track and tax the wealth of people hold public equities.
Those two things there are an enormous bulk (majority?) of wealth.
It only gets a bit more complicated with privately held equities this I will grant.
If you start to get into the nitty gritty of assessing assets like ming vases and such it gets complex as well and likely diminishing returns, but at this point, with this stuff, you might as well not even bother because few are going to hold their wealth in ming vases.
What about a tax such that you can only use assets as collateral for a loan if you've paid any outstanding capital gains on them? Would affect normal people through HELOCs but otherwise would mostly affect the very wealthy.
But as far as I understand, the stocks, and other difficult to liquidate assets, as log as you hold them in that form, are worth "nothing". You can't go buy bread with that, not even a house.
At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.
At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.
> you need to sell and get your local currency in exchange.
This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0].
> That can be considered income
No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry.
If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10%
[0] https://www.wellsfargo.com/cib/institutional-investing/asset...
This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0].
> That can be considered income
No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry.
If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10%
[0] https://www.wellsfargo.com/cib/institutional-investing/asset...
That's how it works in France, too. But my point is that maybe this could be changed to be more in tune with income taxes. In France, however, they have instituted a "flat tax" at 30% on capital gains. Before, it was taxed as income after an abatement.
So changes can be made, they just did it the wrong way.
So changes can be made, they just did it the wrong way.
> At some point, you need to sell and get your local currency in exchange.
But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.
But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.
So what? If banks will be taxed when selling collateral, debt costs will adjust accordingly and pass on to wealthy still.
So we get to pay 40%+ tax on our income on a yearly basis while they get to pay a mystery amount that may or may not be factored into debt costs that can also be deferred for a while? Yeah that sounds fair.
Why misery amount? The government can choose whatever tax it deems appropriate.
Also, where I live options on shares are taxed at 10%. The government does not have to wait until they are exercised to take a cut.
Also, where I live options on shares are taxed at 10%. The government does not have to wait until they are exercised to take a cut.
Because you said:
> debt costs will adjust accordingly and pass on to wealthy still
Let’s think about some the factors that may influence this imaginary debt cost:
- whether asset is an appreciating asset - risk management strategy of the bank - whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal And so on.
How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid.
I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
> debt costs will adjust accordingly and pass on to wealthy still
Let’s think about some the factors that may influence this imaginary debt cost:
- whether asset is an appreciating asset - risk management strategy of the bank - whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal And so on.
How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid.
I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
>But how are those debts paid back?
They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
There's a difference between never paying it back fully, and never paying it back _at all_.
Interest only mortgage exists in the US. You never pay principle.
An interest only loan doesn't suddenly mean there's no repayments. The hint is in the name, you still have to repeat the interest on the loan. Payment terms may vary but if you think that banks across the US are sitting on interest only, asset backed mortgages for the ultra wealthy's most expensive purchases, and taking no payment from them then I don't think we're going to be able to come to an agreement on this topic.
But how are those debts paid back?
Why is it hard? Tax capital gains, tax inheritance, tax corporate super profits, tax consumption (vat), tax FX / currency / speculative securities trading (Tobin tax), etc. It’s not hard, our politicians just lack the will and would rather drive a race to the bottom (“tax reforms”).
I see you have a bottomless appetite for taxing more and lots of imagination on how to do so. Do you have any answers on how that taxed money will be spent? How we can ensure that it's not just lining the pockets of the politicians and bureaucrats in charge of disbursing the money? How we measure the successes and failures of any taxpayer-funded program, so that we can be reasonably confident that the money is being put to good use? How all of this would play out over generations, knowing that the less money (and therefore power) the people have and the more money (and therefore power) the politicians have, the more likely it is that we will slip into authoritarianism?
There is a fairly simple way to tax wealth: inflation.
There are downsides to inflation of course, lower economic growth is a big one. But we are entering a higher inflation, higher interest rate environment whether we like it or not, and that will result in lower wealth inequality. Money will have less direct purchasing power, and assets like housing or company equity will decline in value due to higher borrowing costs.
There are many people who will retort that 'inflation hurts the poor'. Yes, it hurts everyone, but it disproportionately hurts the rich. It is no coincidence that wealth inequality increased dramatically during the low inflation, low interest rate period we have experienced over the last two decades.
There are downsides to inflation of course, lower economic growth is a big one. But we are entering a higher inflation, higher interest rate environment whether we like it or not, and that will result in lower wealth inequality. Money will have less direct purchasing power, and assets like housing or company equity will decline in value due to higher borrowing costs.
There are many people who will retort that 'inflation hurts the poor'. Yes, it hurts everyone, but it disproportionately hurts the rich. It is no coincidence that wealth inequality increased dramatically during the low inflation, low interest rate period we have experienced over the last two decades.
If you own land, shares, companies, then inflation will not affect you.
Is this really... true? I get that there's this idea in people's heads that you couldn't tax for example some incredible rare art collection, because who is to say it's true value and you damage the owner by applying such a tax burden they actually have to sell the art. But let's take a step back. Where is the real money? Bezos, Gates, Buffett, Page, Brin, Ellison, Ballmer, Bloomberg, Zuckerberg. Further down the list the same thing is true - the people with wealth actually have the vast majority of their wealths in companies. It's not difficul to liquidate, it's not difficult to value them, it's actually quite comically easy. Even the guys who actually do have enormous art collections are almost all art dealers, they can and do liquidate their investments all the time.
On to the core question: how much is the stock in the non-public company you work at really worth? I don't know, sell it and we'll find out. A SWE with illiquid stock probably actually has a much shorter timeframe of when they want a liquidity event than the US government has.
The truth is that the reason it's difficult to tax rich people is because the first thing anyone does in this conversation is talk about how hard it would be, without thinking for a second if it actually would be hard. Let's lay aside any talk of real wealth taxes, and just stick to our current tax system, Elon Musk borrowing against his Tesla stock is not a taxable event. Let's change that today. It's specific, easy, would immediately drive revenue, and doesn't require any innovation around true wealth taxes. But... we won't, because it's not difficult, the government just doesn't want to do it. What does that mean? The burden of tax is primarily put on income not wealth, meaning your SWE with non-public stock is already getting absolutely pounded with taxes on their income instead.
On to the core question: how much is the stock in the non-public company you work at really worth? I don't know, sell it and we'll find out. A SWE with illiquid stock probably actually has a much shorter timeframe of when they want a liquidity event than the US government has.
The truth is that the reason it's difficult to tax rich people is because the first thing anyone does in this conversation is talk about how hard it would be, without thinking for a second if it actually would be hard. Let's lay aside any talk of real wealth taxes, and just stick to our current tax system, Elon Musk borrowing against his Tesla stock is not a taxable event. Let's change that today. It's specific, easy, would immediately drive revenue, and doesn't require any innovation around true wealth taxes. But... we won't, because it's not difficult, the government just doesn't want to do it. What does that mean? The burden of tax is primarily put on income not wealth, meaning your SWE with non-public stock is already getting absolutely pounded with taxes on their income instead.
Borrowed money is not income.
No, but it is an avoidance mechanism specifically designed to avoid tax on income.
If an independent third party has deemed your stock sufficiently valuable (and stable) to lend money against, then you should be taxed on that loan. You can get a credit when you repay the loan (to offset tax on the income you used to repay).
If an independent third party has deemed your stock sufficiently valuable (and stable) to lend money against, then you should be taxed on that loan. You can get a credit when you repay the loan (to offset tax on the income you used to repay).
Not familiar with the US tax code, but if Musk borrows $1b with a portion of his Tesla stocks as collateral, will he be charged capital gains tax by assuming that these stocks are now worth $1b?
In the US and most places, you are only liable for capital gains tax on realized gains. The shares have to change hands before a tax is due.
When you die, the value of the stock at time of death gets whacked by inheritance tax, which is 40% at the federal level and 20% at the state (in Washington) level.
You'll have to realize the gain eventually, and pay the tax.
1) You wouldn’t work for payment of an unspecified amount at an indeterminate future date. “Eventual tax” is not the same as “tax now”.
2) Likewise, paying a 2022 debt in 2027 dollars makes their effective tax rate even lower.
3) I don’t get to defer my income tax payments until a favourable year of my choosing, neither should the rich
4) that’s what the credit is for.
2) Likewise, paying a 2022 debt in 2027 dollars makes their effective tax rate even lower.
3) I don’t get to defer my income tax payments until a favourable year of my choosing, neither should the rich
4) that’s what the credit is for.
[deleted]
The point is to force it as such and/or tax elsewhere.
> I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate.
At least in the world of stocks, dark pools help solve exactly this sort of problem.
Once you have enough assets there are many tricks available that are simply inaccessible and unusable by regular salaried employees.
Many of the tricks employed by the wealthiest forcefully remove transparency by a combination of legal and practical methods (e.g., Canada and Delaware share a lot in common).
Disallow opaqueness first, then the solutions will emerge.
At least in the world of stocks, dark pools help solve exactly this sort of problem.
Once you have enough assets there are many tricks available that are simply inaccessible and unusable by regular salaried employees.
Many of the tricks employed by the wealthiest forcefully remove transparency by a combination of legal and practical methods (e.g., Canada and Delaware share a lot in common).
Disallow opaqueness first, then the solutions will emerge.
Apparently Islamic principles have found a balance for this, so why can't we apply it directly?
Short term stock holdings - pay on the net gain of the sale.
Long term stock holdings - pay on the net value at that point in time. Non public companies are charged based on the last valuation round. Companies without funding aren't charged because the intrinsic value is zero.
Dividends - pay on the dividend amount received
All payments above are in cash, at 2.5% for all.
Short term stock holdings - pay on the net gain of the sale.
Long term stock holdings - pay on the net value at that point in time. Non public companies are charged based on the last valuation round. Companies without funding aren't charged because the intrinsic value is zero.
Dividends - pay on the dividend amount received
All payments above are in cash, at 2.5% for all.
And I forgot: outlaw BEPS (base erosion profit shifting), so all corporations pay tax where they originate revenue. There’s way too much tax leakage via double Dutch sandwiches.
One could very well argue that valley SWEs would be rightfully taxed by these measures.
Yes they're not the super rich.
But still among the top X %.
Yes they're not the super rich.
But still among the top X %.
It's only very difficult within the constraints of western capitalist democracies.
China has seen how Capitalists have overrun government and have moved to quickly re-educate anyone that steps out of line.
I'm not advocating this, I'm just saying...
Corporations and the wealthy play games and have more resources than our tax departments, and so have found strategies to win that are not available to people who earn an income and work for a living.
China has seen how Capitalists have overrun government and have moved to quickly re-educate anyone that steps out of line.
I'm not advocating this, I'm just saying...
Corporations and the wealthy play games and have more resources than our tax departments, and so have found strategies to win that are not available to people who earn an income and work for a living.
Come to the Netherlands! 52% kicks in early and plus there is the 2% worldwide wealth tax on all non-real estate investments.
Is it worth it, just to live in a shockingly civilized society under a highly functional government?
Is it worth it, just to live in a shockingly civilized society under a highly functional government?
> Come to the Netherlands!
LOL, no thanks!
LOL, no thanks!
You mean the shockingly civilized society that is a drug trafficking capital of the world with a recent spate of mafia murders? The one with 1.55 births per woman?
I always laugh at dying European societies that consider themselves "civilized" vis-a-vis the rest of the world and can't help but lecture everyone else about how to structure their society. It reminds of Borrell's "Europe is a garden, the rest of the world is a jungle" remarks, which went live before his recent bribery scandal.
I always laugh at dying European societies that consider themselves "civilized" vis-a-vis the rest of the world and can't help but lecture everyone else about how to structure their society. It reminds of Borrell's "Europe is a garden, the rest of the world is a jungle" remarks, which went live before his recent bribery scandal.
Where are you based?
The politicians make money via insider trading, so of course they propose a income tax as opposed to a capital gains tax to "tax the rich". Many of them have been in power for 40+ years, if they were going to tax themselves it would've already been done.
Only the super-rich in America feel wealthy. Everyone else is trapped in an unwinnable game of keeping up with the Jonses. I can almost guarantee that if you actually listed the concrete reasons that you don’t think of yourself as wealthy, they would seem ridiculous to the majority of middle class Americans. (Although obviously I don’t know your personal circumstances. I am thinking of the general case of a seniorish software engineer working for a big tech company in SF.)
> Only the super-rich in America feel wealthy. Everyone else is trapped in an unwinnable game of keeping up with the Jonses.
Tbh even the super-rich feel poor. If you own 10 million, you might have a social network in which there is a guy who owns 100. If you own 100 million, you might know a billionaire. And the billionaire might have met someone like Bezos or Musk. Usually the richer you get, the higher is the wealth differential you are exposed to. You might be proud of your 3 supercar collection, but a guy you know has a hangar full with 200 supercars.
Tbh even the super-rich feel poor. If you own 10 million, you might have a social network in which there is a guy who owns 100. If you own 100 million, you might know a billionaire. And the billionaire might have met someone like Bezos or Musk. Usually the richer you get, the higher is the wealth differential you are exposed to. You might be proud of your 3 supercar collection, but a guy you know has a hangar full with 200 supercars.
FYI, if you make several hundred thousand dollars a year, because you are a SFBay SWE, you are SIGNIFICANTLY different from an average american, and you should realize that. You ARE the wealthy that would and possibly should get taxed. It's not poor people's fault California refuses to do anything about having enough housing. It's not poor people's fault that google and facebook require you to live in california for no reason. Making hundreds of thousands of dollars in salary per year is a very privileged position.
Don't get mad at average americans trying to make the world a better and more fair place, get mad at google and facebook that make several million dollars off the code that you write and kick back a pittance of a salary, and coordinate with each other to keep your compensation low. Even at $400k a year, you are literally being underpaid.
Don't get mad at average americans trying to make the world a better and more fair place, get mad at google and facebook that make several million dollars off the code that you write and kick back a pittance of a salary, and coordinate with each other to keep your compensation low. Even at $400k a year, you are literally being underpaid.
Exactly, this is going on every single day. They run stock reels of Bezos and mega yachts and private jets and then introduce their plan to raise taxes on people who have enough income to renting a 1 bedroom apartment without roommates and have a reasonable chance at saving up enough to buy a home someday.
They want as many voters as possible to feel that they won't be among those who will be taxed. You're in the minority.
The people who vote are indeed more likely the ones to be taxed. It's not the business and homeowners who are the 80%+ skipping every single primary election since they were established. But then considering the ideas I'm seeing on this page, that isn't necessarily a bad idea.
[deleted]
For the majority of the time there has been a Federal Income Tax, there have been top brackets in the 70% range. This was a burden begrudgingly borne by the wealthy for many generations. It funded the US leaving an agrarian lifestyle and becoming a superpower.
Did a 70% top-tax bracket force any of the uber-high earners to stop earning money because they didn't want to give 70% to Uncle Sam? No, the super rich will always want more money/property/dividends/etc no matter how burdensome the tax bracket they fall in might be.
Did a 70% top-tax bracket force any of the uber-high earners to stop earning money because they didn't want to give 70% to Uncle Sam? No, the super rich will always want more money/property/dividends/etc no matter how burdensome the tax bracket they fall in might be.
I could see tax brackets working by how your income compares to the area you live in.
"If your income is 30% above the average income for this area or the national average (whichever is lower), that >30% is taxed at this rate..."
So then you can't have rich folks disappearing to less-taxed areas. It could make rich people communities where they all stick together.
looking forward to the future where currency is time (the movie In Time), and we can tax rich people to death.
"If your income is 30% above the average income for this area or the national average (whichever is lower), that >30% is taxed at this rate..."
So then you can't have rich folks disappearing to less-taxed areas. It could make rich people communities where they all stick together.
looking forward to the future where currency is time (the movie In Time), and we can tax rich people to death.
Is this a new form of NIMBY taxation? “Tax the rich but not rich people like me!”?
I think it's more that the upper middle class gets hammered while those above do not, so it feels like punishment and adversarial. The way things are right now, everyone has to play the "get as much capital as possible" game because it's the only way to support your family and progeny, but as soon as you hit a relatively low threshold, you start receiving a huge amount of tax pressure. If we redistribute wealth, we redistribute infrastructure, homes, education, medical care, etc. this pressure could be relieved by not forcing personal capital to be deployed and responsible for such support structures.
You too are conflating wealth ("rich people") and income ("me").
At a certain point, a high enough income IS wealth. How many american's become millionaires? How many SF software developers can become a millionaire in just a few years?
If you make $400k a year, you are rich/wealthy. If you don't feel it, re-examine your lifestyle and whether you are actually spending your money well, maybe you're buying too much avocado toast /s
If you make $400k a year, you are rich/wealthy. If you don't feel it, re-examine your lifestyle and whether you are actually spending your money well, maybe you're buying too much avocado toast /s
For folks without significant generational wealth or hitting the startup jackpot, feeling rich <=> having lots of disposable income. Before we even talk about personal finances, here are some hurdles I could see:
1. TC numbers (hypothetically ~$400k as you quoted, which generally agrees with levels.fyi) are not real income. We know what happened to (tech) equity this year --- this (unfavorable) gap between grant price/share and vesting price/share has deflated a lot of the TC, much more so if the grant date happens to be right before the onslaught. (Personally I landed almost square in this territory due to a somewhat forced job switch but that's another can of worms I'm not opening today).
2. Whatever is left from that TC number, tax man takes ~40% of it period. Deductions are for most cases a rounding error.
3. TL;DR housing costs scales with salary over here too. Long version: The kind of housing that (transplanted) SWEs and their families would reasonably consider in SFBay has generally been priced (by "the market") right up to the limit of their income-derived affordability, most of which is calculated (by the underwriters) straight from SWE base salary, which we know is constrained by BigTech paybands (which propagates to startups too).
4. Okay, now an inevitable personal finances bullet point: Educated responsible adults as we are, a significant savings (incl. investments) rate surely sounds prudent eh? Say (temporary) goodbye to another xx% of whatever's left at this point.
5. Adding insult to injury, avocado toasts are now about 1.5x to 2x their price compared to early 2020. I feel compelled to add that this agrees with the larger trend of any kind of prepared food.
6. Elephant in the room: Kids.
-----
I can go on and on, but hopefully I am getting the point across. The "salary man" of today has not only his theoretically big TC "pie" shrink over time, but an increasingly larger slice of it becomes marked as non-disposable. Assuming reasonable (not necessarily optimal) personal finances management and maintaining a reasonably high QotL (nothing excessive), I don't see me or my similarly positioned peers feeling rich / upper-middle-class-y any time soon.
1. TC numbers (hypothetically ~$400k as you quoted, which generally agrees with levels.fyi) are not real income. We know what happened to (tech) equity this year --- this (unfavorable) gap between grant price/share and vesting price/share has deflated a lot of the TC, much more so if the grant date happens to be right before the onslaught. (Personally I landed almost square in this territory due to a somewhat forced job switch but that's another can of worms I'm not opening today).
2. Whatever is left from that TC number, tax man takes ~40% of it period. Deductions are for most cases a rounding error.
3. TL;DR housing costs scales with salary over here too. Long version: The kind of housing that (transplanted) SWEs and their families would reasonably consider in SFBay has generally been priced (by "the market") right up to the limit of their income-derived affordability, most of which is calculated (by the underwriters) straight from SWE base salary, which we know is constrained by BigTech paybands (which propagates to startups too).
4. Okay, now an inevitable personal finances bullet point: Educated responsible adults as we are, a significant savings (incl. investments) rate surely sounds prudent eh? Say (temporary) goodbye to another xx% of whatever's left at this point.
5. Adding insult to injury, avocado toasts are now about 1.5x to 2x their price compared to early 2020. I feel compelled to add that this agrees with the larger trend of any kind of prepared food.
6. Elephant in the room: Kids.
-----
I can go on and on, but hopefully I am getting the point across. The "salary man" of today has not only his theoretically big TC "pie" shrink over time, but an increasingly larger slice of it becomes marked as non-disposable. Assuming reasonable (not necessarily optimal) personal finances management and maintaining a reasonably high QotL (nothing excessive), I don't see me or my similarly positioned peers feeling rich / upper-middle-class-y any time soon.
Why should wealth be taxed? It already has been and it is immaterial until it is realized. At that point the profits are taxed.
Lots of income may not make you wealthy but it lets you live a rich lifestyle. Move somewhere cheaper if you aren’t meeting your savings goals.
Lots of income may not make you wealthy but it lets you live a rich lifestyle. Move somewhere cheaper if you aren’t meeting your savings goals.
How do you tax someone buying favorable press coverage?
How do you tax someone buying a Congressperson?
How do you tax someone using their wealth as a threat, as a shield, so that they don't have to participate in the same kind of society as the rest of us, and can enjoy "privilege" (lit. "private law")?
Wealth at rest is not immaterial, and taxing profits or consumption will never work to reduce wealth inequality or the disproportionate power the wealthy have over the rest of us.
How do you tax someone buying a Congressperson?
How do you tax someone using their wealth as a threat, as a shield, so that they don't have to participate in the same kind of society as the rest of us, and can enjoy "privilege" (lit. "private law")?
Wealth at rest is not immaterial, and taxing profits or consumption will never work to reduce wealth inequality or the disproportionate power the wealthy have over the rest of us.
I think it's fair to complain when the "tax the rich" schemes that are actually implemented all still end up placing most of the new tax burden on people who get paid for working (even if it's a lot more than the average worker), and not on their bosses who get most of their money from economic rents.
Basically, I'm fine with paying more taxes, but only if those wealthier than me pay more still.
Basically, I'm fine with paying more taxes, but only if those wealthier than me pay more still.
Middle class is not rich by definition.
That's because the actual point of progressive taxation is to prevent class mobility.
Well said.
If you are wealthy and refuse to earn an income, then your savings will eventually deplete and you’ll become bankrupt.
Additionally they wealth already taxed in a previous era, and is currently taxed in this era any time they spend it via sales tax.
If of course you are spending all your money on personal groceries as a billionaire, then I’m 100% fine with not taxing you.
Additionally they wealth already taxed in a previous era, and is currently taxed in this era any time they spend it via sales tax.
If of course you are spending all your money on personal groceries as a billionaire, then I’m 100% fine with not taxing you.
> If you are wealthy and refuse to earn an income, then your savings will eventually deplete and you’ll become bankrupt.
Please look up "rent", "dividend" and "capital gains".
Please look up "rent", "dividend" and "capital gains".
Rent, dividend and capital gains are all income. I’m not sure what your point is.
I don't think any individual should be a billionaire. There's no conceivable reason for a single person to need or have the right to be a billionaire.
> should
OK, but does that include Rowling's Harry Potter sales, or Persson selling Minecraft to Microsoft?
> There's no conceivable reason
How about "someone is offering me a billion to take over the company I founded regardless of if I actually agree to sell"? Or worse, "someone wants to offer me a million for 0.1% of my shares, but if I sold all my shares the market price would crash by 95%, therefore I get all the blame for being rich with only a handful of the benefits"?
I appreciate there are other economic systems besides one-dollar-one-vote, and we may wish to make mega corporations more democratic and less plutocratic-authoritarian, but that kind of change deserves a book rather than a single comment.
OK, but does that include Rowling's Harry Potter sales, or Persson selling Minecraft to Microsoft?
> There's no conceivable reason
How about "someone is offering me a billion to take over the company I founded regardless of if I actually agree to sell"? Or worse, "someone wants to offer me a million for 0.1% of my shares, but if I sold all my shares the market price would crash by 95%, therefore I get all the blame for being rich with only a handful of the benefits"?
I appreciate there are other economic systems besides one-dollar-one-vote, and we may wish to make mega corporations more democratic and less plutocratic-authoritarian, but that kind of change deserves a book rather than a single comment.
I'm not saying I agree or disagree with this stance but at a practical level it's interesting to think about.
Let's say life is a computer game, and once you max out at $1bn in earned wealth (presumably this includes liquid and illiquid assets such as properties, cars etc), you cannot accumulate more wealth.
How does a government enforce this stance? You cannot stop say Bill Gates shorting Tesla and earning millions from the trade, can you?
Can you stop a landlord renting out their properties to block further income from them?
What about interest generated from bonds or savings accounts?
Do you simply tax the shit out of people if they have over £1bn in wealth?
The big challenge I see for all of this is that rich people have the best (and most expensive) accountants/lawyers money can buy. If you try to tax the shit out of them, their accountants and lawyers will find a way around it.
Also, if one government is too heavy handed, they'll just move assets to another more lenient government.
Let's say life is a computer game, and once you max out at $1bn in earned wealth (presumably this includes liquid and illiquid assets such as properties, cars etc), you cannot accumulate more wealth.
How does a government enforce this stance? You cannot stop say Bill Gates shorting Tesla and earning millions from the trade, can you?
Can you stop a landlord renting out their properties to block further income from them?
What about interest generated from bonds or savings accounts?
Do you simply tax the shit out of people if they have over £1bn in wealth?
The big challenge I see for all of this is that rich people have the best (and most expensive) accountants/lawyers money can buy. If you try to tax the shit out of them, their accountants and lawyers will find a way around it.
Also, if one government is too heavy handed, they'll just move assets to another more lenient government.
You make "almost illegal" financial activities really illegal in the law, prosecute people, and I suspect that 90% of the problems will disappear automagically. Number of people who can become billionaires without committing borderline illegal and completely illegal activities are vanishingly small I suspect, probably only founders of megacorporations and those are often doing illegal stuff too to stay ahead. USA is an outlier probably as far as honest successful corporations go, but in other countries if you are a top100 Fortune person you are likely a criminal too. In my country for sure. Energy - illegal oligopoly, metallurgy - illegal oligopoly, animal farming - illegal oligopoly, etc. The number of illegal schemes happening in the big corps in my country is staggering.
Not to defend corruption, and I'll agree absolutely that there's a lot if room for improvement, but far too many people break far too many laws for full enforcement of any of them; and even outside egregious violations, law itself is too esoteric for most people to understand either their obligations or their rights.
With regard to the first part, the normal examples I give of this are road traffic offences (which if fully enforced would mean the only people allowed to drive would be those who didn't); and drug laws — ignore weed for now, nobody defends heroin, full enforcement of UK heroin laws would treble the UK prison population all by itself, while enforcing the laws on cocaine would more than double the US prison population and increase the British one by a factor of 20.
With regard to the second, look at how confused people get about copyright, trademarks, how they work, what the penalties are for violating them, what counts as "fair use", and so on.
With regard to the first part, the normal examples I give of this are road traffic offences (which if fully enforced would mean the only people allowed to drive would be those who didn't); and drug laws — ignore weed for now, nobody defends heroin, full enforcement of UK heroin laws would treble the UK prison population all by itself, while enforcing the laws on cocaine would more than double the US prison population and increase the British one by a factor of 20.
With regard to the second, look at how confused people get about copyright, trademarks, how they work, what the penalties are for violating them, what counts as "fair use", and so on.
We should focus on the large scale offenses by big entities of course. E.g. if you have 50% market share of chicken production in the country (and another 50% is also a single corporation) then I'm sure that both of the corporations are breaking a lot of laws and utilising a lot of barely legal schemes to launder profits. Same for all sectors of economy. Examples closer to us - ISPs, Cell operators, providers of cloud computing, search, communications etc. All of that must be carefully examined, and then partitioned where monopolies or conflicts of interests arise.
> Do you simply tax the shit out of people if they have over £1bn in wealth?
Seems like the obvious answer, though you're probably right in that people will move assets around and do elaborate things to avoid the tax but they already do that now.
Make a hard cap wealth cap at $1B. Oh you made a great investment that made you $400M dollars? oops looks like you're $200M over the cap. You now owe the government $200M. But good news you hit the $1B cap. You "win" capitalism. Have a nice medal maybe.
Seems reasonable to me.
I suppose the argument against it is that you'd be dissuading near billionaires from investing their money in things (eg. starting new companies) though I'm not entirely sure if money is a real motivator for people who have ~$900M. Is it? I don't know any 900 millionaires to ask.
Seems like the obvious answer, though you're probably right in that people will move assets around and do elaborate things to avoid the tax but they already do that now.
Make a hard cap wealth cap at $1B. Oh you made a great investment that made you $400M dollars? oops looks like you're $200M over the cap. You now owe the government $200M. But good news you hit the $1B cap. You "win" capitalism. Have a nice medal maybe.
Seems reasonable to me.
I suppose the argument against it is that you'd be dissuading near billionaires from investing their money in things (eg. starting new companies) though I'm not entirely sure if money is a real motivator for people who have ~$900M. Is it? I don't know any 900 millionaires to ask.
A better attitude would be to say that billionaires need to share more of their wealth. If you make them pay a let's say 5% wealth tax for having excessive wealth, then they're not strongly discouraged from trying to increase their wealth, while everyone else benefits. And in due time they will cease to be billionaires.
How would you want to achieve that?
[deleted]
The US is only very loosely constrained by its tax base. It does not lack funds.
It has also been spending much more on education over the past decades[1]. With very little to show for it.
[1] https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...
It has also been spending much more on education over the past decades[1]. With very little to show for it.
[1] https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...
Because spending money on education doesn't equate to better outcomes. It creates more bureaucracy, bigger councils, etc.
Teacher pay is still abysmal, especially considering the fact they are expected to act as guardians and even security these days. And you'll never get better outcomes if you can't attract smart people to actually teach, no matter how much you pay the superintendent.
US public education should be called what it is, a government sponsored day care.
Teacher pay is still abysmal, especially considering the fact they are expected to act as guardians and even security these days. And you'll never get better outcomes if you can't attract smart people to actually teach, no matter how much you pay the superintendent.
US public education should be called what it is, a government sponsored day care.
That's the thing I don't get. Most of those budgets should go to people. Rocks and bricks and concrete don't teach people, people teach people :-)
Similar story for medical staff.
Similar story for medical staff.
School budgets are set by your local school board(s). If you want to pay teachers more, vote for school board members that promise to do that exact thing.
School board elections are one of the best examples of a local election being able to enact meaningful, visible change in your community.
School board elections are one of the best examples of a local election being able to enact meaningful, visible change in your community.
The bureaucracies demand quantifiable results. You can't quantify people. You can quantify material garbage.
My partner is a teacher, and the money certainly does not reach educators or kids in need. It mostly gets stuck at the administrative level or is spent for expensive football teams. Hell, there is still a national debate about kids going into debt to pay for lunch
I'm not for sure I agree, but that's a separate issue than de-concentrating wealth. What to do with tax funds, how to appropriately distribute them, etc. is another discussion. Just because those problems exist, we should allow more and more wealth to be concentrated?
It would be good to fix that before we start funneling even more money in that direction, yes. Or at least have a workable plan. If you have a leak in a pipe, you fix the leak before shunting even more into that pipe.
You’d expect education costs to be rising, though, as people are expected to have a higher level of education before entering the workforce than they were previously, and because career changes and reskilling are far more common than previously. It’s a bit like healthcare. You can be spending far more than you were when there was a younger population and fewer sophisticated and expensive treatments, and yet still not be spending enough.
There is no evidence that people have a higher overall level of education before entering the workforce over time.
Rather, people know a different set of skills and accumulate a different body of knowledge. It is only if we define "education" as the degree of knowledge in the body of subjects we teach today that one can say people in the past had less of it. But that's only because we have discarded the many bodies of knowledge an educated person needed to have in the past.
For example, one can laugh and say that to earn a doctorate in mathematics during the renaissance you'd need to know algebra only to the level of solving a cubic equation. However you are missing all the archaic geometric ruler and compass constructions, evaluation of various infinite series, and deep knowledge of Latin, Greek, French, German texts, mastery of rhetoric, music theory, and other topics that few learn today. So it is not true that a mathematician of the present could waltz in and get a Doctorate in Philosophy in medieval Paris. He would probably get quickly thrown out for failing to master the many various scholastic topics that were required of a PhD in that time period, and which no one learns today.
As another example, a new worker in 1800 might be expected to know how to deliver a calf, fix a fence, shod a horse, make homemade preserves, skin a rabbit, set a broken bone, paint a barn, as well as know Greek, geography, history, recite the speeches of Cicero, translate the Odes of Horace, navigate the seas by an astrolabe, stain a bookcase, identify the key flood valleys of Europe and know which animals could be hunted in which part of the year in various European forests, or know the biographies of German princes, etc. But you are correct, they wouldn't have MS Office skills or know how to create a webapp.
Once you move past "hunter-gatherer", you very quickly run into complex societies with their own historically developed bodies of knowledge that require lifetime learning, whether that means learning the seasons and details about planting crops and irrigating fields, dealing with pests, where to dig a well, how to tan leather, etc - or whether that means something else, it is still a vast body of knowledge that takes decades to master. The point is, wherever a society is technologically, it will choose different areas to train its workers, and omit other areas that are no longer needed. But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
Rather, people know a different set of skills and accumulate a different body of knowledge. It is only if we define "education" as the degree of knowledge in the body of subjects we teach today that one can say people in the past had less of it. But that's only because we have discarded the many bodies of knowledge an educated person needed to have in the past.
For example, one can laugh and say that to earn a doctorate in mathematics during the renaissance you'd need to know algebra only to the level of solving a cubic equation. However you are missing all the archaic geometric ruler and compass constructions, evaluation of various infinite series, and deep knowledge of Latin, Greek, French, German texts, mastery of rhetoric, music theory, and other topics that few learn today. So it is not true that a mathematician of the present could waltz in and get a Doctorate in Philosophy in medieval Paris. He would probably get quickly thrown out for failing to master the many various scholastic topics that were required of a PhD in that time period, and which no one learns today.
As another example, a new worker in 1800 might be expected to know how to deliver a calf, fix a fence, shod a horse, make homemade preserves, skin a rabbit, set a broken bone, paint a barn, as well as know Greek, geography, history, recite the speeches of Cicero, translate the Odes of Horace, navigate the seas by an astrolabe, stain a bookcase, identify the key flood valleys of Europe and know which animals could be hunted in which part of the year in various European forests, or know the biographies of German princes, etc. But you are correct, they wouldn't have MS Office skills or know how to create a webapp.
Once you move past "hunter-gatherer", you very quickly run into complex societies with their own historically developed bodies of knowledge that require lifetime learning, whether that means learning the seasons and details about planting crops and irrigating fields, dealing with pests, where to dig a well, how to tan leather, etc - or whether that means something else, it is still a vast body of knowledge that takes decades to master. The point is, wherever a society is technologically, it will choose different areas to train its workers, and omit other areas that are no longer needed. But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
>Rather, people [nowadays] know a different set of skills and accumulate a different body of knowledge.
Yes, but this is increasingly knowledge that needs to be imparted through formal education (for a variety of reasons). Hence it costs more.
>But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
I don't see the logic here. It's fine as long as you can afford it.
>as well as know Greek
Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
Yes, but this is increasingly knowledge that needs to be imparted through formal education (for a variety of reasons). Hence it costs more.
>But how many resources does a society need to train its workers? If that number keeps growing, then there is something wrong with the society.
I don't see the logic here. It's fine as long as you can afford it.
>as well as know Greek
Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
>Only a tiny minority of the working population could read Ancient Greek in Europe in 1800. In England, around 50% of the population were still entirely illiterate at that point in time.
Surely that can't be true? Here in Sweden literacy was made mandatory for adults in 1686. It was not permitted to get married without being able to read.
Surely England can't have been that far behind, as late as 1800ed?
Surely that can't be true? Here in Sweden literacy was made mandatory for adults in 1686. It was not permitted to get married without being able to read.
Surely England can't have been that far behind, as late as 1800ed?
It's entirely true, and England was not unusual in that respect compared to the rest of Europe. See e.g. here: https://ourworldindata.org/literacy. Or here: https://www.researchgate.net/figure/Literacy-rates-in-Europe...
The data you've cited is wrong though. It lists Sweden's literacy rate in 1800 at 21%.
People were interviewed by their local priests to see whether they could read and the results were noted down. From this we know that in the middle of the 1700eds the 70-90% of all people could read.
The law was also clear. You couldn't get married unless you could read. To be married you had to be confirmed, and to be confirmed you had to be able to read.
People were interviewed by their local priests to see whether they could read and the results were noted down. From this we know that in the middle of the 1700eds the 70-90% of all people could read.
The law was also clear. You couldn't get married unless you could read. To be married you had to be confirmed, and to be confirmed you had to be able to read.
I don’t particularly care about the specific case of Sweden. Every source I can find for England or Europe in general shows low literacy rates in around 1800. Do you have any sources that disagree? (Note that the map I linked to shows a higher rate for Sweden, if that’s important to you, but still around 50% for England and many other European countries.)
The funny thing is, you don't even need to tax the rich all that much. The money is there. It's just spent on ludicrous stuff. The US annual defense budget is 800 billion dollars a year. Even when you argue that national defense and a well equipped military are necessary (which I believe them to be), I've seen military cost receipts. They're outrageous. You don't need 50 dollar rolls of toilet paper.
Dropping income tax and replacing it with a progressive sales tax should be at least explored. Wealthy don't file W2s but they do buy luxury items.
Your assumption is that the state will apply that money optimally (or at least more optimally than the super rich - also, notice you didn’t define what super rich are).
Looking at historical and present data, I can be absolutely sure that the state will mismanage that money in almost every country.
I’m Portuguese, my government is collecting more ~ 25% taxes than it collected 6 years ago when the current ruling party got into power. Almost everyone (left and right) agrees that public services and administration are much worst. So, it begs the question: why giving the government even more money, will solve anything?
Looking at historical and present data, I can be absolutely sure that the state will mismanage that money in almost every country.
I’m Portuguese, my government is collecting more ~ 25% taxes than it collected 6 years ago when the current ruling party got into power. Almost everyone (left and right) agrees that public services and administration are much worst. So, it begs the question: why giving the government even more money, will solve anything?
To be honest I think this is strawman argument. I think it is absolutely true that the government will mismanage some of that money. The question is whether that money used with not 100% efficiency is better than a billionaire who may spend that money on anything. I certainly agree there are rich people who donate their money effectively but even then they decide what to spend the money on. So in my opinion some government mismanagement is not the reason to have some redistribution, but rather a reason to ensure that governments are properly accountable etc. And even if that is a government spending it can be still tendered to private companies depending on what's being done.
That implies that privately owned organizations manage money well, which is not the case either. The larger an organization is, the more inefficiencies it accumulates. Plus, don't forget that states usually provide a lot of subsidies to companies and also pay businesses/consultants to do some of their work.
If the state doesn't apply the money optimally, i.e. it's not doing its job, then that's the problem that needs to be fixed.
The idea of the “middle class” is propaganda. The whole point of this as well as any number of wedge social issues is to sow division and direct your anger at marginalized groups instead of the wealthy and powerful.
There are only two groups when it comes to economic status: labor and the capital-owning class. Labor is anyone who derives their income from their labor and goes all the way from the janitor to doctors and professional athletes.
Th idea of the middle class was invented to sow division with the “lower classes”. I mean look at your comment. You assert the “middle class” is getting slammed with taxes. Some (not necessarily you) imply the lower classes are somehow getting a free ride or are lazy. This is the propaganda.
We live in the wealthiest nation on earth. People without housing or food security is completely unnecessary. Charging people $1000/month for insulin, without which they would die, is only that way for corporate profits. Think about that.
There are only two groups when it comes to economic status: labor and the capital-owning class. Labor is anyone who derives their income from their labor and goes all the way from the janitor to doctors and professional athletes.
Th idea of the middle class was invented to sow division with the “lower classes”. I mean look at your comment. You assert the “middle class” is getting slammed with taxes. Some (not necessarily you) imply the lower classes are somehow getting a free ride or are lazy. This is the propaganda.
We live in the wealthiest nation on earth. People without housing or food security is completely unnecessary. Charging people $1000/month for insulin, without which they would die, is only that way for corporate profits. Think about that.
I don't think it was *invented* to sow division, but I agree with you that it can definitely be used for it.
There's different ways to categorize things - lower-class, middle-class and upper-class is a sort of intuitive way which throughout history has made some sense, somewhat, with different names. However, I get that maybe it's not the most useful currently, because there's such a ridiculous divide between upper-class (rich) and the other two, that we, belonging to the bottom 2, should band together to bring change favorable to us.
There's different ways to categorize things - lower-class, middle-class and upper-class is a sort of intuitive way which throughout history has made some sense, somewhat, with different names. However, I get that maybe it's not the most useful currently, because there's such a ridiculous divide between upper-class (rich) and the other two, that we, belonging to the bottom 2, should band together to bring change favorable to us.
You're right, but this misdirection goes both ways. Logically, it would make more sence for the "lower" and the "middle" class to present a unified political front to tax the capital-owning class. But with the division in place, politicians backed by capital can sell a tax plan that is mostly, in fact, about raising taxes on the middle class but not the capital (most proposals that focus on personal income tax rates are in this category) to the "lower" class.
I find it really frustrating that the discourse around taxing the super rich does not emphasize how absurdly rich the super rich are. Even if you are worth 500 million dollars, own a mansion, fancy cars, etc., you are still extremely poor compared to a billionaire. And even among billionaires, someone like Bill Gates is massively more wealthy. On /r/nba some people were remarking about how even among NBA owners, not exactly a poor group, Steve Ballmer is so absurdly rich that he could probably buy the entire NBA (obviously not with his liquid cash, although he did literally buy the Clippers in cash).
Like the phrase "tax the rich" makes people think of their neighbor George who as a nice house or even themselves if they make six figures. Nah man, tax the person who can literally buy the NBA and still be a billionaire.
Like the phrase "tax the rich" makes people think of their neighbor George who as a nice house or even themselves if they make six figures. Nah man, tax the person who can literally buy the NBA and still be a billionaire.
The top 1% pay 40% of the federal tax revenue. The top 5% pay 60%.
California has the highest income tax at 13.3%, the highest federal tax rate is 37%.
That makes the top income tax rate 50%.
California has the highest income tax at 13.3%, the highest federal tax rate is 37%.
That makes the top income tax rate 50%.
I have already covered this elsewhere, but that's an excuse and actually only points to how concentrated the wealth is. Too bad they pay more money than others. Tax them more.
The wealth that wealthy people have isn't "concentrated", it's created. I.e. they didn't take it from you.
It's not created by those people. It's created by some worker somewhere, and those people collect most of that created wealth as economic rent, solely because they own the capital used in the process.
Without their capital the whole organization where workers are creating would not exist in the first place. So the market is rightly rewarding capital owners for risking it in the first place.
Do you think that is easy and just "collecting rent"? What is your experience investing?
Do you think that is easy and just "collecting rent"? What is your experience investing?
Without the labor, the output wouldn't exist either, so why do the capital owners pocket most of the generated wealth?
For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?
For that matter, how did it come to be that capital is so concentrated that most productive people have to rent it to generate wealth?
Both capital owners and workers are paid according to the prices set by the free market for their input. Most of the generated wealth however is captured by the society (ie we each derive more value from the stuff we buy than the cost we pay for it) and by the government - taxes on work, consumption and profit are usually much larger than other costs in a company operation.
Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.
If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.
Capital tends to concentrate, indeed - but that is also a good thing as it allows bigger enterprises. However the cost to build a new business has been steadily decreasing over the year together with the cost of capital while its availability has been increasing. Today's most productive people can easily open their own practices and set their price on their own contracts. The "rent" they pay is hugely outweighs by their future profits.
If you want to rail agains something, rail against the fact that financial education and investing is not more widespread so people do not understand that they can participate and invest in capital markets from very low amounts of money. Capitalism is powerful and empowering but requires work and education.
Top 1% of salary earners. The CEOs, highly paid doctors, engineers. The real capitalists - those who hold the assets and pay for their yachts with stock-backed loans - they don't pay 40% of the federal tax revenue. Their salary is $1/year.
Loans are not income.
There is no law of nature that says only income can be taxed. Loans could be taxed.
You totally get it, and I really like the law of nature phrasing.
How about taxing your mortgage, then?
That could be a law. It would be a bad law for most people since they don’t own any houses.
Taxing loans to billionaires is a good law because it closes the “just take out a loan” loophole.
Taxing loans to billionaires is a good law because it closes the “just take out a loan” loophole.
Alternatively, loans are income today coupled with an expense over some future period.
Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.
OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.
Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.
OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.
How are stock-backed-loans paid back?
If in cash, they have to get the cash from somewhere, right? Supposedly selling the stocks. That can be taxed then and there.
If they transfer the stocks to the lender, that means the stocks in question are valued at $x, since that's the value of the loan. So tax that value.
If in cash, they have to get the cash from somewhere, right? Supposedly selling the stocks. That can be taxed then and there.
If they transfer the stocks to the lender, that means the stocks in question are valued at $x, since that's the value of the loan. So tax that value.
After you die your estate sells stocks
Does the estate pay capital gains on those stocks, or can it take advantage of stepped-up cost basis rules to avoid those as well?
I'm not an expert, but my reading of the IRS's FAQ [1] is that the cost basis of inherited assets gets reset to the fair market value of the assets on the date of death.
1. https://www.irs.gov/faqs/interest-dividends-other-types-of-i...
1. https://www.irs.gov/faqs/interest-dividends-other-types-of-i...
You're right, and then you pay the inheritance tax which is more than the capital gains taxes would have been.
> > And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.
After the $12 million (nearly $13 million next year) exemption, the unused portion of which passes to the surviving spouse and increases their tax-free estate exemption.
But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.
After the $12 million (nearly $13 million next year) exemption, the unused portion of which passes to the surviving spouse and increases their tax-free estate exemption.
But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.
If you're a billionaire, a $12m exemption isn't much of anything.
“But, yes, in the limit case estates aren't the tax-optimal way to transfer capital to survivors, which is why other vehicles are used for people for whom the estate exemption is small potatoes.”
Like what?
The estate gets a stepped up cost basis on the date of death. And then you pay the 40% federal inheritance tax and the 20% state inheritance tax on the total value at the date of death.
Before Kennedy it was 91%.
Imo we are well bellow the Laffer curve.
Imo we are well bellow the Laffer curve.
>Before Kennedy it was 91%.
To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"
To which the common retort is "but nobody actually paid that because prior to the tax code simplifications of the 70s you could trivially reduce your burden in all sorts of ways"
Not only that, the tax avoidance schemes required investing in tax shelters, which were usually very poorly performing investments. When Reagan exchanged the lowered tax rates for elimination of those tax shelters, it allowed capital to flow instead to productive investments, which helped the economic growth.
Then surely, they would have no problem returning to that exact system right? No they want to avoid that by all means necessary? Sounds like they know how much it truly effects things.
As a purely theoretical concept I don't think it's a big deal. It wouldn't have a large effect on me personally. That said, society might hurt a bit from the tax shelter vs productive allocation of capital problem another commenter above mentioned. As a practical matter I have zero faith that the usual scumbags would not corrupt the process leaving everybody with higher taxes than either system and then gaslight everybody into thinking they're paying less. Look at how healthcare turned out.
> That makes the top income tax rate 50%.
While interesting data points, I'm not seeing an argument that they are paying enough, which seems to be your implication. Maybe it should be 90%. Maybe it should be even more.
While interesting data points, I'm not seeing an argument that they are paying enough, which seems to be your implication. Maybe it should be 90%. Maybe it should be even more.
Make taxes too high, and who is going to invest in America? It will be a Pyrrhic victory for you.
We already see wealthier people fleeing California for Texas and Florida, the same for New York.
It's not the government that produces the wealth in the economy, it's business. Confiscatory taxes will wind up with everyone poorer, including you.
We already see wealthier people fleeing California for Texas and Florida, the same for New York.
It's not the government that produces the wealth in the economy, it's business. Confiscatory taxes will wind up with everyone poorer, including you.
Most business revenue in America is still from small to medium sized businesses, so this investment you speak of doesn't sound too important. So yes, I agree that business produces wealth, but the business that matters isn't going anywhere because they're largely local. The larger corporations are still going to do business here as well because of the market power.
As for wealth flight, it's overblown. First fleeing to another state is very different than fleeing the country. Second people aren't staying in America only because the taxes are lower, there's plenty more to offer.
Edit: I forgot to add that the actual evidence for wealth flight is pretty thin.
And for those corporations or wealthy people that do leave, fuck 'em. They're not special, irreplaceable snowflakes. They beat out their competitors by luck, and local competitors will immediately spring up to fill the void they leave.
As for wealth flight, it's overblown. First fleeing to another state is very different than fleeing the country. Second people aren't staying in America only because the taxes are lower, there's plenty more to offer.
Edit: I forgot to add that the actual evidence for wealth flight is pretty thin.
And for those corporations or wealthy people that do leave, fuck 'em. They're not special, irreplaceable snowflakes. They beat out their competitors by luck, and local competitors will immediately spring up to fill the void they leave.
Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.
> local competitors will immediately spring up
What is your experience starting new businesses? It is a highly difficult and risky endeavor and few people find it more attractive than simply getting a job. It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
> local competitors will immediately spring up
What is your experience starting new businesses? It is a highly difficult and risky endeavor and few people find it more attractive than simply getting a job. It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
> Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.
Which brings the need for inter governmental regulation.
Which brings the need for inter governmental regulation.
Good luck with that! The most authoritarianists have ever managed to do was make it illegal for people to leave their inhuman regime: guns on borders, pointing inside. Not surprisingly, those countries were quickly outcompeted by free countries.
It's exactly what has happened / is happening in Europe.
Europe is divided between countries deeply infiltrated by Russia and countries who can’t wait to escape and write their own futures. UK, Poland, Hungary will welcome fleeing capital. Brexit wasn’t the last exit.
With its anti-business attitude, tiny high-tech industry and lacking innovation and creativity, Europe’s importance in the world is vanishing fast.
The future is in Asia and Eastern Europe. And US, of course.
With its anti-business attitude, tiny high-tech industry and lacking innovation and creativity, Europe’s importance in the world is vanishing fast.
The future is in Asia and Eastern Europe. And US, of course.
I completely disagree.
> Pretty much every country that tried to tax wealth had to back up exactly because of wealthy and capital flight.
No, mainly because of the risk of capital flight.
> It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
I disagree. If a good or service is truly valuable, someone will provide it. The value of an unmet need will increase until it becomes attractive, and if it never meets that bar, then by definition it wasn't valuable enough.
The only exceptions are goods or services that capitalism isn't effective at solving anyway, either because they are common goods that capitalism would exploit to exhaustion, or because they would yield only natural monopolies that are rife with abuse. A state-run corporation is a good option here, and wealth flight isn't an issue.
No, mainly because of the risk of capital flight.
> It's exactly this kind of people that you will alienate and drive away with these of wealth-hostile policies.
I disagree. If a good or service is truly valuable, someone will provide it. The value of an unmet need will increase until it becomes attractive, and if it never meets that bar, then by definition it wasn't valuable enough.
The only exceptions are goods or services that capitalism isn't effective at solving anyway, either because they are common goods that capitalism would exploit to exhaustion, or because they would yield only natural monopolies that are rife with abuse. A state-run corporation is a good option here, and wealth flight isn't an issue.
I lived in a country lacking capital (first because it was robbed by communists and then due to the risk of the transition managed by a deeply corrupt political elite) and I can tell you existing demand was only met through imports.
It sucked for everybody - without local capital the entrepreneurship was very limited, jobs remained scarce, specialists emigrated and the trade deficit became unmanageable. In the end multinational corporations slowly entered and bought various state-granted monopolies (the only real monopoly entrepreneurship can't solve) on the cheap. But that tiny capital started a snowball effect that eventually raised the living standard to unhoped-for levels. Now we have both billionaires and a wealthy middle-class. It took a long time though.
Careful what you wish for - a country without successful entrepreneurs and local capital(ists) is an easy prey on the international markets.
It sucked for everybody - without local capital the entrepreneurship was very limited, jobs remained scarce, specialists emigrated and the trade deficit became unmanageable. In the end multinational corporations slowly entered and bought various state-granted monopolies (the only real monopoly entrepreneurship can't solve) on the cheap. But that tiny capital started a snowball effect that eventually raised the living standard to unhoped-for levels. Now we have both billionaires and a wealthy middle-class. It took a long time though.
Careful what you wish for - a country without successful entrepreneurs and local capital(ists) is an easy prey on the international markets.
Billionaires should not exist. When one gets to a certain amount of wealth, TBD, there they should get a golden plate saying "Congratulations, you won capitalism" and from them on, tax rate is 100%.
Ah, the mythical "super-rich" who could fund all of our solutions, if only we could prise their money out of their clutching hands!
It's funny how they always exist, even in countries like the UK and France which in reality have taxed them out of existence, and payscales are absurdly compressed compared to the US.
Careful what you wish for, you are someone else's "super rich".
It's funny how they always exist, even in countries like the UK and France which in reality have taxed them out of existence, and payscales are absurdly compressed compared to the US.
Careful what you wish for, you are someone else's "super rich".
>the UK and France which in reality have taxed them out of existence
You're making it sound like billionaires are an endangered species there. :) Last time I checked there's more than enough billionaires living in the UK and France[1].
[1] https://en.wikipedia.org/wiki/Bernard_Arnault
You're making it sound like billionaires are an endangered species there. :) Last time I checked there's more than enough billionaires living in the UK and France[1].
[1] https://en.wikipedia.org/wiki/Bernard_Arnault
That's the problem. The wealth of billionaires isn't tied to any particular country, so they always have the means to move their wealth to a tax haven. Calls to tax the rich always end up falling to the upper-middle/lower-upper classes (e.g. FAANG engineers who read HN).
Not the only source but https://www.hurun.net/en-US/Rank/HsRankDetails?pagetype=glob... for a full list of billionaires (according to Hurun).
That's the very definition of cherry picking.
Try this dataset instead:
https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
Try this dataset instead:
https://en.wikipedia.org/wiki/List_of_countries_by_number_of...
According to the third list (Hurun), the UK is keeping pace with the US.
Shame Hurun doesn't publish its source data, or a list of those people.
Which is an irrelevant objection, unless the list is inaccurate. Hurun reports are widely cited with few (if any) questions on its accuracy.
In fact, it's an inaccurate objection proven by 1 minute of research: https://www.hurun.net/en-US/Rank/HsRankDetails?pagetype=glob...
In fact, it's an inaccurate objection proven by 1 minute of research: https://www.hurun.net/en-US/Rank/HsRankDetails?pagetype=glob...
>Hurun reports are widely cited with few (if any) questions on its accuracy.
I could make the same statements about Forbes and Knight Frank, so that doesn't help explain the 3x disparity between Hunan's figures and the rest.
>it's an inaccurate objection proven by 1 minute of research:
I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
I could make the same statements about Forbes and Knight Frank, so that doesn't help explain the 3x disparity between Hunan's figures and the rest.
>it's an inaccurate objection proven by 1 minute of research:
I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
> Shame Hurun doesn't publish its source data, or a list of those people
> I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
The raw data is there to help you derive and check Hurun’s claim.
Perhaps you mean you want an easy way to sort and aggregate the information in order to dispute this.
However, the burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
At this point it’s hard to take your objection seriously; nor view it as anything more than cherry picking with an underlying agenda.
> I too found that list of the globe's billionaires. As we are comparing the rates of billionaires in the US, UK, and France, that page doesn't help.
The raw data is there to help you derive and check Hurun’s claim.
Perhaps you mean you want an easy way to sort and aggregate the information in order to dispute this.
However, the burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
At this point it’s hard to take your objection seriously; nor view it as anything more than cherry picking with an underlying agenda.
> you mean you want an easy way to sort and aggregate the information in order to dispute this.
For a start, I need the list to include the country of origin of each person.
>he burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
I've pointed out that Hurun don't make public their list of billionaires per country, unlike the other providers of that data. As no-one yet has been able to show otherwise, my point stands.
For a start, I need the list to include the country of origin of each person.
>he burden is on you to do this as you’re the one questioning the accuracy of the widely cited Hurun list.
I've pointed out that Hurun don't make public their list of billionaires per country, unlike the other providers of that data. As no-one yet has been able to show otherwise, my point stands.
While it's true that wealth is relative, this is so disingenuous that I can only presume that this comment is not made in good faith.
FWIW, I think multinational corporations that engage in all manner of legal tax avoidance are probably more of a problem than individual billionaires.
FWIW, I think multinational corporations that engage in all manner of legal tax avoidance are probably more of a problem than individual billionaires.
The solution is to cut the size of government first. The inefficiency and outright grift happening in all federal agencies would make any entrepreneur’s head spin. Imagine if Congress had to answer to VCs for their spending. They would all be blackballed from the investor community overnight.
The “tax the rich more” line is a little naive. The world is a different place after the Rothschilds figured out how to shield their wealth from monarchies. It’s easier than ever to offshore wealth, remember the Panama papers that promptly disappeared from the news?
The “solution” of global governments is a cure that’s likely far worse than the disease.
It’s a complicated situation. A progressive VAT tax that is consistent across jurisdictions would be a good start. The tax code (at least in the US) needs to be thrown out and replaced. Monetary policy and taxation via inflation is also primitive and in dire need of reform.
The “tax the rich more” line is a little naive. The world is a different place after the Rothschilds figured out how to shield their wealth from monarchies. It’s easier than ever to offshore wealth, remember the Panama papers that promptly disappeared from the news?
The “solution” of global governments is a cure that’s likely far worse than the disease.
It’s a complicated situation. A progressive VAT tax that is consistent across jurisdictions would be a good start. The tax code (at least in the US) needs to be thrown out and replaced. Monetary policy and taxation via inflation is also primitive and in dire need of reform.
The problem with this live of thinking is that in reality most taxes are paid by wealthy people. The majority of people actually pay 0 taxes and in fact receive credits above their burden of 0.
Whine there’s certainly room to address fair taxation rates we should seriously consider how we spend tax revenues today. A 1.5 trillion omnibus is being rushed through Congress that’s full of pork and special interests. We just sent however many billions to a country to fight a war that has nothing to do with us.
So we spend all this money and of course it’s not enough. People say “more! Tax the rich!” Without considering the reality.
Whine there’s certainly room to address fair taxation rates we should seriously consider how we spend tax revenues today. A 1.5 trillion omnibus is being rushed through Congress that’s full of pork and special interests. We just sent however many billions to a country to fight a war that has nothing to do with us.
So we spend all this money and of course it’s not enough. People say “more! Tax the rich!” Without considering the reality.
That's not a problem at all. The concern is not the absolute dollars paid. The concern are the percentages and the concentration of wealth. That the rich pay a lot of tax is basically immaterial except that it points out just how skewed the wealth distribution is.
The "rich pay the majority of taxes" is an excuse.
The "rich pay the majority of taxes" is an excuse.
This all presupposes that the government is an efficient user of capital, when its pretty clear its not. Heavy taxes on the rich, means that capital investments that a rich person might finance, become government programmes and bureaucracies. Theres obviously a sweet spot here - but rich folks are good at creating capital and governments are notorious for wasting it.
Now in the US I probably don’t have to tell you where most of the money goes - hint military - so more rich folks money into the governments coffers - what industry do you think benefits the most from a policy like this?
Now in the US I probably don’t have to tell you where most of the money goes - hint military - so more rich folks money into the governments coffers - what industry do you think benefits the most from a policy like this?
> but rich folks are good at creating capital and governments are notorious for wasting it.
There is more than a little nuance here:
- governments are notorious for being called out on supposed inefficiencies.
Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson.
- "rich folks are good..."
I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways.
I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.
There is more than a little nuance here:
- governments are notorious for being called out on supposed inefficiencies.
Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson.
- "rich folks are good..."
I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways.
I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.
I've never understood the argument. I've worked in several different private companies, and calling them "Efficient" is so off base as to be laughable. Remember, a private company will happily let an import engineer go instead of giving them a small raise.
Go work for the government then? Or wait, the government is way stingier with raises than private companies are! Engineers fight over jobs at private companies and shun government jobs because governments don't reward good work.
Most of our money does not go to the military. Defense spending is about 700b per year, while the budget is over 4t.
The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.
The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.
Poor people already pay next to nothing in taxes - the bottom 60% of society, making less than $50k only contributes 7% of total tax revenue from income taxes, while 0.3% of those making more than $1M per year contributes 27%. [1]
I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people.
[1] https://www.stlouisfed.org/on-the-economy/2017/january/feder...
I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people.
[1] https://www.stlouisfed.org/on-the-economy/2017/january/feder...
Your first sentence ignores what you say in the second. In the US, poor people pay a significant portion of their income in sales tax which is regressive.
I would suggest to think of this not in terms of contribution to the whole, but percentage of ($income - $housing - $food - $stdxpenses). With $stdxpenses covering standard living expenses including energy, water, basic insurance, basic commute.
I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do.
In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.
I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do.
In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.
> Poorer people get reduced tax, rich people get more.
This already happens. Many people either don't pay tax, or pay less tax than they cost.
> The government doesn't need to handle capitol allocation.
Then who will spend the tax money?
This already happens. Many people either don't pay tax, or pay less tax than they cost.
> The government doesn't need to handle capitol allocation.
Then who will spend the tax money?
The working poor pay into FICA which is a greater percentage of their cash flow. They get it back upon annual tax reconciliation. The same entitlement programs nonetheless have lots of unfunded liabilities so the money has already been allocated even if it's not currently "there" -- 'The Rich' are beneficiaries of entitlement spending too.
It's a simpler situation than that. Regardless of proportions of payment, we already have a percentage of the population whose public services are paid for by someone else, either directly through income or divided tax or indirectly through higher prices from corporation tax, or more indirectly through inflationary monetary policy.
In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
Your criticism of "Tax the Rich" is basically tone policing? I don't understand your point.
Oh I'm not implying it's be revolutionary, just that we should.
> This all presupposes that the government is an efficient user of capital, when its pretty clear its not.
It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".
It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".
You’re assuming an infinite perfectibility of human nature. The problem with government planning is that it’s removed from the best, local information and inherently has broken incentives.
By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something.
By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something.
By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
Broken incentives? What about Boeing with their 737 MAX? That is a prime example of broken incentives costing human lives. What about stock trading causing famines? Our current way of doing "economy" is massively broken and affects everything.
Who said anything about people being infallible? Amusing to nitpick market failures when planned economies have all led to mass poverty and famine. And market economies have created, in the last 200 years, unparalleled prosperity.
Meanwhile every single one of these private companies you put up on a pedestal is LITERALLY a top down planned economy.
And if they’re poorly run, the company goes bankrupt or gets bought out by a stronger company. The government isn’t subject to that kind of check, except in the most catastrophic case.
[deleted]
The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster.
The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment.
In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.
> What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth.
Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.
What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work.
What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
TFA talks about all of this. The point of the article is that in a system with a finite amount of wealth, even a society that starts equal will eventually become highly unequal: as long as there is continued betting/competition where all parties have an equal risk tolerance corresponding to their income. The concentrating effects of these bets is the important lesson. TFA describes some ways to avoid this outcome.
But TFA article is completely unrelated to the real world.
There is not a finite amount of wealth. People create new wealth through innovation.
People do not mindlessly continue the same investing strategy when incentives change. If you reduce the expected return from an investment, they stop investing in it.
So any strategies that might be useful for the contrived game described in the article are not relevant to the real world.
There is not a finite amount of wealth. People create new wealth through innovation.
People do not mindlessly continue the same investing strategy when incentives change. If you reduce the expected return from an investment, they stop investing in it.
So any strategies that might be useful for the contrived game described in the article are not relevant to the real world.
Nearly every economic action you take can be viewed as an investment or bet. Getting up in the morning and going to work represents a bet that your compensation will be worth the time spent. Sending your kids to school/college is an even more obvious example. For self-employed people all of this gets much more literal: every job involves a tradeoff of time and resources that could be spent on different projects. Even open-source hobby projects are can be a time-investment in building your resume. These "bets" have counterparties as well: for example, your employer can afford to negotiate much harder than you can on salary, because you need a job and health insurance more than they need you.
I also agree that this is a simplified model. But its simplicity is what makes it elegant: you can see the effect in a model that lacks all of the complexity of real-world economic activity. In the real world the "bets" are more complicated and the odds more variable, but you can't just claim "this effect must go away" without articulating a clear reason that it would.
The reasonable point you do make is that in our current economy the "pie" isn't fixed: new wealth is being created all the time, and this is one reason we don't collapse into permanent inequality the way this model does. This doesn't negate the model, however, it just means there is something counteracting it. Unfortunately the fear is that in the future (or perhaps even the present) new wealth creation will no longer keep up with this underlying concentrating effect, and we'd better think hard about what to do then.
I also agree that this is a simplified model. But its simplicity is what makes it elegant: you can see the effect in a model that lacks all of the complexity of real-world economic activity. In the real world the "bets" are more complicated and the odds more variable, but you can't just claim "this effect must go away" without articulating a clear reason that it would.
The reasonable point you do make is that in our current economy the "pie" isn't fixed: new wealth is being created all the time, and this is one reason we don't collapse into permanent inequality the way this model does. This doesn't negate the model, however, it just means there is something counteracting it. Unfortunately the fear is that in the future (or perhaps even the present) new wealth creation will no longer keep up with this underlying concentrating effect, and we'd better think hard about what to do then.
> but you can't just claim "this effect must go away" without articulating a clear reason that it would.
If the effect is that, all else being equal, people with a lot of money can make more money in an absolute sense than people without a lot of money, then of course it doesn't go away. It's not that that isn't real (it's simply how percentages work) it's that it's not actually a problem because the model is so far removed from reality as to be irrelevant.
The real world is not a 1v1 adversarial game where people are betting against each other. More often they are collaboratively betting together and both benefit if they succeed.
Young, poor* entrepreneur brings an idea, maybe specialized domain knowledge, and time and energy
old, rich investor brings capital, maybe business experience and network, and gives it to entrepreneur to execute.
If all goes well old, rich investor and young, poor entrepreneur both make a lot of money. Young, poor entrepreneur becomes old, rich investor for the next generation.
If the venture fails, old, rich investor loses money (which went to pay some number of employees and vendors, who get to benefit from it), but old, rich investor expects this to happen for some or most investments. Young, poor entrepreneur loses time but gains experience and connections.
Nobody tricked anybody or stole anything from anyone or "lost a bet" like they are playing a rigged game in Vegas.
If you tell old, rich investor they aren't allowed to make any money by investing in young, poor entrepreneur any more, they don't just keep on doing it and allow you to redistribute their profits. They buy T-Bills instead. Young, poor entrepreneur goes to work for some other company (that old, rich investor probably funded in the past and owns) and gets a mediocre salary instead of getting rich and the world is deprived of whatever innovation they might have had.
This is pretty much fine for the old, rich investors, they're already rich. But it screws over the possibility of getting rich for anyone who isn't already. Which, if you were trying to reduce inequality, is the opposite of what you'd want.
* - or more realistically, middle or upper-middle class
Another unrealistic part about the model is that people keep betting a fixed percentage of their net worth. If you have a million dollars, maybe you can invest $100,000 into the seed round of a startup. If you have a billion dollars, it's unlikely you can invest $100 million into one investment. You spread it across multiple investments, maybe hundreds, and the average return is less than what you would get from succeeding on one big investment, because there simply isn't an opportunity that can make use of that much capital at once.
If the effect is that, all else being equal, people with a lot of money can make more money in an absolute sense than people without a lot of money, then of course it doesn't go away. It's not that that isn't real (it's simply how percentages work) it's that it's not actually a problem because the model is so far removed from reality as to be irrelevant.
The real world is not a 1v1 adversarial game where people are betting against each other. More often they are collaboratively betting together and both benefit if they succeed.
Young, poor* entrepreneur brings an idea, maybe specialized domain knowledge, and time and energy
old, rich investor brings capital, maybe business experience and network, and gives it to entrepreneur to execute.
If all goes well old, rich investor and young, poor entrepreneur both make a lot of money. Young, poor entrepreneur becomes old, rich investor for the next generation.
If the venture fails, old, rich investor loses money (which went to pay some number of employees and vendors, who get to benefit from it), but old, rich investor expects this to happen for some or most investments. Young, poor entrepreneur loses time but gains experience and connections.
Nobody tricked anybody or stole anything from anyone or "lost a bet" like they are playing a rigged game in Vegas.
If you tell old, rich investor they aren't allowed to make any money by investing in young, poor entrepreneur any more, they don't just keep on doing it and allow you to redistribute their profits. They buy T-Bills instead. Young, poor entrepreneur goes to work for some other company (that old, rich investor probably funded in the past and owns) and gets a mediocre salary instead of getting rich and the world is deprived of whatever innovation they might have had.
This is pretty much fine for the old, rich investors, they're already rich. But it screws over the possibility of getting rich for anyone who isn't already. Which, if you were trying to reduce inequality, is the opposite of what you'd want.
* - or more realistically, middle or upper-middle class
Another unrealistic part about the model is that people keep betting a fixed percentage of their net worth. If you have a million dollars, maybe you can invest $100,000 into the seed round of a startup. If you have a billion dollars, it's unlikely you can invest $100 million into one investment. You spread it across multiple investments, maybe hundreds, and the average return is less than what you would get from succeeding on one big investment, because there simply isn't an opportunity that can make use of that much capital at once.
Again, you are talking about a world where the economy is not static: where there is room for overall economic growth that exceeds the wealth-concentrating effect. That’s the world we’ve lived in for at least the past few decades. But there’s no immutable law that says we’ll be able to maintain 3-10% GDP growth forever. There have been many periods of economic stagnation in the recent past where wealth concentrated exactly the way this model suggests. And there will be similar periods in the future, whether that’s the near future (demographic decline) or slightly more distant future (exponential growth can’t continue forever.)
In either case it is useful to understand the underlying concentrating effect even if one believes it is tolerable because other effects dominate.
In either case it is useful to understand the underlying concentrating effect even if one believes it is tolerable because other effects dominate.
Rich folks are only so seemingly "efficient" and good at creating capital because they decline to do what the government does.
The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos.
Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada.
These two different groups aren't working on the same problems.
The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos.
Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada.
These two different groups aren't working on the same problems.
Adding on to this, we absolutely know how to tax assets. We do it all the time: property (i.e. house) taxes. The unfortunate thing for middle class home owners is that houses are a type of wealth that is taxed just for having it whereas art, corporate shares, bonds, and trust funds are not.
Another contributor is dividends getting taxes lower than earned income (like from a job). Why would money you got from sitting on your ass doing nothing be taxed less than money you got by working a job?
As if the wealthy have never thought of ways to hide their money... The best you'll do is tax those who are actually turning up to get a salary. Ie you will tax people who arguably might be producing something, as opposed to the inter-generational, rent-seeking families that own so much of our world.
If you ask me, and you accept overt governmental control of everything, the best thing to do would be a system of openess about ownership, so that ownership of everything can be seen by everyone - with no murky legal instruments.
If you have the information about who owns what - and everything is owned by people, individuals, even if they hide behind legal and corporate instruments - you can then consider addressing what would be an equitable may to proceed.
My guess would be that something ludicrously minor like a 10% wealth tax on the top 0.01% of wealth owners, would cover us indefinitely.
If you ask me, and you accept overt governmental control of everything, the best thing to do would be a system of openess about ownership, so that ownership of everything can be seen by everyone - with no murky legal instruments.
If you have the information about who owns what - and everything is owned by people, individuals, even if they hide behind legal and corporate instruments - you can then consider addressing what would be an equitable may to proceed.
My guess would be that something ludicrously minor like a 10% wealth tax on the top 0.01% of wealth owners, would cover us indefinitely.
"To solve all this, it's pretty simple,"
I feel if it was simple it would be fixed?
I feel if it was simple it would be fixed?
Something can be very simple, and still be very hard to achieve because of resistance to it.
Which is why I don't think it's very simple, you have to convince a lot of powerful people they should pay more tax to achieve said goal, that's not easy.
"Simple" is the opposite of "complicated".
"Easy" is the opposite of "hard".
Reaching a high shelf is very simple. But if you're short, it may be hard.
Calculus is very complicated. But if you're a third-year grad student in mathematics, it may also be very easy for you.
"Easy" is the opposite of "hard".
Reaching a high shelf is very simple. But if you're short, it may be hard.
Calculus is very complicated. But if you're a third-year grad student in mathematics, it may also be very easy for you.
Simple and easy are not antonyms here -- something can be simple but difficult to accomplish depending on the time and place at the same time. For example, "respect women" is a simple enough phrase but getting the Taliban to follow it is anything but simple.
The problem is that at the other end there is also dysfunction. With high taxes and regulations keeping companies and profits in line the result is also a combination of structural inflation and stagnation resulting from the high cost of almost any kind of investment or operations. This is what triggered the fundamental changes which occurred from the late 70s through the 80s with Thatcher and Reagan.
It might be helpful if we could construct metrics for social function that more clearly showed when we approach extremes that interfere with business or social functions.
It might be helpful if we could construct metrics for social function that more clearly showed when we approach extremes that interfere with business or social functions.
Solving problems requires both the way and the will - those two things are not co-incident in many politicians.
It's because of who is in control, who has also brainwashed the poor into "someday this could be you living this lifestyle".
> brainwashed the poor
Yes, let the enlightened bureaucrats and their Ivy League-educated advisors make the decisions for the great unwashed masses who clearly cannot think for themselves.
Yes, let the enlightened bureaucrats and their Ivy League-educated advisors make the decisions for the great unwashed masses who clearly cannot think for themselves.
The overly simplistic takes on wealth on this page and the 80%+ who don't bother to vote in the primaries when it counts makes a good case for that.
None of the proposed wealth distribution solutions on this page do anything to address the real problems of lack of housing, poor working conditions, and reducing poverty. Punishing the wealthy doesn't actually fix anything. Wealth redistribution could well be the result of implementing policies that make people's lives better. It could be they may become even wealthier. I don't care either way if the actual problems get addressed.
Nothing gets fixed by punishing the winners after the fact. The real solution is to make the conditions of winning dependent upon providing the solutions to poverty and scarcity in the first place. Which they already do a decent job of in many cases.
None of the proposed wealth distribution solutions on this page do anything to address the real problems of lack of housing, poor working conditions, and reducing poverty. Punishing the wealthy doesn't actually fix anything. Wealth redistribution could well be the result of implementing policies that make people's lives better. It could be they may become even wealthier. I don't care either way if the actual problems get addressed.
Nothing gets fixed by punishing the winners after the fact. The real solution is to make the conditions of winning dependent upon providing the solutions to poverty and scarcity in the first place. Which they already do a decent job of in many cases.
So this redistribution... How will this ever be fair? If I work harder and smarter, save/invest instead of spending recklessly - how is it fair that the fruits of my effort are taken by the government (who incidentally created all the laws and loopholes we have now) to redistribute as THEY see fit (also known as Buying Votes).
How do you redistribute my house (expensive due to location) to others living in less expensive places? How about my car (expensive and fast). It costs more, drinks more fuel, and looks nearly new. Never mind that I paid a gasguzzler tax on purchase, sales tax, smog inspection since new(another tax in disguise). It looks new. But I care for it, handwash it, polish it, seal it, personally - my labor. I roundtrip it 90miles a day, so it as 135k miles. But it looks new. MY LABOR. Nobody offered to wash/wax it for me and make some cash. Just like I shovel snow off my driveway. And rake leaves. Nobody wants to do that work. They just want their part of the redistribution.
Y'all worry about these millionaires and their money, yet here you are, hoping to learn the secrets of success from Y-Combi companies... and become wealthy yourselves.
Y'all worry about these millionaires and their money, yet here you are, hoping to learn the secrets of success from Y-Combi companies... and become wealthy yourselves.
I know all of this but reading it again made me angry.
The problem with this plan is that modern economies need a lot of capital.
There are three places that capital can come from:
* the state, but we have voted year in and year out for tax cuts and spending rises, so the state is bankrupt. Not only is it not a source of capital, it is a major customer for it
* normal individuals saving and those small amounts being aggregated by banks etc. But rampant (and government supported) consumerism means most people are also consumers of capital not sources of it. Incidentally an example of the opposite of this is Germany where ordinary people save a lot more and don't have OTT mortgages and credit card debt. Mysteriously they have very few billionares...
* Billionaires. Which given the US (and UK where I live need their capital AND cannot get it elsewhere are able to charge a premium for it and cannot really be taxed etc without pain spreading all over the rest of the economy.
But if you try and tell people to spend less, save more, pay their taxes and accept less services in order to have a better, fairer, more equal, ultimately richer life they bulk...
There are three places that capital can come from:
* the state, but we have voted year in and year out for tax cuts and spending rises, so the state is bankrupt. Not only is it not a source of capital, it is a major customer for it
* normal individuals saving and those small amounts being aggregated by banks etc. But rampant (and government supported) consumerism means most people are also consumers of capital not sources of it. Incidentally an example of the opposite of this is Germany where ordinary people save a lot more and don't have OTT mortgages and credit card debt. Mysteriously they have very few billionares...
* Billionaires. Which given the US (and UK where I live need their capital AND cannot get it elsewhere are able to charge a premium for it and cannot really be taxed etc without pain spreading all over the rest of the economy.
But if you try and tell people to spend less, save more, pay their taxes and accept less services in order to have a better, fairer, more equal, ultimately richer life they bulk...
This focus on super-rich individuals is totally misguided. What's important is the economic system. Rich individuals are simply a nauseating side-effect of capitalism. Nobody really likes it, but there simply isn't anything better. The burden of proof is on the complainers. Even Marxist-sympathetic Peter Singer gets it.
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
> This focus on super-rich individuals is totally misguided. What's important is the economic system. Rich individuals are simply a nauseating side-effect of capitalism. Nobody really likes it, but there simply isn't anything better. The burden of proof is on the complainers.
Serious critics aren't suggesting we do away with capitalism, they're suggesting that it has negative externalities that can be corrected by better taxation. The focus on billionaires is exactly right, because as the model in the article shows, taxation can suppress the extreme inequality that results.
Serious critics aren't suggesting we do away with capitalism, they're suggesting that it has negative externalities that can be corrected by better taxation. The focus on billionaires is exactly right, because as the model in the article shows, taxation can suppress the extreme inequality that results.
I don't get the productivity argument. What productivity is enabled by billionaires or even individuals? Noam Chomsky has covered this, but most corporations benefit extensively from decades of government funded research and development. The socialist driven productivity is there, it's just that we slap capitalism on it at the end and think it was that that got us here.
I think this is referring to a widely used mental model in economics whereby you look at the allocation of resources "other than money". So if you look at a piece of farmland, you look at how many people it feeds and not so much at the fact that person X owns it and person Y needs to pay X for food. The fact that X becomes richer as a side-effect of Y not having to starve triggers our sense of injustice, but at the end, what really matters is that everyone gets fed. If, trying to right such injustices, you end up with an economic system where that piece of land feeds fewer people, you might have done yourself a disservice.
R&D is just one aspect. Productivity refers to general competent management incentivized by market pressure.
Anti-capitalists apparently can't even run lemonade stands these days:
Ezra Klein: "If progressivism can’t work there, why should the country believe it can work anywhere else?" https://www.nytimes.com/2021/02/11/opinion/california-san-fr...
"Meltdowns Have Brought Progressive Advocacy Groups to a Standstill at a Critical Moment in World History"
https://theintercept.com/2022/06/13/progressive-organizing-i...
https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessne...
https://nationalcenter.org/ncppr/2021/05/27/basecamp-climbs-...
Ezra Klein: "If progressivism can’t work there, why should the country believe it can work anywhere else?" https://www.nytimes.com/2021/02/11/opinion/california-san-fr...
"Meltdowns Have Brought Progressive Advocacy Groups to a Standstill at a Critical Moment in World History"
https://theintercept.com/2022/06/13/progressive-organizing-i...
https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessne...
https://nationalcenter.org/ncppr/2021/05/27/basecamp-climbs-...
Well, what is "economy"? Economy exists because we split work, and we do that to optimize taking care of our needs. I make tools for more efficient hunting, you do more efficient hunting with that in order to get food not just for you, but for others, including me, with these. It also means if machines do most of that work there will actually be less economy, but more free time for humans.
If you look at what is commonly called "economy", more and more of what is done there actually has a negative real economic value, it effectively hurts humans. The reason behind that is how we measure this economic value: It is completely broken. But as long as people strongly believe in this garbage, everything is focused on that, even it is trailed by chaos and destruction.
So capitalism, at least in its current form (neo-liberalism), fails as hard as socialism or communism, for that matter. Reason for that: Humans.
I also don't think anyone expects completely equal distribution of everything, but things are so far off in the other corner by now that something needs to be done, fast.
If you look at what is commonly called "economy", more and more of what is done there actually has a negative real economic value, it effectively hurts humans. The reason behind that is how we measure this economic value: It is completely broken. But as long as people strongly believe in this garbage, everything is focused on that, even it is trailed by chaos and destruction.
So capitalism, at least in its current form (neo-liberalism), fails as hard as socialism or communism, for that matter. Reason for that: Humans.
I also don't think anyone expects completely equal distribution of everything, but things are so far off in the other corner by now that something needs to be done, fast.
Or alternatively realise that there isn't a fixed amount of money and therefore if 'rich people' want to count their coins let them do so.
(i) it solves the capital accumulation problem (ii) you can accommodate the hoarding by guaranteeing people a job at the living wage, which then injects the right amount of new money, both temporally and spatially, to offset the hoarding.
Tax has nothing to do with raising money. Tax is about reducing the capacity of the private sector to hire people so the public sector can hire them instead. If there is unemployment then the public sector hasn't hired enough people or taxes are too high/ineffective.
It's never about money. It's always about stuff.
Here's how it works[1]
[1]: https://new-wayland.com/blog/how-the-job-guarantee-fixes-mai...
(i) it solves the capital accumulation problem (ii) you can accommodate the hoarding by guaranteeing people a job at the living wage, which then injects the right amount of new money, both temporally and spatially, to offset the hoarding.
Tax has nothing to do with raising money. Tax is about reducing the capacity of the private sector to hire people so the public sector can hire them instead. If there is unemployment then the public sector hasn't hired enough people or taxes are too high/ineffective.
It's never about money. It's always about stuff.
Here's how it works[1]
[1]: https://new-wayland.com/blog/how-the-job-guarantee-fixes-mai...
There isn't a fixed amount of money. And taxes are only incidentally about public sector hiring.
There is (more or less) a fixed amount of power.
Taxes doesn't raise money, but they do redistribute and decentralise power, making it harder for the very rich to dominate economic and social strategy for their own ends.
There is (more or less) a fixed amount of power.
Taxes doesn't raise money, but they do redistribute and decentralise power, making it harder for the very rich to dominate economic and social strategy for their own ends.
Except that if you have power, then by definition you can stop people redistributing it.
Otherwise you don't actually have power.
That concept is another fallacy of composition.
Taxes are there to reduce the capacity of the private sector to hire by reducing monetary flow. Without that you will get inflation.
Otherwise you don't actually have power.
That concept is another fallacy of composition.
Taxes are there to reduce the capacity of the private sector to hire by reducing monetary flow. Without that you will get inflation.
This model does not resemble a free economy at all. Not only it doesn't consider the wealth-creation aspect of a free economy, but it assumes people "wagers" their wealth. No society does this and is a terrible model of how an economy works. Most people earn their wages, if they have some money left they may save that, but long term saving is not comparable with a bet on a coin flip, if you think it is, then you should not save at all because you will go broke with probability one. Again, that is not what happens in our societies.
Jumping to the conclusion that "taxing the rich" could solve anything is completely wrong. You would just make things more expensive and add extra incentives to take jobs abroad. It doesn't matter that the model is too simplistic, the problem is that this model is too far from reality.
Jumping to the conclusion that "taxing the rich" could solve anything is completely wrong. You would just make things more expensive and add extra incentives to take jobs abroad. It doesn't matter that the model is too simplistic, the problem is that this model is too far from reality.
There a thing called the Laffer Curve. It’s not as though politicians, whose job it is to spend money, and whom can easily get more popular votes by spending ever larger sums of money rather than budgeting in such a way that defers immediate gratification, have never thought of just taxing more (read history).
I think this time we should go above and beyond regular heavy taxation.
We should seek to extend republican norms within the corporate sphere and downright prohibit rent-seeking.
A country whose inhabitants have no say in its internal politics is called a tyranny. It's more than time to see the current workplace the same way.
A country whose inhabitants have no say in its internal politics is called a tyranny. It's more than time to see the current workplace the same way.
There is no “this” to solve because this is a wildly inaccurate simulation and not the real economy.
> Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
Oh yes, the "they don't know what's good for them" argument.
Oh yes, the "they don't know what's good for them" argument.
How does this "solve" anything? Do you actually think that if rich people start paying more, then that will result in a reduction in what poor/middle class people pay?
You are treating the government as if it had even the tiniest bit of fiscal discipline, as if it says, ok, we only have $x coming in, therefore we can only spend $x this year (or alternatively, we plan to spend x, therefore we're obliged to collect x in revenue, but no more than that.)
US government hasn't worked like this in decades. Our debt is out of control and growing exponentially. The government has the green light to spend spend spend without any caution whatsoever. Joe Biden has a 4000-page, $1.7 trillion spending bill working it's way through Congress right now that nobody has read. Do you think any politician actually cares how it's going to be paid for? Do you think there are enough ultra rich people in this country, that even if taxed at 99.9%, will dig us out from a 30+ trillion hole?
You are treating the government as if it had even the tiniest bit of fiscal discipline, as if it says, ok, we only have $x coming in, therefore we can only spend $x this year (or alternatively, we plan to spend x, therefore we're obliged to collect x in revenue, but no more than that.)
US government hasn't worked like this in decades. Our debt is out of control and growing exponentially. The government has the green light to spend spend spend without any caution whatsoever. Joe Biden has a 4000-page, $1.7 trillion spending bill working it's way through Congress right now that nobody has read. Do you think any politician actually cares how it's going to be paid for? Do you think there are enough ultra rich people in this country, that even if taxed at 99.9%, will dig us out from a 30+ trillion hole?
Or maybe just align income tax on capital gain taxes?
Eh, this would discourage investment. Investment is important.
By the same logic, taxing sweat-of-the-brow income higher than capital gains discourages labor. And, between the two, labor is clearly more important.
It sure does, which is why we should tax land instead. :) No level of taxation on land value will prevent the land from materializing and being usable.
As a reaction to this, the super-rich will just implement offshore strategies to move their operations to tax-friendly jurisdictions.
[deleted]
> To solve all this, it's pretty simple, and the U.S. actually used to do it: heavily tax the super rich.
That never happened. https://mises.org/library/good-ol-days-when-tax-rates-were-9...
That never happened. https://mises.org/library/good-ol-days-when-tax-rates-were-9...
What is "that" that you're referring to? Tax rates have absolutely fallen. If you're referring the article's claim that the rich pay much more taxes in terms of dollar amount, that doesn't necessarily mean anything because the rich are wealthier and more concentrated than every before.
For example:
> According to investment bank Credit Suisse, the fraction of global household wealth held by the richest 1 percent of the world's population increased from 42.5 to 47.2 percent between the financial crisis of 2008 and 2018. To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
https://www.scientificamerican.com/article/is-inequality-ine...
For example:
> According to investment bank Credit Suisse, the fraction of global household wealth held by the richest 1 percent of the world's population increased from 42.5 to 47.2 percent between the financial crisis of 2008 and 2018. To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
https://www.scientificamerican.com/article/is-inequality-ine...
Looking at the total world population is completely meaningless. This is because fertility rate in virtually every developed country is below 2, however there are extremely poor countries where the population is exploding with fertility rates above 8.
> To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
This is also completely meaningless, because that figure is largely imaginery and super illiquid. Rest assured, Jeff Bezos can't cash out of Amazon and expect to be paid the current market rate for all of his shares.
It's also completely meaningless because the world's bottom 3.5 billion people control virtually no wealth whatsoever. Makes for a good headline though
> To put it another way, as of 2010, 388 individuals possessed as much household wealth as the lower half of the world's population combined—about 3.5 billion people; today Oxfam estimates that number as 26.
This is also completely meaningless, because that figure is largely imaginery and super illiquid. Rest assured, Jeff Bezos can't cash out of Amazon and expect to be paid the current market rate for all of his shares.
It's also completely meaningless because the world's bottom 3.5 billion people control virtually no wealth whatsoever. Makes for a good headline though
For the U.S. alone, I think the stat is something like out of every 10,000 people, it's something ridiculous like either 40 or even 4 people that own as much wealth as the bottom 6,000 combined. It may honestly be something worse like 1. I remember calculating this from a research paper I read, and I feel like 10,000 was the sample population needed to get a non-fractional rich person or persons. This is absurd.
Bezos may not be able to sell his shares in significant amounts, but he can sure use them for collateral. This is a very basic strategy for the super rich...
It'll be interesting to see if that strategy continues to work in a rising-rates environment, where the value of AMZN or TSLA may not be infinitely appreciating.
It's even worse that that. As interest rates rise, equities generally fall as they have been as they need to compete with interest bearing assets so their costs are skyrocketing and their collateral is collapsing risking them for a margin call and loosing everything.
Yes, I mentioned it above. There’s no way of stopping it, because the modern financial system is extremely dependent on such collaterization.
Bezos uses it to spend his pile of money, but for one Bezos there are 100 businesses who use the same exact instrument as a perfectly legitimate way to borrow money.
It’ll be extremely hard to draw the line between both use cases in a way Bezos couldn’t exploit it.
Bezos uses it to spend his pile of money, but for one Bezos there are 100 businesses who use the same exact instrument as a perfectly legitimate way to borrow money.
It’ll be extremely hard to draw the line between both use cases in a way Bezos couldn’t exploit it.
Accumulated spending should be a better measurement than current wealth. Otherwise those with debt has negative wealth.
Your source doesn't address the amount of tax collected from the ultra wealthy in relative proportion to their wealth. It only addresses the amount as a percentage of the federal budget.
Do you seriously think that the ultra wealthy have ever paid the 90% tax rate?
The point is that the source you cited to claim they didn't doesn't actually prove that, so what reason do us random HNers have to believe you over the initial claim that the higher tax rate in the past actually addressed this problem?
Ha, Austrian school of economics... I'm sure they have a neutral point of view.. /s
https://en.wikipedia.org/wiki/Austrian_School#Criticism
https://en.wikipedia.org/wiki/Austrian_School#Criticism
Heavy taxing is not the take away from the model the article discuses.
The model clearly shows that while heavy taxation does not fully eliminate unequal distribution, it does dramatically suppress the inequality. Completely eliminating inequality is not necessarily a goal.
If the government is not bound by a balanced budget amendment (can spend more than it takes in), and can print money whenever it wants, why do I pay taxes?
If the entire monetary system is fake, why do they need 40+% of my paycheck?
If the entire monetary system is fake, why do they need 40+% of my paycheck?
Because without an income stream no one loans to the government, or at least not at current rates. Interest rates would explode.
Funnily enough Britain just demoed that for everyone. the prior pm tried to reduce taxes a ton and everything nearly went to hell in a hand basket.
So at least we can be confident the taxes are actually doing things.
Funnily enough Britain just demoed that for everyone. the prior pm tried to reduce taxes a ton and everything nearly went to hell in a hand basket.
So at least we can be confident the taxes are actually doing things.
> Because without an income stream no one loans to the government
The government prints whatever money it needs to pay its bills, and does so already with impunity. It also pays interest on money loaned to it (bonds) with printed fiat.
Also, you completely missed the point. Of course taxes “do things”, and ending them would also “do something”. That wasn’t the question.
The question is simple, why pay taxes at all when the government has the ability to print an endless supply of money?
The government prints whatever money it needs to pay its bills, and does so already with impunity. It also pays interest on money loaned to it (bonds) with printed fiat.
Also, you completely missed the point. Of course taxes “do things”, and ending them would also “do something”. That wasn’t the question.
The question is simple, why pay taxes at all when the government has the ability to print an endless supply of money?
Why so should people answer or respond if the responses are ignored in order to repeat posting the same wrong preconceptions… preconceptions that were already addressed and even provided a contemporary example that was also ignored.
The solution is simple: Tax land not income.
Fair taxation doesn't work with regulatory capture. The US is a gross-unequal mafia colonial power. If it wasn't, campaign finance reform not only would've passed decades ago, it wouldn't be necessary. Instead, it's easy to be super rich and pay almost no taxes like Trump or Buffett.
> Corporations and the super rich have bought out democracy, and what is crazy is that they are supported by the very groups they intrinsically hate and hurt through their policies.
This is known since at least Marx, and still it doesn't change. This makes me very sad.
This is known since at least Marx, and still it doesn't change. This makes me very sad.
the problem is the taxeg go to funding military and healthcare. education is futher down the list.
Global fair taxation is what capitalism must solve in this century.
Tax the rich and they leave.
OP has made a fundamental mistake in their logic. Poverty and earnings aren't based on "coin flips".
OP has made a fundamental mistake in their logic. Poverty and earnings aren't based on "coin flips".
> Tax the rich and they leave.
A common claim but never accompanied by actual evidence.
A common claim but never accompanied by actual evidence.
But tell me, how are you going to tax the super rich? It's incredibly difficult to tax someone who's actually poor on paper. Most super rich people actually don't seem to have much wealth officially declared, all of their wealth is sort of like "pseudo" in that it's all tied up in assets, and sometimes assets that aren't directly owned by them but their companies etc. and they have a lot of shortcuts for tax breaks on the stuff that can be taxed. With the current system in place then it's impossible to actually tax the rich.
> It's incredibly difficult to tax someone who's actually poor on paper
You think this because the super rich want you to think this. Actually, it's not hard and there are some good ideas floating around (e.g. more inheritance tax, don't let them get loans without taxes againt their illiquid wealth). Does it require a change of laws? Yes, but that's the whole point of democracy.
You think this because the super rich want you to think this. Actually, it's not hard and there are some good ideas floating around (e.g. more inheritance tax, don't let them get loans without taxes againt their illiquid wealth). Does it require a change of laws? Yes, but that's the whole point of democracy.
The top federal inheritance tax rate is 40%. The top Washington state inheritance tax rate is 20%. I.e. the government takes half.
Sure, but we all know about the loop holes that need to be fixed.
> more inheritance tax
won't fix anything
> don't let them get loans without taxes againt their illiquid wealth
You don't want to fix this. It would kill repurchasing agreements as a collateral damage, making access to credit more difficult and expensive for everyone. Not to mention HELOCs. You might say, "ok, exempt HELOCs", but that's just an arbitrary goalpost.
The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
won't fix anything
> don't let them get loans without taxes againt their illiquid wealth
You don't want to fix this. It would kill repurchasing agreements as a collateral damage, making access to credit more difficult and expensive for everyone. Not to mention HELOCs. You might say, "ok, exempt HELOCs", but that's just an arbitrary goalpost.
The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
> The economy is organic, you can just use a wrench and have a go at a couple of cogs and expect there to be no knock-on effect.
What do you even mean by "organic"? Of course governments can, do and should intervene in the economy. And yes, there should be a range of experts evaluating policies before they are encated. I never stated the opposite.
What do you even mean by "organic"? Of course governments can, do and should intervene in the economy. And yes, there should be a range of experts evaluating policies before they are encated. I never stated the opposite.
It isn't difficult at all. This is an oft repeated excuse. The rich use their wealth as collateral to purchase things, like homes, companies, investments, etc. and transfer wealth to inheritors with basically no tax. So stop worrying about trying to figure out how to tax unrealized wealth and start taxing the things that unrealized wealth helps secure and purchases. This is one way to force realization of that wealth and thus tax it as well and get it back into circulation.
Right now, the rich are extremely incentivized to remain "poor on paper", so we should remove those incentives.
Right now, the rich are extremely incentivized to remain "poor on paper", so we should remove those incentives.
> transfer wealth to inheritors with basically no tax.
Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.
Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.
> Other than 40% federal estate tax and 20% Washington state tax, which is right next to zero.
Took me 5 seconds to Google this:
https://smartasset.com/taxes/5-ways-the-rich-can-avoid-the-e...
Took me 5 seconds to Google this:
https://smartasset.com/taxes/5-ways-the-rich-can-avoid-the-e...
Those can wind up deferring taxes, not eliminating them, and still they have exemption limits. The Roth IRA has contribution limits.
Gifts eliminate estate tax up to $12m. You can exceed even that limit by purchasing a property and placing it in a QPRT.
Life insurance trusts also have no limit.
Finally, even if it were true that it's merely deferring taxes, that means you can essentially time the market to pay less in tax when the rules are more favourable, and you can realize more gains in the interim.
Life insurance trusts also have no limit.
Finally, even if it were true that it's merely deferring taxes, that means you can essentially time the market to pay less in tax when the rules are more favourable, and you can realize more gains in the interim.
Except there are abuses of Roth IRAs and other cases where tax can be completely avoided. I think it was only recent that some limitations of Roth IRAs were put in place for heirs, but such investment vehicles do exist that do not get hit by the normal estate taxation processes.
Roth IRAs have contribution limits.
It’s a problem of choosing not to enforce it.
Some rich person says “teehee, I actually have no money! It’s all in (some country)!” and the US gov says “oops! Guess you really are poor!”
They take a letter of the law instead of a spirit of the law approach with taxes. If they start seizing mansions because clearly they have no money and the only way they could afford it is through ill-gotten means, people will start paying. Police already take cash from the wallets of random people because they assume it’s illegal—meanwhile the IRS knows full well where your money comes from but they pretend to believe the tricks of the mega rich.
Plus the IRS literally have access to banks around the world. You’re required to give them proof of foreign bank accounts or face imprisonment and other countries comply with IRS requests. They can literally seize wealth and know it’s yours. They choose not to.
Some rich person says “teehee, I actually have no money! It’s all in (some country)!” and the US gov says “oops! Guess you really are poor!”
They take a letter of the law instead of a spirit of the law approach with taxes. If they start seizing mansions because clearly they have no money and the only way they could afford it is through ill-gotten means, people will start paying. Police already take cash from the wallets of random people because they assume it’s illegal—meanwhile the IRS knows full well where your money comes from but they pretend to believe the tricks of the mega rich.
Plus the IRS literally have access to banks around the world. You’re required to give them proof of foreign bank accounts or face imprisonment and other countries comply with IRS requests. They can literally seize wealth and know it’s yours. They choose not to.
> They take a letter of the law instead of a spirit of the law approach with taxes.
Do you think it's a bad thing that the letter of the law is enforced over the spirit of the law, whatever the latter means?
Do you think it's a bad thing that the letter of the law is enforced over the spirit of the law, whatever the latter means?
Your solution to inequality is to double down on civil asset forfeiture?
Please try this somewhere I don't live and let me know how it works out.
Please try this somewhere I don't live and let me know how it works out.
Of course you can track down de facto ownership and streams of income regardless of de jure separation. This is a question of political will, not economical (im)possibilities.
Whenever you try making rich people responsible, they move abroad. In Norway, the super rich are becoming Swiss citizens after a recent change in taxation. Unless Switzerland takes social responsibility, they're getting away with it. But if Switzerland does the right thing, the rich will find another safe haven.
However, this is a short term issue. The long term changes require a historical change in culture and policy. Otherwise we're still very much catering to the will of old money and power structures that resembles autocracy.
(I'm just an armchair socialist and no expert by any measure, ymmv.)
Whenever you try making rich people responsible, they move abroad. In Norway, the super rich are becoming Swiss citizens after a recent change in taxation. Unless Switzerland takes social responsibility, they're getting away with it. But if Switzerland does the right thing, the rich will find another safe haven.
However, this is a short term issue. The long term changes require a historical change in culture and policy. Otherwise we're still very much catering to the will of old money and power structures that resembles autocracy.
(I'm just an armchair socialist and no expert by any measure, ymmv.)
What's wrong with saying good riddance to the super rich moving abroad? I'm tired of these threats of the rich and corporations saying they'll just go elsewhere. I say go for it and call their bluff.
They still need to interact with developed countries economic systems, so still punish them there.
They still need to interact with developed countries economic systems, so still punish them there.
Is that not the point?
If the billionaires are net negative and worse than the value they provide, ie billionaires are harmful to society, it seems the easiest way to reduce inequality is just to have them leave.
That's win/win for everyone, they keep their money, you get a society without billionires.
If the billionaires are net negative and worse than the value they provide, ie billionaires are harmful to society, it seems the easiest way to reduce inequality is just to have them leave.
That's win/win for everyone, they keep their money, you get a society without billionires.
The tax code does not require anyone to declare their assets. It's the income that gets declared.
[deleted]
You tax capital gains, interest income, dividends, royalties etc etc etc exactly the same as income from labor is taxed.
More importantly, the super rich get to choose when, how, how much, and where, and from where they are paid.
And even more importantly, they all live on low interest ELOCs.
There's also no reasonable way of fixing this.
And even more importantly, they all live on low interest ELOCs.
There's also no reasonable way of fixing this.
> There's also no reasonable way of fixing this.
Assuming that's true, and given that the current situation is also unreasonable, I guess we'll just have to go with an unreasonable way of fixing it.
Assuming that's true, and given that the current situation is also unreasonable, I guess we'll just have to go with an unreasonable way of fixing it.
This smells misleading / overly simplistic but I can’t quite quite put my finger on precisely why?
Some thoughts
- consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
- something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
Some thoughts
- consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
- something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
Some counterpoint thoughts:
> - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which is why a lot of poor people end up massively underpaid).
> - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
HPSquared said this in another comment [1] and I agree: what matters on this model is that every step is not additive but multiplicative, which is what leads to the inequality.
1: https://news.ycombinator.com/item?id=34091339
> - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win)
Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which is why a lot of poor people end up massively underpaid).
> - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).
HPSquared said this in another comment [1] and I agree: what matters on this model is that every step is not additive but multiplicative, which is what leads to the inequality.
1: https://news.ycombinator.com/item?id=34091339
1. Sure, I think there are degrees of consent
- people enthusiastically lining up to get the latest sneaker / iPhone.
- mildly enthusiastic grocery shopping.
- overpriced medical drugs due to a monopoly.
- taxation.
- outright theft at gunpoint
2. Insightful, thanks. I think one variable the model doesn’t account for is time (which is not multiplicative and scarce).
Money and power can be multiplicative so maybe most of us are playing the non-multiplicative game of spending our time to make money, while the rich are leveraged time to play multiplicative games where they spend money to make more money and happened to win a bunch of times.
- people enthusiastically lining up to get the latest sneaker / iPhone.
- mildly enthusiastic grocery shopping.
- overpriced medical drugs due to a monopoly.
- taxation.
- outright theft at gunpoint
2. Insightful, thanks. I think one variable the model doesn’t account for is time (which is not multiplicative and scarce).
Money and power can be multiplicative so maybe most of us are playing the non-multiplicative game of spending our time to make money, while the rich are leveraged time to play multiplicative games where they spend money to make more money and happened to win a bunch of times.
2.) Pretty much. That's the way I see it. They also take risks with their time in order to find multiplicative or even exponential results. Such as starting a business that might go nowhere.
Similarly, (from comment [1]) paraphrasing an idea from Victor Wooten's video. If you grow up around people that do interesting things with money then you'll learn to do interesting things with money too. (He said people who grow up around people who speak music naturally learn to speak music quickly and easily too.)
[1] https://news.ycombinator.com/item?id=34094950
Similarly, (from comment [1]) paraphrasing an idea from Victor Wooten's video. If you grow up around people that do interesting things with money then you'll learn to do interesting things with money too. (He said people who grow up around people who speak music naturally learn to speak music quickly and easily too.)
[1] https://news.ycombinator.com/item?id=34094950
In the real world, there is more than one sandwich seller and they compete with each other. When was the last time you non-consensually bought a sandwich?
Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice.
Indeed, sandwiches are abundant and affordable.
Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice.
Indeed, sandwiches are abundant and affordable.
People tend to think about monopolies in terms of single companies, but they're more commonly a systemic thing.
Housing: Most voters are homeowners, with the shared incentive to increase the price of housing in their town through restrictive policies. This ignores the interesting conversation about whether NIMBY actually increases property values, but most people believe they do. They don't even have to be explicit about it, nor get 100% cooperation, but the emergent property is clear and shockingly consistent across US
Healthcare: There are many systems at play here, as an example: The AMA restricts the number of doctors who can enter the profession: https://skeptics.stackexchange.com/questions/4561/does-the-a...
Education: Prestige de-facto limits the number of 'desirable' schools in the marketplace, and the high-prestige schools haven't grown nearly as much as overall enrollment.
There's no single top hat wearing, cigar chomping fat cat. Or even a smoke filled back room. But a variety of cultural and regulatory norms keep the dynamics entrenched. Which isn't to say that they can't be changed! But it won't be just the subtle nudge of Adam Smith's invisible hand.
Housing: Most voters are homeowners, with the shared incentive to increase the price of housing in their town through restrictive policies. This ignores the interesting conversation about whether NIMBY actually increases property values, but most people believe they do. They don't even have to be explicit about it, nor get 100% cooperation, but the emergent property is clear and shockingly consistent across US
Healthcare: There are many systems at play here, as an example: The AMA restricts the number of doctors who can enter the profession: https://skeptics.stackexchange.com/questions/4561/does-the-a...
Education: Prestige de-facto limits the number of 'desirable' schools in the marketplace, and the high-prestige schools haven't grown nearly as much as overall enrollment.
There's no single top hat wearing, cigar chomping fat cat. Or even a smoke filled back room. But a variety of cultural and regulatory norms keep the dynamics entrenched. Which isn't to say that they can't be changed! But it won't be just the subtle nudge of Adam Smith's invisible hand.
Those are all industries that are heavily regulated and/or subsidized by the government. I’m not saying the free market is the perfect answer to everything, but none of those are a free market.
That's a No True Scotsman, by that definition there simply isn't free market at all in the world. Every product and service has regulations on how/what can be sold...
"Free market" has an actual definition.
And no. There is not, in fact, a truly "free market" in the world, in the sense that people frequently talk about in terms of "the free market will solve XYZ". Because it's an idealized abstraction used to talk about the theory and philosophy of market economics.
I don't claim to be deeply conversant with the theory, but I do know that a truly free market requires:
1. Commoditization: The products or services need to be effectively interchangeable, aside from features and price on which different vendors can compete
2. Perfect information: The buyers and sellers all need to be perfectly informed about all aspects of the products or services (including things like, "was this made with slave labour?")
3. Unconstrained ability to choose: The buyers must have no constraints on their choice beyond those actively under competition—they can't, for instance, be lying on a gurney with their appendix rupturing while deciding which hospital to give their "business" to. They also can't be so hungry that they must buy food now or risk starvation, or under such tight financial constraints that they must choose the very cheapest option or risk destitution.
If a given market does not exhibit even one of these characteristics, it cannot be considered a "free market" of the type we should expect to arrive at the ideal distribution of resources.
And no. There is not, in fact, a truly "free market" in the world, in the sense that people frequently talk about in terms of "the free market will solve XYZ". Because it's an idealized abstraction used to talk about the theory and philosophy of market economics.
I don't claim to be deeply conversant with the theory, but I do know that a truly free market requires:
1. Commoditization: The products or services need to be effectively interchangeable, aside from features and price on which different vendors can compete
2. Perfect information: The buyers and sellers all need to be perfectly informed about all aspects of the products or services (including things like, "was this made with slave labour?")
3. Unconstrained ability to choose: The buyers must have no constraints on their choice beyond those actively under competition—they can't, for instance, be lying on a gurney with their appendix rupturing while deciding which hospital to give their "business" to. They also can't be so hungry that they must buy food now or risk starvation, or under such tight financial constraints that they must choose the very cheapest option or risk destitution.
If a given market does not exhibit even one of these characteristics, it cannot be considered a "free market" of the type we should expect to arrive at the ideal distribution of resources.
That’s not the point. If this post is trying to argue that high prices are all just caused by greedy capitalists, then pointing out the three most heavily government-manipulated markets does not exactly support the hypothesis.
> In the real world, there is more than one sandwich seller and they compete with each other. When was the last time you non-consensually bought a sandwich?
But that competition isn't perfect. Right now, for example, there are very clear indications of price gouging with the excuse of inflation.
And it isn't even just with food. See the renting market for an example. People who had enough money to buy a house to rent it earn more money, and people who didn't spend more money because they need a house to live (and moving is a very high barrier for a lot of people).
But I think the most important example is jobs, mainly jobs with a low barrier of entry, which are mostly taken by poor people. People that don't have enough savings/time to get better education or to find for better jobs have to get whatever they can, so their employers have a lot of power to set low salaries: the employer can deal with an employee leaving or taking more time to fill a position, the employee probably needs a job quickly to pay the bills.
But that competition isn't perfect. Right now, for example, there are very clear indications of price gouging with the excuse of inflation.
And it isn't even just with food. See the renting market for an example. People who had enough money to buy a house to rent it earn more money, and people who didn't spend more money because they need a house to live (and moving is a very high barrier for a lot of people).
But I think the most important example is jobs, mainly jobs with a low barrier of entry, which are mostly taken by poor people. People that don't have enough savings/time to get better education or to find for better jobs have to get whatever they can, so their employers have a lot of power to set low salaries: the employer can deal with an employee leaving or taking more time to fill a position, the employee probably needs a job quickly to pay the bills.
Switch sandwiches out with internet service provider, and do you get the same story?
Yes? The vast majority of people are able to buy Internet service and it is not a significant percentage of income, even for people with a low income.
Do you know of people taking out second mortgages on their house or drowning in debt to afford Internet service?
The flip side of the equation is that if a business is to exist, it has to set a price that people are capable of paying. Yes, sometimes with supply constraints they can charge more, but charge too much and nobody will be able to buy, which means $0 revenue for the business.
Do you know of people taking out second mortgages on their house or drowning in debt to afford Internet service?
The flip side of the equation is that if a business is to exist, it has to set a price that people are capable of paying. Yes, sometimes with supply constraints they can charge more, but charge too much and nobody will be able to buy, which means $0 revenue for the business.
> The vast majority of people are able to buy Internet service and it is not a significant percentage of income
how did you know that the cost of such a service is not way overpriced compared to the cost of production?
Are there really many ~sandwich providers~ISP that you can compare it to? Or are the prices just taken because there's no alternative, and that ~sandwiches~internet access is needed for living?
how did you know that the cost of such a service is not way overpriced compared to the cost of production?
Are there really many ~sandwich providers~ISP that you can compare it to? Or are the prices just taken because there's no alternative, and that ~sandwiches~internet access is needed for living?
The cost of production is irrelevant. The sale price is determined by the supply and demand on both sides (supply of the product, and supply of money available to pay for it).
A market like ISPs is subject to natural monopoly because of the physical nature of running wires to houses. A true free market would see any competitor free to run their own wires and offer a service, but we don't allow that. We kind of did in the early days of electricity when people just strung up wires wherever they liked. It led to a lot of people getting electrocuted.
If there is really a large margin available for a competitor to undercut, someone will find a way to do it. And, as predicted, people are with options like Starlink and 5G hotspots becoming viable.
A market like ISPs is subject to natural monopoly because of the physical nature of running wires to houses. A true free market would see any competitor free to run their own wires and offer a service, but we don't allow that. We kind of did in the early days of electricity when people just strung up wires wherever they liked. It led to a lot of people getting electrocuted.
If there is really a large margin available for a competitor to undercut, someone will find a way to do it. And, as predicted, people are with options like Starlink and 5G hotspots becoming viable.
The thesis was an investigation into whether the super-rich are better at making money, but they just took widely known distributions to tell a story enforcing that view without diving in as to why that's the case.
It's the classic case of using statistics as a method to divert blame onto something else. You learn nothing but a sense of despair from these kinds of analysis.
It's the classic case of using statistics as a method to divert blame onto something else. You learn nothing but a sense of despair from these kinds of analysis.
Zero-sum assumption and lack of returns on bets seem suspicious.
Betting is a bad deal for everyone in this model (even the rich person) since each coin flip is variance for no expected gain. Kelly betting implies you should bet nothing in this game.
Betting is a bad deal for everyone in this model (even the rich person) since each coin flip is variance for no expected gain. Kelly betting implies you should bet nothing in this game.
If you increase the payoff of the bet, it might prevent the poorest from becoming destitute, but the relative effect (where wealth concentrates in a few people) intuitively would still be present.
That's what I meant. It just comes down to the inequality being there and rich people having more capital to bet/invest/whatever and relatively get richer just though them having a bigger starting capital.
The most obvious omission from that model is that in a real economy people voluntarily give money to others in exchange for goods and services. If everyone was equally good at producing useful goods and services then even if the yard-sale effect was occurring due to investment/wagering behaviour it's unlikely to lead to the extreme inequality the "pure" version does.
It's also fairly obvious that in the real economy there's virtually nobody in the super-rich list that's got there purely by being lucky with investments. To what degree that's true only because we do have redistributive taxation systems I don't know.
The yard sale model doesn't attempt to model an actual economy. It's a thought experiment to counter causality bias.
Human minds tend to be biased towards causal explanations. So if we see huge wealth disparities, we're biased towards thinking that these disparities must exist for some deeper reason (often argued to be meritocracy). The model counters that thinking, by showing that, even in a very simple model with rules that seem fair to everyone, huge disparities can appear entirely at random.
It doesn't prove that the disparities we see in the real world are fully random. It invites us to question the assumption that they aren't.
Human minds tend to be biased towards causal explanations. So if we see huge wealth disparities, we're biased towards thinking that these disparities must exist for some deeper reason (often argued to be meritocracy). The model counters that thinking, by showing that, even in a very simple model with rules that seem fair to everyone, huge disparities can appear entirely at random.
It doesn't prove that the disparities we see in the real world are fully random. It invites us to question the assumption that they aren't.
The model is zero-sum, there are no gains from trade, the people just speculate. In this context, trading is harmful and this type of activity should be banned, or at least heavily taxed.
If economic activity is valuable, but leads to inequality, then you need some framework to trade off the value created vs. the social benefits of greater equality.
If economic activity is valuable, but leads to inequality, then you need some framework to trade off the value created vs. the social benefits of greater equality.
I did think that but even if you extended the model to be one where money could be created via "successful" investments, I suspect much the same result would transpire - wealth would concentrate fairly rapidly if everyone kept re-investing %x of their wealth, such that a certain % of investments would result in wealth creation and others simple loss of funds.
Yes, this is a great extension idea.
If you make a model like this, for different parameters of speculation vs. value creation you can then test what the most socially beneficial rates of tax are.
More tax will lead to smaller but more equal economies and laissez-faire shouldn’t be optimal.
I would just want the model to acknowledge the non-speculation part, because many of the things I buy are from spectacularly rich companies, but that are genuinely useful to me.
If you make a model like this, for different parameters of speculation vs. value creation you can then test what the most socially beneficial rates of tax are.
More tax will lead to smaller but more equal economies and laissez-faire shouldn’t be optimal.
I would just want the model to acknowledge the non-speculation part, because many of the things I buy are from spectacularly rich companies, but that are genuinely useful to me.
The article mentions that instituting a 0.5% tax made the coin flipping exercise much fairer. Since the income tax rates in the USA are way higher than that, it seems like I might be able to conclude that the USA treats people fairly. Articles like this one are hinting that people only improve their lot in life through luck. While luck does play a part in life, focusing on that seems counterproductive to me.
I am a devout capitalist with an accounting degree and an MBA. I believe the theory and data indicates that wealth is a mix of (in order): luck, family wealth, social ability, attractiveness, height, intelligence, natural abilities which align well with making money (conscientiousness, ability to delay gratification, affinity for work in scalable professions like IT, etc), culture, place of residence, likelihood of sociopathy, and many more.
Luck is part of it, but there are so many other factors here. When they converge, we often end up with people extremely good at making money. Under capitalism and in principle, this isn't a bad thing. It means they're generating outsized benefit for society. However problems quickly emerge: with economic power comes market inefficiencies. The wealthy can use their power to buy out competition, under-price them (below profit), out-market them, and leverage their efficiencies of scale and bargaining power to maintain a permanent moat. We are seeing all of this occur to an extreme degree in the modern software space. Frustratingly, anti-competitive laws have been on the books for a century, and are sufficiently broad to use. It's just that U.S. politicians lack the will.
Existentially, I believe that power corrupts. Billionaires are billionaires because they created a lot of value for society. Great. But once they're billionaires, they can control the destiny of countries, and this undermines democracy and greater social outcomes. I believe therefore that a balance must exist between deterrent effect which occurs with aggressive redistribution (and the effect is undeniable), and preventing the emergence of ultra powerful individuals.
Luck is part of it, but there are so many other factors here. When they converge, we often end up with people extremely good at making money. Under capitalism and in principle, this isn't a bad thing. It means they're generating outsized benefit for society. However problems quickly emerge: with economic power comes market inefficiencies. The wealthy can use their power to buy out competition, under-price them (below profit), out-market them, and leverage their efficiencies of scale and bargaining power to maintain a permanent moat. We are seeing all of this occur to an extreme degree in the modern software space. Frustratingly, anti-competitive laws have been on the books for a century, and are sufficiently broad to use. It's just that U.S. politicians lack the will.
Existentially, I believe that power corrupts. Billionaires are billionaires because they created a lot of value for society. Great. But once they're billionaires, they can control the destiny of countries, and this undermines democracy and greater social outcomes. I believe therefore that a balance must exist between deterrent effect which occurs with aggressive redistribution (and the effect is undeniable), and preventing the emergence of ultra powerful individuals.
Do billionaires really create enough value to warrant obscene wealth? Sure they deserve some wealth, but do they really deserve a billion dollars?
Are you forgetting the thousands of employees that are enabling them to become obscenely wealthy?
And I don’t buy the “deterrent effect” argument. IMO discouraging billionaires from acquiring more is a good thing and opens the door for other people to step up.
Are you forgetting the thousands of employees that are enabling them to become obscenely wealthy?
And I don’t buy the “deterrent effect” argument. IMO discouraging billionaires from acquiring more is a good thing and opens the door for other people to step up.
> do they really deserve a billion dollars?
yes, as long as they did not undertake an illegal action to obtain that wealth.
The employees that enabled the wealth creation is surely paid, and not coerced into the deal.
yes, as long as they did not undertake an illegal action to obtain that wealth.
The employees that enabled the wealth creation is surely paid, and not coerced into the deal.
I hope this is sarcasm.
> I believe the theory and data indicates that wealth is a mix of (in order): luck, family wealth, social ability, attractiveness, height, intelligence, natural abilities which align well with making money (conscientiousness, ability to delay gratification, affinity for work in scalable professions like IT, etc), culture, place of residence, likelihood of sociopathy, and many more.
One could argue that most (if not all) of these factors still come down to being lucky
One could argue that most (if not all) of these factors still come down to being lucky
it's too reductionist to attribute luck to all of those factors imho.
Regardless of the rest, I like how this article shows the relationship of it's not the same bet to get back to where you started. I've observed very similar mistakes a number of times in how that % relationship works.
It really reminds me of Eve Online. It's been a many years, but once upon a time when I did play it, we were looking at different sensor jammers. And the ones that looked like the worst were actually the best, because they couldn't be countered. Most worked like a +1/-1, but one applied as a fraction. So if the jammer cut a value by 50%, the counter to it added 50%. But adding 50% doesn't get you back to where you started, the opposite increase is 100%. 20 - 50% = 10. 10 + 50% = 15, not 20.
Another one is for the property I live in, we're pushing back on the government about losing a subsidy of ~33%. The property management company, managers, accountants kept sending letters saying this will cause prices to go up 33%. And I keep having to explain that the notices are wrong, removal of a 33% subsidy increases prices by 50%, not 33%.
It really reminds me of Eve Online. It's been a many years, but once upon a time when I did play it, we were looking at different sensor jammers. And the ones that looked like the worst were actually the best, because they couldn't be countered. Most worked like a +1/-1, but one applied as a fraction. So if the jammer cut a value by 50%, the counter to it added 50%. But adding 50% doesn't get you back to where you started, the opposite increase is 100%. 20 - 50% = 10. 10 + 50% = 15, not 20.
Another one is for the property I live in, we're pushing back on the government about losing a subsidy of ~33%. The property management company, managers, accountants kept sending letters saying this will cause prices to go up 33%. And I keep having to explain that the notices are wrong, removal of a 33% subsidy increases prices by 50%, not 33%.
wrt Eve Online, I've long thought that game economies could support public discourse. Just like how SimCity informs debates about land use.
Of course "real world" games, which don't nerf winner-takes-all, wouldn't be much fun to play for the non-winners.
Of course "real world" games, which don't nerf winner-takes-all, wouldn't be much fun to play for the non-winners.
The coin flip game on this as an illustration of the gamblers ruin concept.
It is the real reason casinos make so much money.
People think they are taking off the small margin in the form of the house edge, but that is there really just to speed the process up a little bit, and to stop someone coming along with way more money than the casino and beating them at their own game.
They are able to make huge profits by regularly taking all someone's money, or atleast all of what they are willing to risk.
There are so many wealth making opportunities that give more than literally zero expected value, and don't require 20% of your wealth.
You can become rich by following the rules of expected value and compound interest.
Backtest this against the population and tell me that people today wouldn't be richer if they made sound financial decisions based on the information at the time. I know I would be richer. The kicker is, wealth inequality would rise along with median wealth, because compound interest. This is so unpalatable for some people that they argue against sound decision making and reduce wealth creation to coin flips.
You can become rich by following the rules of expected value and compound interest.
Backtest this against the population and tell me that people today wouldn't be richer if they made sound financial decisions based on the information at the time. I know I would be richer. The kicker is, wealth inequality would rise along with median wealth, because compound interest. This is so unpalatable for some people that they argue against sound decision making and reduce wealth creation to coin flips.
While I’m not sure I’m following you 100%, luck takes a bigger part the higher the wealth. For example, existing billionaires have a way higher chance of having inherited a huge sum than the average population. If you take sound financial decisions you might get up to a million or a few, and above that it will be always more luck than skills. 100000x that is a huge lot of luck.
Unless you come from a wealthy situation, the only way to get rich is luck. That's it.
Hard work is worthless, just ask people in the third-world work 18 hours for a pittance to survive.
Of course luck may require certain knowledge, wherewithal and timing. You don't win a lotto without waking up at the right time, driving to the right shop and buying the right ticket.
Hard work is worthless, just ask people in the third-world work 18 hours for a pittance to survive.
Of course luck may require certain knowledge, wherewithal and timing. You don't win a lotto without waking up at the right time, driving to the right shop and buying the right ticket.
Yup. the rich were lucky when they were born. they have a surplus of luck...they can. afford to be unlucky for years and years.....it's the same as the money thing....they can afford to lose
You're claiming all the super rich lay in their sofa's all day and waited until they got lucky?
I'm laying in my sofa all day waiting to get lucky. Still, after all this time, still no luck. Maybe next year.
Without super hard work, you won't get rich.
I'm laying in my sofa all day waiting to get lucky. Still, after all this time, still no luck. Maybe next year.
Without super hard work, you won't get rich.
[deleted]
This combines with the observation that intelligence is normally distributed, so the rich people are more likely to be average people that got lucky, because there's more of them than smart people with a good strategy. It also applies in the opposite direction, there's more unlucky average people than true failures.
That doesn't seem to follow, unless intelligence and ability to make money are mostly uncorrelated, which I think is a very strong claim that needs to be substantiated.
> Although such an unequal distribution may seem unfair, it might be justifiable if it turned out that the most successful people were indeed the most talented/competent. So what did the simulation find? On the one hand, talent wasn't irrelevant to success. In general, those with greater talent had a higher probability of increasing their success by exploiting the possibilities offered by luck. Also, the most successful agents were mostly at least average in talent. So talent mattered.
> However, talent was definitely not sufficient because the most talented individuals were rarely the most successful. In general, mediocre-but-lucky people were much more successful than more-talented-but-unlucky individuals. The most successful agents tended to be those who were only slightly above average in talent but with a lot of luck in their lives.
https://blogs.scientificamerican.com/beautiful-minds/the-rol...
> However, talent was definitely not sufficient because the most talented individuals were rarely the most successful. In general, mediocre-but-lucky people were much more successful than more-talented-but-unlucky individuals. The most successful agents tended to be those who were only slightly above average in talent but with a lot of luck in their lives.
https://blogs.scientificamerican.com/beautiful-minds/the-rol...
From my observations these traits may be inversely correlated.
This article has some fascinating visualisations and offers a very compelling theory. However, I think the author lacks two very important points that compound the issue of poverty: the "boots theory" - aka a poor person spends 10$ a year over ten years on new but crap shoes while a rich person spends 100$ once every ten years for a new but good shoe - and the fact that money makes money.
The latter is the elephant in the room, IMO: once you hit 1 million dollars net worth, even a very conservative investment aka government bonds at 1% yields 10.000$ a year, at 5 million dollars it's 50.000$ a year, and at 10 million dollars, it's 100.000$ a year. Basically, once you have reached ~5 million dollars of wealth, you can afford to do whatever the fuck you want (and a bit earlier, if you are willing to risk a bit more and go for stocks). You can choose to not work a day in your life any more and chill out in Costa Rica sipping pina coladas every day, you can go and work for some charity without payment, or you can start up a company and not care how much money you make - as long as you're not actually losing money or spending over the yield of your investments, you literally cannot fail any more. You and your children won't ever experience being poor or homeless.
Super-rich people have it even easier. When you have 100 million dollars or manage to reach billionaire status - why not throw a million or two into some startups each year? Best case, you end up striking a goldmine and making ten times that, worst case you're out of a million dollars but your other conservative investments will make that back in a year.
The latter is the elephant in the room, IMO: once you hit 1 million dollars net worth, even a very conservative investment aka government bonds at 1% yields 10.000$ a year, at 5 million dollars it's 50.000$ a year, and at 10 million dollars, it's 100.000$ a year. Basically, once you have reached ~5 million dollars of wealth, you can afford to do whatever the fuck you want (and a bit earlier, if you are willing to risk a bit more and go for stocks). You can choose to not work a day in your life any more and chill out in Costa Rica sipping pina coladas every day, you can go and work for some charity without payment, or you can start up a company and not care how much money you make - as long as you're not actually losing money or spending over the yield of your investments, you literally cannot fail any more. You and your children won't ever experience being poor or homeless.
Super-rich people have it even easier. When you have 100 million dollars or manage to reach billionaire status - why not throw a million or two into some startups each year? Best case, you end up striking a goldmine and making ten times that, worst case you're out of a million dollars but your other conservative investments will make that back in a year.
It is also fact that the more money you have, the more options to increase your wealth are actually offered to you. Means there is no "equal footing" to begin with. And when it comes to covering your basic human needs there is an upper limit to that, even if you go the luxury route.
So can this be generalized to other collectable items? If as a hobby I collect, sell and exchange X does it mean I will lose money in the long run? Recently there was a few articles about investing in Lego sets, from this article POV it may not be that good investment, the future price is hard to estimate and probably you will guess price increase/decrease about half of the time right. So using this model you will lose money in the long run. Or did I miss something?
Returning to the simulation, the coin experiment can be explained using different model: Imagine position X on a line: |A A A A X B B B B B B B B B B B|, X can move either left or right by the amount specified by the rules of the game. But since one person is poorer the boundary | is closer to X. X is doing a random walk, so it will move with exactly the same probability e.g. 5 positions left or 5 positions right. But for the poor player 5 positions to the left means he is left with no money to play again, and for the rich player it means he lost some of his advantage. If the difference is huge like x100 the poor player has basically no change at winning at all. So this game is only fair if A and B have similar amount of money.
Returning to the simulation, the coin experiment can be explained using different model: Imagine position X on a line: |A A A A X B B B B B B B B B B B|, X can move either left or right by the amount specified by the rules of the game. But since one person is poorer the boundary | is closer to X. X is doing a random walk, so it will move with exactly the same probability e.g. 5 positions left or 5 positions right. But for the poor player 5 positions to the left means he is left with no money to play again, and for the rich player it means he lost some of his advantage. If the difference is huge like x100 the poor player has basically no change at winning at all. So this game is only fair if A and B have similar amount of money.
If you can only guess correctly half the time, then yes, it would apply to your scenario. But I don't think that's often the case with people who are seriously into collecting something. Chances are good that you know enough about what you're collecting to reasonably anticipate the things that will likely have more staying power.
Isn't this just the old concept of the "Gambler's Ruin"? https://en.wikipedia.org/wiki/Gambler%27s_ruin
Ha, well that didn't go as expected!
https://imgur.com/a/uyXjs1N
I do appreciate an interactive example that doesn't have a canned result :-)
https://imgur.com/a/uyXjs1N
I do appreciate an interactive example that doesn't have a canned result :-)
I came to this conclusion long ago. I called it the gravitational model of the economy. money has gravity....the more it has, the stronger the pull. it wants to join....
I love explorables! Simple model but good to see.
I am not sure I believe the reasoning in the title but the effect they show is interesting. Money is power, even in a heads or tails game
I am not sure I believe the reasoning in the title but the effect they show is interesting. Money is power, even in a heads or tails game
Money follows money.
If I have 10€ and I make 1% profit, I've made a whopping 1€. Now I can buy a few potatoes.
Someone with 1M€ makes the same amount of profit, now they have 10 000€. That's a good few months of living expenses for the regular person.
And this is not even taking into account the access to different people and resources you get just with having enough money to get into the right circles.
If I have 10€ and I make 1% profit, I've made a whopping 1€. Now I can buy a few potatoes.
Someone with 1M€ makes the same amount of profit, now they have 10 000€. That's a good few months of living expenses for the regular person.
And this is not even taking into account the access to different people and resources you get just with having enough money to get into the right circles.
comparing percentage profit is meaningless.
At low monetary amounts (like 10 euros), it's easy to make 1% profit. At high monetary amounts like 1 million, it's quite hard to get 1% profit - much harder than at 10 euros.
Therefore, to quantify the risks, the absolute amount invested must be compared, not just the return %. At $1 million, they took 100,000 times more risk than the $10 investment.
At low monetary amounts (like 10 euros), it's easy to make 1% profit. At high monetary amounts like 1 million, it's quite hard to get 1% profit - much harder than at 10 euros.
Therefore, to quantify the risks, the absolute amount invested must be compared, not just the return %. At $1 million, they took 100,000 times more risk than the $10 investment.
An archived PDF version of the paper mentioned can be found here: https://web.archive.org/web/20100527181035/http://www.cmth.b...
If resources would be distributed evenly, would society be better?
Who would make better allocation decisions than some arbitrary elite that happens to be rich? Without those riches, where is the surplus money that can be invested into innovations? Right now, the masses could pool some small amounts of money like $10 and have millions and billions to start new companies.
There was 'Ask HN: How might HN build a social network together?'[1]. I am not aware that something has been started, despite all the skills most likely being available. Without somebody fronting the money to make even more money, how can people be motivated to create progress?
[1] https://news.ycombinator.com/item?id=33999296
Who would make better allocation decisions than some arbitrary elite that happens to be rich? Without those riches, where is the surplus money that can be invested into innovations? Right now, the masses could pool some small amounts of money like $10 and have millions and billions to start new companies.
There was 'Ask HN: How might HN build a social network together?'[1]. I am not aware that something has been started, despite all the skills most likely being available. Without somebody fronting the money to make even more money, how can people be motivated to create progress?
[1] https://news.ycombinator.com/item?id=33999296
What's wrong about it? Unless you also "defund the police", that is. If law enforcement is well-funded and works well - which isn't all that expensive or hard on a national scale - than what's the problem about extreme inequality?
If we were a species that evolved where extreme inequality made sense, we'd probably be fine with it. But we aren't - not even close. We have strong notions of fairness and acting in the best interests of society as a whole, that enable us to cooperate effectively etc. Extreme inequality eats away at what has made us successful as a species.
> If law enforcement is well-funded and works well - which isn't all that expensive or hard on a national scale - than what's the problem about extreme inequality?
Law enforcement in the US is insanely well funded. The NYPD, for example, has 5 billion dollars of budget for 50k employees and serves about 8.8 million citizens. In contrast, in the German state of Bavaria, a budget of 3.8 billion euros [1] supports 45.000 employees and 13 million people.
And yet, Bavaria has extremely low crime rates (the lowest in Germany with ~3700/100k people [2]), and the police stats could be even better if cops weren't forced to waste time on marijuana bullshit... while in New York, headlines referring to a lack of safety are more or less the norm [3].
The most interesting thing to me is: in absolute numbers, Bavaria had 508.000 crime reports filed in 2021 (cleaned up for cases of being in Germany unlawfully). New York reports 95.000 crimes in 2021... a sixth of the Bavarian absolute case count. What is the cause of this difference, and why is public perception of safety so immensely different?
[1] https://www.stmfh.bayern.de/haushalt/staatshaushalt_2019/hau... (page 5, table E, line "Polizei")
[2] https://www.tvmainfranken.de/auch-dank-wuerzburg-und-aschaff...
[3] https://www.bloomberg.com/graphics/2022-is-nyc-safe-crime-st...
[4] https://www.newsweek.com/new-york-city-most-dangerous-year-c...
Law enforcement in the US is insanely well funded. The NYPD, for example, has 5 billion dollars of budget for 50k employees and serves about 8.8 million citizens. In contrast, in the German state of Bavaria, a budget of 3.8 billion euros [1] supports 45.000 employees and 13 million people.
And yet, Bavaria has extremely low crime rates (the lowest in Germany with ~3700/100k people [2]), and the police stats could be even better if cops weren't forced to waste time on marijuana bullshit... while in New York, headlines referring to a lack of safety are more or less the norm [3].
The most interesting thing to me is: in absolute numbers, Bavaria had 508.000 crime reports filed in 2021 (cleaned up for cases of being in Germany unlawfully). New York reports 95.000 crimes in 2021... a sixth of the Bavarian absolute case count. What is the cause of this difference, and why is public perception of safety so immensely different?
[1] https://www.stmfh.bayern.de/haushalt/staatshaushalt_2019/hau... (page 5, table E, line "Polizei")
[2] https://www.tvmainfranken.de/auch-dank-wuerzburg-und-aschaff...
[3] https://www.bloomberg.com/graphics/2022-is-nyc-safe-crime-st...
[4] https://www.newsweek.com/new-york-city-most-dangerous-year-c...
Something is wrong here, 500M for 45K people means ~850 euros per month per employee which is less than German minimum wage (1584 eur per month). Plain mistake.
$100K per year per employee in NYC sounds about right: around half are probably salaries plus payroll tax on them, resulting in just-over-poverty wage for low level employees and barely-middle-class for the higher ups; and the other half for supplies, building maintenance, etc.
$100K per year per employee in NYC sounds about right: around half are probably salaries plus payroll tax on them, resulting in just-over-poverty wage for low level employees and barely-middle-class for the higher ups; and the other half for supplies, building maintenance, etc.
> Something is wrong here, 500M for 45K people means ~850 euros per month per employee which is less than German minimum wage (1584 eur per month). Plain mistake.
Indeed. I don't know what our precious Interior Minister has been talking about, chances are he simply once again blasted bullshit towards the press and no one called him out as well... I dug a bit in the government's budget plan and updated the figures. Still, we spend ~1.2 billion (assuming 1:1 exchange rate) less than the US, with five million more citizens that are served by the cops - so there is still a marked difference.
Indeed. I don't know what our precious Interior Minister has been talking about, chances are he simply once again blasted bullshit towards the press and no one called him out as well... I dug a bit in the government's budget plan and updated the figures. Still, we spend ~1.2 billion (assuming 1:1 exchange rate) less than the US, with five million more citizens that are served by the cops - so there is still a marked difference.
The difference is probably less poor and desperately poor people.
Of course! But MY favourite billionaire is definitely not like the other billionaires..
The example that is used in this blog post is completely and absolutely wrong. He portrays wealth accumulation as a zero-sum game with people coin-flipping against each other. In reality, someone does not have to lose for wealth to be created.
No, but it's a decent approximation. Even in the case of "creating wealth", the person with more money usually gets a bigger share of the money simply because they had more money. This being Hacker News, I think we all are too close to the tech startup model, which is certainly far more equitable than others; but a lot of companies do not share fairly the value created between workers and owners.
If this was true about wealth creation, intergenerational wealth would eventually outcompete everything else, while it looks like the opposite is true.
Unless the people with money are the ones that made it themselves, they will keep buying bad watches like everyone else.
The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
Unless the people with money are the ones that made it themselves, they will keep buying bad watches like everyone else.
The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
> If this was true about wealth creation, intergenerational wealth would eventually outcompete everything else, while it looks like the opposite is true.
Not outcompete, but intergenerational wealth does play a huge part in class mobility [1].
> The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
The amount of money you have is a very important factor in your options. The more money you have, the more options you have to invest with more expected value. For example, what options does a family that manages to save $500 a year to invest that money in something that brings them a lot of expected value?
1: https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpe... Page 6, figure 3
Not outcompete, but intergenerational wealth does play a huge part in class mobility [1].
> The what they invest it in, is the whole point. If you spend your life and wealth playing 20% of your bankroll with zero expected value - you should completely expect not to be wealthy, and if you do become wealthy it will be completely by chance, against the odds.
The amount of money you have is a very important factor in your options. The more money you have, the more options you have to invest with more expected value. For example, what options does a family that manages to save $500 a year to invest that money in something that brings them a lot of expected value?
1: https://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpe... Page 6, figure 3
I disagree with the conclusions you draw and how you apply them to this context.
Richer people don't have access to higher EV else their kids wouldn't have very similar relative mobility, they should be richer than their parents. And it seems that the risk of becoming downwardly mobile (absolute and relative) increases along with income. Which makes sense as some sort of mean reversion. Along with the bottom quintile having higher positive mobility than richer quintiles, EV increasing with income doesn't make sense to me.
The family with $500 should keep it as liquid as possible unless they have enough credit to cover drawdowns in income. Other than that - they get the same EV as everyone else. $500/yr at 7% over 40 years will get you $100k. How many people with $500 actually invest it? Historical lookback on 40 years of the S&P 500 gets you real return of 8.77%.
Richer people don't have access to higher EV else their kids wouldn't have very similar relative mobility, they should be richer than their parents. And it seems that the risk of becoming downwardly mobile (absolute and relative) increases along with income. Which makes sense as some sort of mean reversion. Along with the bottom quintile having higher positive mobility than richer quintiles, EV increasing with income doesn't make sense to me.
The family with $500 should keep it as liquid as possible unless they have enough credit to cover drawdowns in income. Other than that - they get the same EV as everyone else. $500/yr at 7% over 40 years will get you $100k. How many people with $500 actually invest it? Historical lookback on 40 years of the S&P 500 gets you real return of 8.77%.
Not many people with 500 dollars invest it because they probably need it for essential things. Not to mention that the money you can get at 40 years doesn’t really matter too much when right now you can’t buy a house, even can’t pay your bills…
> simply because they had more money
It's because they took on more risk. The bigger the risk, the bigger the payout. The safer the investment, the lower the payout.
> do not share fairly the value created between workers and owners.
They do if one considers risk.
It's because they took on more risk. The bigger the risk, the bigger the payout. The safer the investment, the lower the payout.
> do not share fairly the value created between workers and owners.
They do if one considers risk.
There are several things here.
One is that you're only considering direct monetary risk. For example, imagine a person that starts a business with X dollars, which will usually be a percentage of their wealth. This person hires an employee at a salary that's barely above their living expenses, but with the idea to ascend as the company grows. If the company goes bust, who loses more? The owner still has money, the person living paycheck to paycheck might not have enough funds to live until they find a new job and they have probably lost money because they didn't go for a higher paying job (with less upside but more safety).
Two, the risk/benefit ratio is not fairly distributed either. If I have a hundred dollars in the bank I cannot really access any investment opportunity, like creating a business, that could multiply that money with the same risk.
Three, thinking only in relative terms is a mistake, even if risk/benefit ratios were evenly distributed, because not all people have the same relative expenses. For example, assume both person A and B get into a stock that after a year gives them a 50% profit. Person A invests their emergency fund, which is $1000 bucks. Person B is far more wealthy and invests $100k, and they still have a lot of money leftover. Here, A is actually taking on more risk because losing that thousand dollars means they might not have enough money to fix their car or pay for health treatment. Person B, if they lose that money, it will hurt but it won't really change their living situation. And when the profits come, A has $500 more, which is not that much and probably goes into the emergency fund again; but B has earned $50k and probably has enough to go on a super nice vacation and still have a lot leftover. In other words, even if the risk/benefit ratio is the same, the actual consequences are not equal. Having more money makes the same ratios far more beneficial in practice.
One is that you're only considering direct monetary risk. For example, imagine a person that starts a business with X dollars, which will usually be a percentage of their wealth. This person hires an employee at a salary that's barely above their living expenses, but with the idea to ascend as the company grows. If the company goes bust, who loses more? The owner still has money, the person living paycheck to paycheck might not have enough funds to live until they find a new job and they have probably lost money because they didn't go for a higher paying job (with less upside but more safety).
Two, the risk/benefit ratio is not fairly distributed either. If I have a hundred dollars in the bank I cannot really access any investment opportunity, like creating a business, that could multiply that money with the same risk.
Three, thinking only in relative terms is a mistake, even if risk/benefit ratios were evenly distributed, because not all people have the same relative expenses. For example, assume both person A and B get into a stock that after a year gives them a 50% profit. Person A invests their emergency fund, which is $1000 bucks. Person B is far more wealthy and invests $100k, and they still have a lot of money leftover. Here, A is actually taking on more risk because losing that thousand dollars means they might not have enough money to fix their car or pay for health treatment. Person B, if they lose that money, it will hurt but it won't really change their living situation. And when the profits come, A has $500 more, which is not that much and probably goes into the emergency fund again; but B has earned $50k and probably has enough to go on a super nice vacation and still have a lot leftover. In other words, even if the risk/benefit ratio is the same, the actual consequences are not equal. Having more money makes the same ratios far more beneficial in practice.
Losing your job is not nearly the same as losing millions of dollars. You can just get another job. Those millions will be very hard to replace. Even if you get a 6 figure job, how are you going to get those millions back?
> If I have a hundred dollars in the bank I cannot really access any investment opportunity
robinhood.com says hello!
> not all people have the same relative expenses
Right. But that's their problem, not the company's problem. If I sell Bob and Ted each a coffee for $10, and Bob is right and Ted is poor, they still each get charged $10. I don't do a background check and pour over their financial statements in order to determine how much to charge them.
> If I have a hundred dollars in the bank I cannot really access any investment opportunity
robinhood.com says hello!
> not all people have the same relative expenses
Right. But that's their problem, not the company's problem. If I sell Bob and Ted each a coffee for $10, and Bob is right and Ted is poor, they still each get charged $10. I don't do a background check and pour over their financial statements in order to determine how much to charge them.
> Losing your job is not nearly the same as losing millions of dollars. You can just get another job. Those millions will be very hard to replace. Even if you get a 6 figure job, how are you going to get those millions back?
"You can just get another job" not that easy for quite a lot of people. Some people lose their job and that leads to losing their homes. If I had to choose, I'd prefer to lose millions of dollars than to lose my house in a vulnerable situation.
> robinhood.com says hello!
Yeah, and the casino exists too, and I bet the casino is safer. What I said is that with less money you don't have the same investment opportunities with the same risk/benefit ratios. Yeah, you can invest in stock and not do any of the crazy options stuff, but that's not really going to give you a lot of profit.
> Right. But that's their problem, not the company's problem.
Never said it's the problem of the company, just that the same amount of dollars has different value to different people. That's one of the mechanisms that makes it easier for people with more money to get even more money for no reason other than having more money: the more you have, the less it matters to lose a certain fixed amount. A $20k investment does not actually have the same risk for someone that has $30k in their account than for someone that has $10M.
"You can just get another job" not that easy for quite a lot of people. Some people lose their job and that leads to losing their homes. If I had to choose, I'd prefer to lose millions of dollars than to lose my house in a vulnerable situation.
> robinhood.com says hello!
Yeah, and the casino exists too, and I bet the casino is safer. What I said is that with less money you don't have the same investment opportunities with the same risk/benefit ratios. Yeah, you can invest in stock and not do any of the crazy options stuff, but that's not really going to give you a lot of profit.
> Right. But that's their problem, not the company's problem.
Never said it's the problem of the company, just that the same amount of dollars has different value to different people. That's one of the mechanisms that makes it easier for people with more money to get even more money for no reason other than having more money: the more you have, the less it matters to lose a certain fixed amount. A $20k investment does not actually have the same risk for someone that has $30k in their account than for someone that has $10M.
Indeed- the more money a person has, the more adventurous they can get in producing value. It's not rocket science! (most of the time)
Producing value? Sometimes. Sometimes extracting rent. Sometimes speculating.
If private equity buys a pharma company and cuts research, jacks up prices to extract money from insurance, that might be "clever" but it is not really benefitting anyone, quite the opposite.
Obviously a lot of capital is used to create more value, but it does so by using labour, so it is the creativity of the people working for that capital that is adding the value mostly, while the capital sits back and enjoys it's growth. This is the concept behind public traded companies.
If private equity buys a pharma company and cuts research, jacks up prices to extract money from insurance, that might be "clever" but it is not really benefitting anyone, quite the opposite.
Obviously a lot of capital is used to create more value, but it does so by using labour, so it is the creativity of the people working for that capital that is adding the value mostly, while the capital sits back and enjoys it's growth. This is the concept behind public traded companies.
>while the capital sits back and enjoys it's growth
So people should risk their capital for nothing? I'm all for better pay and working conditions but the value from some ventures does not always come from the creativity of the workers. Sometimes it does, sometimes it doesn't so much.
So people should risk their capital for nothing? I'm all for better pay and working conditions but the value from some ventures does not always come from the creativity of the workers. Sometimes it does, sometimes it doesn't so much.
Er no. Just saying we shouldn’t be in awe of people because they have money and can make more of it, like this is a societal service they are performing. Sometimes it is, sometimes it isn’t, sometimes it is the opposite.
>the more money a person has, the more adventurous they can get in producing value.
I think it is more a case of the more access to capital they have. People who have demonstrated that they can create a lot of value usually get access to lots of capital, even if that capital is not theirs. It's pretty standard to not fund business ventures by one's self. An indication of a good business plan is buy-in from others.
I think it is more a case of the more access to capital they have. People who have demonstrated that they can create a lot of value usually get access to lots of capital, even if that capital is not theirs. It's pretty standard to not fund business ventures by one's self. An indication of a good business plan is buy-in from others.
I believe his point is about coin flipping being a fundamental force in the market. That at the basis of a market, there’s a game of coin flips going on.
True, there may be technological innovations in factories, farms, and labs that grow the size of the pie as a whole. But probably those with most market power will have most of the access to those innovations.
And even if the value of technology would be fairly distributed, it does feel to me that the underlying game of coin flips rigs the whole system in favor of the eventual oligarch.
True, there may be technological innovations in factories, farms, and labs that grow the size of the pie as a whole. But probably those with most market power will have most of the access to those innovations.
And even if the value of technology would be fairly distributed, it does feel to me that the underlying game of coin flips rigs the whole system in favor of the eventual oligarch.
What is the optimal size of a bet? This is called "Kelly bet". Even before Black-Scholes came into existence, Edward O. Thorp, a billionaire mathematician, figured out the innards of Black-Scholes strategy and made money for himself using Kelly strategy.
If you invest in some stock, and if that stock is moving in your favor, you should increase your bet or leverage more. If your bet is moving against you, cut down your bet size. That's what experienced traders do--just reduce your position by 50 percent; inexperienced/retail traders tend to increase their position, when things go against them.
If you invest in some stock, and if that stock is moving in your favor, you should increase your bet or leverage more. If your bet is moving against you, cut down your bet size. That's what experienced traders do--just reduce your position by 50 percent; inexperienced/retail traders tend to increase their position, when things go against them.
Cool interactions on mobile.
But the poor vs rich game ended up with the poor person going up to $1000 and the rich person going down below $100.
I recognize it's just chance... but it's funny that the results directly conflicted the author's point.
But the poor vs rich game ended up with the poor person going up to $1000 and the rich person going down below $100.
I recognize it's just chance... but it's funny that the results directly conflicted the author's point.
Same thing happened to me. Lol
This focus on super-rich individuals is totally misguided. What's important is the economic system. Rich individuals are simply a nauseating side-effect of capitalism. Nobody really likes it, but there simply isn't anything better. The burden of proof is on the complainers. Even Marxist-sympathetic Peter Singer gets it.
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
>Look, I think it would be better if you had an economic system in which we didn’t have billionaires—but the productivity that billionaires have generated was still there, and that money was more equitably distributed. But, really, there hasn’t been a system that has had equity in its distribution and the productivity that capitalism has had. I don’t see that happening anytime soon.
http://archive.today/2021.04.25-160837/https://www.newyorker...
I mean, we could just tax people more and redistribute to the bottom.
Basically create a society with some high income spread, say 100x. So a low salary would be like 40k as a floor, and 4milliom as a ceiling. Wealth can be capped via a similar scheme.
That way, people are highly incentived via capitolism just as they are now, but wealth is constrained.
Imo it's not that the mechanics are wrong, it's that the parameters are ill-tuned
Basically create a society with some high income spread, say 100x. So a low salary would be like 40k as a floor, and 4milliom as a ceiling. Wealth can be capped via a similar scheme.
That way, people are highly incentived via capitolism just as they are now, but wealth is constrained.
Imo it's not that the mechanics are wrong, it's that the parameters are ill-tuned
This is fair. Piketty thinks even 10x spread is sufficient to incentivize the entrepreneurs.
I’m suggesting that villainizing the rich is silly. Even in a perfectly meritocratic system according to OP, there’s going to be massive inequality.
I’m suggesting that villainizing the rich is silly. Even in a perfectly meritocratic system according to OP, there’s going to be massive inequality.
It’s hilarious that the author blames the yard sale model for their never earning money on vintage watches.
The issue with applying the yard sale model is when testing against real world markets, almost no market follows the predicted distribution curve, which imo implies that something about the model is incorrect, ergo cant possibly be the reason for continually losing deal on vinyage watches.
Many markets follow pro basketball player distribution, and unless you believe that steph curry is getting lucky on every shot, implies different model.
The issue with applying the yard sale model is when testing against real world markets, almost no market follows the predicted distribution curve, which imo implies that something about the model is incorrect, ergo cant possibly be the reason for continually losing deal on vinyage watches.
Many markets follow pro basketball player distribution, and unless you believe that steph curry is getting lucky on every shot, implies different model.
The thought process of blaming all social problems on random outcomes, and marginalize the individual's volition, itself is a fallacy.
Unfortunately, it’s a simulation.
Coin flip is pure luck, so there’s no accountability in losing the game. Hence, redistributing the wealth sounds like a fair idea.
The catch is that some people actually believe in luck, so they believe accountability doesn’t count.
Plus, taxing the rich will (and rightfully so) make them leave. And then, who will pay the taxes? Who will create jobs? How many people will lose their jobs?
Coin flip is pure luck, so there’s no accountability in losing the game. Hence, redistributing the wealth sounds like a fair idea.
The catch is that some people actually believe in luck, so they believe accountability doesn’t count.
Plus, taxing the rich will (and rightfully so) make them leave. And then, who will pay the taxes? Who will create jobs? How many people will lose their jobs?
[deleted]
Ι would like to recommend this book which explains how rich people hide their money and owning assets without getting taxed (since a lot of people mentioned this in the comments):
https://www.goodreads.com/book/show/39979237-moneyland
https://www.goodreads.com/book/show/39979237-moneyland
Haha this example is so obvious what happens in one MMORPG game I used to play
There is hazard game dice where you have 50% chance to win
But people who run those "casinos" figured many years ago that they will use e.g 90 95% payouts
So this way the longer you plsy, the more you lose cuz even if you bet the same amount twice and win once and losr once then youre behind
There is hazard game dice where you have 50% chance to win
But people who run those "casinos" figured many years ago that they will use e.g 90 95% payouts
So this way the longer you plsy, the more you lose cuz even if you bet the same amount twice and win once and losr once then youre behind
"To make 100 dollars into 110 dollars, this is work. To make 100 million into 110 million, this is inevitable."
Does this article also happen to be Robinhood's investment pitch and business model?
I don't understand why Jon doesn't lose the $240. Because isn't that what he risked to get his opponent's ("me") $160? Conversely, "me" should've ended up with $1040 and Jon with $960.
No.
Money is better at making money. The system is designed to do this.
If you're making money with your labor, you are at a gigantic disadvantage compared to those who are making their money by investing capital.
Money is better at making money. The system is designed to do this.
If you're making money with your labor, you are at a gigantic disadvantage compared to those who are making their money by investing capital.
binomial distribution re-branded as "Yard-sale model"
Just read this
http://www.paulgraham.com/wealth.html
http://www.paulgraham.com/wealth.html
No, rich people think about money, debt, and cash flow very differently.
There are also a lot of bad actors at the upper end that are facilitating a global ponzi scheme at our expense, and they will be bailed out over and over again because they've made it impossible for competing banks to enter the market through lobbied regulation that came as a response to their bad behavior.
Read up about the creation of the fed, what they've done, how many bailouts they've done, how many people were held accountable, you'll find it always ends in their favor. Behaviors that would send individuals to jail for decades are avoided by paying a small piece of the proceeds they get from those frauds disguised as penalties. Its been baked into the system.
Worse, many people immediately jump to something along the lines of "well that's people being greedy and its a downside of capitalism and we have to do something about that".
The problem with those people is, they don't know what they are talking about because its not capitalism, you often get monopolies in socialism, and while capitalistic societies are driven by a division of labor, socialistic economic systems are driven by corruption, and what are our the major issues right now? Corruption.
There are also a lot of bad actors at the upper end that are facilitating a global ponzi scheme at our expense, and they will be bailed out over and over again because they've made it impossible for competing banks to enter the market through lobbied regulation that came as a response to their bad behavior.
Read up about the creation of the fed, what they've done, how many bailouts they've done, how many people were held accountable, you'll find it always ends in their favor. Behaviors that would send individuals to jail for decades are avoided by paying a small piece of the proceeds they get from those frauds disguised as penalties. Its been baked into the system.
Worse, many people immediately jump to something along the lines of "well that's people being greedy and its a downside of capitalism and we have to do something about that".
The problem with those people is, they don't know what they are talking about because its not capitalism, you often get monopolies in socialism, and while capitalistic societies are driven by a division of labor, socialistic economic systems are driven by corruption, and what are our the major issues right now? Corruption.
They're better at getting government to give them large sums of money too.
Well… except that many super rich had failed businesses, went bankrupt etc?
I used to kinda think along the lines of this post. However, when examining the performance of top investors for example (eg Buffet, Templeton, Marks etc) it is clear it isn’t mainly luck.
I used to kinda think along the lines of this post. However, when examining the performance of top investors for example (eg Buffet, Templeton, Marks etc) it is clear it isn’t mainly luck.
People can and do learn from running failed businesses.
Yes, because R > G.
That's really all there is to it.
That's really all there is to it.
No. It's momentum and inertia.
This is a dishonest piece. It ignores that it's based on a zero-sum game and the world isn't zero sum. The quoted economists know that very well.
I like that the coin flip game illustrates the concept of compounding interest, but it doesn't model wealth creation at all.
Most new ventures aren't I-win-you-lose, they're we-win-or-I-lose. Wealthy people really can take bigger bets more frequently like the article suggests, but it's not necessarily at the expense of everyone else.
A more accurate illustration would be a game where each round you have a choice: bet 25% of your money or recieve $0.30. After each round, you must pay $0.25 to play again. Some people start the game with no money, some people start with $1.00.
If you think this game through, you'll still end up with super wealthy outliers and bankruptcies, but the players in the game actually have some agency.
I like that the coin flip game illustrates the concept of compounding interest, but it doesn't model wealth creation at all.
Most new ventures aren't I-win-you-lose, they're we-win-or-I-lose. Wealthy people really can take bigger bets more frequently like the article suggests, but it's not necessarily at the expense of everyone else.
A more accurate illustration would be a game where each round you have a choice: bet 25% of your money or recieve $0.30. After each round, you must pay $0.25 to play again. Some people start the game with no money, some people start with $1.00.
If you think this game through, you'll still end up with super wealthy outliers and bankruptcies, but the players in the game actually have some agency.
Please make your substantive points without name-calling or swipes (like "dishonest"). They don't add to the informational comment and they tend to irritate, distract, and ultimately evoke worse from others.
This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.
You're right, that was poorly worded.
Regardless of what complex strategy you apply in the real world, this still indicates that there's a bias at the core of a 50-50 fair bet in the long run, ability and IQ aside.
Besides the economy can very well have zero sum game elements to it
Besides the economy can very well have zero sum game elements to it
> This is a dishonest piece. [...] If you think this game through, you'll still end up with super wealthy outliers and bankruptcies, but the players in the game actually have some agency.
You basically admitted that the zero sum property has little bearing on the outcomes we're scrutinizing here, and so the argument is ultimately the same. I'm not sure how the piece is dishonest simply because it dispenses with an apparently irrelevant premise.
You basically admitted that the zero sum property has little bearing on the outcomes we're scrutinizing here, and so the argument is ultimately the same. I'm not sure how the piece is dishonest simply because it dispenses with an apparently irrelevant premise.
Honestly, this was a good observation that forced me to think more deeply about why the distinction matters.
I disagree that it's irrelevant. If the game is zero sum, the winners must succeed at the expense of everyone else. The game mechanics themselves produce unfair outcomes since nobody has any agency in their own outcome. Therefore, as this piece argues, the rules should be changed.
On the other hand, my example provides an alternative explanation for wealth inequality in which risk taking and inequality are inextricably linked. In my game, nobody loses because someone else won.
Far fewer people would find these game mechanics unfair, even though the final distribution of wealth is the same. It is not obvious that the rules should be changed.
I could adjust my game mechanics to make them look even more like the real world (as I see it): Every time someone takes a risk and wins, the non-bet reward should go up by a penny (e.g. from $0.30 to $0.31). In that situation, one would expect all the players to encourage risk taking because they know it benefits everyone whether they're taking risks or not. They might even conclude that the risk takers should have a chance at being wealthier than them because of these effects.
Using the zero-sum game leads the reader to a conclusion based on a false premise and I feel that was intellectually dishonest.
Note: one can still argue that the rules should be changed because wealth inequality itself is a problem, but that's not what this article is doing. It's arguing it based on the fictional rules.
I disagree that it's irrelevant. If the game is zero sum, the winners must succeed at the expense of everyone else. The game mechanics themselves produce unfair outcomes since nobody has any agency in their own outcome. Therefore, as this piece argues, the rules should be changed.
On the other hand, my example provides an alternative explanation for wealth inequality in which risk taking and inequality are inextricably linked. In my game, nobody loses because someone else won.
Far fewer people would find these game mechanics unfair, even though the final distribution of wealth is the same. It is not obvious that the rules should be changed.
I could adjust my game mechanics to make them look even more like the real world (as I see it): Every time someone takes a risk and wins, the non-bet reward should go up by a penny (e.g. from $0.30 to $0.31). In that situation, one would expect all the players to encourage risk taking because they know it benefits everyone whether they're taking risks or not. They might even conclude that the risk takers should have a chance at being wealthier than them because of these effects.
Using the zero-sum game leads the reader to a conclusion based on a false premise and I feel that was intellectually dishonest.
Note: one can still argue that the rules should be changed because wealth inequality itself is a problem, but that's not what this article is doing. It's arguing it based on the fictional rules.
The only reason why it isn't zero sum is because we get access to more resources, and this leads de facto to more money in the pool (money <--> resources) right? If we assume the best case that these new resources are distributed equally and not depending on wealth, then the Yard Model still holds in place as we talk about relative percentages.
No, because new resources don't materialize like manna from heaven. Someone, somewhere needs to reorganize resources in a more efficient way or discover new ones. If you benefit "equally" from that change in dynamics to the person who actually catalyzed the change, then there would be less incentive to catalyze it in the first place.
It may happen from time to time because people are curious and benevolent. But, in general, if catalyzing that change has a cost, then the society depends on some people sacrificing their own good for everyone else's. In other words, the benefactor will have paid to catalyze it, but they'll only get an "equal" share of the gains to the people who sacrificed nothing.
I think you probably don't mean "equally" though. You probably mean "fairly". And it's probably true that "sacrificing" 20% of a billion dollars is a lot different than 20% of ten thousand dollars. But rates of return do tend to decrease at scale, maybe not enough?
Personally, I think taking from the catalyzers isn't optimal. It's also petty to worry that they benefitted "too much" from their actions. If we must tax, tax land and consumption. I haven't thought it through, but maybe a 100% estate tax, minus some reasonably capped life insurance for spouses and dependents, would reduce some of the feelings of unfairness that people experience.
It may happen from time to time because people are curious and benevolent. But, in general, if catalyzing that change has a cost, then the society depends on some people sacrificing their own good for everyone else's. In other words, the benefactor will have paid to catalyze it, but they'll only get an "equal" share of the gains to the people who sacrificed nothing.
I think you probably don't mean "equally" though. You probably mean "fairly". And it's probably true that "sacrificing" 20% of a billion dollars is a lot different than 20% of ten thousand dollars. But rates of return do tend to decrease at scale, maybe not enough?
Personally, I think taking from the catalyzers isn't optimal. It's also petty to worry that they benefitted "too much" from their actions. If we must tax, tax land and consumption. I haven't thought it through, but maybe a 100% estate tax, minus some reasonably capped life insurance for spouses and dependents, would reduce some of the feelings of unfairness that people experience.
>No, because new resources don't materialize like manna from heaven.
No, you're wrong. Me finding gold or pretty much anything of value does mean that it did materilize from heaven. Many more examples...
No, you're wrong. Me finding gold or pretty much anything of value does mean that it did materilize from heaven. Many more examples...
Gold very rarely falls on your head while you're reclining on the sofa.
Not even that, simple bartering increases value by distributing items away from the people who don't want them, to the people who do. Value is subjective.
If we each start with one red and one blue pen, but I prefer red pens and you prefer blue, we (voluntarily) trade the pens and each have two of our favourite colour. Net gain!
If we each start with one red and one blue pen, but I prefer red pens and you prefer blue, we (voluntarily) trade the pens and each have two of our favourite colour. Net gain!
That sounds interesting. Did you run the simulation?
I didn't. The interesting and difficult part would be that every agent could play a different strategy. It's fine to take $0.30 every round, you can play forever. Some people with a $1.00 would bet three times in a row, lose, and go bust.
Edit: if you run it, I'd love to see and play with it!
Edit: if you run it, I'd love to see and play with it!
Wealth isn’t zero sum but power over law (as defined by who has influence over the rules we live by) is.
When you have concentration of power due to concentration of wealth, the society will become unstable and undemocratic.
So even though wealth isn’t zero sum, wealth inequality is a problem that needs to be addressed for long term stability.
When you have concentration of power due to concentration of wealth, the society will become unstable and undemocratic.
So even though wealth isn’t zero sum, wealth inequality is a problem that needs to be addressed for long term stability.
> Wealth isn’t zero sum but power over law…
Religious extremism isn’t coming mainly from the wealthy. It’s dominantly a lower-strata southern thing, with notable metastases all around the country, yet it plays strongly in the US system.
That some wealthy co-opt the extremists doesn’t change the above.
Religious extremism isn’t coming mainly from the wealthy. It’s dominantly a lower-strata southern thing, with notable metastases all around the country, yet it plays strongly in the US system.
That some wealthy co-opt the extremists doesn’t change the above.
I don’t believe that this voting bloc is actually voting in its best interests. The power rests more with the people who are able to manipulate it.
If you have a tornado coming straight at your house with your family inside you will be praying I guarantee you.
If you lived in a sparse, lonely place, with a bad economy, maybe joining a church starts sounding like a good idea.
Instead of judging people consider yourself lucky.
If you lived in a sparse, lonely place, with a bad economy, maybe joining a church starts sounding like a good idea.
Instead of judging people consider yourself lucky.
Nice strawman. I wrote “extremism”. You’re responding to something else.
Then who are the southern religious extremists? name them.
Look at the main Christian denominations associated with extremism, then look at where their main strength is. You’ll find a correlation to the US south.
As an example, look at the Global Methodist Church, which is liberating bigoted congregations from the United Methodist church. So far, it’s main (but not exclusive!) strength is in the south.
As an example, look at the Global Methodist Church, which is liberating bigoted congregations from the United Methodist church. So far, it’s main (but not exclusive!) strength is in the south.
I am more worried about the ideology that has killed the most humans: communism.
Zero sum game? Fractional reserve banking would like to have a word with you
It also ignores another big factor if psychology, humans are a lot more afraid of losing what they have than gaining anything.
So even in this stupid simulation, it just doesn’t work, as people get wealthier they actually risk less.
This whole article is Marxist academic bullshit, eaten up by Marxist upper class tech 20 year olds in this thread.
So even in this stupid simulation, it just doesn’t work, as people get wealthier they actually risk less.
This whole article is Marxist academic bullshit, eaten up by Marxist upper class tech 20 year olds in this thread.
> It also ignores another big factor if psychology, humans are a lot more afraid of losing what they have than gaining anything.
Rightly, I think. The marginal utility of the next dollar is higher when you have fewer dollars. (I think of it as roughly a 1/x curve, but I have no solid data for this.) This means that, if I bet 50% of my available money on a 50/50 chance, I will lose more utility with a loss than I will gain with a win.
But the more I have, the flatter the curve out where I am. So the richer I am, the more I can make that 50/50 bet, not just because I can take the loss better, but also because in terms of my personal utility, the rewards and losses are more evenly balanced.
Also note that if you have a 20% loss, it takes a 25% gain (on what you have left) to bring you back to even.
Rightly, I think. The marginal utility of the next dollar is higher when you have fewer dollars. (I think of it as roughly a 1/x curve, but I have no solid data for this.) This means that, if I bet 50% of my available money on a 50/50 chance, I will lose more utility with a loss than I will gain with a win.
But the more I have, the flatter the curve out where I am. So the richer I am, the more I can make that 50/50 bet, not just because I can take the loss better, but also because in terms of my personal utility, the rewards and losses are more evenly balanced.
Also note that if you have a 20% loss, it takes a 25% gain (on what you have left) to bring you back to even.
This is just not how it works on the psychological level. Mathematically yes, but we are not machines.
Someone with a net worth of $1bn is not going to brazenly bet $500m because hey, who cares it’s only half my net worth. That’s ridiculous.
Just like this entire post and discussion. It’s a frustrated poor intellectuals self explanation for why they are unsuccessful.
It’s also the line of thinking that when taken to the extreme killed around 130m people in the 20th century.
Someone with a net worth of $1bn is not going to brazenly bet $500m because hey, who cares it’s only half my net worth. That’s ridiculous.
Just like this entire post and discussion. It’s a frustrated poor intellectuals self explanation for why they are unsuccessful.
It’s also the line of thinking that when taken to the extreme killed around 130m people in the 20th century.
Their coin flip thought experiment is extremely misleading and it took me a while to understand why but now I think I can explain it.
Intuitively, it seems like everyone is making a fair bet because you're equally likely to win or lose. If you have an initial net worth of $1000 and flip a coin you're equally like to gain or lose $200 and your expected net worth after the flip is still $1000 (50% chance of $1200 or $800) so it's a wash, right? However their simulation kept having me end up poor which confused me, so I ran the same simulation in a Python script. What I found was as the number of flips increases your net worth approaches zero! I found this surprising because if the expected net worth after a single flip is unchanged, I would expect this to stay true for multiple flips. But based on simulations, against my intuition, it seems like this is actually a bad bet in the long term and you'll always lose money. This is still true even if you start to skew the odds and give them a 51% chance to win the coin flip.
So after some googling I found something called the Kelly Criterion which calculates whether a bet is good or bad based on the gains and losses and chance of each and decided to plug in these numbers: https://en.wikipedia.org/wiki/Kelly_criterion#Proof
For the game in the article, the rules are that the poorer person bets 20% of their net worth on a coin flip, so these are the variables:
If you forced a rich person to play this same game of repeatedly betting 20% of their money on a coin flip they would also end up losing all their money! When you frame it like this it's obvious that having a poor person play an unfavored gambling game and deposit their losses to a rich person is going to favor the rich people. This doesn't seem like a critique on capitalism or inequality, it's more analogous gambling at a casino.
----
However I am still confused how you can have a game where the expected gain after a single match is 0%, but when playing multiple rounds your expected gain is negative (this is what plugging numbers into the expected value formula in the Kelly Criterion wiki seems to prove). I find this counterintuitive and hoping someone can explain this.
Intuitively, it seems like everyone is making a fair bet because you're equally likely to win or lose. If you have an initial net worth of $1000 and flip a coin you're equally like to gain or lose $200 and your expected net worth after the flip is still $1000 (50% chance of $1200 or $800) so it's a wash, right? However their simulation kept having me end up poor which confused me, so I ran the same simulation in a Python script. What I found was as the number of flips increases your net worth approaches zero! I found this surprising because if the expected net worth after a single flip is unchanged, I would expect this to stay true for multiple flips. But based on simulations, against my intuition, it seems like this is actually a bad bet in the long term and you'll always lose money. This is still true even if you start to skew the odds and give them a 51% chance to win the coin flip.
So after some googling I found something called the Kelly Criterion which calculates whether a bet is good or bad based on the gains and losses and chance of each and decided to plug in these numbers: https://en.wikipedia.org/wiki/Kelly_criterion#Proof
For the game in the article, the rules are that the poorer person bets 20% of their net worth on a coin flip, so these are the variables:
f=20%
p=50%
q=50%
a=20%
b=20%
r = (1 + f*b) ^ p * (1 – f*a) ^ q
= (1 + 0.2 * 0.2) ^ 0.5 * (1 – 0.2 * 0.2) ^ 0.5
= 0.99919967974
If you forced a rich person to play this same game of repeatedly betting 20% of their money on a coin flip they would also end up losing all their money! When you frame it like this it's obvious that having a poor person play an unfavored gambling game and deposit their losses to a rich person is going to favor the rich people. This doesn't seem like a critique on capitalism or inequality, it's more analogous gambling at a casino.
----
However I am still confused how you can have a game where the expected gain after a single match is 0%, but when playing multiple rounds your expected gain is negative (this is what plugging numbers into the expected value formula in the Kelly Criterion wiki seems to prove). I find this counterintuitive and hoping someone can explain this.
The trick IMO is to use your extended family as a network and try to keep things within the network.
People don't like this but not only does it work well it's often more efficient in general.
People don't like this but not only does it work well it's often more efficient in general.
Probably, they have just more richer parents. And luck is also a factor
Better at finding opportunities to make money. Better at eliminating competition see Bill Gates and Microsoft and the DOJ. Some are just born rich and learned how to invest.
I don't think they're better at anything. The power of money to make money and to buy opportunity, time, and mitigate risk is extreme. Being able to take risks and fall back on your family's wealth can enable huge gains when taking high risk chances. See basically every "entrepreneur" like Gates, Bezos, Musk, Zuckerberg, etc.
Rich people are in the right sectors empowered by globalisation and tech, those are health care, food and education industries.
https://www.youtube.com/watch?v=vsmwnUPQ3Q8
Bill Gates is working on his version of circular economy, his charities feed into his investments: "The global pharmaceuticals market size is projected to grow from $1585.05 billion in 2022 to $2401.22 billion by 2029, at a CAGR of 6.1% in forecast period."
> circular economy
haha that's my first thought when I hear about "charities" by the billionaires in the Anglosphere world... sounds like some tax dodging loophole with huge marketing budget and a website. Why don't they just pay their taxes?
haha that's my first thought when I hear about "charities" by the billionaires in the Anglosphere world... sounds like some tax dodging loophole with huge marketing budget and a website. Why don't they just pay their taxes?
Pudding.cool is amazing. Go back them on Patreon (I think you get stickers)
1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts.
2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome.
As others have pointed out this is really not a good description of the economy as a whole due to its zero-sum assumption.
However I think it’s a relatively useful analogy for the stock market and how other passive investment markets work.
Passive investment is a larger percentage of the economy than ever before and is increasingly how the “rich get richer.”
A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction.
Another solution is to disrupt passive investment markets. The one that comes to mind is rental housing. If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income.