It’s my opinion but that was a very one sided view. And I need to read more on this but I don’t think the way he pointed it out is how anyone is proposing wealth tax.
What's the opposing view, other than "they are rich, they can afford it + we really need the money for $good-things"? I'm not sure if you are disagreeing with the math or making a separate point about why we should do it anyway?
I truly don't know the answer on whether the wealth tax is a good idea (and there probably isn't a single right answer). But, that sure is a shitty way of saying, "I don't understand, can you explain your viewpoint to me?"
I think it's an accurate summary of the arguments in favor of a wealth tax. But I would really like to hear if there are other arguments that can't be characterized that way. But it's hard to be persuaded when no-one actually presents the argument, and instead just criticizes the tone.
There were multiple prominent politicians with serious wealth tax proposals running in the 2020 Democratic Party primary. If you want implementation details I would suggest that you read their proposals.
As for an "argument" it's really no different than any other political position in that it boils down mainly to what you personally value.
I've observed at least two distinct value systems which can both lead to supporting a wealth tax.
1) Maybe you believe in helping the marginalized and creating a more equitable society. Perhaps you believe it is insane and obscene that multi-millionaires and billionaires walk past tent cities of homeless people every day in the streets of San Francisco. Maybe you care about the well-being of other people and recognize that what is good for them is usually good for yourself.
2) Or maybe you believe that tax policy should optimize efficiency as a facilitator of economic growth. You recognize that the diminishing marginal utility of wealth and the runaway inequality in America presents a problem of inadequate aggregate demand and threatens the entire economy. Maybe you've done the math and realize that the US government must raise revenues to have any hope of staving off an eventual sovereign debt crisis.
From what I've seen, the people opposed to a wealth tax usually believe something else.
I'm firmly in the camp that believes that the situation in SF is obscene.
But if CA wants to work on fixing its social ills, they could start by implementing the basics, like a functioning property tax system, and reducing the tremendous amount of spending on things like pension abuse, before moving on to more exotic and invasive solutions like wealth taxes.
So many of their issues stem from the ridiculous housing and other property development situation. It's not the fault of the ultrawealthy so much as the moderately wealthy NIMBY homeowner. But it's less popular to blame them, because for many of us, they are ourselves.
Fair point, and same probably goes for other billionaires, who have their money in a variety of investments. That probably does a lot to juice the stock market, pumping up valuations, but it doesn't do as much to generate actual economic returns. Happy to be educated otherwise.
What PG describes is basically what's proposed - the main difference is that most American proposals have a floor before it kicks in.
That floor is pretty high depending on the proposal ($30-50 million), but that doesn't stop the problem of equity ownership being eaten away over time when a lot of your worth is tied up into a successful company (like Bezos).
You also get other incentive problems with things like angel investing. If someone is at the wealth cap they're less incentivized to risk money when they'll either lose it because the investment fails, or lose it because it gets eaten by the wealth tax.
Other proposals have low floors where you just have the problem of a lot of wealth getting taken.
In general it's good for a society to incentivize wealth creation/growth and still protect the lower bound of society. A wealth tax dis-incentivizes wealth creation - and for what? It just comes across to me as a 'hate the rich' policy that creates perverse incentives.
Disclosures so people don't think there's hidden motivated reasoning here:
- I'm nowhere near the wealth cap and probably never will be
- I think trump is an idiot and the republican party is a disaster
- I voted for Hillary and will vote for Biden.
I still think the wealth tax is a bad idea and bad policy.
> It just comes across to me as a 'hate the rich' policy that creates perverse incentives.
Indeed, wealth tax sounds good because there are problems with income inequality and it's currently fashionable to hate the rich. But that's about where it ends, while second-order effects are ignored or at least not taken seriously.
Andrew Yang was one of the few high-profile Democrats brave enough to push back on it.
"I think the wealth tax is an idea, in spirit, that makes sense, given the wealth distribution. But in practice it would have massive implementation problems. There would be capital flight, wealthy people would renounce their citizenship. And the bigger problem isn’t even the money. It’s the annual inventorying of their assets. The truly wealthy in this country have zero interest in submitting to an annual audit of all of their assets. They barely know what all their assets are. And the last thing they’re going to do is report them every year and then pay a toll. So you would have massive compliance problems. And to me there are better ways to make this economy fair, though I understand the spirit of it and the intent of it. But I agree that it would be somewhere between problematic and a disaster in practice."
Easy ways to stop that, start with a huge tax on your wealth when you renounce citizenship.
They built the wealth on the back of their nation, on the back of the infrastructure, education, laws and blood of their ancestors, no good reason they should keep it when they choose to leave.
It's the fundamental basis behind tax. 95% tax on any wealth over, say, $500k on renouncing citizenship, total forfeit if found to be hiding assets, done.
>>Easy ways to stop that, make it illegal to take your wealth when you renounce citizenship.
If you have to come up with ways to stop people from fleeing your country instead of too many people wanting to enter your country then you probably have a problem. And no, I don't think it is as easy as you say. Simple sounding solutions like this can have huge disastrous consequences.
See, I always thought that socialism degenerates into tyranny.
My socialist country didn't even allow people to travel - to prevent capital flight and brain drain - and now you are proposing to basically close borders to some people until you buy your own freedom.
Why is disincentivizing the accumulation of massive wealth in a small subset of the population bad for society? What is the advantage to society of an individual accumulating tens of billions of dollars worth of wealth?
It's dis-incentivizing wealth creation in general and taking ownership away from people that build companies.
There's a compelling argument that growth (that accounts for human rights and protecting the environment) is the best way to help the most people the fastest: https://press.stripe.com/#stubborn-attachments.
Policy that dis-incentivizes wealth creation creates perverse incentives that limit growth.
We're better off with policy that limits how wealth can be leveraged into political power, and policy that helps protect and improve the lower bound of society. That said, I think it's likely reasonable to limit how wealth can be passed down generations (to prevent things like dynastic wealth, but that's a separate issue and I don't know enough to really comment on it).
Wealth creation isn't zero-sum, just because someone builds a business and creates wealth doesn't mean they're taking it from others. We want a society where people are incentivized to create and grow wealth as much as they can (within bounds for environment protection and human rights), not just to some arbitrary cap before it gets taken by the government.
All of the above ignores real modern examples that directly leverage their wealth to do things that would not be done otherwise (Elon Musk: SpaceX, Tesla, Neuralink, Boring # Bezos: Amazon and Blue Origin # Gates: Health and Public Policy). I think the general argument in favor of growth is better than these specific examples though because it's a more systemic argument about incentives for the structure of a society rather than relying on individuals and their choices.
There's also the implementation issues (which are real), but I'm not going to argue that bit just because a lot of good ideas are hard to implement but still worthwhile. The wealth tax though I think is both a bad idea and hard to implement. The bad idea bit is more important.
> Wealth creation isn't zero-sum, just because someone builds a business and creates wealth doesn't mean they're taking it from others.
It absolutely is zero sum - but not from the point of money, but from the point of view of another finite resource; human labour and talent.
The fact that someone has more wealth than someone else means that the market will value their time/spend more than someone who is poor.
Think about it this way, if you see money as a way for society to allocate resources - is the fact that you own more wealth than someone else mean that you can should be able to direct more of where the resource spend of human labour is?
How many talented engineers work at Rolls Royce to create £250,000 cars which would be better put to use elsewhere? How many software engineers work at startups funded as a moonshot for the wealth of the founders work on CRUD apps where they could be working on something like scientific or educational tech? How much chemical engineering talent do we sink into cosmetics?
Your cited examples prove the point above - the only reason why those examples exist is at the whim of those who have wealth. What about less savoury examples of the use of wealth such as Academi or Palantir?
The only reason wealth creation is not zero sum is because of the way it's defined. I can redefine anything zero sum to be not. Slicing a pie into pieces and sharing it is non-zero because there was no joy of sharing before! Etc.
I see you didn't bother to read past the first few words; but I'll be charitable and explain why this is _reducto ad absurdum_.
First, we're talking about capitalism as a economic system which has only been in place for ~200 years. I think you'd be hard pressed to find any capitalist which would give credit to capitalism before the birth of capitalism. If your critique is based on the fact that capitalism is a successful economic system and better than what came before it, I fail to see where I suggest the opposite view. To suggest it's the _best_ possible system is rather more difficult.
Second, wealth has no definition without some form of economic system. Is wealth the free time that someone has, the trinkets or baubles that someone owns or their lifespan? By all accounts capitalism has done wonders for the second and third measures of wealth (arguments that technology and scientific progress which capitalism doesn't tend to fund notwithstanding). The first I'm unsure about; census data only shows since the 1970's and of course we have the massive bump due to a doubling of the demographic who are working.
> It absolutely is zero sum - but not from the point of money, but from the point of view of another finite resource; human labour and talent.
I think your point is less about wealth creation, and more about access to capital and how that influences who can fund what work. It's a subtle distinction, but I think an important one - and yes you're right access to capital and how capital is allocated is zero sum and this influences what work is done.
I don't think this is entirely a bad thing though because in a society with an effective market what makes money should be related to what people want. The incentive alignment that comes from this (and capitalism generally) has allowed the largest creation of wealth in human history (of which everyone benefits when you look at things like infant mortality, public health generally, standard of living, etc.).
This doesn't mean there aren't places to improve in terms of equality of opportunity for access to capital or that there shouldn't be rules to prevent incentives that can lead to outcomes worse for individuals and the group (see the fish farming story in this: https://slatestarcodex.com/2014/07/30/meditations-on-moloch/), but it also doesn't mean that the wealth tax or dis-incentivizing wealth creation is a good idea. Venture Capital is important here because it gives access to money to people and ideas that would have a hard time getting it otherwise (on bets that only occasionally pay off huge).
We want people to be incentivized to take risks and start companies that can create massive amounts of wealth and entire new industries. If you have a wealth tax, someone making a couple million a year as an investment banker will be less likely to leave and risk that money to create something since they'll probably get to the cap without doing that anyway.
Starting a company is already a pretty hard/risky decision to make, we don't want to make it harder.
> How many talented engineers work at Rolls Royce to create £250,000 cars which would be better put to use elsewhere? How many software engineers work at startups funded as a moonshot for the wealth of the founders work on CRUD apps where they could be working on something like scientific or educational tech? How much chemical engineering talent do we sink into cosmetics?
The way to fix this is with incentives that encourage people to go into areas society thinks are more worthwhile, but I think you're too dismissive of things like CRUD apps. Those things provide enormous value for the companies that need them (I think even cosmetics research has led to new medical knowledge).
That said, I agree with the spirit of your questions - I wish humanity was better at coordinating. There's so much we could do if we were better at coordinating. I think capitalism and incentivizing for wealth creation (with controls for human rights/environment) is the best we've got to make the most progress the fastest. It aligns human nature and rewards people that make things that people value.
There's a risk of a corrupting influence on liberal democracy that needs to be controlled (https://www.ted.com/talks/lawrence_lessig_we_the_people_and_...), but I think this is best structure for society to efficiently allocate resources/capital in a way that encourages the most wealth creation and growth.
Does this mean you end up with things like Las Vegas where human investment would be better off elsewhere? Yes, but I think that's an acceptable trade-off for everything else you get (and people like Las Vegas).
Attempts to remove the capitalist incentive structure and dictate what's important for people to do (or worse control how money is allocated to people) seems to lead to massive corruption and people doing what's necessary to get the money (which is often unrelated to actual success).
As far as Academi - I'm not arguing for unregulated, no-government, capitalism. Companies should provide value within society and society should enact legislation via elected representatives in some form of liberal democracy (and companies should operate within those laws). I may not agree with every action that happens here, but nobody will - and that's why we have liberal democracy to sort it out.
> I think your point is less about wealth creation, and more about access to capital and how that influences who can fund what work. It's a subtle distinction, but I think an important one - and yes you're right access to capital and how capital is allocated is zero sum and this influences what work is done.
I agree; I'm talking about the allocation of capital in a capitalist society; I'm effectively arguing that inequality and wealth distorts the markets such that
capital is allocated to be invested in products which those who are richer care more about - to put it in a more reductive way the fitness function is a
simple maximum rather than, for example, having a scaling factor per person.
A liberal democracy is intended to be the latter, but as we've seen, enough wealth and lobbying implies that you can indeed, influence
enough of your fellow populace to vote how you want them to.
> I think this is best structure for society to efficiently allocate resources/capital in a way that encourages the most wealth creation and growth
With all due respect, this is similar to the argument laid out by Leibniz when asked about the existence of God; that is that "We live in the best
of all possible worlds" - and in that case the rebuttal is the same, given that the proposition is such a strong one the burden of proof is on the
proposer. After all, Mercantilism was thought to be the best system during the Rennaisance and Feudalism in the Middle ages to give two examples
of economic systems which were later discarded.
> The way to fix this is with incentives that encourage people to go into areas society thinks are more worthwhile
Capitalism only has a single answer to this question; the areas which have more capital are by definition the areas which
society thinks are more worthwhile! Which, is why it is an incredible system - it manages to make people who by and
large are self-interested and self-organize and as you say has been the biggest driver for human wealth and
prosperity for over a century without the need for some benevolent dictator.
To my mind, there are several really big problems which we have to face in the coming years. You alluded to it here
tangentially;
> people like Las Vegas
I think with adtech industry and social media, it's incredibly easy to influence what people desire and want - if you
can control what people want; can we still really say that capitalism makes people more prosperous, if the very
reason that they were poor because we induced artificial needs and desires in them?
On a more practical level, I agree with you; people should be incentivised to start companies because it's good for
society. But where we disagree, possibly, is that money is the only driver which causes people to start companies.
The IBD banker in your example, would start the company regardless of whether the payout was lower, but
by implementing a wealth tax, maybe the we could give the opportunity to the teacher with the great idea about
educational technology to create _their_ business and enrich society.
I appreciate the thoughtful back and forth - I also think we agree more than we disagree.
> "...given that the proposition is such a strong one the burden of proof is on the proposer"
I should clarify that I'm not arguing so much that capitalism is the best possible system that could exist and it's always worth thinking about ways things than can be better. There is a lot of evidence in favor of capitalism though compared to other systems that have existed, mostly in the amount of created wealth it has enabled via growth and the speed at which that improvement happened. Then looking at all of the societal metrics that have improved in that context (infant deaths, violent crime reduction, poverty, etc.)
It's the best structure I'm aware of and a lot of idealized proposals of alternatives fall flat.
The Stubborn Attachments book makes this argument in a way I found pretty convincing.
> "But where we disagree, possibly, is that money is the only driver which causes people to start companies. The IBD banker in your example, would start the company regardless of whether the payout was lower, but by implementing a wealth tax, maybe the we could give the opportunity to the teacher with the great idea about educational technology to create _their_ business and enrich society."
I think you can give this opportunity without a wealth tax and its associated negative incentives (I think these issues are unrelated). I also don't think money is the only driver, but you don't want to dis-incentivize growth when you don't have to.
Billionaires often make compelling arguments for why they should get to keep their money (Paul Graham and Elon Musk being two examples).
I disagree with their point of view because:
1. My neighbour having enough food to eat and a warm house is a form of wealth FOR ME.
2. If wealth that is generated is taxed, this means that it is harder to accumulate wealth, this means that the people that do manage to accumulate wealth have better qualities than the people that do so in a tax free environment. And thus they make better decisions about how to allocate their money.
3. Billionaires are not accountable to anyone for how they spend their wealth. This is fine if they are all like Musk. But they are not. Of the countless number, only two are trying to build rockets to Mars. Counter examples are Osama Bin Laden and the guys who funded the NRA. If the wealth is taxed then it is fought over in a shared space in which we all have a say, no matter how small.
I like the argument that Rawls made in "A theory of Justice", where he said that when you are deciding how to make a fair society you should think from a perspective in which you do not know what role you will have in that society.
> 1. My neighbour having enough food to eat and a warm house is a form of wealth FOR ME.
I want that too, but it's unrelated to a wealth tax or the existence of billionaires. I'd argue the wealth tax dis-incentivizes growth and makes it less likely your neighbor could have enough to eat and a warm house. We can and should improve the lower bound of society, but you don't do this by taxing wealth and dis-incentivizing growth.
> 2. If wealth that is generated is taxed, this means that it is harder to accumulate wealth, this means that the people that do manage to accumulate wealth have better qualities than the people that do so in a tax free environment. And thus they make better decisions about how to allocate their money.
I don't think this follows. Maybe it's harder so only the nastiest people attempt to do it and fight more with each other since their wealth decays over time? I don't have strong opinions on this, it's just not very compelling.
> 3. Billionaires are not accountable to anyone for how they spend their wealth. This is fine if they are all like Musk. But they are not. Of the countless number, only two are trying to build rockets to Mars. Counter examples are Osama Bin Laden and the guys who funded the NRA. If the wealth is taxed then it is fought over in a shared space in which we all have a say, no matter how small.
Yeah - on this we agree, there should be restrictions (there actually are some on political contributions and obviously things that are illegal/sanctioned). Limits on how wealth translates into political power should exist and probably need to be better. This is a different issue than a wealth tax and dis-incentivizing growth.
If I didn't know whether I'll be born in the bottom 1% or top 1%, I'd still choose a society that incentivizes wealth creation. Poor people in those societies are the richest poor people in the world. They have more prospects, they have more rights and they have more access to the benefits of civilization like education or electricity than the societies that promote the idea of taking away someone's property and make it difficult to start businesses.
>Poor people in those societies are the richest poor people in the world.
I suspect the average poor person in much of Europe is much better off than the average poor person in America. Yet Europe incentives wealth creation a lot less than America.
There are only four countries with wealth taxes. That is not “common in a Europe”.
> Net wealth taxes are far less widespread than they used to be in the OECD but there has recently been a renewed interest in wealth taxation. While 12 countries had net wealth taxes in 1990, there were only four OECD countries that still levied recurrent taxes on individuals’ net wealth in 2017. Decisions to repeal net wealth taxes have often been justified by efficiency and administrative concerns and by the observation that net wealth taxes have frequently failed to meet their redistributive goals. The revenues collected from net wealth taxes have also, with a few exceptions, been very low.
Africa is huge so this comment in isolation doesn't really mean anything.
What parts of Africa? Liberal democracy and capitalism are prerequisites before you can make a wealth-tax no wealth-tax comparison.
People in this thread are also confusing protecting the lower bound in society with taxing wealth. This confusion only makes sense when you think wealth creation is zero-sum (it's not). You can protect the lower bound of society (Europe does a better job of this than the US generally) and incentivize growth/wealth creation.
You don't have to choose one, you can choose both.
Its our country, our world. You don't live on it alone; we live here together. People who are very rich don't earn proportionally on how hard they work. Its the people who earn very little who do the hard, tough labor.
Money is a societal construct and as such it belongs to exactly the person society says it belongs to. That may not be the billionaire depending on the society.
Everything in society is a social construct, implicit or explicit. Right now the social construct that we have is that you get to keep the money you worked for after paying some taxes.
I do wonder if you could make something like the wealth tax work in the United States.
>We're better off with policy that limits how wealth can be leveraged into political power
Has there ever been a case in history where a society has successfully limited the political impact with those of disproportionately immense wealth?
edit:
>There's a compelling argument that growth (that accounts for human rights and protecting the environment) is the best way to help the most people the fastest:
I'd prefer to be an average or below person in most of Europe (free healthcare, free education, 6 weeks of paid vacation, various other benefits, low crime, etc.) rather than America. Yet America values growth a lot more than Europe.
>Wealth creation isn't zero-sum, just because someone builds a business and creates wealth doesn't mean they're taking it from others. We want a society where people are incentivized to create and grow wealth as much as they can (within bounds for environment protection and human rights), not just to some arbitrary cap before it gets taken by the government.
You're right that wealth creation isn't zero sum, but studies make this point a bit more nuanced than your argument would suggest.
Historical analysis of growth appears to indicate that equality and growth in America have been largely correlated on a decade by decade basis until the last 20-30 years. It was only in the most recent cycle of international growth that this link appears to have been broken.
So it's not simple enough to pretend that pro-wealth and pro-growth policies are one and the same; the opposite appears to have been the case until very recently.
I agree with most of your comment and it's making me rethink some of my opinions. But is this accurate:
> Wealth creation isn't zero-sum, just because someone builds a business and creates wealth doesn't mean they're taking it from others.
I'd say that's exactly the model that some of the startups are taking. Uber and Lyft come to mind. A part of their wealth is coming from the pockets of workers who have to work for lower wages than before and get hit by depreciation that they didn't account for when earning.
>A part of their wealth is coming from the pockets of workers who have to work for lower wages than before and get hit by depreciation that they didn't account for when earning
I'm pretty sure that the large majority of uber/lyft drivers never worked as taxi/limo drivers, so not sure how we can compare their earnings to "before". The cost of the vehicle has always been an import part of the economics of the taxi/limo business. In the old days, you would either have to be an employee, with lower hourly rate, lots of mandated hours, but with employee benefits, or you would have to pay rent for the use of someone else's vehicle, which would come out of your earnings if you were working for yourself. At least when people buy their own vehicles for ride-sharing, they are getting the vehicle at cost, not cost + profit margin, and they get to use the vehicle for personal use, meaning they don't need to spend money on a separate vehicle for personal use. For a lot of potential uber/lyft drivers, the additional flexibility of working or not working whenever you like is better for them than being an employee. Seems unclear to me how taking that choice away from them would improve their lives somehow?
There is a separate issue about whether adults should have the right to make their own decisions, even if they may turn out to be harmful to them. But it's not clear to me whether making the choice to be a taxi/limo driver 20 years ago was very different in that regard to becoming an Uber/lyft driver today?
Fyi had a family member in the taxi/limo business in NYC for many years. They started as a paid driver, then managed to find someone to rent them a limo so they could work for themselves, then saved up enough to get their own limo, then eventually gave up driving and just rented their limo to other drivers. Both parties at each stage were consenting adults.
Arguably wealth creation is never zero-sum, but businesses also do cause money to transfer which is - but I get what you're trying to say and won't dispute definitions.
By wealth creation I mean something like this: you buy parts to build a house on land you've purchased. After you're done building the value of that house is worth more than the sum of its parts. The time you invested created something more valuable without taking anything from someone else (you now have more 'wealth' than you had when you had some land and a pile of house parts). This doesn't take wealth away from anyone else, but if you were to sell someone may choose to buy your newly created house when they might have otherwise chosen the neighbors house which is slightly older. That's a bit of a different thing.
There are definitely some industries where a lot of the cut-throat nature is a result of stagnation and groups fighting each other over what profit is available via competition. (Thiel talks about this in Zero to One and why businesses in competitive markets are a bad idea).
That said, the uber/lyft example is interesting.
Some points:
- Prior to uber and lyft a lot more people would just drive drunk, taxis were unreliable and expensive - if you had to take a taxi somewhere people would just opt not to go.
- Taxi companies were pretty corrupt and (at least in NYC) relied on a medallion model that expressly limited growth and empowered organized crime groups. This led to a worse experience for everyone except the medallion holders who could extort drivers and riders (while providing bad service).
- A lot of people that drive for uber and lyft were not driving for taxis before, the market maker effect of uber/lyft and people that need a ride created a much larger market for people hiring taxis. This creates wealth - both for the drivers that did not have that ability before and for the riders that would not have previously bothered to call a taxi (and clearly all the people that work at uber/lyft generally). It might also have knock on effects where people go out more which might benefit local businesses more, but that's fairly speculative.
Are there people that get screwed in this? Probably - taxi companies that provided bad/expensive service are not competitive with uber/lyft. A smaller amount of people at those companies that were making more are probably making less. Is that worse for society generally? My personal view is that it's not.
Anyway - on a meta note, I also appreciate the back and forth and engaging with me. I'm open to being persuaded otherwise. I've read a lot about this stuff and have tried really hard to understand the underlying truth away from politics. This is where I've currently landed.
You fail to note that the medallion system existed partially to limit traffic, pollution, car accidents, pedestrian accidents and all the other externalities caused by massive amounts of additional cars on the road. You can argue if it's a net benefit or not but you failing to even note it is telling.
Most bad policies have at least some reasonable sounding (often well-intentioned) justification for their existence, but that's not really relevant to the point I was making.
Well-intentioned bad policies usually just fail to account for unexpected outcomes, or they create perverse incentives that quickly overshadow the original goals and make things worse. In particularly nasty cases the reasonable sounding justification was never the goal (or even initially well-intentioned) and it's just a cover for the some other motive.
I'm not sure which was the case for medallions originally, maybe it's what you suggest - or maybe some people were just trying to lock in a monopoly they could exploit. The number of cars on the road would likely have been moderated by what the market could support without them. The creation of monopolies locked in place via legislation was not a good outcome and created lots of problems.
Now with Uber/Lyft operating, suddenly the taxi service in NYC has improved (they'll actually take you where you need to go, the credit cards machines are no longer mysteriously broken).
