If I’m getting a blowjob from a supermodel and you’re having your nutsack branded with a hot iron, on average we’re doing okay!
Agreed. Couple that with some really punitive estate taxes and we’re good to go.
Not income. Tax overall wealth.
The responses have gotten into a debate about the proper degree of forced redistribution of income/wealth. And it is a debate of degree: the voting constituency totally against that is minuscule.
But the question is a binary whether one person could have so much it resulted in a distorted society. Obviously yes, as in the example already given, one person owns every penny of a country’s wealth. You have to be pretty extreme, past the category of internet people who say they want no welfare state, to argue that would be healthy.
OTOH the proposition that the degree of income/wealth inequality in say the US now, after accounting for existing govt-forced transfers is unhealthy is purely subjective. The proposition that it’s enough to constrain per capita GDP growth* is almost surely wrong, though you often hear that. It’s probably the other way around if anything.
*which is an average; redefining growth as growth of the median income is just changing definitions to try to make one’s proposition, that inequality at US level holds back growth, into a quasi-tautology. Obviously if the distribution has become more skewed the average has outpaced the median. That doesn’t mean the distribution change is constraining growth of the average.
Money is power. Giving people extreme amounts of power without serious checks and balances is over time dangerous for any society.
If your nutsack is getting branded it’s not because someone else is getting supermodel blowjobs. Now it’s true that your lot would be improved if somehow the government were to pry the supermodel off the rich guy and attach her to you, but that doesn’t mean that the circumstances that led her to the rich guy in the first place have anything to do with the hot iron causing you problems.
So we keep hearing. But just how exactly have the country’s rich employed all this supposed power? And how is it keeping anyone down or harming them? As far as I can tell most of their legislative efforts are focused on trying to keep the wolves away from their stash. Taking money from them and giving it to everyone else is not a sound remedy to excessive power anyway. That’s what laws and regulations are for.
The reason nobody paid those rates in the past was loopholes, which are politically inevitable once marginal rates get to a certain point.
Anyway the missing factor in your description is more basic. In the US tax system as it has existed up to now, reinvesting profits into hiring workers, stimulating the economy etc has not exempted those profits from taxes. The source of new capital is profits after taxes. If you took the current US system and just raised the rate to 95%, no loopholes, that would mean virtually no money available to invest in anything. It would make it the govt’s role, since they’d collected all that money, to invest. The degree to which the govt rather than private entities should invest in and therefore naturally own ‘the means of production’ is debatable across a spectrum, but it certainly has drawbacks at a certain point.
Your idea would make some sense with a big modification to the tax system. A complete deduction for capital reinvestment (not just a depreciation deduction for existing assets). That’s called a progressive consumption tax. Then the rates on consumption, income after reinvestment can be higher (though 95% is hyperbole obviously) without constraining investment, which is where future living std increases come from.
I personally find it disappointing that idea, around a long time, gained limited traction in the recent tax debate (it was enacted in a way on the corporate side, through allowing same year 100% depreciation by companies, but only for a few years if not renewed, and not on the personal side). However it’s the essence of a supply side idea.
Anyway you can’t have sky high tax rates on profit/income counted before reinvestment (as they are taxed now) and then say that’s going to spur reinvestment. It’s exactly the other way around. Except to the extent the job of investing in new assets is turned over to the govt, which again you don’t have to be 100% against in all cases to see big potential problems with that if greatly expanded.
I would point out also that most of the harm done in the last century (and by harm I mean death, repression and misery) has come not from any power the wealthy have but from governments seeking to enforce economic equality.
Extreme wealth strains the concept of a civil society of laws.
Being a billionaire doesn’t just buy you big houses and fancy cars. It buys you your own laws, and insulation from normal civil order. Enough money translates to power, and power corrupts.
I’m not sure what the solution to the problem is. That is: I think that the presence of billionaires is probably a bad thing for society, but any policies put in place to prevent them might be even worse.
But there are clearly problems with extreme wealth. You don’t have to look that hard to find them.
There’s a whole bunch of holes in your argument.
Money doesn’t sit in a vault. Okay. So what does it matter who owns the money. If a wealthy guy owns a billion dollars, it’s out there creating new wealth. And if the government takes the money from the wealthy guy, the money will still be out there creating new wealth.
If your claim is that money always generates wealth, then it shouldn’t matter if it’s owned by billionaires or governments. But if money sometimes doesn’t create wealth, then the rest of your argument collapses.
What happens if a bunch of money ends up in the hands of a non-productive billionaire? If our goal, as a society, is to create new wealth then we should get that money away from him. If that’s not our goal, then why should we care if billionaires keep their money? It doesn’t matter if they’re creating new wealth or not.
Maybe the secret is to have a lot of money. It makes sense for billionaires to have a lot of money because then they’ll go out and use it. It doesn’t make sense for middle class people and poor people to get more money; they wouldn’t have enough to do anything significant with it.
But if the key to creating new wealth is to accumulate it into the largest pile, shouldn’t we encourage high taxes? That way the government will have a much bigger accumulation of money that any individual billionaire could ever have. So based on size, it’s better for the government to have money than for rich people to have it just as it’s better for rich people to have money than for poor people to have it.
What about talents? According to your argument, rich people have the talent to create new wealth. As long as they have an incentive to do so. If that’s the case, we should provide them with more incentive - by taking away most of the money they have. That will motivate them to put their talents to work and create some new wealth rather than just resting on the wealth they already have.
Yes, people keep saying this, but when I ask for real world examples I don’t seem to get anything back. So far the dreaded power and abuse that money brings seems to be mostly theoretical. On the other hand we have a century’s worth of the most egregious consequences of power when wielded by governments intent on doing away with income inequality. Yet no one around here ever says a word about that. It seems to me that if one wants to be fearful of power, a government seeking to do away with money and class distinctions is far more frightening.
Of course there were loopholes. Loopholes are necessary for a progressive tax structure. I don’t know of anyone suggesting removing all loopholes from a progressive tax. The only ones I see suggesting removing loopholes are those who push for an incredibly regressive flat tax (or something like a flat tax) with those at the top paying a lower rate than those at the bottom. (See, a flat tax sounds good to the lumpen, but those at the top still manage to pay a lower rate.) Can you point to where I suggested closing all loopholes?
I also disagree that there should be a 100% deduction for capital investments. Otherwise companies could conceivably buy, say, new Thingamajig Machines every year, resulting in a glut of used Thingamajig Machines. Or unscrupulous people may abuse the system such that they don’t actually buy new Thingamajig Machines, but through creative accounting make it appear that they have and take the deduction. Better to have companies invest in themselves, rather than spend money that could otherwise be used for investment.
As to pre-tax vs. post- vs. pre-investment deductions, my dad had a couple of airplanes that he leased back to an FBO. The expenses were taken off of the top of his taxes. This is the first time I’ve heard that you’re taxed on money you don’t have.
Do you believe that someone could be “too rich”?
It depends on which politicians they donate to.
Sorry, I have to leave now, but in parting I’ll just say that it isn’t my argument that’s full of holes.
But before I leave, let me give you an example of what happens when government, not well-heeled individuals, create products. Take a look at the East German Trabant, surely one of the most laughable excuses for an automobile ever created. I’ll hit a few of the high points:
-
500 or 600 cc two-stroke engine
-
1 - 30 hp depending on whether you’re going uphill or downhill.
-
Fuel tank above the engine which is gravity fed to eliminate the expense of a fuel pump. There is no fuel gauge, the fuel is checked under the hood with a dipstick.
-
Ten year waiting list. Used Trabants sell for more than new ones because at least they’re available.
-
Innovation non-existent. Virtually unchanged in 40 years.
Now let’s take a look at what our society gets from our evil and powerful capitalist overlords:
- Ta-da (And of course this is only one of dozens of models of automobiles and trucks people in our society have to choose from.)
Capitalism, and the produce of the rich guys it creates, are good. Pie-in-the-sky efforts at big daddy government enforcing fairness and equality for all are not.
The criminal justice system is rife with examples. Poor people get abused and locked up. Rich people can lawyer, obstruct, and bribe their way out of punishment.
The legislative system is rife with examples. Rich people get special exemptions inserted into laws for their benefit. Poor people get whatever.
It boggles the mind that you really cannot think of any cases where rich people have exploited their wealth for power.
Perhaps we’re speaking past each other because we are failing to agree on some basic assumption?
Beowulf and the dragon.
Treasures are typically distributed amongst the surviving participants of a given enterprise. In this process, social bonds of trust, loyalty, and kinship are strengthened and the greater society is stronger as a result. In hoarding treasure and taking it out of circulation, the dragon effectively undermines society by making it harder for individuals to reinforce bonds of trust, loyalty, and kinship. After all, if there is no treasure to distribute then nobody can demonstrate generosity or philanthropy, and nobody is deserving of the loyalty of anyone else. So profound is this effect that by the time the treasure-hoarding dragon is addressed, Beowulf finds himself abandoned by those who, in the past, swore oaths of loyalty to him, to fight beside him for the mutual benefit of all. Beowulf, the embodiment of everything valued by his society, dies as a result.
The point is, great wealth is not in and of itself evil, as long as you are willingly giving a fair amount of it to those who, ultimately, helped you to get it in the first place. In contrast, hoarding it out of what can only be seen as greed, is destructive to a society. And as we see in this tale, as well as more recent events (18th century France), eventually those with whom you ought to have been sharing will eventually rise up and destroy you even if it means destroying themselves in the process.
More practically, Bill Gates & friends made a pretty god living by being innovative and aggressive–modern day Vikings, if you will. Similarly, the Walton family is stacking mad chips by ruthlessly applying a well thought out marketing strategy. The big difference is Gates is doing the Beowulf thing and compensates his employees well, and willingly redistributes huge chunks of wealth to those in need. WalMart employees, on the other hand, get fucked in every way possible by their employer, and I’m unaware of any philanthropy the Waltons are into that represents a fair portion of their overall income.
So, it’s not really about wealth or wealthy people, it’s about the sort of people who are wealthy and whether or not they share, in any meaningful and socially-bonding way, the fruits of their labors.
Since wealth is finite, too much congregated at the top means that everyone else lacks enough wealth to buy food, shelter, transportation, education and medical care. The more people lack these things, the more radicalized they become. That is why communism happens. Communism happens when the people are so poor, destitute and ignored by the powers that be that they become desperate. Ignoring the people and hoping they go away won’t make them go away, it’ll just radicalize them. You need some wealth redistribution to keep authoritarian governments from becoming too appealing.
Too much wealth at the top makes it easier for the wealthy to buy up the levers of influence like politicians or the media. In some other countries they can buy up the police, military, judiciary, etc too.
Since the economy is mostly demand based, too much wealth at the top can reduce consumer demand, slowing economic growth. Taxing the money and investing it in education, health care or mass transit can create more jobs.
Why would it motivate them? The government is just going to take that away as well.
I build a house; you come along and burn it down. I am going to build another house for you to burn - why, exactly?
Regards,
Shodan
Your argument was that large fortunes are good because they’re “invested in money-making enterprises that people benefit from”.
You just provided a counter-example; a case of a large sum of money being wasted on something that nobody benefited from. Your own example disproves your argument.