I am not sure but I think the likes of Bill Gates cannot legally sell all their stock at once. If Bill Gates decided tomorrow to sell all his stock in Microsoft he’d crash that stock. As such I believe there are laws/regulations which prevent him from doing that (not that he’d be stupid enough to try).
I am not sure how fast he can unload his shares but it’d take some time.
Can I see the strange math you used to come up with that falsehood?
This is all kind of silly. The people at the upper end of the pay scale for my position would be gone, leaving an even larger supply/demand problem in my profession. End result, I’d be asking for, and receiving, a very very big raise. I still wouldn’t be earning 343 times my typical employee, unlike your average CEO at a large corporation. I happen to like my CEO, and would miss him when he left, but I’m not foolish enough to believe that there aren’t a ton of people who could do a wonderful job of running our company and willing to do it for a lot less money.
The short term loss in tax revenue would be more than offset by the immediate gain in assets.
Of course not. We aren’t doomed to income inequality, we can change our society to eliminate it. We just have to live with the consequences of our decisions. We could tax all income over $250,000 a year at 95%, and confiscate all estates over $1,000,000. There you go, income inequality eliminated in one go. It would be easy.
Of course, we might not like the results of our little scheme.
Look, we’re dealing with three issues here.
Numero uno, what happens if we throw a bunch of banknotes onto a bonfire? Not much, because the total amount of banknotes is only about 10% of the amount of money. Banknotes are a very small part of the money supply. There’s a slight deflation, but not a 50% deflation, rather a 5% deflation. If the rich convert their holdings to cash, and then burn the cash, that’s the same effect. The factories are still there, the infrastructure is still there, all that’s happened is that new people own them and there are hiccups in our financial system.
Numero two-o, what happens if we take a huge amount of real assets like cars and houses and artwork and railways and canals and airplanes and computers and office buildings and factories and throw them onto a bonfire? This is horrible. The results would be similar to what Japan and Germany went through after losing WWII, with no Marshall plan to rebuild afterwards. Of course, factories and houses can be rebuilt, and in fact, Germany and Japan rebuilt relatively quickly. After one or two decades, they were back on their feet.
Numero three-o, what happens when we take the richest people in the country and shoot them in the head. Whether we measure “richest” by income or assets is unclear. The problem here is that in general, people with high incomes are providing services that people really really want. Again, this is similar to losing a war, except you’re not losing your young men or a random selection of the population, but preferentially the best and brightest. It ain’t like Bill Gates is irreplacable. But you shoot Bill Gates, and Steve Ballmer, and the next couple hundred people at the top of the Microsoft (or maybe it’s thousands), you can’t expect Microsoft to move on as though nothing had happened. The company would collapse, and then all the people making $249,999 and under are out of work too. Then do that with every person in the country, and we’re facing economic collapse. Yes, we could dig ourselves out of the hole, but losing 3 million people in a war would be devestating even if they were random people. Losing the 3 million top earners would be worse. It would take a generation to recover.
The key here isn’t that the top 1% is irreplacable. None of them is irreplacable, the graveyards are full of irreplaceable men. But losing every one of them at exactly the same time, even without loss of physical assets, means ruin. I worked for a company, and the founder died. The company closed up shop. He was an irreplacable man in that organization. Now, everyone moved on and found other work. But if that happens in every company in the country, where are people going to work? You’d have a depression.
Or who knows what. We’d probably have such a tough time we’d have a radical economic and political restructuring, and some form of authoritarian rule for at least a decade or so.
How do they take their wealth with them? Does Bill Gates get to walk around Microsoft with a sledgehammer and smash every fifth computer (if he, say, owns 20% of Microsoft)?
If Bill Gates dies tomorrow, Microsoft doesn’t disappear, its ownership changes. If Bill Gates sells all his assets and takes the giant pile of cash and sets it on fire, then he hasn’t destroyed any wealth because money is just a way to facilitate the exchange of goods and services, it isn’t wealth.
Actually, a “less exploitative” system would generate far less money to be taxed. The wealthy have created the money they have. It isn’t all just sitting around in a finite sum waiting for the wealthy to come gobble up their unfair share. Create a system where government distributes wealth more or less the same for everyone and the golden geese will simply cease to lay their golden eggs, and everybody will be forced to live substandard lives because the produce of the masses won’t support anything better.
When considering the “socialism solution”, which is really what you’re talking about, we would do well to pay heed to the words of Winston Chruchill, who said:
People in this country should be thanking the rich instead of envying and resenting them, for it’s the rich who create their incomes and make the abundance they enjoy possible.
If I’m understanding you correctly, you’re saying that “wealth” only applies to your material possessions and has nothing to do with the buying power of your money?
If I have 1 billion dollars in cash, and no other assets, I’m not wealthy? And if I burn that 1 billions dollars and am left with nothing, my net worth hasn’t changed at all?
No they haven’t. They live off of the people who create wealth, or outright defraud them to get it. They get the credit for creating the wealth the way they get everything else: they steal it from those who deserve it.
Unless there is some sort of salary cap, those now making under $250K will be moving into more responsible positions with raises, since most industries will not have their markets affected much. (Yacht makers will be screwed.) Second, as you said, stock prices would crash as the rich sell to that set of people making less than $250K.
Now, I make less than that but have a good bit of cash, and I’d buy, buy, buy. As stocks recover to their inherent value, we’d make a ton and the government would get some from us on capital gains.
Third, not having to pay inflated salaries will mean that a lot of companies will have more to pay the average worker or to turn back to stockholders in terms of dividends. In either case, more people who consume more get it, employment increases, and the economy is better off. The rich leaving by itself probably won’t affect employment all that much.
There will be a lot of turmoil as we find out which new execs have it and which don’t, but it certainly isn’t the case that management skill is exclusively in the $250 K and above set.
If we’re talking about wealth instead of income, the calculations all change. I assume he is talking about income, since a lot more people have more than $250K in assets.
Falsehood? It’s basic math. Right now 1.5% of households, earn $250k and above. That’s 1.7million out of 113 million households.
Remove that, and you’re left with just over 111.3 million households.
Right now 1.3million households earn between $200k and $249k. After all the rich people leave, they will now be the top 1.14%.
According to wiki, “In the United States at the end of 2001, 10% of the population owned 71% of the wealth and the top 1% owned 38%. On the other hand, the bottom 40% owned less than 1% of the nation’s wealth”
When you remove that 38%, the bottom 40% still only have 1.6% of what’s left. The upper 9% go from having 33% of the wealth to having 53%. I think it’s pretty safe to say the new top 1% will still hold the bulk of the wealth, and the bottom will still be poor.
Well, obviously.
Really? You wouldn’t continue to work for the good of society? I have to say I’m a bit disappointed.
Kind of makes you wonder why they don’t put in a competing bid and offer to save your company millions per year. If so many people are willing to be a CEO/executives for a fraction of the price, why doesn’t the average wage fall?
If we remove all the top 1% of the NBA/NFL/NHL/MLB players would anything change? There are still plenty of people willing to play pro sports. Hard to imagine why leagues need salary caps. I know I’d be perfectly willing to pay the same ticket price to watch a bunch of amateurs, after all, their heart will be in it right?
Mean family net worth by percentile of net worth
The mean for the top 10% is $4million, the next group (75-89%) is just over $500k. When you remove the top 1%, the next 1% will still have most of the remaining wealth. That’s wealth distribution in the US.
True though that may be in many cases, I speak from knowing a lot of people in the range I’m describing that predatory amorality also gets a great many people to the 6-figure plateau ($100,000-200,000) where they stop to be sufficiently big fish rather than contend with giants on the giant’s terms.
You misunderstand, obviously.
If you have a billion in cash, you’re wealthy, because that cash can be traded for valuable goods and services. That cash is literally an IOU from the rest of us that you can trade in whenever you like for whatever you like.
Now, what happens when you burn that cash? It’s exactly like ripping up a coupon for a free Big Mac. You haven’t destroyed any Big Macs, you’ve just relieved McDonalds of the obligation to provide you a Big Mac sometime in the future. In other words, you’ve given McDonalds the value of one Big Mac. Note that the value of a Big Mac is different for different people, that’s why some people buy Big Macs and eat them and some people make Big Macs and sell them.
So, for years Bill Gates has been busily making copies of Windows and trading those copies of Windows to other people in exchange for IOUs for future goods and services. If Bill Gates takes those IOUs and rips them up, he’s personally poorer, but the rest of us aren’t. He’s lost $30 billion dollars but the rest of us collectively gain $30 billion dollars the second he sets the cash on fire. There’s a loss for him and a gain for various other people, for a net change of zero.
Now obviously money has value, otherwise we wouldn’t use it. But the value of a dollar is arbitrary. We can add more dollars to the economy, or remove dollars from the economy, and that doesn’t affect our real wealth, it just changes the value of the dollar relative to other goods and services.
To put it another way, if taking $30 billion in cash and destroying it destroyed real value, then why can’t we just print up $30 billion dollar bills and get richer? Why not print up quadrillions, and have the government hand out $30 billion to everyone in America? Then we’d all be as rich as Bill Gates, and everyone would live in a mansion with a private jet. If adding money to the economy doesn’t magically create goods and services out of thin air, neither does removing money from the economy magically destroy goods and services.
You seem to be going back and forth between income and wealth. I’m pretty sure income is the topic. Would you like to try again?
I have no problems reconciling a supply/demand driven job market, which is what I would be taking advantage of, with my ideological leanings. Do you? The CEO market doesn’t function anything like the rest of the workplace. If it did, a typical CEO of a large corporation would probably make in the high six figures or so.
Do you really know so little about this? Let me help you out. CEO pay is determined mostly by, wait for it… CEOs. Hell, I’ll be a CEO for $750K, and in certain industries, would be damned good at it (my current boss would be even better at it than I and would probably do it for a million).
And they wouldn’t be handed another job as good or better after running the company or the economy into the ground. Somehow I don’t see Bob the Programmer having much of a future programming career if he did something that drove his company bankrupt, much less if he somehow crashed the national or global economy. Bob the CEO can do that and just get handed another job as CEO elsewhere.
Ok, that makes sense. But… If Bill goes in every day for a Big Mac, couldn’t McDonald’s reasonably expect to receive that dollar every day? That’s what budgets are based on, right? McDonald’s expects to receive X dollars and then plans to spend some amount less than X. If Bill stops buying Big Macs because he’s burned all his money, technically the only person who has lost anything is Bill, but only because he hadn’t spent his money yet. But now he can never spend his money, which means McDonald’s will never receive his money, which means they can’t buy those new cash registers that they wanted, which means Cash Registers Inc won’t be able to invest in new and better POS models, etc.
Now go back to the original topic. One estimate I read is that the top 2% pay 40% of total income taxes. We expect to receive X and spend some amount less than X. But now X is 40% less because the top 2% burned all their money. Sounds to me like that money had value to other people. Or am I still missing something?
I don’t know. Considering what most plumbers make per hour, I’m assuming they’ll be onboard.
The point being, that if the top 2% has half the cash, then when they leave, every one of us effectively sees their income double because the remaining dollars in the economy are worth more. That’s massive deflation, and it would suck, but it’d also give the government the perfectly valid reason to print and distribute a lot of money.
Bottom line, if we’re only talking about income and cash assets, the only thing we collectively lose in your scenario is the collected wisdom and expertise of 2% of the population. We literally don’t lose anything else.
Income was the topic, and people freaked out because the OP mentioned rich people taking their riches with them. Had you read just a little bit further, had you applied yourself just a little more, you would have seen my next post showing household wealth.
So your boss would be better at it than you, and he’s also paid more than you, do you see a connection?
If you remove your boss, and put you in his place, you would do a worse job.
Now, if we remove all of the bosses, and all of the executives, then move everyone left up a couple of rungs on the ladder, would the new group do a better job or worse job?
If the stadium implodes at next year’s NBA All Star game, would the league be better or worse?
Hold on a second there. You jumped over (or intentionally left out) the part where you managed to acquire this coupon for a free Big Mac. If you spent an hour scrubbing old people and that was your reward, you lost an hour of your time that can never be replaced.
To have cash in order to burn you had to trade something to get it, right? You got up every day and went to work, where your employer compensated you for your time by giving you one of those fancy IOUs. Cash in our society represents time lost.
Yes we are. He worked for years copying software to acquire that $30billion, by trading his time for someone else’s cash. We has a society have lost the value of that time. He was supposed to make all that money and spend it, but now that’s gone, it was supposed to go back into the economy.
Again, not entirely true. If that $30billion is in a bank it’s providing capital so loans can be issued. If he withdraws it at a comically large ATM, that dispences $20 million dollar bills, the bank will suffer as a result, right?
Now, go back to your McDonald’s example. If a person spends all day making a Big Mac, then burns it, that was a day’s labour lost that could have been put to better use. Sure they still charged someone, but the time has been “burned.”
Because the original $30billion was created through the application of time and talent, hence the notion of wealth creation. Why is an original Picasso worth more than a reprint? Something had to have been done in order to generate that $30billion. It’s also why counterfeiting is a serious crime.
The way I interpret the OP is that by “taking their cash” this discussion differs from simply saying, “all the rich people suddenly die.”
If Bill Gates dies, all his wealth goes to other people who get to spend it. We could then quibble over the perceived loss of ol’Billy, but with his billions still in the economy very little would change.
And that’s part of the reason why there are estate taxes, his wealth represents something very real, that if destroyed would impact our society. Like I said in my previous post, simply taking it out of the bank as cash would have serious implications. If he stopped spending any of it and let it continue to amass our economy would be worse off (hence the repeated notion that we need consumer spending to increase).
So him taking all his wealth with him (or destroying it all) would have to cause some effect.
