11 ms·

An open letter to Paul Graham

111 points by zawaideh 11y ago

hallowed_ed 11y ago
'Dr. Mr Graham' surely it's just 'Dr' or just 'Mr'. It can't be both. We're not German here.
- neogodless 11y ago
  Right! Or did you mean "Dear Mr. Graham"?
- grabcocque 11y ago
  Maybe he's German? In German it's customary to say "Frau/Herr Doktor XXX" (Madam/Mr. Dr. XXX)
Alex3917 11y ago
> ... we’re looking at 2–3% growth from here on out. So, by this completely rational view of the "pie," it is, in fact, trending towards a zero sum game. Not only does GDP not measure wealth, but as wealth increases you might actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans out of work, wealth will have increased, but the GDP will decrease.
- jondubois 11y ago
  Well that only reinforces OP's argument... In this scenario you have a few powerful companies taking the pie away from taxi drivers, from small petrol station owners, from small car mechanics, etc... It is a zero-sum game because these people will have to beg on the streets. In this scenario, would the driverless car have helped improve life for humans? Yes it would improve the life of rich people; it will be very convenient for them to not have to drive... But what about regular humans? An alternative scenario would be to tax driverless car companies and give the money back to the people whose livelihoods were taken. I have no doubt that in a fully-automated world, society will either be socialist or communist. If wealthy people start thinking about inequality and actively work to improve things, then we will have socialism. If they don't, it will just spread misery and resentment among the lower class and will likely lead to a more dramatic change in the state of affairs. Oppression leads to extremism. Just look at what happened after world war one when Germany was burried in insurmountable war reparation debt... It created a generation of resentful german extremists - And along came WW2.
  - forrestthewoods 11y ago
    That's not how it works. Automation doesn't put things in the hands of a few powerful companies. Those items become commodities. You don't get rich selling commodities. Corporations spend billions upon billions to make sure they aren't reduced to commodities. Cheap access to driverless cars will be a huge boon for the poor. Can you imagine what it would be like to have cheap access to goods no matter where you live? To receive delivery of materials cheaply and quickly? That's not a wealth destroyer. That's wealth creation infrastructure.
    - jondubois 11y ago
      Maybe, but what is the point of having all that wealth if only 10% of the population can access it? If automation replaces 90% of jobs, then you're going to have a lot of unemployed people with no money. I disagree about automation becoming a commodity. Automation is all about monopolies. You only need to write software once and only the company with the best technology will control the whole market... Why would a consumer use a piece of technology if it is less efficient than a competing piece of technology? Just look at Intel vs AMD. Intel's CPUs became just a little bit faster, and as a result, in just a few years they decimated AMD financially. Technology is a winner-takes-it-all game.
ohyes 11y ago
The last few paragraphs where he laid out what PG's actual desire might be (for VC funding to maintain the same tax status), was immensely helpful to me in understanding the whole exchange. Why PG chose to make a side on argument towards that leaves me a little bemused, however
- ljw1001 11y ago
  Because it sounds better to say job creators are being hunted than to say I want to keep my sweetheart tax breaks.
salmonet 11y ago
>If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. And they are still free to start businesses and pursue wealth. They are still rich. They have not been “hunted” or “killed.” The crux of your argument — that “Ending economic inequality would mean ending startups” — is both a straw man (no one’s advocating eliminating income inequality completely) and untrue (people can still pursue whatever they want — they just have to pay more taxes on it.) It sounds simple, but as remote work becomes easier it becomes more tempting to do it in another country (a country that won't tax that person $800,000,000). Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."
- GFK_of_xmaspast 11y ago
  Someone making $800M is not doing "work".
  - AndrewKemendo 11y ago
    What are they doing then?
- kamaal 11y ago
  >>Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else." This is exactly what is happening, even now. Why do you think ridiculously smart and hard working people in countries like China and India, graduating from the top universities in their countries come to the US and take great pains to stay and work in the US. If you make it impossible to succeed people don't even try, or find loopholes or else go where the rules of the game are fair.
hyperliner 11y ago
What is wrong with taxing 80% of the wealth is that then the return on the equity placed into the business to make it real just decreased 80%. At some point then many of those startups won't be created because there won't be enough return to pay for the risk. So then there will not be more of "those jobs" and there won't be any wealth created. Therefore no taxes will be paid. And we just reduced the pie to zero. I am not sure what the number is, but when I hear 80% taxes, I think someone (maybe me) is not doing their math. But I do agree that one must first make sure to understand the argument of the other side before articulating a counter-argument. I think in this case, there is also the problem that the message gets diluted because of the messenger: unfortunately PG does not have credibility in this area because (presumably) he has not been on the ground dealing with poverty issues as many others. Then again, many economists haven't either, even as they also postulate solutions.
- ljw1001 11y ago
  You're assuming these companies create a lot of jobs, but in fact they create far fewer jobs than they did 30 years ago. As Intel founder Andy Grove said (of companies like Apple): "plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs." Instagram (for another example) had 13 employees when sold for $1 billion.
  - hyperliner 11y ago
    It's a fair point. But I think that the issue is that we then are lumping all of these companies into one category and we should look into what they are doing. So if we think that "dating apps" or "photo apps" derive less social value then we would tax them more than startups that derive "more value" (say, fighting disease or providing solar power). There are systems already in place for this type of incentive, where government provides tax breaks in fields deemed "socially more valuable."
    - ConfuciusSay 11y ago
      You have to be very careful with laws like this where a human has to sit and evaluate the societal benefit of one business over another. Tons of unintended, and potentially very negative, consequences to this. Simplifying the tax system and increasing the top marginal tax rates back to something closer to where they were 40 years ago is preferable in my opinion.
chrisco255 11y ago
You have an unsubstantiated argument with presuming that taxing billionaires or millionaires at 80% would be good for society. Let's set aside arguments of individuality vs. socialism and whether government should operate for the hugely debatable, ephemeral term, "the greater good". I think that invites a separate essay on its own. From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created. Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole. If you had taxed Musk at 80%, and he was left with a paltry $30 million or so, it's likely that one or more of the above companies never happen. The opportunity cost is that less jobs get created, unique and innovative technology never gets formed, and the ripple effects (such as spurring Chevrolet and others to make electric vehicles) never happen. While not always the case, it is often the case that private capital investments do improve society in meaningful ways. The economy is a very fungible thing and the idea that it is approaching "zero sum" is an unfounded one in the extreme.
- cobaltblue 11y ago
  I was thinking of Musk too. A person with $1bn in the bank is very rich. So is a person with $200m in the bank. But the first person still has a lot more freedom of action. When you rob people of their freedom of action, you get bad economies.
- jacquesm 11y ago
  Musk is the exception though, he explicitly did not take his money 'home', he invested it (all of it!) back into new projects. Most people that somehow made a lot of money would not do this.
  - lintiness 11y ago
    name one. billionaires don't sit on their capital.
cryoshon 11y ago
Meh. I didn't write a follow up to PG's follow up because I assumed he wouldn't be receptive to my arguments and didn't want to start a war of words over a topic that has been rehashed a bajillion times. Even the economists are saying we need to reduce economic inequality if we want to avoid disaster. That's far more topical thought and information than anyone arguing on HN can bring to bear, I assume. (I really hope I am right.) The OP article is definitely factual with its four main points-- I'd also like to add that the trick of putting yourself into the opposing position's shoes and reconstructing their argument is one of the best rhetorical techniques that exists.
- cobaltblue 11y ago
  Can you name three? In any case, a good economist typically just says what the state of the world is or will be given x, y, z, not what should be. I can think of one economist (Robin Hanson) who doesn't say "we should reduce financial inequality".
  - cryoshon 11y ago
    Friedman, Piketty, Stiglitz, Krugman. I see what you are saying, though-- the exact prescription may not be something any of these four have said, though they certainly detail the consequences of inequality.
  - ConfuciusSay 11y ago
    Here are four - Era Dabla-Norris ; Kalpana Kochhar ; Nujin Suphaphiphat ; Frantisek Ricka ; Evridiki Tsounta. They work at a little organization called the International Monetary Fund, and they conclude: "We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down." https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986.0 https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....
dave_sullivan 11y ago
>> Literally no one in America, save for a very few on the fringe, is talking about “eliminating income inequality.” I don't know about that; I've heard plenty of people talk about eliminating income inequality as an end goal (but I live in the SF Bay Area, so maybe a reflection of demographics out here?) It's like saying no one but the fringe is going to vote for donald trump, and yet those poll numbers... >> What people are talking about is a progressive income tax to reduce inequality. Well, we have that. Taxes are historically low, so I'd be ok with raising them somewhat, but not too much. >> So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist. This is really the crux of my argument: instead of increasing taxes first, we should hold the government more accountable over spending and look at programs and how they help or do not help the poor. Poverty is the metric that should be focused on, not inequality. If inequality is reduced as a side effect, all the better. But poverty is the problem. If government got more money from taxes, what makes you think they would use it to effectively reduce poverty?
- cmiles74 11y ago
  The 80% sounds over the top to myself as well, but in the article they were using it in reference to someone with an income of 1 billion dollars per year. To my mind, 80% on 1 billion isn't so crazy. It sounds like the far end of the scaled tax curve. As far as I can tell, there are only a handful of people (like maybe five) that make in excess of 1 billion a year. I work with government agencies and I am all for them being more accountable, I have no doubt that they could spend a lot less than they do. On the other hand, I am entirely unwilling to wait for them to become more efficient before deciding to severely tax the five people who make over 1 billion per year.
  - joslin01 11y ago
    So if you taxed those 5 people, you would make 4 billion. We spend over 3 trillion a year. Do you really think the punishment fits the crime? Wiser management of federal resources would go a lot further than throwing more money down the hole.
chrisco255 11y ago
"Because poverty is not actually a bad thing that causes income inequality, it is a circumstance of it." Poverty is a circumstance of living in a world with limited resources where trade offs have to be made in virtually all decisions. When I have lunch today, I am, in a twisted interpretation, depraving someone else of that food. In a world where everything has a cost, whether hidden or real, poverty in some form will exist.
lintiness 11y ago
uh, money to the government doesn't end poverty, not even remotely. the question we should all ask is whether individuals, individually motivated, better allocate money than the government. the idea they don't give to charity or fight poverty with their billions is also preposterous.
JustSomeNobody 11y ago
>If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. Ah, yes. One can be rich, but don't you dare be TOO rich!
- ZenoArrow 11y ago
  What's wrong with that? The gap between the rich and the poor (and the problems this creates) is at the core of the economic inequality issue, in comparison with the poor, it is possible to be 'TOO rich'.
mangeletti 11y ago
This is a rare situation / age we're in, because we haven't seen these levels of income inequality in a long time. To the degree to which I would apply labels to myself, I'm a capitalist, and I'm a libertarian. I don't trust our corrupt political system anymore, and I certainly don't think the government has the ability to help society as much as it hurts it, at least most of the time. Because of this, I think that any extra taxation that the government levies will commensurately damage our society. That said, I can't help but think that our entire economy has been swept out from under our feet by the financial sector. It's not tech companies and supposedly "rich" tech founders that capture our economy. It's VCs. A VC can give a company that would otherwise be insolvent the capital it needs to capture an entire market, and then raise the prices. We see it time and time again. We're trained to believe that, without VC, the tech industry would somehow be stifled. This is simply untrue. Without VC, a lot of our "side" projects that create true innovation would have a chance at success. The reason many of them don't is because they're up against the same thing from a VC-backed competitor. Except, the VC-backed version is cheaper (or free), is backed by an unsustainable, large team of skilled developers, and doesn't care that it's hemorrhaging money, because once it creates a monopoly it will pay dividends for life to the very few who own it.
- jondubois 11y ago
  What you wrote is exactly what I've been thinking about over the past year. Especially the part about VCs - That's my life's story. I would upvote this with all my karma if I could. Very well said.
- badsock 11y ago
  I'm very much on the other side of the political spectrum, but I would have a lot more appreciation for libertarianism if someone could come up with a credible, practical solution for making monopolies (or monopolistic behaviour) rare or impossible. With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence.
  - AndrewKemendo 11y ago
    With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence. If I remember back to my anarchist philosophy, that is ceding too much ground. Patents, access to cheap capital, "artificial" interest rates etc... are all government influence that large companies can take advantage of to become monopolistic. Without those the argument goes, that firms would never get so big because competition would sprout up immediately to cut into their market dominance. If you look at Standard Oil or Bell System, the case studies for all monopolies, they all hinged on some government grated protection. In Bell's case it was initially a patent and then subsequently "legally sanctioned regulated monopoly." In the case of Standard Oil they utilized Trusts, which were legally recognized forms of distributing ownership to stay within the law. So unfettered capitalism might not lead to long and enduring monopolies, but it would be much nastier and competition much more fierce because the systems on which business is built today would have to go away in total - to include regulated banking, infrastructure standards etc... The question should instead be: Is the world in which there is no regulation one that you would actually want to live in? I would argue no. edit: Note that I don't agree with this view, it is however the argument that is made.
throwaway_5561 11y ago
As someone who was born in Soviet Union, and (thankfully) escaped at a fairly early age, arguments like this just completely boggle my mind. Why do people think it's ok to take other people's money? If a billionaire has money - regardless of whether they earned or inherited it - it's THEIR money. If they earned it lawfully, they should pay the same % of tax that everyone else pays - and keep the rest to do whatever they please. Who are YOU to tell them how to spend THEIR MONEY better? If you're jealous of them having more money than you - this is a truly free country, nothing is stopping you from earning just as much as they have. Yes, life isn't fair, they may be born into wealth and you're not - but try being born in North Korea, then talk about it not being fair. This is the principle that America was founded on, and what's allowed it to be successful. And as someone who studied just a bit of history, it seems completely insane to me that people think taking money from the rich and distributing it to the poor think it will turn out OK. The same exact thing happened in dozens of socialist countries - those that are in charge of the distribution, somehow distribute the most of it to themselves, and then take away people's freedoms so they would stay in power. To think that something else is going to happen is just plain ignorance of basic human nature.
- crimsonalucard 11y ago
  The situation is far more complex than you assume. It is impossible for one person to make a billion dollar 747. One man simply doesn't have enough intelligence or strength to do construct such a sophisticated device. If a 747 is worth a billion dollars then creating a billion dollars of paper money or making the plane itself are both equivalent concepts. Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747? Why do billionaires exist? Billionaires exist only because the paper money was taken from the wealth produced by other people. The Billionaire needs to employ workers to build a 747. In short, for Billionaires to be Billionaires they must be an owner of some corporation where the wealth produced by the labor of employees is unfairly distributed to them. This is wealth inequality. This was the problem your old country attempted and somewhat failed to resolve with communism. Whatever you think communism is, wealth inequality is a feature of capitalism and it is fundamentally unfair because it is taken from others.
jondubois 11y ago
I think capitalism has been a zero-sum game for a very long time. Marketing just dominates everything now - 90% of the work people do is to figure out how to make the company that they work for gain market share over the companies that other people work for and the solution these days is usually marketing... Instead of focusing their energy on how to make their product cheaper. The cost of RAM memory seems to have stagnated. The prices of vital drugs are going up. Property prices are going up. The era of value-creation is over. The real winners are those who can make other people create all the value and just capture that value.
hluska 11y ago
It's interesting to me that these types of arguments always boil down taxing the wealthy. That is a way to redistribute wealth, but what about working to do a more efficient job of redistributing wealth from government to the citizens? Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws. In the end, the tax authority may collect more money, but they also have to spend significantly more. In the end, will such a scheme really result in more money in the government's coffers?? And then, what happens to money once it reaches the G?? How much of the money is wasted on poorly planned/executed programs? How much is wasted by massive, overstaffed organizations? How much of the money designated for 'social services' ends up in the hands of lower income people versus how much ends up paying for bureaucracy? Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible.
- rcurry 11y ago
  "Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible." Yeah, if someone tells me that they can spend Elon Musk's money more productively than he can, I'd kind of like them to be able to point to some track record of having done that in the past with all the other money they've had their hands on.
  - gbhn 11y ago
    Many people think Musk is in the top percentiles of "using money well." While I think it is always appropriate to want the government to run better, it's probably not fair to set such a high bar for it. One might just as easily say "no VC should invest money in any company whose founder has a poorer track record than Elon Musk" which is of course a ridiculous posture.
- ryandrake 11y ago
  > Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws. If there was ever political will to tax the wealthy at such a rate, there would also be the political will to end the loopholes allowing people to avoid that rate, otherwise it would be pointless.
badusername 11y ago
https://medium.com/@girlziplocked/paul-graham-is-still-asking-to-be-eaten-5f021c0c0650#.84ry1qyun https://medium.com/@girlziplocked/paul-graham-is-still-askin...
digital_ins 11y ago
Anyone who thinks that an 80% tax on the rich is going to yield spectacular results should take a look at the whole host of countries following the communist economic model as well as the countries that adopted the non-explicit communist model (these include most of the countries in the 'Non-Aligned Movement') to see how heavily taxing the rich as well as trusting that the government is more efficient with capital allocation is working out. It's not.
bsbechtel 11y ago
One thing that is often ignored when considering a progressive income tax is that years of income are often sacrificed in order to achieve higher earnings. Consider an entrepreneur who earns <$30,000 for for 5+ years while re-investing in a breakthrough technology, or a doctor who spends 10+ years studying and living on a minimal income who one year earn $250,000+ and fall into the highest tax bracket. Those individuals have basically concentrated all of their earnings into a shorter time period, at (in the entrepreneur's case) significant personal risk/expense. This can make the net lifetime earnings of these supposedly 'rich' individuals actually less, and taxed at a higher rate, than those who don't ever achieve this level of income.
forrestthewoods 11y ago
Every response post I've read is terrible. Frustratingly so. Inequality is bad. People want to reduce inequality. Startups strive to strictly increase inequality. Now what? An extreme progressive tax plus startups will STILL increase inequality. Not decrease. To be honest I want to increase inequality even more. Because I want to allow more immigrants and refugees. You can't let in hundreds of thousands of refugees without increasing inequality. It's not possible. What some of these posts say, without actually saying it, is that oh some types of inequality are bad and some are good. A small local business that earns it's owner a 6 figure salary? Well that's obviously good. When people say inequality is bad they meant those filthy point-oh-one percenters on Wall Street. Not the plumber who has 10 employees and made $350,000 last year. Obviously. Inequality is at most a 2nd order derivative. It doesn't actually matter much. Things can be good with high inequality or they can be bad with low inequality. It gets far more attention than it should, imo.
- crimsonalucard 11y ago
  logical arguments are often inspired by individual motivations despite efforts of everyone to remain rational. I ask you: Are you poor or are you rich? When inequality increases, do you benefite? or do you become worse off? This answer would indeed be very interesting if you were a poor person. If you are a rich person, then you're answer is expected. Normal. People concoct very articulate and valid logic to fit their own biases and situation. The logic is so sound that it's often hard to find bias. What can always be observed however is... does the logic benefit the individual who introduced said logic. I feel people need to introduce their background before they introduce their arguments. Like PG did, one should always announce whether or not they are a manufacturer of wealth inequality or not before they spill their arguments.
  - forrestthewoods 11y ago
    I like your line of thinking. Particularly your sound logic line. To answer, that depends entirely on how you depend poor or rich. And to who you are comparing. Within the United States the median household income is $50,000. Average household income is $69,000. If someone makes more than mean/median and they receive a raise than is an increase in inequality. There's hardly a US based programmer on HN that doesn't qualify as rich and strive to increase inequality by seeking career growth and raises. I don't think that's a bad thing. I would be such a programmer.
rythie 11y ago
In living (for some), 80%+ tax rates have been used and tax was very high for about 5 decades: - the top marginal rate of tax was 62% in 1932 (up from 25% in 1931) - rising to 91% in 1963 (income over $200k) - It was at 70% in 1981 (before dropping to 50% in 1982) http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2013-nominal-and-inflation-adjusted-brackets http://taxfoundation.org/article/us-federal-individual-incom... and a graph here: http://visualizingeconomics.com/blog/2010/02/04/historical-marginal-income-tax-rates http://visualizingeconomics.com/blog/2010/02/04/historical-m... Though I can find very little that talks about the affects of this taxation on society.
- chrisco255 11y ago
  The 80%+ tax rate were used to pay for WWII debts. Also, tax loopholes were absolutely rampant prior to the 1986 tax reform act. Because tax rates and deductions are so fungible, and vary from country to country and even state to state (if we factor state and local taxes) the only objective measure is to look at tax revenue as a percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...
acgourley 11y ago
I read PG as saying, "You can't fix exponential forces with linear solutions." Furthermore I got the impression PG's essay is in favor of progressive reform such as reduced incarceration rates and even something like basic income but is going out of the way to make the point it still won't get rid of in equality because it cannot as long as we embrace technology. He's trying to say instead of going after the impossible bogeyman (inequality) let's go after the very real bogeyman (poverty). I feel like the author of this post reads PG totally different. He seems to think PG is saying, "Inequality isn't a big problem and it can't be fixed and screw these dumb poor people."
digital_ins 11y ago
Also the talk of GDP growth slowing down is so off-putting. It just goes to show that the author has no understanding of economics. GDP growth tends to slow down as the base increases. The entire article sounded like an adult making the case that if he ate more, he'd grow taller.
vannevar 11y ago
From the fourth point: So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game. It doesn't even matter how growth is trending. Graham's misguided criticism of the 'myth' misses a simple mathematical fact: that the growth in income among the top 1% dramatically outpaces overall economic growth. Consequently, contrary to his assertion, the rich are increasing their income at the expense of the poor. There is no where else the money can be coming from. You can argue (wrongly, in my opinion) that this is solely because the rich are smarter and harder-working than the poor. But you cannot rationally argue that such a shift is not happening in a broad sense.
andrewmcwatters 11y ago
I really don't like the word "progressive" being used in a context like this, and it seems more like a cognitive anchor for associating actual progress with this proposal. It seems really backward and regressive if anything.
padseeker 11y ago
It drives me nuts that Hacker News is such an awesome resource but the person behind it is such an arrogant jerk. Am I banned now?
nsns 11y ago
A somewhat less nuanced response, that (despite a lively conversation) never made it to the front page: https://news.ycombinator.com/item?id=10831261 https://news.ycombinator.com/item?id=10831261
crimsonalucard 11y ago
PG talks about startups as if they are the best thing that ever happened to this world. The iphone did not come from a startup. Nor did the internet. The world needs startups but if the startup fails like the way most of them do... then it's just wasted capital producing a good that has zero utility. Anybody have a good argument for why we need startups for every little stupid business idea? PG almost describes the "entrepreneur" as some sort of genetically superior being.
- codingdave 11y ago
  PG (or anyone involved with YC) has a financially vested interest in everyone believing that startups are great. I don't know the dude, so cannot presume his full thoughts or motivations, but he is FAR from an unbiased source.
oneJob 11y ago
There is a follow-up by Mr. Graham [1], and there is a follow-up to his follow-up by the original open-letter author [2]. I would like to add one thing. Given that Mr. Graham has put forth an essay on an (macro) economic topic, and his employment of the 'per se' argument method, there is an obvious lack of proper treatment of the basic and foundational economic concept of 'ceteris paribus'. Without employing the tool of 'ceteris paribus' in his his essay Mr. Graham has left the door wide open for discussion of all sorts of things which might form a critical response to his argument: "But economic inequality per se is not bad." On the same topic, in his follow-up he weakens his argument substantially by prefacing it with: "I thought it might help clarify matters if I tried to write a version so simple that it leaves no room for misinterpretation." Less words does not necessarily make for a smaller room, Mr. Graham. [1] http://www.paulgraham.com/sim.html http://www.paulgraham.com/sim.html [2] https://medium.com/@RickWebb/paul-graham-s-second-inequality-essay-is-only-slightly-better-here-s-what-s-still-wrong-with-it-9b57ba8e516d#.hum2bsuur https://medium.com/@RickWebb/paul-graham-s-second-inequality...
randomThoughts9 11y ago
I think that a lot of people that are against higher/progressive taxes or see these level of inequality (income and wealth) as a good thing believe in the "self-made man" myth. But that is just a myth. When someone "makes it", can you really disregard? - his teacher from school - the doctor that saved his life when he was young - the guy on the street that maybe said something that triggered a chain of actions that ended in his success - the books he read - the peace of mind provided by living in a safe place - etc. Is it enough that you paid for that doctor appointment? I don't know. But you would not be here at all without it, and that doctor himself benefited from all of the above. A different way of looking at things could be that, as we as a society don't know what works and what doesn't, we invest in people. Some are lucky, and based on their circumstances (and on their personal merit, I won't deny that) will manage to succeed in life.
paulus_magnus2 11y ago
Most of problems of inequality come down to the fact that rich are allowed to invest into land / housing. One can argue if enormous capital gains should be taxed or not, but the problem starts when rich park their money where it inflates "normal people"'s necessities. Best jobs are concentrated in few big cities, workers have to live there. Rich don't have to live there but they corner the housing market in order to extract maximum percentage from workers' salaries. I don't care how much money the rich have as long as they don't inflate the housing so I can afford to buy my own. Capitalism has learned to extract more surplus value from labour about the moment when worker productivity and salaries started diverging. It used to be that the rich are very few and once they bought all the London property normal people could live their lives. Nowadays there are so many foreign billionaires (China) who either have money or can access cheap debt that they can corner property market in every major city.

111 points by zawaideh 11y ago

hallowed_ed 11y ago

'Dr. Mr Graham' surely it's just 'Dr' or just 'Mr'. It can't be both. We're not German here.

neogodless 11y ago
Right! Or did you mean "Dear Mr. Graham"?
grabcocque 11y ago
Maybe he's German? In German it's customary to say "Frau/Herr Doktor XXX" (Madam/Mr. Dr. XXX)

Alex3917 11y ago

> ... we’re looking at 2–3% growth from here on out. So, by this completely rational view of the "pie," it is, in fact, trending towards a zero sum game. Not only does GDP not measure wealth, but as wealth increases you might actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans out of work, wealth will have increased, but the GDP will decrease.

jondubois 11y ago
Well that only reinforces OP's argument... In this scenario you have a few powerful companies taking the pie away from taxi drivers, from small petrol station owners, from small car mechanics, etc... It is a zero-sum game because these people will have to beg on the streets. In this scenario, would the driverless car have helped improve life for humans? Yes it would improve the life of rich people; it will be very convenient for them to not have to drive... But what about regular humans? An alternative scenario would be to tax driverless car companies and give the money back to the people whose livelihoods were taken. I have no doubt that in a fully-automated world, society will either be socialist or communist. If wealthy people start thinking about inequality and actively work to improve things, then we will have socialism. If they don't, it will just spread misery and resentment among the lower class and will likely lead to a more dramatic change in the state of affairs. Oppression leads to extremism. Just look at what happened after world war one when Germany was burried in insurmountable war reparation debt... It created a generation of resentful german extremists - And along came WW2.
- forrestthewoods 11y ago
  That's not how it works. Automation doesn't put things in the hands of a few powerful companies. Those items become commodities. You don't get rich selling commodities. Corporations spend billions upon billions to make sure they aren't reduced to commodities. Cheap access to driverless cars will be a huge boon for the poor. Can you imagine what it would be like to have cheap access to goods no matter where you live? To receive delivery of materials cheaply and quickly? That's not a wealth destroyer. That's wealth creation infrastructure.
  - jondubois 11y ago
    Maybe, but what is the point of having all that wealth if only 10% of the population can access it? If automation replaces 90% of jobs, then you're going to have a lot of unemployed people with no money. I disagree about automation becoming a commodity. Automation is all about monopolies. You only need to write software once and only the company with the best technology will control the whole market... Why would a consumer use a piece of technology if it is less efficient than a competing piece of technology? Just look at Intel vs AMD. Intel's CPUs became just a little bit faster, and as a result, in just a few years they decimated AMD financially. Technology is a winner-takes-it-all game.

ohyes 11y ago

The last few paragraphs where he laid out what PG's actual desire might be (for VC funding to maintain the same tax status), was immensely helpful to me in understanding the whole exchange. Why PG chose to make a side on argument towards that leaves me a little bemused, however

ljw1001 11y ago
Because it sounds better to say job creators are being hunted than to say I want to keep my sweetheart tax breaks.

salmonet 11y ago

>If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. And they are still free to start businesses and pursue wealth. They are still rich. They have not been “hunted” or “killed.” The crux of your argument — that “Ending economic inequality would mean ending startups” — is both a straw man (no one’s advocating eliminating income inequality completely) and untrue (people can still pursue whatever they want — they just have to pay more taxes on it.) It sounds simple, but as remote work becomes easier it becomes more tempting to do it in another country (a country that won't tax that person $800,000,000). Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."

GFK_of_xmaspast 11y ago
Someone making $800M is not doing "work".
- AndrewKemendo 11y ago
  What are they doing then?
kamaal 11y ago
>>Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else." This is exactly what is happening, even now. Why do you think ridiculously smart and hard working people in countries like China and India, graduating from the top universities in their countries come to the US and take great pains to stay and work in the US. If you make it impossible to succeed people don't even try, or find loopholes or else go where the rules of the game are fair.

hyperliner 11y ago

What is wrong with taxing 80% of the wealth is that then the return on the equity placed into the business to make it real just decreased 80%. At some point then many of those startups won't be created because there won't be enough return to pay for the risk. So then there will not be more of "those jobs" and there won't be any wealth created. Therefore no taxes will be paid. And we just reduced the pie to zero. I am not sure what the number is, but when I hear 80% taxes, I think someone (maybe me) is not doing their math. But I do agree that one must first make sure to understand the argument of the other side before articulating a counter-argument. I think in this case, there is also the problem that the message gets diluted because of the messenger: unfortunately PG does not have credibility in this area because (presumably) he has not been on the ground dealing with poverty issues as many others. Then again, many economists haven't either, even as they also postulate solutions.

ljw1001 11y ago
You're assuming these companies create a lot of jobs, but in fact they create far fewer jobs than they did 30 years ago. As Intel founder Andy Grove said (of companies like Apple): "plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs." Instagram (for another example) had 13 employees when sold for $1 billion.
- hyperliner 11y ago
  It's a fair point. But I think that the issue is that we then are lumping all of these companies into one category and we should look into what they are doing. So if we think that "dating apps" or "photo apps" derive less social value then we would tax them more than startups that derive "more value" (say, fighting disease or providing solar power). There are systems already in place for this type of incentive, where government provides tax breaks in fields deemed "socially more valuable."
  - ConfuciusSay 11y ago
    You have to be very careful with laws like this where a human has to sit and evaluate the societal benefit of one business over another. Tons of unintended, and potentially very negative, consequences to this. Simplifying the tax system and increasing the top marginal tax rates back to something closer to where they were 40 years ago is preferable in my opinion.

chrisco255 11y ago

You have an unsubstantiated argument with presuming that taxing billionaires or millionaires at 80% would be good for society. Let's set aside arguments of individuality vs. socialism and whether government should operate for the hugely debatable, ephemeral term, "the greater good". I think that invites a separate essay on its own. From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created. Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole. If you had taxed Musk at 80%, and he was left with a paltry $30 million or so, it's likely that one or more of the above companies never happen. The opportunity cost is that less jobs get created, unique and innovative technology never gets formed, and the ripple effects (such as spurring Chevrolet and others to make electric vehicles) never happen. While not always the case, it is often the case that private capital investments do improve society in meaningful ways. The economy is a very fungible thing and the idea that it is approaching "zero sum" is an unfounded one in the extreme.

cobaltblue 11y ago
I was thinking of Musk too. A person with $1bn in the bank is very rich. So is a person with $200m in the bank. But the first person still has a lot more freedom of action. When you rob people of their freedom of action, you get bad economies.
jacquesm 11y ago
Musk is the exception though, he explicitly did not take his money 'home', he invested it (all of it!) back into new projects. Most people that somehow made a lot of money would not do this.
- lintiness 11y ago
  name one. billionaires don't sit on their capital.

cryoshon 11y ago

Meh. I didn't write a follow up to PG's follow up because I assumed he wouldn't be receptive to my arguments and didn't want to start a war of words over a topic that has been rehashed a bajillion times. Even the economists are saying we need to reduce economic inequality if we want to avoid disaster. That's far more topical thought and information than anyone arguing on HN can bring to bear, I assume. (I really hope I am right.) The OP article is definitely factual with its four main points-- I'd also like to add that the trick of putting yourself into the opposing position's shoes and reconstructing their argument is one of the best rhetorical techniques that exists.

cobaltblue 11y ago
Can you name three? In any case, a good economist typically just says what the state of the world is or will be given x, y, z, not what should be. I can think of one economist (Robin Hanson) who doesn't say "we should reduce financial inequality".
- cryoshon 11y ago
  Friedman, Piketty, Stiglitz, Krugman. I see what you are saying, though-- the exact prescription may not be something any of these four have said, though they certainly detail the consequences of inequality.
- ConfuciusSay 11y ago
  Here are four - Era Dabla-Norris ; Kalpana Kochhar ; Nujin Suphaphiphat ; Frantisek Ricka ; Evridiki Tsounta. They work at a little organization called the International Monetary Fund, and they conclude: "We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down." https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986.0 https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....

dave_sullivan 11y ago

>> Literally no one in America, save for a very few on the fringe, is talking about “eliminating income inequality.” I don't know about that; I've heard plenty of people talk about eliminating income inequality as an end goal (but I live in the SF Bay Area, so maybe a reflection of demographics out here?) It's like saying no one but the fringe is going to vote for donald trump, and yet those poll numbers... >> What people are talking about is a progressive income tax to reduce inequality. Well, we have that. Taxes are historically low, so I'd be ok with raising them somewhat, but not too much. >> So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist. This is really the crux of my argument: instead of increasing taxes first, we should hold the government more accountable over spending and look at programs and how they help or do not help the poor. Poverty is the metric that should be focused on, not inequality. If inequality is reduced as a side effect, all the better. But poverty is the problem. If government got more money from taxes, what makes you think they would use it to effectively reduce poverty?

cmiles74 11y ago
The 80% sounds over the top to myself as well, but in the article they were using it in reference to someone with an income of 1 billion dollars per year. To my mind, 80% on 1 billion isn't so crazy. It sounds like the far end of the scaled tax curve. As far as I can tell, there are only a handful of people (like maybe five) that make in excess of 1 billion a year. I work with government agencies and I am all for them being more accountable, I have no doubt that they could spend a lot less than they do. On the other hand, I am entirely unwilling to wait for them to become more efficient before deciding to severely tax the five people who make over 1 billion per year.
- joslin01 11y ago
  So if you taxed those 5 people, you would make 4 billion. We spend over 3 trillion a year. Do you really think the punishment fits the crime? Wiser management of federal resources would go a lot further than throwing more money down the hole.

chrisco255 11y ago

"Because poverty is not actually a bad thing that causes income inequality, it is a circumstance of it." Poverty is a circumstance of living in a world with limited resources where trade offs have to be made in virtually all decisions. When I have lunch today, I am, in a twisted interpretation, depraving someone else of that food. In a world where everything has a cost, whether hidden or real, poverty in some form will exist.

lintiness 11y ago

uh, money to the government doesn't end poverty, not even remotely. the question we should all ask is whether individuals, individually motivated, better allocate money than the government. the idea they don't give to charity or fight poverty with their billions is also preposterous.

JustSomeNobody 11y ago

>If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. Ah, yes. One can be rich, but don't you dare be TOO rich!

ZenoArrow 11y ago
What's wrong with that? The gap between the rich and the poor (and the problems this creates) is at the core of the economic inequality issue, in comparison with the poor, it is possible to be 'TOO rich'.

mangeletti 11y ago

This is a rare situation / age we're in, because we haven't seen these levels of income inequality in a long time. To the degree to which I would apply labels to myself, I'm a capitalist, and I'm a libertarian. I don't trust our corrupt political system anymore, and I certainly don't think the government has the ability to help society as much as it hurts it, at least most of the time. Because of this, I think that any extra taxation that the government levies will commensurately damage our society. That said, I can't help but think that our entire economy has been swept out from under our feet by the financial sector. It's not tech companies and supposedly "rich" tech founders that capture our economy. It's VCs. A VC can give a company that would otherwise be insolvent the capital it needs to capture an entire market, and then raise the prices. We see it time and time again. We're trained to believe that, without VC, the tech industry would somehow be stifled. This is simply untrue. Without VC, a lot of our "side" projects that create true innovation would have a chance at success. The reason many of them don't is because they're up against the same thing from a VC-backed competitor. Except, the VC-backed version is cheaper (or free), is backed by an unsustainable, large team of skilled developers, and doesn't care that it's hemorrhaging money, because once it creates a monopoly it will pay dividends for life to the very few who own it.

jondubois 11y ago
What you wrote is exactly what I've been thinking about over the past year. Especially the part about VCs - That's my life's story. I would upvote this with all my karma if I could. Very well said.
badsock 11y ago
I'm very much on the other side of the political spectrum, but I would have a lot more appreciation for libertarianism if someone could come up with a credible, practical solution for making monopolies (or monopolistic behaviour) rare or impossible. With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence.
- AndrewKemendo 11y ago
  With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence. If I remember back to my anarchist philosophy, that is ceding too much ground. Patents, access to cheap capital, "artificial" interest rates etc... are all government influence that large companies can take advantage of to become monopolistic. Without those the argument goes, that firms would never get so big because competition would sprout up immediately to cut into their market dominance. If you look at Standard Oil or Bell System, the case studies for all monopolies, they all hinged on some government grated protection. In Bell's case it was initially a patent and then subsequently "legally sanctioned regulated monopoly." In the case of Standard Oil they utilized Trusts, which were legally recognized forms of distributing ownership to stay within the law. So unfettered capitalism might not lead to long and enduring monopolies, but it would be much nastier and competition much more fierce because the systems on which business is built today would have to go away in total - to include regulated banking, infrastructure standards etc... The question should instead be: Is the world in which there is no regulation one that you would actually want to live in? I would argue no. edit: Note that I don't agree with this view, it is however the argument that is made.

throwaway_5561 11y ago

As someone who was born in Soviet Union, and (thankfully) escaped at a fairly early age, arguments like this just completely boggle my mind. Why do people think it's ok to take other people's money? If a billionaire has money - regardless of whether they earned or inherited it - it's THEIR money. If they earned it lawfully, they should pay the same % of tax that everyone else pays - and keep the rest to do whatever they please. Who are YOU to tell them how to spend THEIR MONEY better? If you're jealous of them having more money than you - this is a truly free country, nothing is stopping you from earning just as much as they have. Yes, life isn't fair, they may be born into wealth and you're not - but try being born in North Korea, then talk about it not being fair. This is the principle that America was founded on, and what's allowed it to be successful. And as someone who studied just a bit of history, it seems completely insane to me that people think taking money from the rich and distributing it to the poor think it will turn out OK. The same exact thing happened in dozens of socialist countries - those that are in charge of the distribution, somehow distribute the most of it to themselves, and then take away people's freedoms so they would stay in power. To think that something else is going to happen is just plain ignorance of basic human nature.

crimsonalucard 11y ago
The situation is far more complex than you assume. It is impossible for one person to make a billion dollar 747. One man simply doesn't have enough intelligence or strength to do construct such a sophisticated device. If a 747 is worth a billion dollars then creating a billion dollars of paper money or making the plane itself are both equivalent concepts. Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747? Why do billionaires exist? Billionaires exist only because the paper money was taken from the wealth produced by other people. The Billionaire needs to employ workers to build a 747. In short, for Billionaires to be Billionaires they must be an owner of some corporation where the wealth produced by the labor of employees is unfairly distributed to them. This is wealth inequality. This was the problem your old country attempted and somewhat failed to resolve with communism. Whatever you think communism is, wealth inequality is a feature of capitalism and it is fundamentally unfair because it is taken from others.

jondubois 11y ago

I think capitalism has been a zero-sum game for a very long time. Marketing just dominates everything now - 90% of the work people do is to figure out how to make the company that they work for gain market share over the companies that other people work for and the solution these days is usually marketing... Instead of focusing their energy on how to make their product cheaper. The cost of RAM memory seems to have stagnated. The prices of vital drugs are going up. Property prices are going up. The era of value-creation is over. The real winners are those who can make other people create all the value and just capture that value.

hluska 11y ago

It's interesting to me that these types of arguments always boil down taxing the wealthy. That is a way to redistribute wealth, but what about working to do a more efficient job of redistributing wealth from government to the citizens? Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws. In the end, the tax authority may collect more money, but they also have to spend significantly more. In the end, will such a scheme really result in more money in the government's coffers?? And then, what happens to money once it reaches the G?? How much of the money is wasted on poorly planned/executed programs? How much is wasted by massive, overstaffed organizations? How much of the money designated for 'social services' ends up in the hands of lower income people versus how much ends up paying for bureaucracy? Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible.

rcurry 11y ago
"Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible." Yeah, if someone tells me that they can spend Elon Musk's money more productively than he can, I'd kind of like them to be able to point to some track record of having done that in the past with all the other money they've had their hands on.
- gbhn 11y ago
  Many people think Musk is in the top percentiles of "using money well." While I think it is always appropriate to want the government to run better, it's probably not fair to set such a high bar for it. One might just as easily say "no VC should invest money in any company whose founder has a poorer track record than Elon Musk" which is of course a ridiculous posture.
ryandrake 11y ago
> Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws. If there was ever political will to tax the wealthy at such a rate, there would also be the political will to end the loopholes allowing people to avoid that rate, otherwise it would be pointless.

badusername 11y ago

https://medium.com/@girlziplocked/paul-graham-is-still-asking-to-be-eaten-5f021c0c0650#.84ry1qyun https://medium.com/@girlziplocked/paul-graham-is-still-askin...

digital_ins 11y ago

Anyone who thinks that an 80% tax on the rich is going to yield spectacular results should take a look at the whole host of countries following the communist economic model as well as the countries that adopted the non-explicit communist model (these include most of the countries in the 'Non-Aligned Movement') to see how heavily taxing the rich as well as trusting that the government is more efficient with capital allocation is working out. It's not.

bsbechtel 11y ago

One thing that is often ignored when considering a progressive income tax is that years of income are often sacrificed in order to achieve higher earnings. Consider an entrepreneur who earns <$30,000 for for 5+ years while re-investing in a breakthrough technology, or a doctor who spends 10+ years studying and living on a minimal income who one year earn $250,000+ and fall into the highest tax bracket. Those individuals have basically concentrated all of their earnings into a shorter time period, at (in the entrepreneur's case) significant personal risk/expense. This can make the net lifetime earnings of these supposedly 'rich' individuals actually less, and taxed at a higher rate, than those who don't ever achieve this level of income.

forrestthewoods 11y ago

Every response post I've read is terrible. Frustratingly so. Inequality is bad. People want to reduce inequality. Startups strive to strictly increase inequality. Now what? An extreme progressive tax plus startups will STILL increase inequality. Not decrease. To be honest I want to increase inequality even more. Because I want to allow more immigrants and refugees. You can't let in hundreds of thousands of refugees without increasing inequality. It's not possible. What some of these posts say, without actually saying it, is that oh some types of inequality are bad and some are good. A small local business that earns it's owner a 6 figure salary? Well that's obviously good. When people say inequality is bad they meant those filthy point-oh-one percenters on Wall Street. Not the plumber who has 10 employees and made $350,000 last year. Obviously. Inequality is at most a 2nd order derivative. It doesn't actually matter much. Things can be good with high inequality or they can be bad with low inequality. It gets far more attention than it should, imo.

crimsonalucard 11y ago
logical arguments are often inspired by individual motivations despite efforts of everyone to remain rational. I ask you: Are you poor or are you rich? When inequality increases, do you benefite? or do you become worse off? This answer would indeed be very interesting if you were a poor person. If you are a rich person, then you're answer is expected. Normal. People concoct very articulate and valid logic to fit their own biases and situation. The logic is so sound that it's often hard to find bias. What can always be observed however is... does the logic benefit the individual who introduced said logic. I feel people need to introduce their background before they introduce their arguments. Like PG did, one should always announce whether or not they are a manufacturer of wealth inequality or not before they spill their arguments.
- forrestthewoods 11y ago
  I like your line of thinking. Particularly your sound logic line. To answer, that depends entirely on how you depend poor or rich. And to who you are comparing. Within the United States the median household income is $50,000. Average household income is $69,000. If someone makes more than mean/median and they receive a raise than is an increase in inequality. There's hardly a US based programmer on HN that doesn't qualify as rich and strive to increase inequality by seeking career growth and raises. I don't think that's a bad thing. I would be such a programmer.

rythie 11y ago

In living (for some), 80%+ tax rates have been used and tax was very high for about 5 decades: - the top marginal rate of tax was 62% in 1932 (up from 25% in 1931) - rising to 91% in 1963 (income over $200k) - It was at 70% in 1981 (before dropping to 50% in 1982) http://taxfoundation.org/article/us-federal-individual-income-tax-rates-history-1913-2013-nominal-and-inflation-adjusted-brackets http://taxfoundation.org/article/us-federal-individual-incom... and a graph here: http://visualizingeconomics.com/blog/2010/02/04/historical-marginal-income-tax-rates http://visualizingeconomics.com/blog/2010/02/04/historical-m... Though I can find very little that talks about the affects of this taxation on society.

chrisco255 11y ago
The 80%+ tax rate were used to pay for WWII debts. Also, tax loopholes were absolutely rampant prior to the 1986 tax reform act. Because tax rates and deductions are so fungible, and vary from country to country and even state to state (if we factor state and local taxes) the only objective measure is to look at tax revenue as a percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...

acgourley 11y ago

I read PG as saying, "You can't fix exponential forces with linear solutions." Furthermore I got the impression PG's essay is in favor of progressive reform such as reduced incarceration rates and even something like basic income but is going out of the way to make the point it still won't get rid of in equality because it cannot as long as we embrace technology. He's trying to say instead of going after the impossible bogeyman (inequality) let's go after the very real bogeyman (poverty). I feel like the author of this post reads PG totally different. He seems to think PG is saying, "Inequality isn't a big problem and it can't be fixed and screw these dumb poor people."

digital_ins 11y ago

Also the talk of GDP growth slowing down is so off-putting. It just goes to show that the author has no understanding of economics. GDP growth tends to slow down as the base increases. The entire article sounded like an adult making the case that if he ate more, he'd grow taller.

vannevar 11y ago

From the fourth point: So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game. It doesn't even matter how growth is trending. Graham's misguided criticism of the 'myth' misses a simple mathematical fact: that the growth in income among the top 1% dramatically outpaces overall economic growth. Consequently, contrary to his assertion, the rich are increasing their income at the expense of the poor. There is no where else the money can be coming from. You can argue (wrongly, in my opinion) that this is solely because the rich are smarter and harder-working than the poor. But you cannot rationally argue that such a shift is not happening in a broad sense.

andrewmcwatters 11y ago

I really don't like the word "progressive" being used in a context like this, and it seems more like a cognitive anchor for associating actual progress with this proposal. It seems really backward and regressive if anything.

padseeker 11y ago

It drives me nuts that Hacker News is such an awesome resource but the person behind it is such an arrogant jerk. Am I banned now?

nsns 11y ago

A somewhat less nuanced response, that (despite a lively conversation) never made it to the front page: https://news.ycombinator.com/item?id=10831261 https://news.ycombinator.com/item?id=10831261

crimsonalucard 11y ago

PG talks about startups as if they are the best thing that ever happened to this world. The iphone did not come from a startup. Nor did the internet. The world needs startups but if the startup fails like the way most of them do... then it's just wasted capital producing a good that has zero utility. Anybody have a good argument for why we need startups for every little stupid business idea? PG almost describes the "entrepreneur" as some sort of genetically superior being.

codingdave 11y ago
PG (or anyone involved with YC) has a financially vested interest in everyone believing that startups are great. I don't know the dude, so cannot presume his full thoughts or motivations, but he is FAR from an unbiased source.

oneJob 11y ago

There is a follow-up by Mr. Graham [1], and there is a follow-up to his follow-up by the original open-letter author [2]. I would like to add one thing. Given that Mr. Graham has put forth an essay on an (macro) economic topic, and his employment of the 'per se' argument method, there is an obvious lack of proper treatment of the basic and foundational economic concept of 'ceteris paribus'. Without employing the tool of 'ceteris paribus' in his his essay Mr. Graham has left the door wide open for discussion of all sorts of things which might form a critical response to his argument: "But economic inequality per se is not bad." On the same topic, in his follow-up he weakens his argument substantially by prefacing it with: "I thought it might help clarify matters if I tried to write a version so simple that it leaves no room for misinterpretation." Less words does not necessarily make for a smaller room, Mr. Graham. [1] http://www.paulgraham.com/sim.html http://www.paulgraham.com/sim.html [2] https://medium.com/@RickWebb/paul-graham-s-second-inequality-essay-is-only-slightly-better-here-s-what-s-still-wrong-with-it-9b57ba8e516d#.hum2bsuur https://medium.com/@RickWebb/paul-graham-s-second-inequality...

randomThoughts9 11y ago

I think that a lot of people that are against higher/progressive taxes or see these level of inequality (income and wealth) as a good thing believe in the "self-made man" myth. But that is just a myth. When someone "makes it", can you really disregard? - his teacher from school - the doctor that saved his life when he was young - the guy on the street that maybe said something that triggered a chain of actions that ended in his success - the books he read - the peace of mind provided by living in a safe place - etc. Is it enough that you paid for that doctor appointment? I don't know. But you would not be here at all without it, and that doctor himself benefited from all of the above. A different way of looking at things could be that, as we as a society don't know what works and what doesn't, we invest in people. Some are lucky, and based on their circumstances (and on their personal merit, I won't deny that) will manage to succeed in life.

paulus_magnus2 11y ago

Most of problems of inequality come down to the fact that rich are allowed to invest into land / housing. One can argue if enormous capital gains should be taxed or not, but the problem starts when rich park their money where it inflates "normal people"'s necessities. Best jobs are concentrated in few big cities, workers have to live there. Rich don't have to live there but they corner the housing market in order to extract maximum percentage from workers' salaries. I don't care how much money the rich have as long as they don't inflate the housing so I can afford to buy my own. Capitalism has learned to extract more surplus value from labour about the moment when worker productivity and salaries started diverging. It used to be that the rich are very few and once they bought all the London property normal people could live their lives. Nowadays there are so many foreign billionaires (China) who either have money or can access cheap debt that they can corner property market in every major city.