8 ms·

The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. If you limit the prize, then you also limit amou

by mamon 9y ago

The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. If you limit the prize, then you also limit amount of effort that one is willing to make to get it. Therefore, after UBI is introduced on mass scale we might see a slow but steady decline in economic activity: fewer new companies started, fewer investments made, riches focusing on tax evasion and moving their business abroad instead of just running and developing it, resulting in recession. Of course you can go with nuclear option and forfeit all their properties at once, in the name of social justice (does that ring a bell?) but you can only do it once, and eventually will run out of the money seized this way.

zimzam 9y ago
This assumes that the primary reason to start a company is to become fantastically wealthy, which I would contest. Sure, most founders want to get rich, but I'd assert most would be just as happy to end up in the 8 figure range ($10's of millions) as they would in the 9-10 figure range. (And such a reduction would require taxes on a scale far beyond what UBI would require) Few people are going to consider starting a company and then sit down, calculate their tax burden as a billionaire and decide that it isn't worth starting Apple, Facebook or Google.
- rhino369 9y ago
  Founders might looking for a good living and glory, but VC's for example are looking to really capitalize on 100X growth.
  - ThatGeoGuy 9y ago
    To play devil's advocate: you may not need VC's as much in a UBI world. You don't have to worry about income if your startup fails, so you're less likely to play the VC lottery in hopes that you can ride the funding into a successful exit.
    - orthecreedence 9y ago
      Exactly. In a UBI world, the government becomes the investor for innovation. If an idea you tried doesn't work out, you try something else. It becomes much easier to start a business, and you no longer get kicked out on the street for failing.
- goatherders 9y ago
  Lol. I'm sure most everyone on the planet would be happy to settle for the 8 figure range. It's humorous that anyone would suggest 8 figures isn't "fantastically wealthy" when only a fraction of a fraction of a fraction of a percent of people ever reach that level.
- deleted 9y ago
  [deleted]
jellicle 9y ago
Why is it that giving money to rich people increases their motivation, but giving money to poor people decreases their motivation? This "motivation" thing sure is hard to understand!
- mdpopescu 9y ago
  A possible explanation would be this: People are on a continuum between "extremely lazy" and "extremely hard-working". I know that I would stop working if I had ten million dollars, even though I love programming, because I would prefer to read books all day long. Elon Musk, on the other hand, would probably not stop working even with ten billion dollars, because he is obsessed with creating stuff. This suggests that most people will generally settle where they are content with what they're making. I know this is true for me (it would be easy for me to make twice what I'm making now, and ten times is achievable but would take a lot more effort than I'm willing to put in); from what I can tell, it's true for all the people I know. Also, you're equivocating on the "giving money" expression. Giving $10 to a homeless person and to Elon Musk would probably not motivate either of them.
bluehazed 9y ago
Riches' motivation to do what? Continually hoard resources? The problem of hoarding, tax evasion, and generally just theft from society disguised as "innovation tax" is the problem that already exists. You're not reducing economic activity, you're just taking economic output and putting it where it deserves to go.
- gloverkcn 9y ago
  Instead of deserves to go, I would say where it will be the most mobile. Sitting in a bank account doesn't do anything for the economy. Giving it to the poor means it will get spent. The people that the poor buy from will see an increase of revenue and make more money. Those people being one step above the poor will spend the profits (as well as buy more inventory), and the cycle continues. Trickle up will generate the economy spur more than trickle down.
  - refurb 9y ago
    Rich people don't have most of their money sitting in bank accounts. And even if they did, you think the banks just sit on it? No, they loan it out.
odonnellryan 9y ago
> The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. Two problems: 1) Assuming the "riches' motivation" is something that would be bad to undermine 2) This probably isn't true
URSpider94 9y ago
Look, no matter how much you tax the wealthy, you always have a positive derivative -- the more money you make, the more you take home. I really can't see anyone making a rational decision to work less hard because the tax rate is too high, within reason. The other thing that becomes blindingly clear when you live somewhere like Silicon Valley is that wealth is logarithmic. If you take home a million dollars a year here, you're still living in a 2000 sq foot home in a town with a half-decent school district. If you want a house walkable to downtown Palo Alto, you'd better be making $5 - $10 million (those homes go for $4 - 5 million). And if you want a real mansion, you'll need $20-30 mil. You want your own jet? $100 mil. There's always someone making MUCH more money than you, unless your name is Gates or Bezos. In that environment, a 3x increase in pay is still a meaningful difference in take-home.
- rhino369 9y ago
  >I really can't see anyone making a rational decision to work less hard because the tax rate is too high, within reason. I really think people do. Two years ago I had to work 250 hours in December to get a 25k bonus. At ~40% taxation, I felt it was worth it. I probably wouldn't at 65%. That is a pretty extreme case, but well off people turn down work if it isn't lucrative enough. Plus, if you are taxing investments, then it all matters because of risk. Tax factors into the expected value of an investment. It's not worth investing money if 70% of the proceeds get taken away. This is why world wide, capital is taxed fairly lightly.
  - pg314 9y ago
    > It's not worth investing money if 70% of the proceeds get taken away. Yes it is. As long as the 30% of the proceeds are higher than the proceeds of the best alternative use of your money. > This is why world wide, capital is taxed fairly lightly. This is wrong. It is taxed fairly lightly because it is mobile. Tax it too much and it just moves abroad.
    - Taek 9y ago
      I was just in a meeting yesterday with a fund that chose not to pursue lucrative investment opportunities because the tax situation was much worse than the other opportunities available. Tax is absolutely a huge part of the decision making for any substantial wealth management. Whether you buy property, bonds, or do something more creative is heavily influenced by the taxes you'll have to pay.
worldsayshi 9y ago
> you undermine riches' motivation To tax the rich is not the same as disincentivizing investment! Investment matters to the economy, not capital. Yes you need capital in order to invest. You need the right amount of capital in the right places! Rich hoarders are not the best investors.
- redahs 9y ago
  Taxing capital and labor creates deadweight loss and disincentivizes investment in the production of more goods and services. Capital goods are durable goods which go to wherever they are best treated, including overseas. If you want to tax the rich without taxing capital or labor, then you want to tax land. Unlike capital, there is only a finite supply of land and it cannot be moved overseas. Wealthy individuals like owning land in areas with high land values in stable countries with high public spending, and with a land value tax they directly pay for it.
BeetleB 9y ago
>The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. If you limit the prize, then you also limit amount of effort that one is willing to make to get it. Commonly stated, but any real data to support it? I think what kills the economy more is when the barrier to entry is high. This impacts mostly non-wealthy folks. In the US, it is ridiculously trivial to set up a "company". I've heard in some countries, you need to apply for a license, which could be expensive (say $2000). And along with that a lot of regulation that is quite affordable to big companies, but not to the average Jane. The rich easily absorb all these costs, and it barely hurts their motivation. Poorer people trying to make a living and grow their wealth somewhat are most impacted.
- deleted 9y ago
  [deleted]
cortesoft 9y ago
Just like any resource, your 'motivation per dollar' return decreases as people get richer. For $20, a very poor person will do a lot of difficult things; a rich person probably wouldn't even get off the couch for $20. Once you get past a certain wealth level, money actually STOPS being a motivator, at least in the ways that it is for poorer people. Instead, it becomes more like a scorecard, to demonstrate to others your success. That desire to demonstrate your success will always be there, whether you tax the money or not.
hinkley 9y ago
The rich don't broker in dollars, they broker in power. Our current president filed for [corporate] bankruptcy ~~something like five~~ four times? He wasn't worried. He knew he'd be back on top again. All his relationships and social capital would be intact, except maybe with the people he owed money to.

by mamon 9y ago

zimzam 9y ago

This assumes that the primary reason to start a company is to become fantastically wealthy, which I would contest. Sure, most founders want to get rich, but I'd assert most would be just as happy to end up in the 8 figure range ($10's of millions) as they would in the 9-10 figure range. (And such a reduction would require taxes on a scale far beyond what UBI would require) Few people are going to consider starting a company and then sit down, calculate their tax burden as a billionaire and decide that it isn't worth starting Apple, Facebook or Google.

rhino369 9y ago
Founders might looking for a good living and glory, but VC's for example are looking to really capitalize on 100X growth.
- ThatGeoGuy 9y ago
  To play devil's advocate: you may not need VC's as much in a UBI world. You don't have to worry about income if your startup fails, so you're less likely to play the VC lottery in hopes that you can ride the funding into a successful exit.
  - orthecreedence 9y ago
    Exactly. In a UBI world, the government becomes the investor for innovation. If an idea you tried doesn't work out, you try something else. It becomes much easier to start a business, and you no longer get kicked out on the street for failing.
goatherders 9y ago
Lol. I'm sure most everyone on the planet would be happy to settle for the 8 figure range. It's humorous that anyone would suggest 8 figures isn't "fantastically wealthy" when only a fraction of a fraction of a fraction of a percent of people ever reach that level.
deleted 9y ago
[deleted]

jellicle 9y ago

Why is it that giving money to rich people increases their motivation, but giving money to poor people decreases their motivation? This "motivation" thing sure is hard to understand!

mdpopescu 9y ago
A possible explanation would be this: People are on a continuum between "extremely lazy" and "extremely hard-working". I know that I would stop working if I had ten million dollars, even though I love programming, because I would prefer to read books all day long. Elon Musk, on the other hand, would probably not stop working even with ten billion dollars, because he is obsessed with creating stuff. This suggests that most people will generally settle where they are content with what they're making. I know this is true for me (it would be easy for me to make twice what I'm making now, and ten times is achievable but would take a lot more effort than I'm willing to put in); from what I can tell, it's true for all the people I know. Also, you're equivocating on the "giving money" expression. Giving $10 to a homeless person and to Elon Musk would probably not motivate either of them.

bluehazed 9y ago

Riches' motivation to do what? Continually hoard resources? The problem of hoarding, tax evasion, and generally just theft from society disguised as "innovation tax" is the problem that already exists. You're not reducing economic activity, you're just taking economic output and putting it where it deserves to go.

gloverkcn 9y ago
Instead of deserves to go, I would say where it will be the most mobile. Sitting in a bank account doesn't do anything for the economy. Giving it to the poor means it will get spent. The people that the poor buy from will see an increase of revenue and make more money. Those people being one step above the poor will spend the profits (as well as buy more inventory), and the cycle continues. Trickle up will generate the economy spur more than trickle down.
- refurb 9y ago
  Rich people don't have most of their money sitting in bank accounts. And even if they did, you think the banks just sit on it? No, they loan it out.

odonnellryan 9y ago

> The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. Two problems: 1) Assuming the "riches' motivation" is something that would be bad to undermine 2) This probably isn't true

URSpider94 9y ago

Look, no matter how much you tax the wealthy, you always have a positive derivative -- the more money you make, the more you take home. I really can't see anyone making a rational decision to work less hard because the tax rate is too high, within reason. The other thing that becomes blindingly clear when you live somewhere like Silicon Valley is that wealth is logarithmic. If you take home a million dollars a year here, you're still living in a 2000 sq foot home in a town with a half-decent school district. If you want a house walkable to downtown Palo Alto, you'd better be making $5 - $10 million (those homes go for $4 - 5 million). And if you want a real mansion, you'll need $20-30 mil. You want your own jet? $100 mil. There's always someone making MUCH more money than you, unless your name is Gates or Bezos. In that environment, a 3x increase in pay is still a meaningful difference in take-home.

rhino369 9y ago
>I really can't see anyone making a rational decision to work less hard because the tax rate is too high, within reason. I really think people do. Two years ago I had to work 250 hours in December to get a 25k bonus. At ~40% taxation, I felt it was worth it. I probably wouldn't at 65%. That is a pretty extreme case, but well off people turn down work if it isn't lucrative enough. Plus, if you are taxing investments, then it all matters because of risk. Tax factors into the expected value of an investment. It's not worth investing money if 70% of the proceeds get taken away. This is why world wide, capital is taxed fairly lightly.
- pg314 9y ago
  > It's not worth investing money if 70% of the proceeds get taken away. Yes it is. As long as the 30% of the proceeds are higher than the proceeds of the best alternative use of your money. > This is why world wide, capital is taxed fairly lightly. This is wrong. It is taxed fairly lightly because it is mobile. Tax it too much and it just moves abroad.
  - Taek 9y ago
    I was just in a meeting yesterday with a fund that chose not to pursue lucrative investment opportunities because the tax situation was much worse than the other opportunities available. Tax is absolutely a huge part of the decision making for any substantial wealth management. Whether you buy property, bonds, or do something more creative is heavily influenced by the taxes you'll have to pay.

worldsayshi 9y ago

> you undermine riches' motivation To tax the rich is not the same as disincentivizing investment! Investment matters to the economy, not capital. Yes you need capital in order to invest. You need the right amount of capital in the right places! Rich hoarders are not the best investors.

redahs 9y ago
Taxing capital and labor creates deadweight loss and disincentivizes investment in the production of more goods and services. Capital goods are durable goods which go to wherever they are best treated, including overseas. If you want to tax the rich without taxing capital or labor, then you want to tax land. Unlike capital, there is only a finite supply of land and it cannot be moved overseas. Wealthy individuals like owning land in areas with high land values in stable countries with high public spending, and with a land value tax they directly pay for it.

BeetleB 9y ago

>The problem with taking money from the rich and giving it to the poor is that you undermine riches' motivation. If you limit the prize, then you also limit amount of effort that one is willing to make to get it. Commonly stated, but any real data to support it? I think what kills the economy more is when the barrier to entry is high. This impacts mostly non-wealthy folks. In the US, it is ridiculously trivial to set up a "company". I've heard in some countries, you need to apply for a license, which could be expensive (say $2000). And along with that a lot of regulation that is quite affordable to big companies, but not to the average Jane. The rich easily absorb all these costs, and it barely hurts their motivation. Poorer people trying to make a living and grow their wealth somewhat are most impacted.

deleted 9y ago
[deleted]

cortesoft 9y ago

Just like any resource, your 'motivation per dollar' return decreases as people get richer. For $20, a very poor person will do a lot of difficult things; a rich person probably wouldn't even get off the couch for $20. Once you get past a certain wealth level, money actually STOPS being a motivator, at least in the ways that it is for poorer people. Instead, it becomes more like a scorecard, to demonstrate to others your success. That desire to demonstrate your success will always be there, whether you tax the money or not.

hinkley 9y ago

The rich don't broker in dollars, they broker in power. Our current president filed for [corporate] bankruptcy ~~something like five~~ four times? He wasn't worried. He knew he'd be back on top again. All his relationships and social capital would be intact, except maybe with the people he owed money to.