11 ms·

A 70 percent marginal rate could help, not hurt, innovation

27 points by perfmode 8y ago

beaconstudios 8y ago
I'm a business owner and working on a startup, and I'd back a high marginal rate. But my concern is that governments are terrible at spending tax money effectively. I'm all for my disposable income being used for the greater good but I expect that the money would be gobbled up by wasteful bureaucracy and administration, or doing things I disagree with like sponsoring war or building surveillance dragnets. I'm from the UK and the 2018 budget's total public expenditure for the 2019/2020 year is expected to be £842 billion [1]. That's £12,757 per person [2] - almost half the average salary [3]. I don't think the problem with our government is a lack of money, and I can only presume the situation in the US is similar. [1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752202/Budget_2018_red_web.pdf https://assets.publishing.service.gov.uk/government/uploads/... page 4 [2] https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/november2018 https://www.ons.gov.uk/peoplepopulationandcommunity/populati... [3] https://www.theguardian.com/money/2018/may/12/salary-what-get-paid-talk-about-it-makes-brits-cringe https://www.theguardian.com/money/2018/may/12/salary-what-ge...
- dbingham 8y ago
  I think enough of the money would go to supporting necessary services that it would still be worthwhile. And the more we can get the population on firmer economic footing, the more they'll be able to participate in democracy, hold the government accountable, and work towards a more efficient government. But the point of a marginal tax rate that high isn't just to fund the government. It's to fight wealth concentration. And even if every dollar taxed is completely wasted, it still serves to keep inequality down and fights the concentration of wealth (and there for power). That's worthwhile.
  - beaconstudios 8y ago
    why do you want to fight wealth concentration though? As far as I'm aware (and I could totally be wrong, I'm open to changing my opinion on almost everything) the only symptoms of wealth concentration are related to political corruption (where we should be preventing external money/gifts from getting to politicians, not preventing people from having money in the first place) and the Gini coefficient's effect on crime, which seems to me to be a function of envy because a high Gini coefficient is correlated with high crime even in areas with low poverty. My view of "good" government spending is to raise the lowest living standards to a place of dignity and security. I don't think the government should be punishing people for succeeding in the markets if they do so legitimately.
    - danaris 8y ago
      Wealth concentration reduces liquidity. When more of the wealth that exists is in the hands of those with less, they spend it, and it's circulating in the economy. Indeed, it's circulating in the parts of the economy that need circulating money the most—the poorest parts. Inequality leads to large amounts of the money in the economy being locked away doing very little. So if we reduce the amount the very richest can siphon out of the active economy and pack away for a rainy day that'll never come (seriously, when is it going to be rainy enough for it to matter to someone making $20 million/yr whether they get to keep $16 million of it or $13 million of it?), we help stimulate the entire economy, almost by definition. Furthermore, the more people who have enough money to take opportunities for education and entrepreneurship, the more likely we are to have good new small businesses and innovative ideas.
      - beaconstudios 8y ago
        this argument rests on the condition that the rich store their wealth in some Scrooge McDuckian vault, away from the economy. This isn't true - usually, wealth is either spent on luxury items (so the money goes back into the economy) or it is invested (funding economic growth). If that weren't the case, wealth would be eroded via inflation. Now, there's a good argument to be made that many modern investment vehicles don't actually contribute to growth - and if that can be proven to be the case, these vehicles should be delegitimised. > Furthermore, the more people who have enough money to take opportunities for education and entrepreneurship, the more likely we are to have good new small businesses and innovative ideas. This is returning to the argument that we should raise living standards, not penalise wealth. I'm on board with that.
- adventured 8y ago
  > That's £12,757 per person [2] - almost half the average salary [3]. I don't think the problem with our government is a lack of money, and I can only presume the situation in the US is similar. It's even worse in the US by a considerable margin. The total government spending in the US - Federal, state, local - is near ~$7.5 trillion. That's roughly $22,721 per person. It's larger than the combined economies of Germany and France (with a Turkey or Switzerland thrown in). We should have gold lined streets, the world's greatest universal healthcare system, high speed rail connecting every major city, trillions put away for social security, and practically no homelessness or poverty.
- basch 8y ago
  Maybe I misunderstand, but if you make more than 10 million, and you dont want to pay 70% taxes on the money over 10 million, wouldnt you have the option to give it away to a charity? You basically have the choice to either allocatate your "social good contribution" yourself, or let the people do it for you.
  - beaconstudios 8y ago
    I don't know if that's how charity write-offs work, but given the option that's probably what I'd do yeah. I think that explains why so many billionaires are philanthropists, too.
    - basch 8y ago
      Youd have to give away 100% tho, if you gave away 70% you'd still owe 70% on the remaining 30%. Also, remember this is income tax. Not capital gains tax. So that means 10 million in salary, not stock sales. About 12,000 people in the US make over 10 million that way, and about 1000 people make over 50 million. This conversation is about an infinitesimally small portion of the population. It's kind of a weird conversation to play out across the news media and campaign ads. "Liberals want to tax you" ads are actually one of those 12,000 people paying the television to shout "please vote not to tax me for your own enrichment" to the other 99.99% of the population. They dangle the carrot of an america dream, implying "One day when you are in the 10 million dollar club you wouldnt want this for yourself, treat me how you would want to be treated," full well knowing that 99.99% of the population will never be making 10 million.
      - beaconstudios 8y ago
        > Youd have to give away 100% tho, if you gave away 70% you'd still owe 70% on the remaining 30%. presuming you mean 100% of everything over 10m then yeah, that would be fine. > Also, remember this is income tax. Not capital gains tax. So that means 10 million in salary, not stock sales. That's the strange thing. I'd think progressive capital gains tax at a comparable rate would also be needed or directory compensation will be switched to stock instead. > This conversation is about an infinitesimally small portion of the population. It's kind of a weird conversation to play out across the news media and campaign ads. "Liberals want to tax you" ads are actually one of those 12,000 people paying the television to shout "please vote not to tax me" to the other 99.99% of the population. It's not just the wealthy that are against taxing the wealthy. I personally don't think it would make a lick of difference, and may even harm the economy in the long run, for the reasons I've outlined in the excessive number of comments I've left on this thread. If it worked I would support it, but I don't believe it would.
- TheIronYuppie 8y ago
  Can you explain why £12,757 is bad? It's an arbitrary figure and other than "it's big" I have no context for whether or not it's "the right" amount, and certainly would not use it as a point as to whether or not "governments are terrible" is correct. Let's say I got this all back (from here[1] - I didn't vet these numbers but let's say it's order of magnitude correct - also, this is US numbers, but you get the idea) - is there a better way to spend than this?: - Pensions $3,238.24 - Health Care $3,438.55 - Education $331.68 - Defense $2,771.78 - Welfare $1,092.87 - Protection $116.15 - Transportation $289.44 - General Government $140.06 - Other Spending $330.44 - Interest $1,008.40 - Balance $(0.31) I mean - I can GUARANTEE that I don't know how to spend on pensions, or defense, or education/etc better than a professional. I'm not saying they're perfect, but they're CERTAINLY better than me, and LIKELY better than someone with a profit seeking motive. [1] https://www.usgovernmentspending.com/federal_budget_estimate_vs_actual_2018_XXbs2n_00E0F0G0H0I0203040506070809010#usgs302 https://www.usgovernmentspending.com/federal_budget_estimate...
  - CryptoPunk 8y ago
    The professional you trust to spend that taxpayer money has a profit motive just like the company owner whose company you purchase a service from in a free market. In the former, the professional can profit by trading their influence for money, by advocating for political parties that increase their pay (consider the pay gap between federal workers and private sector workers has grown steadily since 1950, in favor of the federal worker, as government sector unions wield enormous power in politics), and they can profit in time by putting in less time and effort than what they're responsible to provide. The latter can explicitly profit by winning your business in the market and charging more than their cost to produce. The latter works better in any industry that is natutally competitive because it's provided in the context of a competitive market which is shaped by consumer choice.
    - TheIronYuppie 8y ago
      Yeah, I've worked in government for many years before I went to the private sector. While what you specify does exist, if it's more than 0.00001% of people, I'd be stunned. The average professional government worker makes $50k, and is terrified more than anything in the world of doing something bad that gets surfaced to congress. They would GLADLY forgo profit/influence/etc just to make sure they don't get disciplined. And to suggest that the private sector (worked in FAANG + M the majority of my life) doesn't trade influence, vote for political parties that help them, try to weasel out of work, etc is crazy. There's absolutely no difference. The only difference is that at the end of the day: - A private sector worker's job is to deliver a widget that is : amount they can sell it for - cost of production = profit - A public sector worker's job is to deliver a widget that is cost of production only (since there's no profit). Is the cost of production higher in government? Possibly. But at the end of the day, the fact that the government isn't targeting how much it can sell stuff for means it's pretty uniquely well suited for items which shouldn't be charged for in the first place (e.g safety, health, defense, security, etc)
Kephael 8y ago
You'd probably get more innovation in the US if you funneled more money to the top 50 or so engineering schools and forced them to take on more students. There are too many schools with "impacted" majors in worthwhile degree majors. The only thing higher taxes would do is potentially discourage me from running a side business. Taxes wouldn't even need to be raised, just take the funds from the poor performing universities and colleges and move to a German educational model.
- alkibiades 8y ago
  i don’t see how some people going to a rank 5 school instead of rank 15 school would drastically change the US. And trust me, look at the endowments of these schools. Outside of some public ones, it’s not a money issue. Harvard could easily 3x their enrollment with their endowment money
  - Kephael 8y ago
    I was not referring to rank 15 -> 5, I meant that outcomes of students attending a rank 2500 school is typically not particularly good. It is literally impossible to enroll in certain majors at many quality schools despite being academically qualified for the major.
    - alkibiades 8y ago
      give them more money and they’ll hire a thousand more diversity administrators and not a single spot will open up in those impacted programs.
- jdhn 8y ago
  >move to a German educational model Isn't the German model based on assigning people to tracks with very little opportunity to jump out of your track and into another one? Personally, I would hate to be assigned a track that I couldn't move out of if I really wanted to.
jryan49 8y ago
I would be for such a thing if the money goes directly to people. The government doesn't spend any of it.
cartercole 8y ago
go home everyone thinks they can spend other peoples money better than can (except libertarians)
hedora 8y ago
Fun fact: The marginal rate if you cash out stock and build a house in the SF bay area is 51%. With tarrifs and sales tax, the marginal rate on raw materials averages closer to 67%. People wonder why there is a housing shortage. I’d back a higher marginal rate if the brackets were somehow computed over a multi-year sliding income window. One possibility would be to compute marginal rates on windfalls based on how many years it took to earn the windfall payment. In the current system, startup employees defer income for years, then get taxed at astronomical levels when N years of income lands all at once. [edit: Also, most of the tax shelters for the ultra wealthy take multiple years of sustained high income to establish, so simply juicing the max marginal rate is mostly hitting new money, as opposed to passive investors.] That clearly disincentives innovation.

27 points by perfmode 8y ago

I'm a business owner and working on a startup, and I'd back a high marginal rate. But my concern is that governments are terrible at spending tax money effectively. I'm all for my disposable income being used for the greater good but I expect that the money would be gobbled up by wasteful bureaucracy and administration, or doing things I disagree with like sponsoring war or building surveillance dragnets. I'm from the UK and the 2018 budget's total public expenditure for the 2019/2020 year is expected to be £842 billion [1]. That's £12,757 per person [2] - almost half the average salary [3]. I don't think the problem with our government is a lack of money, and I can only presume the situation in the US is similar. [1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752202/Budget_2018_red_web.pdf https://assets.publishing.service.gov.uk/government/uploads/... page 4 [2] https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/november2018 https://www.ons.gov.uk/peoplepopulationandcommunity/populati... [3] https://www.theguardian.com/money/2018/may/12/salary-what-get-paid-talk-about-it-makes-brits-cringe https://www.theguardian.com/money/2018/may/12/salary-what-ge...

dbingham 8y ago
I think enough of the money would go to supporting necessary services that it would still be worthwhile. And the more we can get the population on firmer economic footing, the more they'll be able to participate in democracy, hold the government accountable, and work towards a more efficient government. But the point of a marginal tax rate that high isn't just to fund the government. It's to fight wealth concentration. And even if every dollar taxed is completely wasted, it still serves to keep inequality down and fights the concentration of wealth (and there for power). That's worthwhile.
- beaconstudios 8y ago
  why do you want to fight wealth concentration though? As far as I'm aware (and I could totally be wrong, I'm open to changing my opinion on almost everything) the only symptoms of wealth concentration are related to political corruption (where we should be preventing external money/gifts from getting to politicians, not preventing people from having money in the first place) and the Gini coefficient's effect on crime, which seems to me to be a function of envy because a high Gini coefficient is correlated with high crime even in areas with low poverty. My view of "good" government spending is to raise the lowest living standards to a place of dignity and security. I don't think the government should be punishing people for succeeding in the markets if they do so legitimately.
  - danaris 8y ago
    Wealth concentration reduces liquidity. When more of the wealth that exists is in the hands of those with less, they spend it, and it's circulating in the economy. Indeed, it's circulating in the parts of the economy that need circulating money the most—the poorest parts. Inequality leads to large amounts of the money in the economy being locked away doing very little. So if we reduce the amount the very richest can siphon out of the active economy and pack away for a rainy day that'll never come (seriously, when is it going to be rainy enough for it to matter to someone making $20 million/yr whether they get to keep $16 million of it or $13 million of it?), we help stimulate the entire economy, almost by definition. Furthermore, the more people who have enough money to take opportunities for education and entrepreneurship, the more likely we are to have good new small businesses and innovative ideas.
    - beaconstudios 8y ago
      this argument rests on the condition that the rich store their wealth in some Scrooge McDuckian vault, away from the economy. This isn't true - usually, wealth is either spent on luxury items (so the money goes back into the economy) or it is invested (funding economic growth). If that weren't the case, wealth would be eroded via inflation. Now, there's a good argument to be made that many modern investment vehicles don't actually contribute to growth - and if that can be proven to be the case, these vehicles should be delegitimised. > Furthermore, the more people who have enough money to take opportunities for education and entrepreneurship, the more likely we are to have good new small businesses and innovative ideas. This is returning to the argument that we should raise living standards, not penalise wealth. I'm on board with that.
adventured 8y ago
> That's £12,757 per person [2] - almost half the average salary [3]. I don't think the problem with our government is a lack of money, and I can only presume the situation in the US is similar. It's even worse in the US by a considerable margin. The total government spending in the US - Federal, state, local - is near ~$7.5 trillion. That's roughly $22,721 per person. It's larger than the combined economies of Germany and France (with a Turkey or Switzerland thrown in). We should have gold lined streets, the world's greatest universal healthcare system, high speed rail connecting every major city, trillions put away for social security, and practically no homelessness or poverty.
basch 8y ago
Maybe I misunderstand, but if you make more than 10 million, and you dont want to pay 70% taxes on the money over 10 million, wouldnt you have the option to give it away to a charity? You basically have the choice to either allocatate your "social good contribution" yourself, or let the people do it for you.
- beaconstudios 8y ago
  I don't know if that's how charity write-offs work, but given the option that's probably what I'd do yeah. I think that explains why so many billionaires are philanthropists, too.
  - basch 8y ago
    Youd have to give away 100% tho, if you gave away 70% you'd still owe 70% on the remaining 30%. Also, remember this is income tax. Not capital gains tax. So that means 10 million in salary, not stock sales. About 12,000 people in the US make over 10 million that way, and about 1000 people make over 50 million. This conversation is about an infinitesimally small portion of the population. It's kind of a weird conversation to play out across the news media and campaign ads. "Liberals want to tax you" ads are actually one of those 12,000 people paying the television to shout "please vote not to tax me for your own enrichment" to the other 99.99% of the population. They dangle the carrot of an america dream, implying "One day when you are in the 10 million dollar club you wouldnt want this for yourself, treat me how you would want to be treated," full well knowing that 99.99% of the population will never be making 10 million.
    - beaconstudios 8y ago
      > Youd have to give away 100% tho, if you gave away 70% you'd still owe 70% on the remaining 30%. presuming you mean 100% of everything over 10m then yeah, that would be fine. > Also, remember this is income tax. Not capital gains tax. So that means 10 million in salary, not stock sales. That's the strange thing. I'd think progressive capital gains tax at a comparable rate would also be needed or directory compensation will be switched to stock instead. > This conversation is about an infinitesimally small portion of the population. It's kind of a weird conversation to play out across the news media and campaign ads. "Liberals want to tax you" ads are actually one of those 12,000 people paying the television to shout "please vote not to tax me" to the other 99.99% of the population. It's not just the wealthy that are against taxing the wealthy. I personally don't think it would make a lick of difference, and may even harm the economy in the long run, for the reasons I've outlined in the excessive number of comments I've left on this thread. If it worked I would support it, but I don't believe it would.
TheIronYuppie 8y ago
Can you explain why £12,757 is bad? It's an arbitrary figure and other than "it's big" I have no context for whether or not it's "the right" amount, and certainly would not use it as a point as to whether or not "governments are terrible" is correct. Let's say I got this all back (from here[1] - I didn't vet these numbers but let's say it's order of magnitude correct - also, this is US numbers, but you get the idea) - is there a better way to spend than this?: - Pensions $3,238.24 - Health Care $3,438.55 - Education $331.68 - Defense $2,771.78 - Welfare $1,092.87 - Protection $116.15 - Transportation $289.44 - General Government $140.06 - Other Spending $330.44 - Interest $1,008.40 - Balance $(0.31) I mean - I can GUARANTEE that I don't know how to spend on pensions, or defense, or education/etc better than a professional. I'm not saying they're perfect, but they're CERTAINLY better than me, and LIKELY better than someone with a profit seeking motive. [1] https://www.usgovernmentspending.com/federal_budget_estimate_vs_actual_2018_XXbs2n_00E0F0G0H0I0203040506070809010#usgs302 https://www.usgovernmentspending.com/federal_budget_estimate...
- CryptoPunk 8y ago
  The professional you trust to spend that taxpayer money has a profit motive just like the company owner whose company you purchase a service from in a free market. In the former, the professional can profit by trading their influence for money, by advocating for political parties that increase their pay (consider the pay gap between federal workers and private sector workers has grown steadily since 1950, in favor of the federal worker, as government sector unions wield enormous power in politics), and they can profit in time by putting in less time and effort than what they're responsible to provide. The latter can explicitly profit by winning your business in the market and charging more than their cost to produce. The latter works better in any industry that is natutally competitive because it's provided in the context of a competitive market which is shaped by consumer choice.
  - TheIronYuppie 8y ago
    Yeah, I've worked in government for many years before I went to the private sector. While what you specify does exist, if it's more than 0.00001% of people, I'd be stunned. The average professional government worker makes $50k, and is terrified more than anything in the world of doing something bad that gets surfaced to congress. They would GLADLY forgo profit/influence/etc just to make sure they don't get disciplined. And to suggest that the private sector (worked in FAANG + M the majority of my life) doesn't trade influence, vote for political parties that help them, try to weasel out of work, etc is crazy. There's absolutely no difference. The only difference is that at the end of the day: - A private sector worker's job is to deliver a widget that is : amount they can sell it for - cost of production = profit - A public sector worker's job is to deliver a widget that is cost of production only (since there's no profit). Is the cost of production higher in government? Possibly. But at the end of the day, the fact that the government isn't targeting how much it can sell stuff for means it's pretty uniquely well suited for items which shouldn't be charged for in the first place (e.g safety, health, defense, security, etc)

Kephael 8y ago

You'd probably get more innovation in the US if you funneled more money to the top 50 or so engineering schools and forced them to take on more students. There are too many schools with "impacted" majors in worthwhile degree majors. The only thing higher taxes would do is potentially discourage me from running a side business. Taxes wouldn't even need to be raised, just take the funds from the poor performing universities and colleges and move to a German educational model.

alkibiades 8y ago
i don’t see how some people going to a rank 5 school instead of rank 15 school would drastically change the US. And trust me, look at the endowments of these schools. Outside of some public ones, it’s not a money issue. Harvard could easily 3x their enrollment with their endowment money
- Kephael 8y ago
  I was not referring to rank 15 -> 5, I meant that outcomes of students attending a rank 2500 school is typically not particularly good. It is literally impossible to enroll in certain majors at many quality schools despite being academically qualified for the major.
  - alkibiades 8y ago
    give them more money and they’ll hire a thousand more diversity administrators and not a single spot will open up in those impacted programs.
jdhn 8y ago
>move to a German educational model Isn't the German model based on assigning people to tracks with very little opportunity to jump out of your track and into another one? Personally, I would hate to be assigned a track that I couldn't move out of if I really wanted to.

jryan49 8y ago

I would be for such a thing if the money goes directly to people. The government doesn't spend any of it.

cartercole 8y ago

go home everyone thinks they can spend other peoples money better than can (except libertarians)

hedora 8y ago

Fun fact: The marginal rate if you cash out stock and build a house in the SF bay area is 51%. With tarrifs and sales tax, the marginal rate on raw materials averages closer to 67%. People wonder why there is a housing shortage. I’d back a higher marginal rate if the brackets were somehow computed over a multi-year sliding income window. One possibility would be to compute marginal rates on windfalls based on how many years it took to earn the windfall payment. In the current system, startup employees defer income for years, then get taxed at astronomical levels when N years of income lands all at once. [edit: Also, most of the tax shelters for the ultra wealthy take multiple years of sustained high income to establish, so simply juicing the max marginal rate is mostly hitting new money, as opposed to passive investors.] That clearly disincentives innovation.