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> Instead of trying to figure out those factors and mitigate them so everyone has an equal chance, why don't we just say fuck it, and tax the winners more heavi

by xyzzyz 7y ago

> Instead of trying to figure out those factors and mitigate them so everyone has an equal chance, why don't we just say fuck it, and tax the winners more heavily? Because it reduces the incentive to try to be a winner. The government might get a bigger piece of the pie, but the whole pie will be smaller. More importantly, since we live in regime of economic growth, this kind of policy can have extremely significant impact down the line: over 30 years, the difference between 2% and 3% economic growth is really, really large. Thus, increasing taxes today might result in money to redistribute today, but less money to redistribute 30 years from now. Most governments fortunately understand it, and so in 1980s and 90s significantly reduced income tax rates in top brackets, and are in no mood for raising them. The tax rates for top earners in Sweden and Norway are about the same as they are in the US. The biggest difference between them and the US in terms of taxation is that Sweden, Norway, and other European welfare states typically tax the middle class much, much more than the US does. The welfare state in Germany, France, Norway or Sweden is not funded primarily by the "winners", it is funded by high taxes on people with incomes rather close to the median.

cortesoft 7y ago
I see people make the argument that it will reduce 'incentives to do well' all the time... but why is that so accepted? The net gain for 'winning' is always going to be positive, so it will always be better to win than to not... most people who work really hard to 'win' have that drive in them to succeed regardless of the actual amount of money they make. Really, after enough millions, the extra money isn't really changing their life... yet many still are driven to keep 'winning'... it clearly isn't about having the money to buy things at that point, it is about an internal drive. That won't change if we tax at a higher rate. As for it hurting the economy, what evidence do you have of that? If we use the extra tax dollars to provide UBI, this will cause economic growth as there are more consumers with money to spend. While inflation would be a worry, our modern economy has shown that we have a lot of latent productive capacity (and a lot of goods that don't require more resources to produce, like digital goods) that mitigate the inflation risk.
- xyzzyz 7y ago
  > I see people make the argument that it will reduce 'incentives to do well' all the time... but why is that so accepted? Maybe insights from microeconomics 101 about what happens with supply curve when you drive a tax wedge into it, along with hundreds of papers published estimating the elasticity of labor supply have something to do with it. Yes, labor is elastic. See for example this review from Congressional Budget Office, i.e. people who actually care a lot about what taxes are: https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/workingpaper/10-25-2012-recentresearchonlaborsupplyelasticities.pdf https://www.cbo.gov/sites/default/files/112th-congress-2011-... > The net gain for 'winning' is always going to be positive, so it will always be better to win than to not... Yes, but is it better than taking some time off to do some yacht sailing? If government takes most of your winnings, why not reduce your hours slightly and use it for more leisure instead? > Really, after enough millions, the extra money isn't really changing their life... yet many still are driven to keep 'winning'... it clearly isn't about having the money to buy things at that point, it is about an internal drive. That won't change if we tax at a higher rate. For some, it won't, but for others, it will. Lots of people in fact do give up after enough millions. You cannot only focus on things that are seen, like Elon Musk's drive, but you also have to think about things that are unseen, like that apartment building developer worth a few millions whose name nobody knows outside his local industry, who'll simply decide to retire early instead of putting effort into organizing construction of another apartment complex. > As for it hurting the economy, what evidence do you have of that? If you increase taxes, then, since labor supply is not perfectly inelastic, people will work less, so less work will be done. This is some basic economics. The discussion on this question in the field is not about whether taxes hurt the economy, but rather how much they do. Some people think that they don't hurt much, others think that they hurt a lot, but that they do is really a consensus view, and in fact common sense. > If we use the extra tax dollars to provide UBI, this will cause economic growth as there are more consumers with money to spend. No, this is just the broken window fallacy. At best, there's exactly the same amount of money to spend, you're simply moving the money around between people. If you tax some people to provide UBI for others, the same money is spent either way, it's just different people who spend it. In reality, since taxes have distortionary effects, there will be less money to spend overall: since redistribution is typically from more to less wealthy, and since less wealthy typically spend more on consumption than on investment than more wealthy people, reduced investment will in fact reduce the growth.

by xyzzyz 7y ago

cortesoft 7y ago

I see people make the argument that it will reduce 'incentives to do well' all the time... but why is that so accepted? The net gain for 'winning' is always going to be positive, so it will always be better to win than to not... most people who work really hard to 'win' have that drive in them to succeed regardless of the actual amount of money they make. Really, after enough millions, the extra money isn't really changing their life... yet many still are driven to keep 'winning'... it clearly isn't about having the money to buy things at that point, it is about an internal drive. That won't change if we tax at a higher rate. As for it hurting the economy, what evidence do you have of that? If we use the extra tax dollars to provide UBI, this will cause economic growth as there are more consumers with money to spend. While inflation would be a worry, our modern economy has shown that we have a lot of latent productive capacity (and a lot of goods that don't require more resources to produce, like digital goods) that mitigate the inflation risk.

xyzzyz 7y ago
> I see people make the argument that it will reduce 'incentives to do well' all the time... but why is that so accepted? Maybe insights from microeconomics 101 about what happens with supply curve when you drive a tax wedge into it, along with hundreds of papers published estimating the elasticity of labor supply have something to do with it. Yes, labor is elastic. See for example this review from Congressional Budget Office, i.e. people who actually care a lot about what taxes are: https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/workingpaper/10-25-2012-recentresearchonlaborsupplyelasticities.pdf https://www.cbo.gov/sites/default/files/112th-congress-2011-... > The net gain for 'winning' is always going to be positive, so it will always be better to win than to not... Yes, but is it better than taking some time off to do some yacht sailing? If government takes most of your winnings, why not reduce your hours slightly and use it for more leisure instead? > Really, after enough millions, the extra money isn't really changing their life... yet many still are driven to keep 'winning'... it clearly isn't about having the money to buy things at that point, it is about an internal drive. That won't change if we tax at a higher rate. For some, it won't, but for others, it will. Lots of people in fact do give up after enough millions. You cannot only focus on things that are seen, like Elon Musk's drive, but you also have to think about things that are unseen, like that apartment building developer worth a few millions whose name nobody knows outside his local industry, who'll simply decide to retire early instead of putting effort into organizing construction of another apartment complex. > As for it hurting the economy, what evidence do you have of that? If you increase taxes, then, since labor supply is not perfectly inelastic, people will work less, so less work will be done. This is some basic economics. The discussion on this question in the field is not about whether taxes hurt the economy, but rather how much they do. Some people think that they don't hurt much, others think that they hurt a lot, but that they do is really a consensus view, and in fact common sense. > If we use the extra tax dollars to provide UBI, this will cause economic growth as there are more consumers with money to spend. No, this is just the broken window fallacy. At best, there's exactly the same amount of money to spend, you're simply moving the money around between people. If you tax some people to provide UBI for others, the same money is spent either way, it's just different people who spend it. In reality, since taxes have distortionary effects, there will be less money to spend overall: since redistribution is typically from more to less wealthy, and since less wealthy typically spend more on consumption than on investment than more wealthy people, reduced investment will in fact reduce the growth.