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> But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capi

by bhupy 6y ago

> But hugely unequal distribution of wealth also results in slower economic growth and overall less economic activity than if there is more equal access to capital and resources But wealth != capital. Wealth only becomes capital when it is realized/liquidated, at which point it is taxed. Before that happens, one person's wealth doesn't preclude someone else from investing or being productive because unlike land, wealth is not zero-sum.

jmcgough 6y ago
Sure, wealth isn't zero-sum, but when it's built on top of people making $7.25 an hour with no benefits (or less than that as a contractor), it may as well be. And yes, there are other options for solving problems like that beyond just a wealth tax, but maybe a wealth tax is part of the solution.
- bhupy 6y ago
  > but when it's built on top of people making $7.25 an hour with no benefits, it may as well be. But...it's not? The only person who has concentrated an unimaginable amount of wealth for which this might be true is Jeff Bezos's Amazon, except Amazon workers all earn a $15 minimum wage, 401k matching, and are part of the same group health insurance plan as the engineers and product managers. They happen to enjoy some of the best health insurance available to an entry level job that requires no college education. Outside of Bezos, the vast majority of the wealthy pay their workers handsomely (Bloomberg, Bill Gates, Tim Cook, Page/Brin/Pichai). And even if this was somehow a pervasive truth, the solution to that is a basic income, not a wealth tax. A wealth tax wouldn't even come remotely close to funding a basic income. If you were to seize 100% of all wealth of the top Forbes 500, you would get enough money to run the current Federal government for 8 months. Not 8 months per year, 8 months ONE TIME.
- logicchains 6y ago
  Jobs don't just grow out of thin air. That $7.25 job is self-evidently better for the worker than whatever other opportunities they had available, otherwise they wouldn't be doing it. Taking away that opportunity won't make their life any better, just means they end up on a worse job.
  - epistasis 6y ago
    Well when we have lots of labor, and seemingly not enough jobs for people, even when they could be doing productive things that build their own wealth and others' wealth (like building homes), then that $7.25 wage being the "best" option is a failure of the system, because too few people I society have been empowered with the option of starting their own businesses, or having the access to the tools that would let them create wealth. Too much inequality, not enough people with money to spend, and not enough capital movement to allow people to create new jobs. Capitalism is a fantastic means for directing economic forces as long as everybody has enough capital to do the voting, as it were. If only a few people hold all the capital, then only a few people make decisions and will often engage in capital strikes rather than risk the chance that their position may be threatened.
    - leafmeal 6y ago
      I agree that people lack opportunities and that's a failure of the system, but I think the problem isn't limited capital. I think the problem is the monopoly on land ownership. If there was land freely available, people would happily use it to generate wages, wealth, etc. Obviously land is a limited resource and we can't always just have more "freely available", but a land value tax could remove the monopoly and create new opportunity for development that's otherwise hindered. I just read Progress and Poverty by Henry George and he makes this point very clearly. I highly recommend giving this book a read if you haven't yet.
  - stainforth 6y ago
    > otherwise they wouldn't be doing it This feels like a fallacy
    - epistasis 6y ago
      Well one could always starve more quickly, or stop paying rent. "There are always options," as they say.
    - stjohnswarts 6y ago
      It is a fallacy and ignores the benefit to the economy that having a living wage level of pay for all citizenry vs the artificial corporate welfare support of having government entitlements (food stamps, medicaid, etc) making up the difference so that corporations can pay less. Lassez faire capitalism seems to be a common fallacy promulgated on HN a lot.
epistasis 6y ago
And because that liquidation or transformation is a taxable event, and holding the wealth is not, people are far more likely to hold onto wealth rather than try to transform it. Totally agreed that wealth is not zero-sum, and I thank you for bringing it up, because zero-sum-thinking is all too common, and the reason for so much misery when it comes to thinking about these things. (But even as a non-zero-sum, availability of capital is highly influenced by the degree of idleness of wealth hoards.)
- bhupy 6y ago
  > And because that liquidation or transformation is a taxable event, and holding the wealth is not, people are far more likely to hold onto wealth rather than try to transform it. But if wealth is never liquidated, then how is it anything more than just a life high score? It's inconsequential to the outside world.
  - epistasis 6y ago
    If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. But I do agree that since wealth is not zero sum, it is completely consequential. Where it really matters is when the wealth distribution becomes more unequal, resulting in less ability to initiate new economic ventures. Extreme wealth inequality results in only a very few people controlling the economy, and in those cases wealth hoarding becomes an end in itself to concentrate economic powers away from others, and an end in itself.
    - bhupy 6y ago
      > If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. That makes no sense. Just because the fair market value of Elon Musk's holdings in SpaceX and Tesla is some collectively decided amount, doesn't mean that Elon Musk actually possesses that money and can do anything meaningful with it. If he wants to do anything meaningful at all with that theoretical value, he will have to liquidate some of it and turn it into non-theoretical money, and that is taxed already. If he just lets it wither away, then it's of no use to anyone else. > Where it really matters is when the wealth distribution becomes more unequal, resulting in less ability to initiate new economic ventures But this just hasn't been true at all. Just because Bezos is a 100 billionaire on paper, doesn't mean that I will have a harder time raising venture capital for my startup. Wealth isn't zero-sum. And the paper value of one's wealth isn't backed by liquid money, I.e. Bezos's 100+ billion in wealth doesn't actually lock 100 billion dollars in cash from other investments. If you're making the argument that it's difficult to initiate a new economic venture in the same space as Amazon, that's just because Amazon is a strong company — there is nothing wrong with that.

by bhupy 6y ago

jmcgough 6y ago

Sure, wealth isn't zero-sum, but when it's built on top of people making $7.25 an hour with no benefits (or less than that as a contractor), it may as well be. And yes, there are other options for solving problems like that beyond just a wealth tax, but maybe a wealth tax is part of the solution.

bhupy 6y ago
> but when it's built on top of people making $7.25 an hour with no benefits, it may as well be. But...it's not? The only person who has concentrated an unimaginable amount of wealth for which this might be true is Jeff Bezos's Amazon, except Amazon workers all earn a $15 minimum wage, 401k matching, and are part of the same group health insurance plan as the engineers and product managers. They happen to enjoy some of the best health insurance available to an entry level job that requires no college education. Outside of Bezos, the vast majority of the wealthy pay their workers handsomely (Bloomberg, Bill Gates, Tim Cook, Page/Brin/Pichai). And even if this was somehow a pervasive truth, the solution to that is a basic income, not a wealth tax. A wealth tax wouldn't even come remotely close to funding a basic income. If you were to seize 100% of all wealth of the top Forbes 500, you would get enough money to run the current Federal government for 8 months. Not 8 months per year, 8 months ONE TIME.
logicchains 6y ago
Jobs don't just grow out of thin air. That $7.25 job is self-evidently better for the worker than whatever other opportunities they had available, otherwise they wouldn't be doing it. Taking away that opportunity won't make their life any better, just means they end up on a worse job.
- epistasis 6y ago
  Well when we have lots of labor, and seemingly not enough jobs for people, even when they could be doing productive things that build their own wealth and others' wealth (like building homes), then that $7.25 wage being the "best" option is a failure of the system, because too few people I society have been empowered with the option of starting their own businesses, or having the access to the tools that would let them create wealth. Too much inequality, not enough people with money to spend, and not enough capital movement to allow people to create new jobs. Capitalism is a fantastic means for directing economic forces as long as everybody has enough capital to do the voting, as it were. If only a few people hold all the capital, then only a few people make decisions and will often engage in capital strikes rather than risk the chance that their position may be threatened.
  - leafmeal 6y ago
    I agree that people lack opportunities and that's a failure of the system, but I think the problem isn't limited capital. I think the problem is the monopoly on land ownership. If there was land freely available, people would happily use it to generate wages, wealth, etc. Obviously land is a limited resource and we can't always just have more "freely available", but a land value tax could remove the monopoly and create new opportunity for development that's otherwise hindered. I just read Progress and Poverty by Henry George and he makes this point very clearly. I highly recommend giving this book a read if you haven't yet.
- stainforth 6y ago
  > otherwise they wouldn't be doing it This feels like a fallacy
  - epistasis 6y ago
    Well one could always starve more quickly, or stop paying rent. "There are always options," as they say.
  - stjohnswarts 6y ago
    It is a fallacy and ignores the benefit to the economy that having a living wage level of pay for all citizenry vs the artificial corporate welfare support of having government entitlements (food stamps, medicaid, etc) making up the difference so that corporations can pay less. Lassez faire capitalism seems to be a common fallacy promulgated on HN a lot.

epistasis 6y ago

And because that liquidation or transformation is a taxable event, and holding the wealth is not, people are far more likely to hold onto wealth rather than try to transform it. Totally agreed that wealth is not zero-sum, and I thank you for bringing it up, because zero-sum-thinking is all too common, and the reason for so much misery when it comes to thinking about these things. (But even as a non-zero-sum, availability of capital is highly influenced by the degree of idleness of wealth hoards.)

bhupy 6y ago
> And because that liquidation or transformation is a taxable event, and holding the wealth is not, people are far more likely to hold onto wealth rather than try to transform it. But if wealth is never liquidated, then how is it anything more than just a life high score? It's inconsequential to the outside world.
- epistasis 6y ago
  If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. But I do agree that since wealth is not zero sum, it is completely consequential. Where it really matters is when the wealth distribution becomes more unequal, resulting in less ability to initiate new economic ventures. Extreme wealth inequality results in only a very few people controlling the economy, and in those cases wealth hoarding becomes an end in itself to concentrate economic powers away from others, and an end in itself.
  - bhupy 6y ago
    > If it were completely inconsequential to the outside world, then others would not value it, and it wouldn't be considered wealth. That makes no sense. Just because the fair market value of Elon Musk's holdings in SpaceX and Tesla is some collectively decided amount, doesn't mean that Elon Musk actually possesses that money and can do anything meaningful with it. If he wants to do anything meaningful at all with that theoretical value, he will have to liquidate some of it and turn it into non-theoretical money, and that is taxed already. If he just lets it wither away, then it's of no use to anyone else. > Where it really matters is when the wealth distribution becomes more unequal, resulting in less ability to initiate new economic ventures But this just hasn't been true at all. Just because Bezos is a 100 billionaire on paper, doesn't mean that I will have a harder time raising venture capital for my startup. Wealth isn't zero-sum. And the paper value of one's wealth isn't backed by liquid money, I.e. Bezos's 100+ billion in wealth doesn't actually lock 100 billion dollars in cash from other investments. If you're making the argument that it's difficult to initiate a new economic venture in the same space as Amazon, that's just because Amazon is a strong company — there is nothing wrong with that.