11 ms·

Paying laborers more does not lead to the kind of inequality we see. "You can't have low inequality by definition if you decide to start paying one group a ton

by sidlls 6y ago

Paying laborers more does not lead to the kind of inequality we see. "You can't have low inequality by definition if you decide to start paying one group a ton of money." Very few of even FAANG-level salaries are high enough to put them in the same bucket as the people who wield power through their wealth. Paying the entire field of SWE laborers even 50% more salary is not going to appreciably change the inequality gap.

frombody 6y ago
Marginal tax rates are much higher in Europe at lower levels, so in order to pay someone 50% more, you would have to pay them 100% more for them to get a 50% pay increase to make up for the money taken by taxes (the mechanism that prevents wealth inequality)
- asdfasgasdgasdg 6y ago
  That's more or less true in the U.S. too, at the rates software engineers make, at least in NY and CA. In my locality a software engineer making $100k will face a 40% marginal tax rate.
  - strombofulous 6y ago
    40%?! Where do you live? The effective federal income tax at 100k is 22.75%. I don't think any state has a 17.25% effective income tax, certainly not if you only earn 100k.
    - arcticbull 6y ago
      If you're making 100K in California, your marginal tax rate is: - Federal: 24% - State: 9.3% - FICA: 7.65% (6.2% social security, 1.45% medicare) - SDI: 1% This gets you to 42%. Your employer matches the FICA payments too, so that's closer to 50% of your take-home pay. Once you make enough to pay off the regressive FICA taxes ($142K) you get bumped back down to "just" the mid-high 30% range briefly, until you hit $163K, then its back up to 40% again.
      - strombofulous 6y ago
        Wow, I had no idea
        ilikeerp 6y ago
        It's not insane - it's pretty common in most developed countries. The US is a major outlier.
        titanomachy 6y ago
        In many developed countries, 42% tax would cover healthcare, a pension you can actually live off of, and fully-paid education for all of your children. Californians get none of those things, and I don't really understand what it is that they get over (e.g.) Washingtonians for the extra ~30% in taxes.
        pm90 6y ago
        They get protection by the US military and promotion of Californian business interests throughout the world through Federal institutions. Not to mention: friction free access to a large labor pool and US domestic market etc. I get your point that the US doesn’t provide as much social services as other developed nations. Almost all these nations depend on US hegemony to not have to spend as much on their military. This is a choice that the US made. There are good arguments for scaling back military spending and increasing social spending without compromising US hegemony though, however those choices may not be politically expedient so here we are.
        newswasboring 6y ago
        I don't want to address the hegemony point beyond I disagree on the need or even effectiveness of US military. But I would want to point out the curious phrasing and of your first paragraph and what that says about USA way of thinking. All these points are business targeted while all european points are individual targeted.
  - overscore 6y ago
    That's fairly low by E.U. standards. The marginal rate in Ireland would be 52%.
- ChuckNorris89 6y ago
  >the mechanism that prevents wealth inequality False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe. For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets. So actually, in some European countries, while having low income inequality because of high income taxes, you end up with huge wealth inequality due to untaxed inheritances, assets and overvalued properties rolled over across multiple generations to the point where Germany's top 10% own two thirds of the country's wealth: https://www.iamexpat.de/expat-info/german-expat-news/germanys-richest-10-percent-owns-two-thirds-its-wealth https://www.iamexpat.de/expat-info/german-expat-news/germany... To level the playing field and reduce wealth inequality, a sound policy would be to tax income less and tax inheritances and assets more but fat chance of that ever happening as that would be a blow to the ruling class.
  - overscore 6y ago
    This comment makes the mistake of treating Europe like a country, which it is not. > For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets. In Ireland, apart from relatively small tax-free thresholds (€335,000 lifetime from parent to child, for example), gifts and inheritances are taxed at 33%. In the UK, above its (similar) threshold, the rate is 40%. The US Federal Estate tax rate is 40%, but with an enormous $11,580,000 estate threshold, which is orders of magnitude higher than Ireland or the UK. Even though Ireland and the UK have some of the highest inheritance taxes in the world, the EU effective average is still ~14% - double the global average of ~7% and on par with the US, where added State taxes vary the average between 12% and 19%. Source: https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-of-all-major-economies/ https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-...
    - ChuckNorris89 6y ago
      >This comment makes the mistake of treating Europe like a country, which it is not. Of course it's not, never said it was but cherry picking countries with larger inheritance tax is also a mistake as you can't choose where you pay your taxes as an EU resident. You pay them where your main residence is. So on the other side of the spectrum you have Austria which has high income tax (because socialism and income equality) but basically no inheritance taxes, and taxes on assets are levied on their original purchase price so you end up having countless residents who earn small incomes but are sitting on millions of euros of wealth due to exploding real estate values but only pay 5 Euros tax per year as that's levied against the purchase price from 60 years ago when their grandparents bought it for pennies. So you end up with huge wealth inequality where even people with good incomes pay high taxes and are priced out of the real estate market if they don't come from families of means.
cjblomqvist 6y ago
Are you sure about that? Sure, not the top elite, but there's still a significant gap between upper middle class and lower in for example Sweden, which I believe is one of the more equal countries. FAANG level salaries would significantly widen that gap.
- piva00 6y ago
  Agree with this take, being in the upper 10% of salaries in Sweden gave me perspective on how wide of a gap there is between myself, some friends working other office jobs (accountants, architects) and some in more blue collar work. I don't feel like I deserve a much higher salary than what I have for this society, I'll be honest and say that sometimes I feel ashamed of earning so much more than some friends given that my job isn't really that important for society.
  - sverhagen 6y ago
    Being from the Netherlands, I recognize this shame. High positions in the workforce are often shamed, talked about as "easy money", as if it's inherently corrupt, people don't acknowledge their risks and responsibilities. Whether that warrants those high salaries or not, I'm not commenting on that debate. Public functions or private organizations in which the government invests, must cap salaries at what the prime minister makes, which is "only" around 200k euros, a fraction of what american CEOs make. This includes public television talent; imagine your US network television nightly news anchors being capped at 200k. (I understand those are private, just making the comparison because they're the highest watched shows in either nation. Private television in the Netherlands is not subject to the cap, but also has not the highest ratings.) Now that I live in the USA, I've never heard anyone talk like that about a successful CEO. Envy yes, aspiration too, admiration yes.
    - Ntrails 6y ago
      British, for contrast. I attribute most of my success to luck. I was born with aptitudes, in a stable family, white male. I'm definitely not worth what I'm paid from a societal point of view. I find the idea of being multiple times the median wage for chilling in front of a computer solving puzzles bizarre. The idea of talking about money is slightly awkward anyway, and I guess I'd say embarrassed rather than ashamed? Different culture and motivation, but a datapoint for you :)
atomashpolskiy 6y ago
Given that in modern economy it's insurmountably more difficult to earn first million than the next ten, 50% increase in SWE salary would give a huge advantage and produce non-linear effects on inequality gap.
pas 6y ago
It does lead to gentrification, instant conflicts between newcomers and old residents, pushes up prices, etc. Plus having that more money means one can invest a bit, and a generation later dad can give a big gift to help seed the kid's startup.

by sidlls 6y ago

frombody 6y ago

Marginal tax rates are much higher in Europe at lower levels, so in order to pay someone 50% more, you would have to pay them 100% more for them to get a 50% pay increase to make up for the money taken by taxes (the mechanism that prevents wealth inequality)

asdfasgasdgasdg 6y ago
That's more or less true in the U.S. too, at the rates software engineers make, at least in NY and CA. In my locality a software engineer making $100k will face a 40% marginal tax rate.
- strombofulous 6y ago
  40%?! Where do you live? The effective federal income tax at 100k is 22.75%. I don't think any state has a 17.25% effective income tax, certainly not if you only earn 100k.
  - arcticbull 6y ago
    If you're making 100K in California, your marginal tax rate is: - Federal: 24% - State: 9.3% - FICA: 7.65% (6.2% social security, 1.45% medicare) - SDI: 1% This gets you to 42%. Your employer matches the FICA payments too, so that's closer to 50% of your take-home pay. Once you make enough to pay off the regressive FICA taxes ($142K) you get bumped back down to "just" the mid-high 30% range briefly, until you hit $163K, then its back up to 40% again.
    - strombofulous 6y ago
      Wow, I had no idea
      - ilikeerp 6y ago
        It's not insane - it's pretty common in most developed countries. The US is a major outlier.
        titanomachy 6y ago
        In many developed countries, 42% tax would cover healthcare, a pension you can actually live off of, and fully-paid education for all of your children. Californians get none of those things, and I don't really understand what it is that they get over (e.g.) Washingtonians for the extra ~30% in taxes.
        pm90 6y ago
        They get protection by the US military and promotion of Californian business interests throughout the world through Federal institutions. Not to mention: friction free access to a large labor pool and US domestic market etc. I get your point that the US doesn’t provide as much social services as other developed nations. Almost all these nations depend on US hegemony to not have to spend as much on their military. This is a choice that the US made. There are good arguments for scaling back military spending and increasing social spending without compromising US hegemony though, however those choices may not be politically expedient so here we are.
        newswasboring 6y ago
        I don't want to address the hegemony point beyond I disagree on the need or even effectiveness of US military. But I would want to point out the curious phrasing and of your first paragraph and what that says about USA way of thinking. All these points are business targeted while all european points are individual targeted.
- overscore 6y ago
  That's fairly low by E.U. standards. The marginal rate in Ireland would be 52%.
ChuckNorris89 6y ago
>the mechanism that prevents wealth inequality False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe. For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets. So actually, in some European countries, while having low income inequality because of high income taxes, you end up with huge wealth inequality due to untaxed inheritances, assets and overvalued properties rolled over across multiple generations to the point where Germany's top 10% own two thirds of the country's wealth: https://www.iamexpat.de/expat-info/german-expat-news/germanys-richest-10-percent-owns-two-thirds-its-wealth https://www.iamexpat.de/expat-info/german-expat-news/germany... To level the playing field and reduce wealth inequality, a sound policy would be to tax income less and tax inheritances and assets more but fat chance of that ever happening as that would be a blow to the ruling class.
- overscore 6y ago
  This comment makes the mistake of treating Europe like a country, which it is not. > For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets. In Ireland, apart from relatively small tax-free thresholds (€335,000 lifetime from parent to child, for example), gifts and inheritances are taxed at 33%. In the UK, above its (similar) threshold, the rate is 40%. The US Federal Estate tax rate is 40%, but with an enormous $11,580,000 estate threshold, which is orders of magnitude higher than Ireland or the UK. Even though Ireland and the UK have some of the highest inheritance taxes in the world, the EU effective average is still ~14% - double the global average of ~7% and on par with the US, where added State taxes vary the average between 12% and 19%. Source: https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-of-all-major-economies/ https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-...
  - ChuckNorris89 6y ago
    >This comment makes the mistake of treating Europe like a country, which it is not. Of course it's not, never said it was but cherry picking countries with larger inheritance tax is also a mistake as you can't choose where you pay your taxes as an EU resident. You pay them where your main residence is. So on the other side of the spectrum you have Austria which has high income tax (because socialism and income equality) but basically no inheritance taxes, and taxes on assets are levied on their original purchase price so you end up having countless residents who earn small incomes but are sitting on millions of euros of wealth due to exploding real estate values but only pay 5 Euros tax per year as that's levied against the purchase price from 60 years ago when their grandparents bought it for pennies. So you end up with huge wealth inequality where even people with good incomes pay high taxes and are priced out of the real estate market if they don't come from families of means.

cjblomqvist 6y ago

Are you sure about that? Sure, not the top elite, but there's still a significant gap between upper middle class and lower in for example Sweden, which I believe is one of the more equal countries. FAANG level salaries would significantly widen that gap.

piva00 6y ago
Agree with this take, being in the upper 10% of salaries in Sweden gave me perspective on how wide of a gap there is between myself, some friends working other office jobs (accountants, architects) and some in more blue collar work. I don't feel like I deserve a much higher salary than what I have for this society, I'll be honest and say that sometimes I feel ashamed of earning so much more than some friends given that my job isn't really that important for society.
- sverhagen 6y ago
  Being from the Netherlands, I recognize this shame. High positions in the workforce are often shamed, talked about as "easy money", as if it's inherently corrupt, people don't acknowledge their risks and responsibilities. Whether that warrants those high salaries or not, I'm not commenting on that debate. Public functions or private organizations in which the government invests, must cap salaries at what the prime minister makes, which is "only" around 200k euros, a fraction of what american CEOs make. This includes public television talent; imagine your US network television nightly news anchors being capped at 200k. (I understand those are private, just making the comparison because they're the highest watched shows in either nation. Private television in the Netherlands is not subject to the cap, but also has not the highest ratings.) Now that I live in the USA, I've never heard anyone talk like that about a successful CEO. Envy yes, aspiration too, admiration yes.
  - Ntrails 6y ago
    British, for contrast. I attribute most of my success to luck. I was born with aptitudes, in a stable family, white male. I'm definitely not worth what I'm paid from a societal point of view. I find the idea of being multiple times the median wage for chilling in front of a computer solving puzzles bizarre. The idea of talking about money is slightly awkward anyway, and I guess I'd say embarrassed rather than ashamed? Different culture and motivation, but a datapoint for you :)

atomashpolskiy 6y ago

Given that in modern economy it's insurmountably more difficult to earn first million than the next ten, 50% increase in SWE salary would give a huge advantage and produce non-linear effects on inequality gap.

pas 6y ago

It does lead to gentrification, instant conflicts between newcomers and old residents, pushes up prices, etc. Plus having that more money means one can invest a bit, and a generation later dad can give a big gift to help seed the kid's startup.