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pg's thoughts on inequality: http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html

vacri 15y ago
From that link, it's clear that pg likes inequality because otherwise it's 'taking money from the rich and giving it to the poor, which adversely affects VC' But the main article talks about 30 years where money has been taken from the poor and given to the rich - that is, everyone has not increased together, and the poorest have lost ground. This article doesn't really answer that.
leot 15y ago
Well put, as pg's essays usually are. But I think there are rather large gaps: 1) He glosses together reduction of income inequality with elimination of it. The zero inequality thing has been tried and failed. 2) one of his arguments is that better education of the poor will increase wealth inequality, because it will increase the number of customers and the number of possible entrepreneurs. While the premises are no doubt true, the conclusion isn't. There are other inequality-decreasing factors that might well have a stronger impact. At the very least, a better educated population might have the wherewithal to organize and vote for increased taxes on wealthy people. Less cynically, better educated people need less stuff to get by (e.g. their cars last longer), and they are savvier consumers. And empirically, if one excludes the U.S., the best educated countries tend to also have the lowest income inequality. 3) pg neglects the costs of U.S. monetary policy on risk taking. The past 20 years have seen low inflation. When inflation is low, there is less need for money to be invested in order to preserve wealth. With higher rates of inflation, investors have no choice but to try and extract greater value out of the wealth they have if they want to keep up. 4) A related point: pg's argument is that high taxes reduce the large rewards founders get, causing them to take smaller risks. Yet there is nothing intrinsic about taxation that necessitates the burden fall primarily on the recently wealthy. PG's argument doesn't easily apply to "old money" -- would the decrease in upside of a wealth tax outweigh the incentives to invest imposed by a wealth tax? From a tech progress/startup perspective, wouldn't the elimination of capital gains in favor of a tax on wealth cause exactly the right kinds of incentives for starting companies?
- Roboprog 15y ago
  Replacing the income tax with an incremental property/savings tax probably would go a long way towards motivating people with wealth to use it or lose it. That idea is dead on arrival in today's heavily lobbied climate, I'm afraid.
  - ericd 15y ago
    It's not just DOA due to lobbying - a great many people just don't agree that rich people should be forced to use or lose their wealth. Why should the govt. have the power to impoverish someone with a lot of money just because they're not generating more with it? That seems to me to be a fairly substantial abuse of their rights.
    - leot 15y ago
      Who said anything about impoverishing anyone? What does "impoverish" mean, exactly, to you? In France, the wealth tax is 0% under €800k, increasing to a maximum of 1.8% (once the person gets to ~€17 million). How could this lead to impoverishment when even relatively conservative asset management averages returns of >5%? Even in this case the party's wealth is still increasing (especially since the proposal is to offset the wealth tax by eliminating all capital gains taxes, which are already extremely difficult to calculate). And it's hardly an abuse: property taxes (a kind of wealth tax) are already levied, and while many complain, few claim it is government overreach. Government policy that favors a small and already powerful minority would seem to be a much greater abuse. The bigger question is: why do most governments tax people for creating value, instead of taxing people for failing to?

vacri 15y ago

From that link, it's clear that pg likes inequality because otherwise it's 'taking money from the rich and giving it to the poor, which adversely affects VC' But the main article talks about 30 years where money has been taken from the poor and given to the rich - that is, everyone has not increased together, and the poorest have lost ground. This article doesn't really answer that.

leot 15y ago

Well put, as pg's essays usually are. But I think there are rather large gaps: 1) He glosses together reduction of income inequality with elimination of it. The zero inequality thing has been tried and failed. 2) one of his arguments is that better education of the poor will increase wealth inequality, because it will increase the number of customers and the number of possible entrepreneurs. While the premises are no doubt true, the conclusion isn't. There are other inequality-decreasing factors that might well have a stronger impact. At the very least, a better educated population might have the wherewithal to organize and vote for increased taxes on wealthy people. Less cynically, better educated people need less stuff to get by (e.g. their cars last longer), and they are savvier consumers. And empirically, if one excludes the U.S., the best educated countries tend to also have the lowest income inequality. 3) pg neglects the costs of U.S. monetary policy on risk taking. The past 20 years have seen low inflation. When inflation is low, there is less need for money to be invested in order to preserve wealth. With higher rates of inflation, investors have no choice but to try and extract greater value out of the wealth they have if they want to keep up. 4) A related point: pg's argument is that high taxes reduce the large rewards founders get, causing them to take smaller risks. Yet there is nothing intrinsic about taxation that necessitates the burden fall primarily on the recently wealthy. PG's argument doesn't easily apply to "old money" -- would the decrease in upside of a wealth tax outweigh the incentives to invest imposed by a wealth tax? From a tech progress/startup perspective, wouldn't the elimination of capital gains in favor of a tax on wealth cause exactly the right kinds of incentives for starting companies?

Roboprog 15y ago
Replacing the income tax with an incremental property/savings tax probably would go a long way towards motivating people with wealth to use it or lose it. That idea is dead on arrival in today's heavily lobbied climate, I'm afraid.
- ericd 15y ago
  It's not just DOA due to lobbying - a great many people just don't agree that rich people should be forced to use or lose their wealth. Why should the govt. have the power to impoverish someone with a lot of money just because they're not generating more with it? That seems to me to be a fairly substantial abuse of their rights.
  - leot 15y ago
    Who said anything about impoverishing anyone? What does "impoverish" mean, exactly, to you? In France, the wealth tax is 0% under €800k, increasing to a maximum of 1.8% (once the person gets to ~€17 million). How could this lead to impoverishment when even relatively conservative asset management averages returns of >5%? Even in this case the party's wealth is still increasing (especially since the proposal is to offset the wealth tax by eliminating all capital gains taxes, which are already extremely difficult to calculate). And it's hardly an abuse: property taxes (a kind of wealth tax) are already levied, and while many complain, few claim it is government overreach. Government policy that favors a small and already powerful minority would seem to be a much greater abuse. The bigger question is: why do most governments tax people for creating value, instead of taxing people for failing to?