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This all presupposes that the government is an efficient user of capital, when its pretty clear its not. Heavy taxes on the rich, means that capital investments

This all presupposes that the government is an efficient user of capital, when its pretty clear its not. Heavy taxes on the rich, means that capital investments that a rich person might finance, become government programmes and bureaucracies. Theres obviously a sweet spot here - but rich folks are good at creating capital and governments are notorious for wasting it. Now in the US I probably don’t have to tell you where most of the money goes - hint military - so more rich folks money into the governments coffers - what industry do you think benefits the most from a policy like this?

danny_codes 4y ago
Most of our money does not go to the military. Defense spending is about 700b per year, while the budget is over 4t. The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.
- robertlagrant 4y ago
  > Poorer people get reduced tax, rich people get more. This already happens. Many people either don't pay tax, or pay less tax than they cost. > The government doesn't need to handle capitol allocation. Then who will spend the tax money?
  - spinchange 4y ago
    The working poor pay into FICA which is a greater percentage of their cash flow. They get it back upon annual tax reconciliation. The same entitlement programs nonetheless have lots of unfunded liabilities so the money has already been allocated even if it's not currently "there" -- 'The Rich' are beneficiaries of entitlement spending too.
    - robertlagrant 4y ago
      It's a simpler situation than that. Regardless of proportions of payment, we already have a percentage of the population whose public services are paid for by someone else, either directly through income or divided tax or indirectly through higher prices from corporation tax, or more indirectly through inflationary monetary policy. In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
      - llbeansandrice 4y ago
        Your criticism of "Tax the Rich" is basically tone policing? I don't understand your point.
      - danny_codes 4y ago
        Oh I'm not implying it's be revolutionary, just that we should.
- 988747 4y ago
  Poor people already pay next to nothing in taxes - the bottom 60% of society, making less than $50k only contributes 7% of total tax revenue from income taxes, while 0.3% of those making more than $1M per year contributes 27%. [1] I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people. [1] https://www.stlouisfed.org/on-the-economy/2017/january/federal-income-taxes-bracket https://www.stlouisfed.org/on-the-economy/2017/january/feder...
  - greedo 4y ago
    Your first sentence ignores what you say in the second. In the US, poor people pay a significant portion of their income in sales tax which is regressive.
    - 988747 4y ago
      Yes, I kind of missed that. On the other hand, sales tax in the US is very low compared to European VAT (0-7% vs 18-25% VAT), so it's much smaller issue.
      - black_13 4y ago
        [dead]
  - Beldin 4y ago
    I would suggest to think of this not in terms of contribution to the whole, but percentage of ($income - $housing - $food - $stdxpenses). With $stdxpenses covering standard living expenses including energy, water, basic insurance, basic commute. I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do. In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.
bmitc 4y ago
> This all presupposes that the government is an efficient user of capital, when its pretty clear its not. It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".
- orcanwe 4y ago
  You’re assuming an infinite perfectibility of human nature. The problem with government planning is that it’s removed from the best, local information and inherently has broken incentives. By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something. By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
  - pixelfarmer 4y ago
    Broken incentives? What about Boeing with their 737 MAX? That is a prime example of broken incentives costing human lives. What about stock trading causing famines? Our current way of doing "economy" is massively broken and affects everything.
    - deleted 4y ago
      [deleted]
    - 4y ago
spinchange 4y ago
The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster. The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.
- imgabe 4y ago
  It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment. In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
  - matthewdgreen 4y ago
    What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.
    - imgabe 4y ago
      > What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work. What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?
Beldin 4y ago
> but rich folks are good at creating capital and governments are notorious for wasting it. There is more than a little nuance here: - governments are notorious for being called out on supposed inefficiencies. Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson. - "rich folks are good..." I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways. I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.
- mrguyorama 4y ago
  I've never understood the argument. I've worked in several different private companies, and calling them "Efficient" is so off base as to be laughable. Remember, a private company will happily let an import engineer go instead of giving them a small raise.
  - Jensson 4y ago
    Go work for the government then? Or wait, the government is way stingier with raises than private companies are! Engineers fight over jobs at private companies and shun government jobs because governments don't reward good work.
Tiktaalik 4y ago
Rich folks are only so seemingly "efficient" and good at creating capital because they decline to do what the government does. The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos. Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada. These two different groups aren't working on the same problems.

danny_codes 4y ago

Most of our money does not go to the military. Defense spending is about 700b per year, while the budget is over 4t. The government doesn't need to handle capitol allocation. We can simply shift the tax burden upwards. Poorer people get reduced tax, rich people get more.

robertlagrant 4y ago
> Poorer people get reduced tax, rich people get more. This already happens. Many people either don't pay tax, or pay less tax than they cost. > The government doesn't need to handle capitol allocation. Then who will spend the tax money?
- spinchange 4y ago
  The working poor pay into FICA which is a greater percentage of their cash flow. They get it back upon annual tax reconciliation. The same entitlement programs nonetheless have lots of unfunded liabilities so the money has already been allocated even if it's not currently "there" -- 'The Rich' are beneficiaries of entitlement spending too.
  - robertlagrant 4y ago
    It's a simpler situation than that. Regardless of proportions of payment, we already have a percentage of the population whose public services are paid for by someone else, either directly through income or divided tax or indirectly through higher prices from corporation tax, or more indirectly through inflationary monetary policy. In other words: we don't need to invent taxing people with more money more. We have that. Millions of people are partly or fully paid for by others. We might want to adjust it, but we don't need to pretend we're doing something revolutionary in doing so.
    - llbeansandrice 4y ago
      Your criticism of "Tax the Rich" is basically tone policing? I don't understand your point.
    - danny_codes 4y ago
      Oh I'm not implying it's be revolutionary, just that we should.
988747 4y ago
Poor people already pay next to nothing in taxes - the bottom 60% of society, making less than $50k only contributes 7% of total tax revenue from income taxes, while 0.3% of those making more than $1M per year contributes 27%. [1] I think the US has pretty good revenue structure in that regard. In my country 62% of federal budget comes from sales taxes (e.g. 23% VAT), which disproportionately affects poor people. [1] https://www.stlouisfed.org/on-the-economy/2017/january/federal-income-taxes-bracket https://www.stlouisfed.org/on-the-economy/2017/january/feder...
- greedo 4y ago
  Your first sentence ignores what you say in the second. In the US, poor people pay a significant portion of their income in sales tax which is regressive.
  - 988747 4y ago
    Yes, I kind of missed that. On the other hand, sales tax in the US is very low compared to European VAT (0-7% vs 18-25% VAT), so it's much smaller issue.
    - black_13 4y ago
      [dead]
- Beldin 4y ago
  I would suggest to think of this not in terms of contribution to the whole, but percentage of ($income - $housing - $food - $stdxpenses). With $stdxpenses covering standard living expenses including energy, water, basic insurance, basic commute. I would be somewhat surprised (rather flabbergasted) if rich folks paid anywhere close to the percentage that poor people do. In other words: if you want to compare by measuring contribution, measure tax rate to what's left for that individual's personal use.

bmitc 4y ago

> This all presupposes that the government is an efficient user of capital, when its pretty clear its not. It's not a presupposition. That's a separate discussion and should also be improved. We shouldn't say, "oh, we're bad at redistribution, so let's not".

orcanwe 4y ago
You’re assuming an infinite perfectibility of human nature. The problem with government planning is that it’s removed from the best, local information and inherently has broken incentives. By the best, local information I mean that in the market, the people with the need for the good or service, and the people who bear the cost of providing it, are the people with the best information and also the ones making the decision to purchase and produce and at what price. The market automatically aggregates this information and produces a price level, which creates the incentive to produce and purchase the appropriate amount of something. By broken incentives I mean the entire body of work that is public choice theory. Don’t think about government agents as benevolent actors. They are on the whole not good or bad, just about as self-interested as anyone else. They don’t make decisions based on what produces the best outcomes for the public. They make decisions based on what advances their own immediate and long term interests as individuals and social groups. Democracy tries to align those but it doesn’t do a very good job since most decisions do not rise to public political issues, the public can only have a limited understanding of, and elections are too blunt an instrument for adjudicating, the propriety of thousands or millions of public sector decisions.
- pixelfarmer 4y ago
  Broken incentives? What about Boeing with their 737 MAX? That is a prime example of broken incentives costing human lives. What about stock trading causing famines? Our current way of doing "economy" is massively broken and affects everything.
  - deleted 4y ago
    [deleted]
  - 4y ago

spinchange 4y ago

The Yard sale model in this post demonstrates that rich people are not necessarily better at allocating capital even if/as they accumulate and compound it faster. The military is NOT where most spending goes - most spending goes to the entitlement programs: social security and Medicare.

imgabe 4y ago
It does not demonstrate that at all. It assumes everyone, rich and poor, is exactly equal at allocating capital because they all have a flat 50% chance to make money on every investment. In reality some poor people are savvy investors and become rich and some rich people are foolish investors and become poor.
- matthewdgreen 4y ago
  What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Presumably you could update this model to give some people “better investing skills” and others worse skills. (In practice you’d just bias the coin flip against the ‘worse’ investors.) I suspect that once inequality has crept into the game then even having “better investing skills” is outweighed by the advantage of being already-rich. But I haven’t run the simulation to see how much investing advantage gets wiped out by wealth inequality: seems like it would be a fun project to code up with my 15y/o.
  - imgabe 4y ago
    > What it demonstrates is that people with equal investing skills will see radically unequal outcomes, based entirely on their pre-existing wealth. Well, duh. Did anyone think otherwise? Obviously a great investor with $1,000,000 will make more money than a great investor with $100. That's not some nefarious plot of evil capitalists to keep down the poors, it's just the math of how percentages work. What system could possibly eliminate that advantage without destroying the incentive to invest at all? If you're managing a million dollars and you are unable to make any more money than you would investing $100, then why would you invest? What would people do with their money in that case? Hide it under a mattress?

Beldin 4y ago

> but rich folks are good at creating capital and governments are notorious for wasting it. There is more than a little nuance here: - governments are notorious for being called out on supposed inefficiencies. Too often, it turns out that there were very good reasons for those inefficiencies, but the criticasters forgot the lesson. - "rich folks are good..." I wouldn't know. Superrich folks are good at manipulating the system and extracting wealth from others, that I can believe. We see that happen often enough - the superrich lose money if they were to pick up a 100 dollar bill (they make more money in that time if they work), while their employees have to pee in water bottles or are exploited in other ways. I strongly doubt that the superrich are better than governments at creating capital for anyone else but themselves in an ethical, human-respecting manner.

mrguyorama 4y ago
I've never understood the argument. I've worked in several different private companies, and calling them "Efficient" is so off base as to be laughable. Remember, a private company will happily let an import engineer go instead of giving them a small raise.
- Jensson 4y ago
  Go work for the government then? Or wait, the government is way stingier with raises than private companies are! Engineers fight over jobs at private companies and shun government jobs because governments don't reward good work.

Tiktaalik 4y ago

Rich folks are only so seemingly "efficient" and good at creating capital because they decline to do what the government does. The ultra wealthy property developer only builds what is profitable, and so slices off to serve only the most profitable part of the market to serve, and accordingly only builds luxury condos. Meanwhile the government is obliged to serve everyone, the disabled, the poor, etc, and so with its housing whatever profits are gained by its market priced rents to the middle class are leveraged toward sustaining the unprofitable housing it is obliged to create, and the whole enterprise isn't profitable and needs outside subsidy to continue. We disparage this as "inefficient" government yada yada. These two different groups aren't working on the same problems.