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There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people

There are two core insights here that are actually pretty obvious: 1. 20% of 1200 is more than 20% of 800. Duh! But the practical insight is simply that people with more wealth can afford bigger bets and expect bigger payouts. 2. Many systems are sensitive to initial conditions. In this model, the first coin flip matter vastly more than all others and determines almost the entire outcome. As others have pointed out this is really not a good description of the economy as a whole due to its zero-sum assumption. However I think it’s a relatively useful analogy for the stock market and how other passive investment markets work. Passive investment is a larger percentage of the economy than ever before and is increasingly how the “rich get richer.” A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. Another solution is to disrupt passive investment markets. The one that comes to mind is rental housing. If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income.

snapplebobapple 4y ago
Something to keep in mind is that Capital gains are not as privileged as they appear in most places because people making that claim are usually not comparing earning a dollar as a person vs earning a dollar in a corp and flowing it through to the individual, they are comparing earning a dollar as a person to earning a dividend or selling a business. There is still a net positive if you hold in the corp for a long time and avoid the personal dividend tax for years and there are some capital gains exemptions for selling corps but they are smaller than most claims on the subject espouse. If you want to harmonize you have to be cognizant of this and not switch to overtaxing earning through corps
xg15 4y ago
> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.
- sangnoir 4y ago
  I remain convinced that unbridled capitalism is incompatible with democracy in the long term, particularly when buying political influence is legitimized.
- rayiner 4y ago
  That, and economists broadly agree that taxing businesses and investment is a bad idea, and that the most efficient thing is a consumption tax: https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-.... Note that this article is from NPR of all things.
  - xg15 4y ago
    Most efficient in archieving what exactly? They only gave actual objectives for 3 of the 6 proposals - and those objectives where "fairer markets" and "create more jobs". Reducing inequality was not mentioned anywhere. Indeed they acknowledge it will hurt lower-income households but handwave that away with some unspecified measures to "minimize" harm to those households. > Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer. ... > Instead, impose a consumption tax, designed to be progressive to protect lower-income households. ... > [carbon tax] can be structured to make sure it doesn't disproportionately harm lower-income Americans. Oh, and of course: > Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people. Because no wealthy person ever thought of ways to restructure their assets so they are poor on paper...
    - pas 4y ago
      > poor on paper How does that have anything to do with corporate income tax? CIT is paid by the legal entity, usually on the profit. After that the board decides what to do with it. Pay dividends or not, etc. And capital gains taxes are due on that. (That is it's basically a specialized personal income tax.) Rich people appearing poor on paper only works if the tax system allows deducting luxury expenses. (Like mortgage payments on second, third and so on properties. Which the US tax system usually does.)
cloutchaser 4y ago
Another solution is for the fed to stop pumping the stock market for the last 14 years like crazy and offering free money to the finance sector. Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere. But it’s not because of “rich people”. It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.
- ThunderSizzle 4y ago
  The other part is the stock market basically became a government-enforced ponzi scheme through 401ks, 403ba, HSAs, IRAs and other tax advantaged accounts. Of course stock prices will go up as long as people are forced to use arbitrary stock funds for retirement to avoid crippling taxes.
dragonwriter 4y ago
> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0] The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes. [0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.
dennis_jeeves1 4y ago
>A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. An even more simpler solution would be to take away the all wealth of rich people and divide it among all people. The calculations would be a lot easier. Taxes are complicated.
- perfecthjrjth 4y ago
  Of course, when you become a dictator, you can do that. When will that happen?
  - dennis_jeeves1 4y ago
    >When will that happen? April 17, 2028.
- theamk 4y ago
  Someone tried this, it was called "USSR" (a.k.a. Soviet Union)! They started by nationalizing all businesses, and had all sort of interesting laws, like jail time for people without "real" jobs (to prevent people living off passive income). Or jail time for people who were trying to get rich by selling stuff for too high of a price. Look it up, pretty interesting story. They did have to build a strong border protection force to prevent people from trying to escape the country, but the country still lasted 69 years.
  - wlecometo 4y ago
    while i agree that "taking away the all wealth of rich people and divide it among all people" is simply unrealistic, wrong and unpractical, i do believe we could ask the wealthier more "effort" than the actual one, without having to recreate a "ussr 2.0" or worst go again for that awful original "experience".
- astrange 4y ago
  It wouldn’t exist anymore then. Bezos is wealthy because Amazon investors want to give him money; they don’t want to give you money, so if you had the Amazon shares they simply wouldn’t be worth anything.
gnull 4y ago
> If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income. You're overthinking it. Sweden made renting out apartments unattractive without all this sophistication, they just regulate the prices and keep them low.
- didgeoridoo 4y ago
  …and has consequently created a housing shortage so severe that their decade-plus waiting list was at one time being considered for the Guinness Book of World Records[0]. Price controls leading to shortages and rationing is basically the microeconomics version of the First Law of Thermodynamics. It has had the same result literally everywhere it has been tried. The solution lies in the supply. Always. If you want more people to have more of something at an affordable price, you have to make more of that thing. [0]: https://www.bbc.com/worklife/article/20160517-this-is-one-city-where-youll-never-find-a-home https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
  - gnull 4y ago
    Totally agree. My previous comment was sarcastic, of course.
- astrange 4y ago
  Don’t Swedes just rent them out on the black market instead? They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
  - cinntaile 4y ago
    > They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy. Sounds like you're just ill-informed? There are shared washing machine rooms in a lot of apartment complexes, although it is getting more rare in newer apartment complexes. You can usually book a slot and then you do your laundry. There is absolutely no shortage of washing machines though.
Oxidation 4y ago
> wealth can afford bigger bets and expect bigger payouts Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.
deleted 4y ago
[deleted]

snapplebobapple 4y ago

Something to keep in mind is that Capital gains are not as privileged as they appear in most places because people making that claim are usually not comparing earning a dollar as a person vs earning a dollar in a corp and flowing it through to the individual, they are comparing earning a dollar as a person to earning a dividend or selling a business. There is still a net positive if you hold in the corp for a long time and avoid the personal dividend tax for years and there are some capital gains exemptions for selling corps but they are smaller than most claims on the subject espouse. If you want to harmonize you have to be cognizant of this and not switch to overtaxing earning through corps

xg15 4y ago

> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. A reason why it hasn't gained traction though is that wealth doesn't just give you buying power but also political influence. So especially those who already have excessive wealth would be in a position to block such a measure.

sangnoir 4y ago
I remain convinced that unbridled capitalism is incompatible with democracy in the long term, particularly when buying political influence is legitimized.
rayiner 4y ago
That, and economists broadly agree that taxing businesses and investment is a bad idea, and that the most efficient thing is a consumption tax: https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-.... Note that this article is from NPR of all things.
- xg15 4y ago
  Most efficient in archieving what exactly? They only gave actual objectives for 3 of the 6 proposals - and those objectives where "fairer markets" and "create more jobs". Reducing inequality was not mentioned anywhere. Indeed they acknowledge it will hurt lower-income households but handwave that away with some unspecified measures to "minimize" harm to those households. > Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer. ... > Instead, impose a consumption tax, designed to be progressive to protect lower-income households. ... > [carbon tax] can be structured to make sure it doesn't disproportionately harm lower-income Americans. Oh, and of course: > Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people. Because no wealthy person ever thought of ways to restructure their assets so they are poor on paper...
  - pas 4y ago
    > poor on paper How does that have anything to do with corporate income tax? CIT is paid by the legal entity, usually on the profit. After that the board decides what to do with it. Pay dividends or not, etc. And capital gains taxes are due on that. (That is it's basically a specialized personal income tax.) Rich people appearing poor on paper only works if the tax system allows deducting luxury expenses. (Like mortgage payments on second, third and so on properties. Which the US tax system usually does.)

cloutchaser 4y ago

Another solution is for the fed to stop pumping the stock market for the last 14 years like crazy and offering free money to the finance sector. Frankly blaming actual entrepreneurs and business owners for the gains in the stock market is such a misguided target it’s insane. The only reason Musk, bezos and others have gotten so insanely rich recently is because the fed had increased its balance sheet by about $8trn. That money went somewhere. But it’s not because of “rich people”. It’s because a bunch of bankers destroyed the financial system in 2008, got bailed out, and never got criminally charged. It’s absolutely insane and it’s fuelling this completely misplaced neo Marxism.

ThunderSizzle 4y ago
The other part is the stock market basically became a government-enforced ponzi scheme through 401ks, 403ba, HSAs, IRAs and other tax advantaged accounts. Of course stock prices will go up as long as people are forced to use arbitrary stock funds for retirement to avoid crippling taxes.

dragonwriter 4y ago

> A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. But of course this has been considered and hasn’t gained traction. There's one substantive and one political issue that are important; the substantive issues is that in an annual progressive income tax system, there are real fairness issues with taxing the outcome of multiyear processes as current-year income at full (whether nominal or, using inflation indexed basis value, real gains). [0] The political one is that the vrry rich havr predominantly capital gains, and progressive tax with reduced capital gains tax rates is how the capitalist class maintains “the rich pay higher income taxes” as a propaganda point while actually paying lower taxes. [0] there are fairly straightforward solutions for this, which make irregular income from sources already subject to normal income tax more fair, but they add a little more complication to the overall solution.

dennis_jeeves1 4y ago

>A very simple distribution solution therefore is to stop privileging capital gains and tax all income equally. An even more simpler solution would be to take away the all wealth of rich people and divide it among all people. The calculations would be a lot easier. Taxes are complicated.

perfecthjrjth 4y ago
Of course, when you become a dictator, you can do that. When will that happen?
- dennis_jeeves1 4y ago
  >When will that happen? April 17, 2028.
theamk 4y ago
Someone tried this, it was called "USSR" (a.k.a. Soviet Union)! They started by nationalizing all businesses, and had all sort of interesting laws, like jail time for people without "real" jobs (to prevent people living off passive income). Or jail time for people who were trying to get rich by selling stuff for too high of a price. Look it up, pretty interesting story. They did have to build a strong border protection force to prevent people from trying to escape the country, but the country still lasted 69 years.
- wlecometo 4y ago
  while i agree that "taking away the all wealth of rich people and divide it among all people" is simply unrealistic, wrong and unpractical, i do believe we could ask the wealthier more "effort" than the actual one, without having to recreate a "ussr 2.0" or worst go again for that awful original "experience".
astrange 4y ago
It wouldn’t exist anymore then. Bezos is wealthy because Amazon investors want to give him money; they don’t want to give you money, so if you had the Amazon shares they simply wouldn’t be worth anything.

gnull 4y ago

> If we made it much much easier to build housing then then rental housing market would be like the used car market: viable but not an easy place to sit back and make passive income. You're overthinking it. Sweden made renting out apartments unattractive without all this sophistication, they just regulate the prices and keep them low.

didgeoridoo 4y ago
…and has consequently created a housing shortage so severe that their decade-plus waiting list was at one time being considered for the Guinness Book of World Records[0]. Price controls leading to shortages and rationing is basically the microeconomics version of the First Law of Thermodynamics. It has had the same result literally everywhere it has been tried. The solution lies in the supply. Always. If you want more people to have more of something at an affordable price, you have to make more of that thing. [0]: https://www.bbc.com/worklife/article/20160517-this-is-one-city-where-youll-never-find-a-home https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
- gnull 4y ago
  Totally agree. My previous comment was sarcastic, of course.
astrange 4y ago
Don’t Swedes just rent them out on the black market instead? They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy.
- cinntaile 4y ago
  > They also can’t seem to get a sufficient supply of washing machines and instead have a laundry bureaucracy. Sounds like you're just ill-informed? There are shared washing machine rooms in a lot of apartment complexes, although it is getting more rare in newer apartment complexes. You can usually book a slot and then you do your laundry. There is absolutely no shortage of washing machines though.

Oxidation 4y ago

> wealth can afford bigger bets and expect bigger payouts Indeed. It's also quite nonlinear. Being able to afford those gambles whole also reserving a cushion that protects your house and apply to eat is very expensive. Not many people can make signify passive income without leveraging anything. But once you can, it becomes a compounding upward curve. Most people die before they get to the second half of the chess board.

deleted 4y ago

[deleted]