6 ms·

$1 is worth much less to the rich than it is to the poor. So if we redistribute it to the poor, the whole of society will get better utility of that dollar. (Ed

$1 is worth much less to the rich than it is to the poor. So if we redistribute it to the poor, the whole of society will get better utility of that dollar. (Edit: I assumed that the $1 is consumed rather than invested. As pointed out below, if the rich invests that $1 instead, it could be more useful to society.) A counter-argument is that too high a marginal tax rate will greatly reduce an important incentive to work and therefore makes everyone worse off, especially from the lack of new inventions (see, e.g., http://en.wikipedia.org/wiki/Atlas_Shrugged http://en.wikipedia.org/wiki/Atlas_Shrugged). A question very relevant to us is "Will it?". If you face, say, 70% marginal tax rate, will you still work as hard or be as ambitious as you are?

mrkurt 18y ago
Or, will you still work as hard, but not necessarily at making money... At super high tax rates I'd be doing less lucrative, but more fun work. If I ended up doing charity work or something, society might be better off (though I'd have less money to spend doing it). If I worked at a bar, society probably wouldn't be better off.
- CWuestefeld 18y ago
  Economists like Friedrich Hayek have shown that the amount of money you can make from any endeavor is a direct indication of the value that society as a whole derives from that endeavor. Thus, if your work doesn't get you rich, it's because society doesn't value your contribution as much as the "rich-making" one. (that's not to say that society doesn't value the "poor" one, but that it doesn't value your marginal addition to the field, as much) there are some hidden assumptions there, particularly surrounding externalities. But I think that those only affect edge cases and on the whole, still allow us to do relative comparisons.
Femur 18y ago
> $1 is worth much less to the rich than it is to the poor. Extending this argument: a $1 product is worth much less to the rich than it is to the poor. Based on this argument, should the rich be charged more for products?
- jbrun 18y ago
  Luxury items (fancy cars etc.) should be taxed at a higher rate than basic items. This is already done in various countries on items such as electronics, gaz-guzzlers, bread, milk, etc. I think if we taxed items appropriately, we would not need income tax on the low and middle classes - they are the ones who can use extra cash to pay for their kids' education (high ROI for the kids), better housing (high ROI for society) and higher quality food (high ROI on $$ saved on health care costs). Rich people (the kind we want), after a certain point, are not motivated by money - they just want to win and make a difference and that can be done in a high tax society as much much as a low one.
  - Femur 18y ago
    I completely agree. If Man A with $100,000 and woman B with $500,000 buy the same $50,000 sport car, they pay the same luxury tax on it. My original question posed to the parent poster was questioning if prices of goods should be based on the income/worth of the individual.
    - jbrun 18y ago
      I think that would be near impossible to enforce, and probably not worth the trouble. Look at all the families that lie about their income and net worth so their kids can get scholarships and student-aid at expensive universities. People will always try and avoid taxes, thus, taxes should be kept simple to avoid loopholes. This is why I really like consumption taxes as opposed to income tax. I think that their should be higher estate taxes, people should not be able to inherit massive fortunes. Some money is ok, but I like the saying, "You should leave enough money for your kids to do whatever they want, but not enough for them to do nothing at all" I know I changed the subject, sorry.
      - Femur 18y ago
        It's OK and I upvoted you. I think anything other than a flat tax is immoral. I think a national sales tax and elimination of income taxes is a great idea. I merely posed my original response as a thought experiment.
glymor 18y ago
It's already 77% totalled up where the economist is based (UK). 40 Income, 10 NI, 12 Employer's NI, 15 VAT. (NI is National Insurance similar to Social Security and VAT is sales tax). Mortgages aren't tax deductible and capital gains starts at 50% (decreasing over 10 years). Insanely enough the services people actually use come from separate council tax (a local authority tax). It was about 1000GBP pa last time I was in the UK.
- halo 18y ago
  Oversimplified. Taxes are progressive and the /highest band/ starts at £37,000. Council tax differs from place to place and is also in bands based around the type of property you live in. You can't simply add VAT like you have, because you obviously can't spend money you don't receive: clearly if you're only receiving 38% of your income, a 15% VAT rate at most can be a smaller percentage of that you do receive, or 5.7% of your total.
  - glymor 18y ago
    Scaling VAT is 7% (17.5*.4) but than you should consider that tax petrol/alcohol is very much higher. My figure for council tax is low as it was sharing and was not in London. The "rich" living in London will be paying a lot more. Progressive income tax would have only minor effects on the "rich". It is obviously a big help for those just above but people in the middle earning say 100K are already only about 5% and the difference only declines.
    - halo 18y ago
      I'd argue that £100,000 is not "the middle" by any stretch. The median wage is £27,092, while top 10% of earn more than £49,192. (citation: http://www.statistics.gov.uk/cci/nugget.asp?id=285 http://www.statistics.gov.uk/cci/nugget.asp?id=285).
      - glymor 18y ago
        First, they disagree about who precisely "the rich" that the motion refers to are. Mr Piketty defines them as the very, very rich: the top 1% or perhaps 0.5% of the income distribution. Mr Edwards, on the other hand, is referring to a broader segment of the population: perhaps the top quintile or quartile. How you define "the rich" would be a big part of the debate. I would argue that a max rate at 35K is far to low. Most more modern tax systems go up in much smaller steps and max out much higher (Singapore maxes out at ~150,000GBP (20%) for example). Piketty's attempt to define the rich as top 1% isn't borne out in at least the UK's tax code. I was originally making a point that the amount of tax we pay is quite a bit more than the headline rate. A minimum of 52% of everyone's money is going to the government. If people really though about just how much of their money this is and how badly they could do with it they would probably find someone better than "the rich" to be angry with.
vaksel 18y ago
http://www.truthandpolitics.org/top-rates.php http://www.truthandpolitics.org/top-rates.php We had 80% tax rates in the 30s. We had 90% tax rates in the 50s. We had 70% tax rates in the 60s & 70s. We had 50% tax rates in the 80s We had 40% tax rates in the 90s. Strangely enough, noone quit making money, no matter what tax rate they had to pay
- Femur 18y ago
  >We had 90% tax rates in the 50s. A man makes $10 (granted it may be his millionth $10 for the year) and we take away $9 from him. Do you honestly think this is right and just?
  - vaksel 18y ago
    you do remember we fought this tiny war in the 40s that needed to be repaid? Seems to me that a lot of people have no problem being patriotic, until it hits their wallet. Is 90% tax rate optimal? Maybe not, but it just goes to show you that even with a 90% tax rate, it wasn't the end of the world. Funny, during the red scare, 90% tax rate was still considered capitalism, and now a 39% instead of 35% is considered communism.
  - AlisdairO 18y ago
    The first point to note is that the 90% rate kicked in at an earning rate of several million in today's money. The second (more debateable) point is that the rich, in the end, receive greater benefit from society than the poor. The poor man receives (say) an education, income support, roads, etc. The rich entrepreneur benefits from the fact that each of his employees received an education thanks to society. The rich man benefits to the tune of many millions because society protects his property (both intellectual and physical), and provides him with a stable environment to do business in. The benefits the rich receive are not just personal, but also present in terms of the affiliations that help make them rich. Sure, there's the question of whether this tax rate is too high, but it's also hard to argue that when someone is earning many millions per year that it's just for them to have all that money, rather than it being distributed a bit more evenly to their workers. Capitalist society does seem to favour income concentrating ever more tightly at the top, and mechanisms need to be in place to address that.
notauser 18y ago
That's why I'd be in favor of wealth (rather than income) taxes. If I was to earn $100mm net this year I could sit on my ass for the rest of my life, effectively taking me out of the motivated labor pool. That much money would probably take my kids out of the pool too even though the hypothetical lazy brats would grow up spoiled and highly undeserving. A wealth tax rate of 10% per year (halving my wealth every ~7 years) would encourage me to carry on thinking of new things, and make sure that my descendants wouldn't get a free ride. For comparison: Wealth tax 10%, 100mm in year 0, 50mm left in year 7, incentive to keep working to stop the pile shrinking. Income tax 50%, 50mm in year 0, 50mm left in year 7, no incentive to work.
- dkokelley 18y ago
  I don't really like this plan. First of all it would be near impossible to enforce, because if you were to make $100mm net this year you would move it all to a place where it is untouchable by the wealth tax. You might change citizenship or find some other loophole to hide your assets from the wealth counters. Second, retirement would have to be looked at entirely differently. I assume the retired would only be taxed at a much lower rate, or not at all. But assigning any wealth tax on the retired implies a government mandated death age, just like a government mandated retirement. See: 'The Giver' Finally, if you knew that your liquid wealth would be taxed at a certain rate, wouldn't you spend it on something? Houses, cars, stocks? What if Mark Zuckerberg was taxed on his artificial wealth? He can't really sell his FB shares to pay for it. If people knew that they HAD to keep 10% of their millions liquid for the rest of their life they would be less likely to invest it, since eventually they would need it. I like the unique way of looking at the issue, but I think it's ultimately unworkable.
lbrandy 18y ago
> $1 is worth much less to the rich than it is to the poor. So if we redistribute it to the poor, the whole of society will get better utility of that dollar. Erm. Whoa there. This seems to me to be fundamentally flawed in no less than two respects... 1) $1 may be less valuable to a rich man than a poor man but that -does-not- imply that it is of less value to society for it to be in the rich mans hands than in the poor mans hands. In fact, it's quite easy to argue (and is often done) that it's substantially more valuable, to society as a whole, in the rich mans hands than in the poor man's hands. 2) More broadly, and the first point follows from this point, this is a false dichotomy. Society doesn't have a fixed number of wealth and it is not a zero sum game. You cannot trade dollars 1:1 and ignore the economic impact. > A question very relevant to us is "Will it?". I find it interesting that you take the first proposition at face value as "self-evidently" true but feel the need to question this second proposition. I find the first one substantially more controversial than the second. Of course increasing the marginal tax rate is going to have some quantifiable effect on the people's habits. Let's say I have a private medical practice and I have the choice between working fridays and getting taxed 70%, or I can have the practice closed up on Fridays so I can play golf, what would I do? What % of doctors would close up shop on Friday? Whatever the answer is, it's not zero.
- Femur 18y ago
  >I find it interesting that you take the first proposition at face value as "self-evidently" true but feel the need to question this second proposition. Excellent point and very well written response.
- nopinsight 18y ago
  I agree with your counter points above. However, I'd say that for the consumption purpose, at least, it's mostly true. No one really needs $100 million house or 5 personal cars. If that $1 is invested, rather than consumed by the rich, then, it could potentially be more beneficial to the society.
  - anamax 18y ago
    > I agree with your counter points above. However, I'd say that for the consumption purpose, at least, it's mostly true. No one really needs $100 million house or 5 personal cars. I'm pretty sure that the folks who built said house and cars appreciate the work. And, I'm pretty sure that I'm going to like some of the technology used in that $100M house. It was nice of the rich guy to pay for the prototypes.
bradgessler 18y ago
People forget that rich people don't just take their money and throw it in a giant vault somewhere never to be seen again. Rich people and companies have to invest their money, which can create jobs and other opportunities for poorer people. The real question here is who do you want to invest your money? An elected official who has never created any value in a marketplace or a wealthy individual who built their fortune by building something that people wanted?
ph0rque 18y ago
I think this whole redistribution debate fundamentally overlooks the fact that what (all) people need is not money, but rather a comfortable place to live, healthy food to eat, clean water to drink, and medical attention as needed (Level 0.5 of Maslow's hierarchy of needs). If this were available to everyone for free, I don't think people would mind the rich being in the same tax bracket. I realize that an implementation of such a project would be insanely complex, but that's another discussion.
akmiller 18y ago
But who does a better job at redistributing money to the poor, the government or the individual? I would argue that individuals are much better at this than the federal government. Bill Gates spends an enormous amount of money on his foundations that help a lot of people. If the government had this money instead would it have been put to as good of use? If anything maybe the government can find new ways of creating even more incentives for individuals to donate to charities and other causes. I don't feel that is realistic though as the government would always rather end up getting the money and be in control than allowing the individual to use their money as they see appropriate. After all, the government is nothing but an extremely large, inept, and greedy corporation. Kind of ironic that they are penalizing GM when they are GM.
padmanabhan01 18y ago
I believe that tax is what one pays for the service one gets from the Government. Like police security, military protection, road maintenance etc. As far as fairness is concerned, if the Government is going to provide more of these services to the rich, then it is justified or fair that it taxes the rich more. If the Government is going to give equal treatment or serve all its citizens equally, then it should only charge everyone equally. Does coke or Apple or Toyota charge its rich customers more and poor customers less? Then why should a Government?

mrkurt 18y ago

Or, will you still work as hard, but not necessarily at making money... At super high tax rates I'd be doing less lucrative, but more fun work. If I ended up doing charity work or something, society might be better off (though I'd have less money to spend doing it). If I worked at a bar, society probably wouldn't be better off.

CWuestefeld 18y ago
Economists like Friedrich Hayek have shown that the amount of money you can make from any endeavor is a direct indication of the value that society as a whole derives from that endeavor. Thus, if your work doesn't get you rich, it's because society doesn't value your contribution as much as the "rich-making" one. (that's not to say that society doesn't value the "poor" one, but that it doesn't value your marginal addition to the field, as much) there are some hidden assumptions there, particularly surrounding externalities. But I think that those only affect edge cases and on the whole, still allow us to do relative comparisons.

Femur 18y ago

> $1 is worth much less to the rich than it is to the poor. Extending this argument: a $1 product is worth much less to the rich than it is to the poor. Based on this argument, should the rich be charged more for products?

jbrun 18y ago
Luxury items (fancy cars etc.) should be taxed at a higher rate than basic items. This is already done in various countries on items such as electronics, gaz-guzzlers, bread, milk, etc. I think if we taxed items appropriately, we would not need income tax on the low and middle classes - they are the ones who can use extra cash to pay for their kids' education (high ROI for the kids), better housing (high ROI for society) and higher quality food (high ROI on $$ saved on health care costs). Rich people (the kind we want), after a certain point, are not motivated by money - they just want to win and make a difference and that can be done in a high tax society as much much as a low one.
- Femur 18y ago
  I completely agree. If Man A with $100,000 and woman B with $500,000 buy the same $50,000 sport car, they pay the same luxury tax on it. My original question posed to the parent poster was questioning if prices of goods should be based on the income/worth of the individual.
  - jbrun 18y ago
    I think that would be near impossible to enforce, and probably not worth the trouble. Look at all the families that lie about their income and net worth so their kids can get scholarships and student-aid at expensive universities. People will always try and avoid taxes, thus, taxes should be kept simple to avoid loopholes. This is why I really like consumption taxes as opposed to income tax. I think that their should be higher estate taxes, people should not be able to inherit massive fortunes. Some money is ok, but I like the saying, "You should leave enough money for your kids to do whatever they want, but not enough for them to do nothing at all" I know I changed the subject, sorry.
    - Femur 18y ago
      It's OK and I upvoted you. I think anything other than a flat tax is immoral. I think a national sales tax and elimination of income taxes is a great idea. I merely posed my original response as a thought experiment.

glymor 18y ago

It's already 77% totalled up where the economist is based (UK). 40 Income, 10 NI, 12 Employer's NI, 15 VAT. (NI is National Insurance similar to Social Security and VAT is sales tax). Mortgages aren't tax deductible and capital gains starts at 50% (decreasing over 10 years). Insanely enough the services people actually use come from separate council tax (a local authority tax). It was about 1000GBP pa last time I was in the UK.

halo 18y ago
Oversimplified. Taxes are progressive and the /highest band/ starts at £37,000. Council tax differs from place to place and is also in bands based around the type of property you live in. You can't simply add VAT like you have, because you obviously can't spend money you don't receive: clearly if you're only receiving 38% of your income, a 15% VAT rate at most can be a smaller percentage of that you do receive, or 5.7% of your total.
- glymor 18y ago
  Scaling VAT is 7% (17.5*.4) but than you should consider that tax petrol/alcohol is very much higher. My figure for council tax is low as it was sharing and was not in London. The "rich" living in London will be paying a lot more. Progressive income tax would have only minor effects on the "rich". It is obviously a big help for those just above but people in the middle earning say 100K are already only about 5% and the difference only declines.
  - halo 18y ago
    I'd argue that £100,000 is not "the middle" by any stretch. The median wage is £27,092, while top 10% of earn more than £49,192. (citation: http://www.statistics.gov.uk/cci/nugget.asp?id=285 http://www.statistics.gov.uk/cci/nugget.asp?id=285).
    - glymor 18y ago
      First, they disagree about who precisely "the rich" that the motion refers to are. Mr Piketty defines them as the very, very rich: the top 1% or perhaps 0.5% of the income distribution. Mr Edwards, on the other hand, is referring to a broader segment of the population: perhaps the top quintile or quartile. How you define "the rich" would be a big part of the debate. I would argue that a max rate at 35K is far to low. Most more modern tax systems go up in much smaller steps and max out much higher (Singapore maxes out at ~150,000GBP (20%) for example). Piketty's attempt to define the rich as top 1% isn't borne out in at least the UK's tax code. I was originally making a point that the amount of tax we pay is quite a bit more than the headline rate. A minimum of 52% of everyone's money is going to the government. If people really though about just how much of their money this is and how badly they could do with it they would probably find someone better than "the rich" to be angry with.

vaksel 18y ago

http://www.truthandpolitics.org/top-rates.php http://www.truthandpolitics.org/top-rates.php We had 80% tax rates in the 30s. We had 90% tax rates in the 50s. We had 70% tax rates in the 60s & 70s. We had 50% tax rates in the 80s We had 40% tax rates in the 90s. Strangely enough, noone quit making money, no matter what tax rate they had to pay

Femur 18y ago
>We had 90% tax rates in the 50s. A man makes $10 (granted it may be his millionth $10 for the year) and we take away $9 from him. Do you honestly think this is right and just?
- vaksel 18y ago
  you do remember we fought this tiny war in the 40s that needed to be repaid? Seems to me that a lot of people have no problem being patriotic, until it hits their wallet. Is 90% tax rate optimal? Maybe not, but it just goes to show you that even with a 90% tax rate, it wasn't the end of the world. Funny, during the red scare, 90% tax rate was still considered capitalism, and now a 39% instead of 35% is considered communism.
- AlisdairO 18y ago
  The first point to note is that the 90% rate kicked in at an earning rate of several million in today's money. The second (more debateable) point is that the rich, in the end, receive greater benefit from society than the poor. The poor man receives (say) an education, income support, roads, etc. The rich entrepreneur benefits from the fact that each of his employees received an education thanks to society. The rich man benefits to the tune of many millions because society protects his property (both intellectual and physical), and provides him with a stable environment to do business in. The benefits the rich receive are not just personal, but also present in terms of the affiliations that help make them rich. Sure, there's the question of whether this tax rate is too high, but it's also hard to argue that when someone is earning many millions per year that it's just for them to have all that money, rather than it being distributed a bit more evenly to their workers. Capitalist society does seem to favour income concentrating ever more tightly at the top, and mechanisms need to be in place to address that.

notauser 18y ago

That's why I'd be in favor of wealth (rather than income) taxes. If I was to earn $100mm net this year I could sit on my ass for the rest of my life, effectively taking me out of the motivated labor pool. That much money would probably take my kids out of the pool too even though the hypothetical lazy brats would grow up spoiled and highly undeserving. A wealth tax rate of 10% per year (halving my wealth every ~7 years) would encourage me to carry on thinking of new things, and make sure that my descendants wouldn't get a free ride. For comparison: Wealth tax 10%, 100mm in year 0, 50mm left in year 7, incentive to keep working to stop the pile shrinking. Income tax 50%, 50mm in year 0, 50mm left in year 7, no incentive to work.

dkokelley 18y ago
I don't really like this plan. First of all it would be near impossible to enforce, because if you were to make $100mm net this year you would move it all to a place where it is untouchable by the wealth tax. You might change citizenship or find some other loophole to hide your assets from the wealth counters. Second, retirement would have to be looked at entirely differently. I assume the retired would only be taxed at a much lower rate, or not at all. But assigning any wealth tax on the retired implies a government mandated death age, just like a government mandated retirement. See: 'The Giver' Finally, if you knew that your liquid wealth would be taxed at a certain rate, wouldn't you spend it on something? Houses, cars, stocks? What if Mark Zuckerberg was taxed on his artificial wealth? He can't really sell his FB shares to pay for it. If people knew that they HAD to keep 10% of their millions liquid for the rest of their life they would be less likely to invest it, since eventually they would need it. I like the unique way of looking at the issue, but I think it's ultimately unworkable.

lbrandy 18y ago

> $1 is worth much less to the rich than it is to the poor. So if we redistribute it to the poor, the whole of society will get better utility of that dollar. Erm. Whoa there. This seems to me to be fundamentally flawed in no less than two respects... 1) $1 may be less valuable to a rich man than a poor man but that -does-not- imply that it is of less value to society for it to be in the rich mans hands than in the poor mans hands. In fact, it's quite easy to argue (and is often done) that it's substantially more valuable, to society as a whole, in the rich mans hands than in the poor man's hands. 2) More broadly, and the first point follows from this point, this is a false dichotomy. Society doesn't have a fixed number of wealth and it is not a zero sum game. You cannot trade dollars 1:1 and ignore the economic impact. > A question very relevant to us is "Will it?". I find it interesting that you take the first proposition at face value as "self-evidently" true but feel the need to question this second proposition. I find the first one substantially more controversial than the second. Of course increasing the marginal tax rate is going to have some quantifiable effect on the people's habits. Let's say I have a private medical practice and I have the choice between working fridays and getting taxed 70%, or I can have the practice closed up on Fridays so I can play golf, what would I do? What % of doctors would close up shop on Friday? Whatever the answer is, it's not zero.

Femur 18y ago
>I find it interesting that you take the first proposition at face value as "self-evidently" true but feel the need to question this second proposition. Excellent point and very well written response.
nopinsight 18y ago
I agree with your counter points above. However, I'd say that for the consumption purpose, at least, it's mostly true. No one really needs $100 million house or 5 personal cars. If that $1 is invested, rather than consumed by the rich, then, it could potentially be more beneficial to the society.
- anamax 18y ago
  > I agree with your counter points above. However, I'd say that for the consumption purpose, at least, it's mostly true. No one really needs $100 million house or 5 personal cars. I'm pretty sure that the folks who built said house and cars appreciate the work. And, I'm pretty sure that I'm going to like some of the technology used in that $100M house. It was nice of the rich guy to pay for the prototypes.

bradgessler 18y ago

People forget that rich people don't just take their money and throw it in a giant vault somewhere never to be seen again. Rich people and companies have to invest their money, which can create jobs and other opportunities for poorer people. The real question here is who do you want to invest your money? An elected official who has never created any value in a marketplace or a wealthy individual who built their fortune by building something that people wanted?

ph0rque 18y ago

I think this whole redistribution debate fundamentally overlooks the fact that what (all) people need is not money, but rather a comfortable place to live, healthy food to eat, clean water to drink, and medical attention as needed (Level 0.5 of Maslow's hierarchy of needs). If this were available to everyone for free, I don't think people would mind the rich being in the same tax bracket. I realize that an implementation of such a project would be insanely complex, but that's another discussion.

akmiller 18y ago

But who does a better job at redistributing money to the poor, the government or the individual? I would argue that individuals are much better at this than the federal government. Bill Gates spends an enormous amount of money on his foundations that help a lot of people. If the government had this money instead would it have been put to as good of use? If anything maybe the government can find new ways of creating even more incentives for individuals to donate to charities and other causes. I don't feel that is realistic though as the government would always rather end up getting the money and be in control than allowing the individual to use their money as they see appropriate. After all, the government is nothing but an extremely large, inept, and greedy corporation. Kind of ironic that they are penalizing GM when they are GM.

padmanabhan01 18y ago

I believe that tax is what one pays for the service one gets from the Government. Like police security, military protection, road maintenance etc. As far as fairness is concerned, if the Government is going to provide more of these services to the rich, then it is justified or fair that it taxes the rich more. If the Government is going to give equal treatment or serve all its citizens equally, then it should only charge everyone equally. Does coke or Apple or Toyota charge its rich customers more and poor customers less? Then why should a Government?