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Were the wealthy truly interested in promoting greater social good, they would put their efforts into reforming tax systems and global finance in order to help

• tocomment 13y ago
  Would a consumption/luxury tax be fairer than a wealth tax? I'd imagine with a wealth tax it would be more difficult for folks to retire?
  • leot 13y ago
    If there are specific policy goals that we'd like to accomplish, it's probably best to make a very simple taxation system (tax the total of everything, using the best appraisal tools we have), and then add specific provisions that address such goals directly. One simple approach to the retirement issue might be to have marginal wealth taxation rates (first $100k are exempt, e.g.), or have (as we do now) limited tax-protected retirement funds (EDIT: e.g., IRAs -- "accounts" might have been the better word).
    • dnautics 13y ago
      that's cute, who would get the privilege to run those tax-protected retirement funds. What sort of investments would be permitted in these funds? Aren't these people, then, the benefits of largesse created as people flee the taxation?
      • michaelt 13y ago
        Plenty of countries already have partly-tax-exempt retirement savings, to encourage people to lock money up for retirement instead of making equivalent instant access investments.
        • jeltz 13y ago
          Yes, and there the banks running those tax exempt savings make a killing through their large profit margins.
      • leot 13y ago
        Huh? Instead of "fund" perhaps I should have said "account". I was just thinking of IRAs (as they're named in the U.S.) and the like.
        • dnautics 13y ago
          what are you allowed to put into an IRA, and those investment vehicles are the benefits of a privilege that no one else has. Could you use your IRA to invest in a person just released from prison, to give them job training, if he agrees to pay you a portion of his salary back? No. But you could use your IRA to invest in a fortune 500 company.
  • yummyfajitas 13y ago
    Depends on your perspective. A consumption tax charges people in proportion to the benefit they receive from society. An income tax charges people in proportion to the value they create for society. A wealth tax charges people in proportion to how much they save for the future. So the question is what do we want to discourage? Consumption, value creation or savings?
    • rlanday 13y ago
      Savings, right, since we want rich people to spend money instead of hoarding it to drive the economy? Or value creation, since it causes economic inequalities? Or maybe even consumption, I guess, if you hate America and don't believe the amount of money we can borrow and spend by racking up a trade deficit is a good measure of economic health.
    • leot 13y ago
      You don't have to spend any money to benefit from being wealthy.
  • dnautics 13y ago
    yup, also what would happen is the government would get bigger and bigger on these newfound taxation revenues. That's not great, but in the most idealistic situation, it's not necessarily bad. However, what is bad, is when the economy sags, the taxation revenues to sustain this bigger government will fall short, the government will go into debt, and do one of two things: It will either print money or borrow. Borrowing (with interest) implicitly assumes the growth of a revenue stream. With private entities, the lender is on the hook if it goes bankrupt and can't fulfill its obligation. With public entities, the citizen is on the hook, so the only solution is to increase taxation down the pike, unless you have a miraculous recovery that restores the economy to what it was before (plus interest). If you don't think the wealthy will find a way to avoid this taxation down the pike that the middle class and poor will have a harder time leveraging, you are naive. Printing money is worse. Because it devalues the currency, makes everything more expensive, and that $100,000 limit that you set as the point where the wealth tax kicks in becomes a lot more painful. Pretty soon, the poor are paying this tax that only the rich were supposed to pay. Over net time, the people that you are hurting the most are the poor, because the rich have long ago figured out how to avoid this tax. Congratulations. Through your programme of good intentions to fix the divide between the rich and poor you have made the situation far worse than it ever was.
    • eli_gottlieb 13y ago
      Money is debt. There has never been a world without public debt, because that debt has to come from somewhere. Usually, it comes from the government, and the rates of interest and repayment dictate growth or shrinkage of the money supply.
      • dnautics 13y ago
        Contemporary money is certainly equivalent debt, but in the long run historically, debt has been private debt. Keeping in mind that for much of modern history, any form of lending was considered "usury" and generally relegated to corners of society. There is a difference between money that is based on savings and money that is based on debt. Money that is based on savings is net, an exchange for services that have already been rendered. Money that is net based on debt is net, an exchange for services that are expected to be rendered. One of these paradigms is subject to painful corrections as a result of counterparty risk; the other paradigm treats unexpected failures as a sunk cost.
• tedsanders 13y ago
  Couldn't you say that about anyone, not just the wealthy? Also, reforming tax systems seems extremely hard to do. How would you propose a motivated millionaire go about it?
  • leot 13y ago
    Provide money for thoughtful, convincing research and advocacy.
    • dnautics 13y ago
      who gets to decide what is 'thoughtful and convincing'? How can I be that person, so that I can decide my friends and family are thoughtful and convincing?
    • tedsanders 13y ago
      Asking sincerely: How far do you think a few million dollars could go? What sort of research needs to be done (and would be convincing to lawmakers)? How would advocacy money be spent? I think this is a steep challenge, even for a millionaire.
      • leot 13y ago
        The first few million would need to be leveraged to gain the support of others with money and influence. Probably the first bunch would be spent meeting with lobbyists to hear what they propose. I'm afraid I can't speak to the returns on lobbying dollars spent, but clearly money talks in this arena. There are a variety of strategic and tactical moves that could be made. I'd be happy to share whatever ideas I have about them in direct communication (pseudonymous contact info is in my profile).
• ferdo 13y ago
  I think the issue goes deeper. Not enough people are willing to look at the root of the problem: the monopoly on the issuing of currency and credit in the US that is held by private interests. When private interests control the volume of currency, they control the material life of the country, including the government. The growing imbalance of wealth and income is a direct result of this cause. Tax reform is a good idea but it's meaningless if it leaves the nations's ownership of currency and credit in private hands.
  • tedsanders 13y ago
    The Fed is not run by private interests. What are you talking about?
    • ferdo 13y ago
      "Instrumentalities like the national banks or the federal reserve banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest." Justice Louis Brandeis, US Supreme Court, 1928 http://openjurist.org/275/us/415 http://openjurist.org/275/us/415
      • tedsanders 13y ago
        The Fed is not run by private interests. The president appoints its members. It has a dual mandate of low inflation and low unemployment. So...?
        • ferdo 13y ago
          The Federal Reserve is owned by private interests with aspects of a public utility. It's the worst of public and private mixed in one package. As Justice Brandeis said, it's a private corporation in which the government has an interest. The Fed of SF has an interesting summary: > "Is the Federal Reserve a privately owned corporation?" > Yes and no. http://www.frbsf.org/education/publications/doctor-econ/2003/september/private-public-corporation http://www.frbsf.org/education/publications/doctor-econ/2003...
• tedsanders 13y ago
  Doesn't a wealth tax encourage immediate consumption? And how do you measure wealth? Would the government hire thousands of wealth assessers to value old houses and cars and furniture? I've always thought that economists consider a consumption tax the ideal tax.
  • leot 13y ago
    Lots of economists like wealth taxes, too, though talking about them to wealthy people often goes over poorly. A wealth tax encourages putting assets to work rather than simply engaging in "wealth preservation". Replacing most tax revenue with a wealth tax + a VAT (a consumption tax) ensures that everyone contributes fairly, and offsets the "immediate consumption" incentives.
    • harryh 13y ago
      Lots of economists like wealth taxes, too. <--- Can you cite some of them please?
      • leot 13y ago
        http://www.economist.com/blogs/freeexchange/2013/06/property-taxes http://www.economist.com/blogs/freeexchange/2013/06/property... http://www.econ.nyu.edu/user/wolffe/ http://www.econ.nyu.edu/user/wolffe/
      • mjn 13y ago
        There's a huge literature on optimal tax policies, usually focused on more specific questions, so I'm not aware of a good survey paper on what economists think of wealth taxes generally. However, two specific questions you could look into, each of which have significant supporters on both sides: 1. What are the relative merits of inheritance taxes and wealth taxes, from the perspective of economic efficiency and/or intergenerational egalitarianism? 2. What are the relative merits of wealth taxes vs. capital-gains taxes? Roughly, is it preferable to tax capital annually based on its current value, or to tax realized gains in capital at the time of realization? The current real-world situation is that inheritance and capital-gains taxes are fairly common, while wealth taxes are uncommon, and there's some disagreement over whether that is the right choice.
• dnautics 13y ago
  the a priori assumption here is that the government is 'better' than private interests in deciding how charitable funds should be spent. Why do you think that these newfound revenues coming into the treasuries of the state will be subjected to good stewardship? The government is liable to be using those funds to fight unjust wars, subject innocent people to draconic and unjust policies with escalating costs (like the drugs wars), and so on and so forth. And there are plenty plenty plenty of corrupt businessmen, but it's way worse in government. right now there is a controversy going on in the central basin municipal water district in california, where overbilling contractors (and kickbacks) happened, the son of an LA councilman was 'hired' as the director, paid six figures to do nothing, and had benefits such as a retirement plan and paid tuition for an expensive private undergraduate degree. How do you get away with that? Almost every director of a nonprofit charity knows that there are rules upon rules prohibiting conflicts of interest that you have to bend over backwards making sure you don't violate in case the IRS comes after you.
  • leot 13y ago
    I don't see where that assumption comes into play. The reform mentioned above need not increase government revenue.
  • quinnchr 13y ago
    People think government is better at it, because that's what the evidence overwhelmingly points to. The U.S. routinely top's the list of the world's most charitable nations (private charity): http://www.npr.org/blogs/thetwo-way/2011/12/20/144035063/survey-u-s-takes-top-spot-as-most-charitable-nation http://www.npr.org/blogs/thetwo-way/2011/12/20/144035063/sur... While we also top the list of OECD countries for child poverty http://www.oecd.org/els/soc/CO2.2%20Child%20poverty%20-%20update%20270112.pdf http://www.oecd.org/els/soc/CO2.2%20Child%20poverty%20-%20up... Now compare those poverty rates with the amount of public and private social spending: http://www.oecd.org/media/oecdorg/directorates/directorateforemploymentlabourandsocialaffairs/Chart2_SOCXWeb2012.JPG http://www.oecd.org/media/oecdorg/directorates/directoratefo... More public social spending has a higher effect on poverty than more private social spending.
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• michaelt 13y ago
  How would a donor go about doing this, in concrete terms? I mean, should I be spending my money on political lobbyists or what? What measurable outcomes should I expect?
  • leot 13y ago
    Funding and founding organizations that can serve as counterweights to the ones advocating on behalf of the interests of the already powerful would be one way. Though it took some decades, we have seen the results, in the public narrative and in policy, of the founding of the Heritage Foundation (1973), the Cato Institute (1974), and Americans for Tax Reform (1985).
• aspensmonster 13y ago
  It's getting downvoted because it's far too similar-sounding to the dreaded S word. I think the reason the wealthy by and large won't "put their efforts into reforming tax systems and global finance in order to help make the world more fair and just" is precisely because they believe the world already is "fair and just." In a world where money is the single largest broadcaster of a whole slew of societal signals --your caste, your worth, your success, your legitimacy-- finding yourself with lots of money tends to reinforce the notion that you must be doing it right already. To the extent that there are problems in the world, it seems the wealthy feel almost universally as if their own resources and philosophies are best suited for remedying them, rather than governments or other collective structures or any contrasting philosophies. This precludes ever examining whether "tax systems and global finance" --or other attitudes and philosophies of the wealthy-- are the actual perpetrators of those problems. Peter Buffet argues that such philosophical transplantation is the cause of the problems the transplantation is trying to fix and that any sincere attempts to remedy society's ills must address it. Honestly, I don't think the wealthy, on the whole, are really concerned about fairness and justice in any context that parts them from their wealth. If egalitarianism was the highest value and penultimate goal, then the concept of extracting surplus value from others' labour and keeping it for yourself would be thrown out entirely. Suggest that however, and you get thrown under the bus for being a pinko-commie-socialist-marxist-anarchist-class-warfaring-moocher-taker-leech.
  • leot 13y ago
    To be clear, I'm not advocating egalitarianism, or contending that it's the highest value. The goal is to align policy with our most defensible values and ideals (hard work, fairness, merit, etc.). If the wealthy truly believe we live in a meritocracy, in which the hardest working and most competent end up the most well off, then taxing wealth should be preferred to taxing capital gains. Any hard working and competent wealthy person should have little trouble earning returns on their personal capital that far exceed a ~1.5% annual wealth tax (over a multi-year time horizon). Only those who choose to do little with their wealth, or cannot manage it competently, end up worse off. But this accords well with "survival of the fittest", yet another value often espoused by the world's wealthiest. In other words, the goal here isn't socialism, it's rationality.
• consonants 13y ago
  Implementing a negative income tax or minimum income would do wonders for the first world poor. It's been done before with overwhelming success. Honestly, having profit as the sole motivation for enterprise in society is strangling the developing world.