by zawaideh on 1/8/16, 2:45 PM with 184 comments
by mangeletti on 1/8/16, 4:29 PM
To the degree to which I would apply labels to myself, I'm a capitalist, and I'm a libertarian. I don't trust our corrupt political system anymore, and I certainly don't think the government has the ability to help society as much as it hurts it, at least most of the time. Because of this, I think that any extra taxation that the government levies will commensurately damage our society.
That said, I can't help but think that our entire economy has been swept out from under our feet by the financial sector. It's not tech companies and supposedly "rich" tech founders that capture our economy. It's VCs. A VC can give a company that would otherwise be insolvent the capital it needs to capture an entire market, and then raise the prices. We see it time and time again.
We're trained to believe that, without VC, the tech industry would somehow be stifled. This is simply untrue. Without VC, a lot of our "side" projects that create true innovation would have a chance at success. The reason many of them don't is because they're up against the same thing from a VC-backed competitor. Except, the VC-backed version is cheaper (or free), is backed by an unsustainable, large team of skilled developers, and doesn't care that it's hemorrhaging money, because once it creates a monopoly it will pay dividends for life to the very few who own it.
by chrisco255 on 1/8/16, 4:06 PM
Let's set aside arguments of individuality vs. socialism and whether government should operate for the hugely debatable, ephemeral term, "the greater good". I think that invites a separate essay on its own.
From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created.
Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole.
If you had taxed Musk at 80%, and he was left with a paltry $30 million or so, it's likely that one or more of the above companies never happen. The opportunity cost is that less jobs get created, unique and innovative technology never gets formed, and the ripple effects (such as spurring Chevrolet and others to make electric vehicles) never happen.
While not always the case, it is often the case that private capital investments do improve society in meaningful ways.
The economy is a very fungible thing and the idea that it is approaching "zero sum" is an unfounded one in the extreme.
by throwaway_5561 on 1/8/16, 4:39 PM
Why do people think it's ok to take other people's money? If a billionaire has money - regardless of whether they earned or inherited it - it's THEIR money. If they earned it lawfully, they should pay the same % of tax that everyone else pays - and keep the rest to do whatever they please. Who are YOU to tell them how to spend THEIR MONEY better?
If you're jealous of them having more money than you - this is a truly free country, nothing is stopping you from earning just as much as they have. Yes, life isn't fair, they may be born into wealth and you're not - but try being born in North Korea, then talk about it not being fair.
This is the principle that America was founded on, and what's allowed it to be successful.
And as someone who studied just a bit of history, it seems completely insane to me that people think taking money from the rich and distributing it to the poor think it will turn out OK. The same exact thing happened in dozens of socialist countries - those that are in charge of the distribution, somehow distribute the most of it to themselves, and then take away people's freedoms so they would stay in power. To think that something else is going to happen is just plain ignorance of basic human nature.
by dave_sullivan on 1/8/16, 4:07 PM
I don't know about that; I've heard plenty of people talk about eliminating income inequality as an end goal (but I live in the SF Bay Area, so maybe a reflection of demographics out here?)
It's like saying no one but the fringe is going to vote for donald trump, and yet those poll numbers...
>> What people are talking about is a progressive income tax to reduce inequality.
Well, we have that. Taxes are historically low, so I'd be ok with raising them somewhat, but not too much.
>> So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist.
This is really the crux of my argument: instead of increasing taxes first, we should hold the government more accountable over spending and look at programs and how they help or do not help the poor. Poverty is the metric that should be focused on, not inequality. If inequality is reduced as a side effect, all the better. But poverty is the problem. If government got more money from taxes, what makes you think they would use it to effectively reduce poverty?
by salmonet on 1/8/16, 4:05 PM
It sounds simple, but as remote work becomes easier it becomes more tempting to do it in another country (a country that won't tax that person $800,000,000).
Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."
by bsbechtel on 1/8/16, 4:43 PM
by Alex3917 on 1/8/16, 3:48 PM
Not only does GDP not measure wealth, but as wealth increases you might actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans out of work, wealth will have increased, but the GDP will decrease.
by ohyes on 1/8/16, 3:55 PM
Why PG chose to make a side on argument towards that leaves me a little bemused, however
by randomThoughts9 on 1/8/16, 5:22 PM
But that is just a myth. When someone "makes it", can you really disregard?
- his teacher from school
- the doctor that saved his life when he was young
- the guy on the street that maybe said something that triggered a chain of actions that ended in his success
- the books he read
- the peace of mind provided by living in a safe place
- etc.
Is it enough that you paid for that doctor appointment? I don't know. But you would not be here at all without it, and that doctor himself benefited from all of the above.
A different way of looking at things could be that, as we as a society don't know what works and what doesn't, we invest in people. Some are lucky, and based on their circumstances (and on their personal merit, I won't deny that) will manage to succeed in life.
by vannevar on 1/8/16, 4:52 PM
So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game.
It doesn't even matter how growth is trending. Graham's misguided criticism of the 'myth' misses a simple mathematical fact: that the growth in income among the top 1% dramatically outpaces overall economic growth. Consequently, contrary to his assertion, the rich are increasing their income at the expense of the poor. There is no where else the money can be coming from. You can argue (wrongly, in my opinion) that this is solely because the rich are smarter and harder-working than the poor. But you cannot rationally argue that such a shift is not happening in a broad sense.
by digital_ins on 1/8/16, 4:43 PM
It's not.
by hyperliner on 1/8/16, 4:05 PM
I am not sure what the number is, but when I hear 80% taxes, I think someone (maybe me) is not doing their math.
But I do agree that one must first make sure to understand the argument of the other side before articulating a counter-argument. I think in this case, there is also the problem that the message gets diluted because of the messenger: unfortunately PG does not have credibility in this area because (presumably) he has not been on the ground dealing with poverty issues as many others. Then again, many economists haven't either, even as they also postulate solutions.
by cryoshon on 1/8/16, 4:06 PM
The OP article is definitely factual with its four main points-- I'd also like to add that the trick of putting yourself into the opposing position's shoes and reconstructing their argument is one of the best rhetorical techniques that exists.
by oneJob on 1/8/16, 5:09 PM
I would like to add one thing. Given that Mr. Graham has put forth an essay on an (macro) economic topic, and his employment of the 'per se' argument method, there is an obvious lack of proper treatment of the basic and foundational economic concept of 'ceteris paribus'.
Without employing the tool of 'ceteris paribus' in his his essay Mr. Graham has left the door wide open for discussion of all sorts of things which might form a critical response to his argument: "But economic inequality per se is not bad." On the same topic, in his follow-up he weakens his argument substantially by prefacing it with: "I thought it might help clarify matters if I tried to write a version so simple that it leaves no room for misinterpretation." Less words does not necessarily make for a smaller room, Mr. Graham.
[1] http://www.paulgraham.com/sim.html
[2] https://medium.com/@RickWebb/paul-graham-s-second-inequality...
by hluska on 1/8/16, 4:42 PM
Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws.
In the end, the tax authority may collect more money, but they also have to spend significantly more. In the end, will such a scheme really result in more money in the government's coffers??
And then, what happens to money once it reaches the G?? How much of the money is wasted on poorly planned/executed programs? How much is wasted by massive, overstaffed organizations? How much of the money designated for 'social services' ends up in the hands of lower income people versus how much ends up paying for bureaucracy?
Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible.
by paulus_magnus2 on 1/8/16, 7:33 PM
One can argue if enormous capital gains should be taxed or not, but the problem starts when rich park their money where it inflates "normal people"'s necessities.
Best jobs are concentrated in few big cities, workers have to live there. Rich don't have to live there but they corner the housing market in order to extract maximum percentage from workers' salaries.
I don't care how much money the rich have as long as they don't inflate the housing so I can afford to buy my own.
Capitalism has learned to extract more surplus value from labour about the moment when worker productivity and salaries started diverging. It used to be that the rich are very few and once they bought all the London property normal people could live their lives. Nowadays there are so many foreign billionaires (China) who either have money or can access cheap debt that they can corner property market in every major city.
by hallowed_ed on 1/8/16, 3:41 PM
by rythie on 1/8/16, 4:47 PM
- the top marginal rate of tax was 62% in 1932 (up from 25% in 1931)
- rising to 91% in 1963 (income over $200k)
- It was at 70% in 1981 (before dropping to 50% in 1982)
and a graph here: http://visualizingeconomics.com/blog/2010/02/04/historical-m...
Though I can find very little that talks about the affects of this taxation on society.
by digital_ins on 1/8/16, 4:50 PM
by acgourley on 1/8/16, 4:49 PM
I feel like the author of this post reads PG totally different. He seems to think PG is saying, "Inequality isn't a big problem and it can't be fixed and screw these dumb poor people."
by andrewmcwatters on 1/8/16, 4:52 PM
It seems really backward and regressive if anything.
by crimsonalucard on 1/8/16, 5:01 PM
The iphone did not come from a startup. Nor did the internet. The world needs startups but if the startup fails like the way most of them do... then it's just wasted capital producing a good that has zero utility.
Anybody have a good argument for why we need startups for every little stupid business idea? PG almost describes the "entrepreneur" as some sort of genetically superior being.
by chrisco255 on 1/8/16, 4:25 PM
Poverty is a circumstance of living in a world with limited resources where trade offs have to be made in virtually all decisions. When I have lunch today, I am, in a twisted interpretation, depraving someone else of that food.
In a world where everything has a cost, whether hidden or real, poverty in some form will exist.
by forrestthewoods on 1/8/16, 4:46 PM
Inequality is bad. People want to reduce inequality. Startups strive to strictly increase inequality. Now what? An extreme progressive tax plus startups will STILL increase inequality. Not decrease.
To be honest I want to increase inequality even more. Because I want to allow more immigrants and refugees. You can't let in hundreds of thousands of refugees without increasing inequality. It's not possible.
What some of these posts say, without actually saying it, is that oh some types of inequality are bad and some are good. A small local business that earns it's owner a 6 figure salary? Well that's obviously good. When people say inequality is bad they meant those filthy point-oh-one percenters on Wall Street. Not the plumber who has 10 employees and made $350,000 last year. Obviously.
Inequality is at most a 2nd order derivative. It doesn't actually matter much. Things can be good with high inequality or they can be bad with low inequality. It gets far more attention than it should, imo.
by nsns on 1/8/16, 5:00 PM
by badusername on 1/8/16, 4:42 PM
by jondubois on 1/8/16, 4:40 PM
The cost of RAM memory seems to have stagnated. The prices of vital drugs are going up. Property prices are going up.
The era of value-creation is over. The real winners are those who can make other people create all the value and just capture that value.
by lintiness on 1/8/16, 4:26 PM
by JustSomeNobody on 1/8/16, 4:27 PM
Ah, yes. One can be rich, but don't you dare be TOO rich!
by padseeker on 1/8/16, 4:54 PM
Am I banned now?