Bill Gates: Piketty's Attack on Income Inequality Is Right 839
New submitter rvw sends word that Bill Gates has posted a review of Capital in the Twenty-First Century, an acclaimed book by economist Thomas Piketty about how income equality is a necessary result of unchecked capitalism. Gates, one of the most successful capitalists of our time, agrees with Piketty's most important conclusions. That said, he also finds parts of the book to be flawed and incomplete, but says Piketty has started vital debate on these issues. Gates writes,
Yes, some level of inequality is built in to capitalism. As Piketty argues, it is inherent to the system. The question is, what level of inequality is acceptable? And when does inequality start doing more harm than good? That's something we should have a public discussion about, and it's great that Piketty helped advance that discussion in such a serious way. ... I agree that taxation should shift away from taxing labor. It doesn't make any sense that labor in the United States is taxed so heavily relative to capital. It will make even less sense in the coming years, as robots and other forms of automation come to perform more and more of the skills that human laborers do today. But rather than move to a progressive tax on capital, as Piketty would like, I think we'd be best off with a progressive tax on consumption.
Help! Help! I'm being repressed! (Score:5, Funny)
Come and see the violence inherent in the system!
The Middle Class is the Bedrock of Society (Score:5, Insightful)
Without a middle class, there is no real economy. If our current system guarantees the destruction of the middle class, then our current system guarantees the destruction of the economy (the economic experiment over the last 30 years seems to support this hypothesis). Thus, we must tweak our system so that it does not destroy the middle class.
In the words of Henry Ford, "I pay my workers well so that they can afford to buy my cars."
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
You can call it whatever you want, but the reality is money flows uphill a lot faster than it flows downhill. The end result is that eventually there will be very little money at all flowing downhill. Whatever you'd like to believe, this problem is a direct result of capitalism.
One could argue that there is less capitalism now (as you've pointed out) but you need to ask why there is less capitalism. There's less of it because companies are now starting to consume each other at an increased rate. Why compete with a bunch of other companies when you can absorb them? This is the natural progression capitalism follows. Consume everything until you're the last one standing. Despite how good it was when it started, it has no choice but to end by killing that which put it on top in the first place because there is no real restraint. The safeguards that are in place are weak and ineffective and don't protect anyone except the companies the safeguards are meant to regulate.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
So, let me get this straight.... the only thing that used to stop the issues with Capitalism was the government stepping in, but it's socialist if the government stops companies now so we can't do that... That's some fine logic there. :D
Are you sure it's a socialist police state? You know you can have capitalist police states. They call those fascist. You should look up that word. It's important. "Fascist movements shared certain common features, including the veneration of the state, a devotion to a strong leader, and an emphasis on ultranationalism and militarism. Fascism views political violence, war, and imperialism as a means to achieve national rejuvenation" from Wikipedia.
You need to read more history. You specifically need to read more history about the robber barons and the crash of '29. It might start looking familiar to you.... huge monopolies, too big to fail, no regulation.... You might also look up the Glas-Steagal act and see that we didn't have any large financial problems until it was repealed.
You might also connect government corruption with WHO is paying them, and start to wonder why all those capitalists paying your government are aiming for a socialist state that would put them out of business. Hint: They're Not.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
I'm tired of this phony either or dichotomy. Capitalism is a tool. Socialism is a tool. The false dichotomy leads to people allowing the tools to dictate how they are used, instead of the other way around. Add too the old adage about the man whose only tool is a hammer.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
No pure "ism" whether it's capital, social, commune or whatever will work in its pure form. They are way to idealistic about the nature of human beings. The strongest most resilient societies take the best of a variety of ism's to maximize the benefit to their members. If you're too much of a purist for your favorite ideology all you will ever be is disappointed when people don't conform to your idea of what they should be.
Re:The Middle Class is the Bedrock of Society (Score:4, Funny)
Usury turns Free Markets into Capitalism (Score:5, Insightful)
If we're going to be pedantic about words, we also need to distinguish a "free market" from "capitalism". Too often self-identified proponents of "capitalism" are really just proponents of free markets, and use "capitalism" as if all it means is "free market".
A free market an economic arrangement where all exchanges are made voluntarily, without coercion.
Capitalism is an economic arrangement where those who own capital can extract surplus value from the labor of those who don't own such capital.
Both contemporary opponents and proponents of either assume that each entails the other:that without some kind or coerced redistribution, those with more capital will exploit those with less, and the only choice is between those two evils. But in principle the two concepts can come apart. The hard question is how.
My proposed answer is that what allows a free market (good) to become capitalism (bad) is the legal enforcement of any contract where someone allows the temporary use of their capital in exchange for a permanent transfer of some other capital. In other words, rent, including the rent on money that we call "interest", or in general, to use a more archaic but etymologically illustrative term, "usury": the charging of a fee for usage. Such contracts allow those who have more capital than they need for their personal use, who can thus afford to lend it out, to extract value from those who need to use more capital than they have, who thus have to borrow it. This creates an "uphill" flow of wealth from those who already have less of it to those who already have more of it.
In the absence of such contracts of usury, the only way someone with more wealth than is personally useful to them to get some value for it would be to sell it off. And, as is already the case, the only thing that those without enough wealth can trade for anything of value is their labor. The natural effect you would expect, in a free market without usury, would be that those with more capital would benefit from it by trading it for labor from others, gaining luxury (not needing to labor themselves) at the cost of their capital; and the laborers, in turn, would gradually accrue capital in exchange for their labor, and this free trade of capital for labor would gradually equalize the capitalists and the laborers, until each had enough capital for their own use, and had to labor upon it themselves. Some natural variation in wealth would still exist due to the natural differences in productivity of different people, but there would be no run-away concentration of wealth independent of productive activity that we have now.
Introduce usury into that system though, as we have now, and suddenly those with more wealth can lend their excess to those with less wealth, for a fee, which fee they can then use to pay for the labor of those who have less, who in turn are having to trade their labor to pay the fees for the use of the wealth of those who have more. In this way, usury creates an "upward" flow of wealth canceling the natural "downward" flow that a free market would be expected to have, and allowing those with more wealth to live perpetually off the labor of those with less wealth, without ever having to actually lose any wealth in exchange. It's not an insurmountable effect, it is still possible for the poor to accrue wealth or the rich to lose it all, but you have to be exceptionally competent or exceptionally incompetent to do each, respectively. For an average person, having wealth makes it easy to keep and gain wealth, and lacking it makes that exceedingly difficult. And I think we have usury — rent and interest — to blame for that. Without it, free markets would be inherently "socialist", as in for the public good, as one would naturally expect.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
Still, what remains a truth is that it's not production that drives the economy. It's selling. You can produce as cheaply as you want to, if there is nobody willing and able to buy your goods, you will go bankrupt. That's pretty much what our current economy is lacking: People able to buy.
The trickle-down idea failed. I really, really hope it's finally getting obvious, if not, well, I guess we have to wait a bit more until more people drop into the have-nots pool. The myth of the poor having only to blame himself for being poor is hopefully by now finally completely dispelled with more and more educated and well trained people are facing eviction because they're being replaced by cheap/free interns. Look around you at work. How many unpaid interns do you have? And how many of them are actually being retained once they would qualify as "normal worker"? And how many get sacked and replaced by the next free slave?
The fallacy about trickle-down was simply that the rich will have to hire people to do their work. Unfortunately we have arrived at the point where those that actually CAN still hire others to do their work have more in their grasp than can be spent sensibly. I only need one Ferrari a month, and there's only so many times that I can redo my facade in marble. When you get (I refuse to say earn) multiple millions a year, there is simply no way that this could even remotely trickle-down. So what happens? You invest it, of course. Which in turn increases the pressure on the supply side because now even more money is pushing in and trying to get invested.
But invested in what? Investing requires that someone has a business idea worth being invested in. But how, in this market, in this economy?
We need money in the people. We need money on the demand side. We need to SELL!
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Production is essential to the mix here, we tried the concept of simply driving an economy by selling each other non-produced things (typically services, like mortgages and loans) and you saw what happened there around 2007/2008.
An economy cannot be spun out of thin air, we need to sell stuff to each other - sure, but we need to sell stuff we need to buy and make sure its regulated so we don't go into another spiral of 'profits' generated out of our imaginations. After all, my house is worth a million dolla
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
In the end economic systems are just ways of distributing resources, and any system allows a small minority to aggregate everything is by definition a failure to distribute.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
The problem here is that history tells us the 99% often found ways to get rid of the 1% once they got too much of a burden. There is no threat bigger than a person who has nothing left to lose.
Re:The Middle Class is the Bedrock of Society (Score:4, Informative)
Your definition of capitalism is wrong.
Capitalism does not indicate "free market" or "laissez-faire" or minimal regulation or low taxes or lack of welfare state. You may see "free market" used in dictionary definitions of capitalism, but not in the strict economic definition.
All capitalism means is that the means of production are owned by private individuals and corporations rather than the state. And the means of production in the United States have never been more thoroughly owned by corporations and individuals. Except for a brief period when the government owned a stake in GM (which it has since completely sold), there is no government ownership of the means of production.
Income inequality, the kind we've seen growing in the US, is how all capitalist systems end up. It's happened in large part because there has been an all-out attack by corporations and government on labor unions. True capitalists don't pay someone unless they absolutely have to. As long as you have concentration of capital, you will have increasing income inequality. The only reason we saw income inequality start to decline was because for a few decades labor unions were very strong.
Re:The Middle Class is the Bedrock of Society (Score:4, Informative)
Regulation is not control, it just sets the ground rules.
By your definition, there has never been a capitalist economy in the history of the world. By your definition, "Capitalism" is a fantasy.
Now that I think about it, maybe you're on to something.
Who talks like this?
I imagine you believe that "capitalism" is a gift handed down from the God and can exist without regulation. If that's the case, why has it never happened? Free markets do not exist in nature. They exist because there are rules.
If you can say that there can be capitalism without regulation, without, as you put it, "control", then I call you a fabulist and prevaricator and say you have nothing but bullshit in you. Typical free market fantasist. Pissed off because you're not allowed to own people.
Re:The Middle Class is the Bedrock of Society (Score:4, Insightful)
But it is not a form of ownership.
If I drive your car, I control it. but you still own it.
We have never been further from state control over industry. What we have is industry control over state.
For god's sake, man, corporate lobbyists are the ones who write the laws. Yes, the actual language of law (including regulation) is directly written by lobbyists.
Re:The Middle Class is the Bedrock of Society (Score:4, Interesting)
(the economic experiment over the last 30 years seems to support this hypothesis). Thus, we must tweak our system so that it does not destroy the middle class.
Amazing that claims such as those in OP persist, given that the historical record is indisputable:
I dispute!
as our economy has become less capitalist, income inequality has been increasing at an ever-increasing pace.
I'm having trouble following this argument, but since it's been rated as "+5 Insightful" I suppose there's supposed to be some truth here.
I can only assume you are referring to the "last 30 years" (as in the quote from GP you are discussing) as a time when "our economy has become less capitalist."
Obviously one has always to define what "capitalist" means, but I suppose most people tend to equate it with economic freedom. And, well, we actually have indices designed to measure how this is changing, such as the Index of Economic Freedom [wikipedia.org], which is a scoring system created by the Heritage Foundation and the Wall Street Journal (and thus should presumably have some meaning for "capitalists," since they based their index on principles derived from Adam Smith).
So, let's look at their historical rankings for the past 20 years [wikipedia.org].
Basically, the U.S. has consistently ranked from 4th to 10th in the world in terms of economic freedom since this index was inaugurated in 1995. The overall world has become slightly more free over this period, so the U.S.'s small decline in ranking is over a period where its score has remained relatively consistent. (And if you want to visualize the data compared to other countries, you can do so here [heritage.org].)
I think most people would agree that the various policies of the U.S. in the 1980s led to greater economic freedom overall, and here we have stats designed by organizations at the heart of capitalism who say that we've been basically static since 1995.
Meanwhile, most indicators show that income inequality has been consistently increasing [wikipedia.org] for at least the past 30 years in the United States.
We can talk about correlation/causation until the cows come home, but this much is simple: when there is a negative correlation, then capitalism isn't the cause.
Except there's no negative correlation, certainly not in the past 30 years you seem to be responding to. Economic freedom in the U.S. is pretty darn high compared to most countries in the world, and it's been consistently scored high for the past few decades.
That's not to say that capitalism is the sole or major cause of income inequality, but the "negative correlation" you claim is not borne out by the actual data.
Re:The Middle Class is the Bedrock of Society (Score:5, Insightful)
as our economy has become less capitalist
What is this "capitalism" you speak of?
Seems like a dumb question, but it really becomes pretty unclear what people mean by the word, when you start listening to what people say. Is "capitalism" an economic system that promotes private ownership of the means of production, with minimal (or no) governmental/public oversight? Is "capitalism" a moral system that holds tenets such as "Greed is a healthy and beneficial impulse that promotes economic growth, which benefits us all," and "the goodness of action can be measured by its ability to generate profit," and "rich people are inherently better than poor people, or how else would they have become more successful?" Is "capitalism" a political system, some kind of subset of "plutocracy" where the public world is governed by the wealthy in proportion to their ability to leverage their economic power to influence political campaigns?
It seems really important to know what "capitalism" is if we want to determine whether we're becoming more or less "capitalist". Once we know what "capitalism" is, we would also have to analyze our political/legal/trade/economic policies to determine whether we're becoming more or less "capitalist", whatever we determine that to be.
Also, if we really wanted to try to determine causation, we'd probably have to determine how long it might take for policies to have an effect, and then compare that to the history of various economic trends. For example, it probably wouldn't make sense to blame an ongoing economic problem that started 10 years ago on an economic policy that was instituted yesterday.
Re:The Middle Class is the Bedrock of Society (Score:5, Interesting)
The summary has it wrong. Piketty argument is not against "unchecked capitalism." His argument is that lower growth leads to wealth inequity, which implies a host of social ills such as increased income inequity, class stratification, etc. He goes on to argue that the current golden period of income equity and class mobility – 1950s to the 1980s was due to a golden period of growth. He believes that we are returning to a more normal growth rate of 2% - which was the norm for the past 300 years. If we can't increase the growth rate – which he thinks we can't – the only way to avoid the social ills is wealth redistribution via taxation.
I think his arguments that lower growth leads to greater wealth inequity are very persuasive. He has posted his very extensive research on his website. I think his other points are valid and interesting but I give them less weight.
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Re:The Middle Class is the Bedrock of Society (Score:4, Informative)
I would not say unsubstantiated. Like climate change, economic historians have to deal with second rate data sets. People in different times and places survey and assemble the data differently. Wars, tax changes, and technology changes the relationship of the underlying variables. etc. It is why I give some of his arguments a lighter weight. However, as I have said before, he has posted his data.
As for lower growth equaling higher inequity, his arguments and data are stronger. In an enterprise, profits are split between capital and labor. If growth is low then demand for new capital is low. A low demand for new capital by definition means low interest rates. With 7% interest and 20 years compound interest is your friend. A modest income can build wealth. If interest rates are at 2%, compound interest is a miserly friend. Better hope you inherit or marry well.
Let me get this right (Score:3, Insightful)
We charge the people doing the labor (income tax) and then *also* charge them on consumption? The people least able to pay?
This will end well.
Re:Let me get this right (Score:5, Informative)
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I'd say one extra thing...don't tax food, that way it wouldn't be regressive against the poor which is often the argument for a consumption tax.
I'd also be for a flat tax too....one simple form, done.
Re:Let me get this right (Score:5, Informative)
Re:Let me get this right (Score:5, Insightful)
Everyone essentially pays no taxes on necessary food/housing/etc... So it's actually better for the poor than the middle and upper classes.
Better for the poor, better for the rich, worse for the middle class.
http://www.factcheck.org/2007/05/unspinning-the-fairtax/ [factcheck.org]
Americans for Fair Taxation rejects the Treasury Department analysis, objecting that Treasury considers only the income tax. By leaving out payroll taxes (which are actually regressive) Treasury's chart makes the FairTax look worse by comparison. We found that including all the taxes that the FairTax would replace (income, payroll, corporate and estate taxes), those earning less than $24,156 per year would benefit. [David Burton, chief economist of the Americans for Fair Taxation] agreed that those earning more than $200,000 would see their share of the overall tax burden decrease, admitting that "probably those earning between $40[thousand] and $100,000" would see their percentage of the tax burden rise.
Show me an alternative tax structure that doesn't lower the tax burden for corporations or high earners by passing it onto the middle class and I'll support it.
Re: (Score:3)
Exactly. The FairTax is highly regressive, because it taxes spending. The poor spend all of their income; the wealthy don't. It tries to make that less obvious with its "prebate", sort of a guaranteed minimum income, which removes some of the burden from those below the poverty line.
If the burden isn't on the poor and it's not on the wealthy then it *must* rest on the middle class. Proponents seem to want to play a shell game, but the fact is that if you want to remain revenue neutral, somebody is paying. A
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The subsidy is the thing I hate the most about Fair Tax.
It perpetuates the myth that Money comes for free from the Government. Develops even more people that budget their expenses around their government check
Re:Let me get this right (Score:5, Insightful)
who decides what is a bare necessity? that's the problem. Fair tax removes the government from deciding what is a bare necessity and leaves it to the household to decide what it considers a bare necessity.
I don't see why this is so hard. We can solve the tax problem and the global warming problem in one shot.
The average person in the USA uses about 400 gallon per year of gas. The average gas tax is about 50 cents per gallon.
Cut that number in half and say that noone pays taxes on the first 200 gallons of gas and everyone pays $1 on the next 200 gallons.
That matches the current usage and pays the current bills while encouraging everyone to save a little gas.
Now multiply that up and say it's $2 for the next 200 gallons, and $4 for the next 200 gallons, etc...
Repeat the above with electricity, water, alcohol, etc... and you've both saved the environment and created a great solution for the tragedy of the commons.
The tax burden then falls on the stereotypical rich person that lives in a 10k square foot house, drives a hummer, and flies around in their private jet
while everyone else has incentives to conserve earth's limited resources. It's probably about as fair and as transparent as you can get with taxes.
Re:Let me get this right (Score:5, Insightful)
I'd also be for a flat tax too....one simple form, done.
A flat tax would do almost nothing to simplify taxes. If all your income is W2 salary, your income tax is already one simple form. If your tax is more complicated, because you own a business, rental property, etc. then 99.9% of the work is determining what is your income. Once you determine that, calculating the percentage (flat or otherwise) would be the remaining 0.1%.
Re:Let me get this right (Score:5, Insightful)
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Deductions are important for anyone who is in business. If businesses (from one person muffin bakers, to 1,000 people factories) cannot deduct business expenses then that leads directly into heavy pressure to vertically integrate by buying suppliers and sellers. Until the only businesses that can compete are the Exxons and Conacos who own the oil rigs, the refineries, the pipelines, the trucks and the gas stations.
Otherwise each sale between business entities incurrs a 10% flat tax.
Re:Let me get this right (Score:5, Insightful)
It wouldn't do anything to mitigate income inequality though - rich people spend far less on consumption as a percentage of their income/capital gains, so unless you have a *very* progressive consumption tax the poor will still be paying a much larger percentage of their income in taxes. Plus there's all the complexity of trying to impose a progressive consumption tax - Do you try to change from a simple X% sales tax at the store to a sliding scale where more expensive items carry a greater tax burden? *That* would be a huge headache all around. It also likely disproportionately disadvantages those inclined to impulse control and long term planning: The person who scrimps and saves to be able to buy a nicer car/house/whatever ends up carrying a higher tax burden than the person with the same income who pisses their money away on little shit as fast as they earn it.
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Does income inequality actually matter though?
If Person A makes a million dollars a year but lives exactly the same lifestyle as Person B who makes $100,000 a year, does it matter?
It seems to me that no one would know or CARE if Person A has $100 million in investments and bank accounts if he lives just like everyone else.
So it is really more of a lifestyle inequality that makes people upset.
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It gives Person A 10x the potential socio-economic clout, which undermines democracy for starters.
You're also talking about a relatively trivial degree of inequality, a mere 10x. At present in the US executives are averaging 300x (500x?) the median income, and they're still "working class" - the people making REAL money don't have jobs, they have investments, and you never hear about them in the news.
Re:Let me get this right (Score:5, Insightful)
Demand, people buying things, is what drives the economy. Person A that makes 100x the money that Person B does, doesn't add 100x the demand to the economy. One person can only buy so much. So, then, Person A's extra money is either going to go into savings (not good, that money is lost, as far as the economy is concerned) or the money is going into investing. Investing plays an important role in the system but it cannot be the basis of the economy, no matter what anyone tries to tell you. Workers are hired and businesses are expanded for no other reason than to fulfill demand.
This is why income inequality is bad. Its growth strangles the economy by shifting money from the masses, who would use that money to drive the economy, to the few who will just put the money into savings when there is nothing worth investing in.
Re:Let me get this right (Score:5, Informative)
Except that the rich spend much less of their income on stuff other than groceries/rent/mortgage than the poor and middle class. Making those exclusions helps the poor, but still shifts the burden toward middle class and lower-income households.
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Remember if we didn't have all the welfare programs (social security, education, welfare, Medicare, Medicade, etc) the top 10% of income earners could pay a 5% income tax and everyone else would pay nothing.
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That's like asking prisoners to pay for their imprisonment. Remember, the purpose of the zoning code is to keep the poor and minorities out of middle-class and wealthy neighborhoods [leagle.com], and that in turn restricts economic mobility, keeping the poor dependent on social programs for their livelihood. For example, the market would build more affordable housing i
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The tax code is used and exploited for votes and social engineering.
It was created specifically for those purposes.
Re:Let me get this right (Score:4, Insightful)
I'd have to agree. Want to help a campaign contributor? Create an obscure rule that allows the contributor to profit based on their specific circumstances, but that no one else understands enough to object on, unless they are a knowledgeable "special interest". Then shut up the opposed special interests by giving them their own rule to satisfy their own constituency.
Want to pretend to help the middle class? Create rules that look like they're getting something, only for those rules to be one-time, or quietly dispensed with in the next rule reshuffle.
The value of an understandable tax code is less about saving the middle class though tax breaks, and more about making it possible for the people to actually understand how much the government is taking and how the programs that our legislators vote on will affect that number.
Re:Let me get this right (Score:5, Interesting)
The rich, depending on how rich, spend ridiculously small percentages of their income. The poor spend every dime. A consumption tax will immediately transfer the bulk of taxation to the poor and middle class. The Ultra rich like the idea of consumption taxes because 99.999% of their money is sitting in long term trusts making 10% and will never ever get spent.
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So people never get to retire?
Re:Let me get this right (Score:5, Insightful)
So people never get to retire?
It depends. If you made the expiration date something like 50 years then people could certainly retire.
It is worth remembering that the vast majority of the top 1% were born into tons of money, they have just got richer during their lifetime.
I was watching the UK version of the apprentice the other day and it occurred to me that at least Alan Sugar made all his own money. Donald Trump from the US show was born rich, then just leveraged his daddys cash to make more cash in the same line of work. He did not even need to set up a business as he was just given one to play around with.
Ok, you can say that these people did well not to lose all their cash but that is not really much of an achievement if you are born with more money than you will ever need in your own lifetime anyway. You can afford to take risks that most people cannot over and over again until one of them pays off.
It is this inherited money that skews the system so massively.
Re:Let me get this right (Score:4, Insightful)
That's called Inflation.
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Instead of paying interest, money should have an expiration date. Use it or lose it.
You mean like inflation?
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Better known as 'inflation'.
Re:Let me get this right (Score:5, Insightful)
Taxing consumption is stupid. It encourages people to save and hoard till the day they die, which defeats the purpose of money. The rich are the most capable of doing this, which big trust funds and investments. Also, the idea of a progressive consumption tax is mind-boggling. How can a sales tax be progressive? Right now, sales taxes are collected on point of sale, which is a flat (actually regressive) tax. Do you have to fill out everything you buy on some IRS form?
A better idea is to tax wealth. That will encourage people to spend, and drive the economy forward.
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So, if it encourages people to build up some capital, it's a bad thing, eh?
Yes, I'm aware that current economic theories pretty much rely on most everyone spending their money as fast as they make it.
And then bitch about the fact that they don't set aside money for their old age, or to deal with bad economic times, etc....
hoarding money / money just sitting there (Score:3)
The problem which I see with comments on both sides of this thread is the assumption that one can hoard money, or that money can be put somewhere where it "just sits." The problem is that, unless Mr. Gates, et al. are taking CASH (paper) and making stacks of it in their basement/attic/wherever the money isn't just sitting anywhere.
Even if they just put it in a bank account (which is about the closest to making a pile out of it) it is then circulated through the economy via increased ability for the banks t
Re:Let me get this right (Score:5, Interesting)
The tax code already encourages people to go into debt. And to speculate, and to set up shell corporations around the globe. Apple borrows billions rather than re-patriating the billions they already have parked offshore. Because they can deduct the costs of borrowing, but have to pay taxes when they re-patriate.
And that's not an argument for not taxing corporate profits, it's an argument for closing stupid loopholes. Governments need revenue (yes, they do), and somebody's got to provide it. How much revenue is not relevant to this discussion of inequality - sure, you should spend more than you take in, okay. What matters is the best way to generate the money you spend in order to have a society that works well for the biggest portion of the population.
Gates' idea of a progressive consumption tax may address the issue as he sees it, but it's completely impractical to implement - as well as not really being very progressive, because as noted by others here, the richest people consume the smallest portions of their wealth. Perhaps the most efficient and fairest form of wealth taxation is the estate tax. To ask how that tax has been recast as the murder of all that's American (think of the family farms!!!! what family farms?) is to ask what's wrong with the corporate, think-tank formulated framing that the corporate, lazy media spit back unfiltered.
But at least Gates is acknowledging the problem, and laying blame where it belongs - at the feet of unregulated Capitalism.
Re:Let me get this right (Score:4, Insightful)
I'd go for that, and it would be somewhat "progressive" too...in that rich people tend to buy MUCH more expensive items, and more of them.
Whoah! We need to go back ot the drawing board here. This is supposed to end up with me paying less taxes,
Re:Let me get this right (Score:5, Insightful)
Taking 50 percent from Bill Gates reduces his power almost by 0. Taking 50 percent from that single mother? Her kids are homeless. The same tax level is not simply the same for all people. Flat tax is an idea for the rich, by the rich, disguised as an idea for the people, by the people. Like *most* American politics.
Re:Let me get this right (Score:5, Insightful)
Still wont solve the problem.
A tax on consumption hits those hardest who consume the most: the middle and lower classes.
And it does nothing to stop or slow the growth of wealth accumulation.
Consumption taxes only feed wealth accumulation.
Whereas on a tax on capital, on wealth, does precisely that: it targets wealth inequality directly, reducing the top heaviness of the system.
You may not be able to run a country off it (which is why income or consumption taxes across the majority of society will still be important), but thats not its purpose.
It's purpose is to keep the system stable so it doesnt run off the tracks. It's one of those necessary restraints on capitalism to it from its own self destructive tendencies.
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A tax on consumption hits those hardest who consume the most: the middle and lower classes. And it does nothing to stop or slow the growth of wealth accumulation.
To be clear, the middle and lower class do not consume the most. The wealthy do. Their consumption is just not as high a proportion of their wealth or income. I don't think it would be a good idea to tax wealth, but it doesn't matter what I think because politicians will always build in some loophole that allows the truly wealthy to hide their money.
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A tax on consumption hits those hardest who consume the most: the middle and lower classes.
Real sales/VAT/consumption taxes are almost never implemented with a flat rate. Necessities are usually exempted, which disproportionately benefits lower incomes. Many jurisdictions also implement a personal or household threshold, so you get a flat refund, which makes a bigger proportionate difference to lower income households.
Consumption taxes are not perfect, but they are both more progressive and have less harmful consequences than the tax system we have now. Taxing payroll is very regressive, and d
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To be fair, he does say a progressive tax on consumption, presumably meaning every additional dollar spent would be taxed at a slightly higher rate. You could lay that out to mean everything from hitting the poorest the hardest all the way to no one paying taxes on the first $100,000 they spend every year, it's all in how you lay out the numbers.
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Re:Let me get this right (Score:5, Insightful)
No, the concern of Piketty, at least the main one is that our current system causes the return on capital investment to be proportionally greater than the growth of the economy, expanding the percentage of the economy that goes to people who don't work. This is extremely problematic in a culture that socially equates work with success.
Re:Let me get this right (Score:5, Insightful)
The goal of Capitalism is to make money merely by virtue of having money. Work in a Capitalist society produces income, but that's almost beside the point. It's 'putting wealth to work' that Capitalism is all about.
And yes, our perverse tax code has been written by the Capitalists to maximize that effect. Minimal taxation on capital gains and dividends, higher taxation on wages (including social security and medicare taxes), regressive taxation on consumption, and non-taxation of most inherited wealth.
And in our particular flavor of Capitalism, we bailout the speculators if they fail massively enough. That's not Capitalism. That's cronyism at its best. Putin-worthy, even...
Re:Let me get this right (Score:5, Insightful)
And 99 ("the 99%") people buying a car at 20k spend 1,980,000 in the economy.
The rich do NOT pump more into the economy than the middle and lower classes.
The middle and lower classes are what drive the economy. They (we) spend the most in the economy, both relative to income and in total dollars. The majority of economic activity in this country is driven by the consumption and spending of the middle and lower classes. The economy is not driven by rich folks buyibng 50million dollar homes.
printing money buys services, devalues savings (Score:3)
Supply and demand informs us that a decrease in the value of dollars can be caused in two ways:
An increase in the supply of dollars or
A decrease in the demand for dollars
As the population grows, the number of people who want dollars will increase not decrease, so inflation wouldn't generally be due to falling demand. It must therefore be due to an increase in supply. It must be caused by an increase in supply - somebody's printing money. Who has the capability to print new money? The federal governm
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Wealth accumulation (by and large) is not the big issue with income inequality. The bigger issues are the access to better education, better security, better health care, etc that wealth provides is as it creates a negative feedback loop.
Economies are driven by the purchasing power of the middle class. Wealth accumulation leads to a decreasing middle class and an increasing lower class. Therefore, the bigger issues you mention are a direct result of wealth accumulation.
If, instead of accumulating wealth, it was spent, then the goods and services provided would create more jobs. The demand to fill these jobs, will increase the wages paid to get good workers. The increased pay the workers receive will stimulate even more demand for goods an
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...excess consumption of the rich...
will probably clog your arteries, unless well cooked, with the fat trimmed off.
Re:Let me get this right (Score:5, Insightful)
If you had read the summary at a minimum, you would have noted that Gates was advocating 1) moving away from a 'labor' tax to a 2) Progressive 'consumption' tax.
It is ok to disagree, but at least disagree with what he actually said.
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The sticking point is the "moving away" part. Can anyone seriously think with as hooked on spending as the government is that any form of tax would actually go away? It's far, far more likely that a consumption tax would be an "also" and not an "instead of".
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The sticking point is the "moving away" part. Can anyone seriously think with as hooked on spending as the government is that any form of tax would actually go away? It's far, far more likely that a consumption tax would be an "also" and not an "instead of".
Just tie any consumption tax legislation to the repeal of the 16th Amendment (in the U.S., of course).
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VAT in the UK was intended as a replacement for income tax, didn't work out that way since someone forgot to abolish income tax. Now we are forced to pay both.
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Absolutely. You know why? Efficient taxation should result in more tax money coming in. If they can't do so, that's a fault of putting out inefficient taxes.
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We charge the people doing the labor (income tax) and then *also* charge them on consumption? The people least able to pay?
This will end well.
The point is to STOP taxing labor and only tax consumption but also to do it progressively.
Luxury taxes and sin taxes are great examples of this. There would be plenty of other
ways to do this. Taxing private jets, taxing first class travel, taxing electricity or water
usage progressively, carbon taxes for the individual, taxing gasoline progressively, etc..
Inequality isn't a problem because rich people MAKE more than poor people. We should
encourage people to create as much wealth as possible. Inequality
Re:Let me get this right (Score:5, Insightful)
This is a semantic misdirection I can't help commenting on when I hear it.
Rich people don't "make" more money than poor people. Rich people "get their hands on" more money than poor people.
Getting money and creating value correlate very weakly.
How would you rank these in terms of a) actual creation of value, and b) income?
1. A CEO
2. A lawyer
3. An engineer
4. A scientist
Now rank them in terms of income.
However one falls on the question of what is most appropriate to tax, and to what level, clarity on the factors of production, consumption, and taxation is critical. "Making money" being used synonymously with "receiving income" is one of the more intractable social barriers to this, IMHO.
Incidentally, this seems to be one of the main problems with recent STEM and "learn to code" efforts. Corporations aren't doing as well with obscuring the basic premise they want more productive work done (and admitting where it comes from is unavoidable in this case), while receiving the majority of the income from that value produced, by the STEM students they wish to "encourage". People aren't, in the main, buying it.
Re:Let me get this right (Score:4, Interesting)
As delusional as imagining I said something I didn't, as you just did? But no, gaining from the creation of value, such as the financial sector does, is not creation of value. If you want to make an argument that it facilitates it, fine, and appropriate relevance (and compensation) for this could be discussed.
Can a scientist/engineer/lawyer organize and run a huge company composed of lawyers, engineers, and scientists?
Yes. One requires extensive knowledge and by definition the ability to manifest value-add directly by that knowledge, that knowledge being the core relevant thing to a company doing it. The part distinctive to the executive role requires a $50 filing of Articles of Incorporation and pre-existing access to wealth or "contacts" for it. There's no question here that in terms of -ability-, the people with the skills can do that, the reverse is definitely not necessarily true. If we are discussion CEO's whose income is validated -insofar as- they are acting as one of the other categories, that is not contrary to my premise. Mostly, however, the market is determined simply by inequality of opportunity, and the business structures derived directly from that--having little to do with any kind of "meritocracy" principles you seem to be alluding to.
Re:Let me get this right (Score:4, Interesting)
There's a reason that top CEOs get paid what they do. Without them, there is no functioning company.
By that standard, there are probably dozens or even hundreds of employees who should be paid top dollar at a given company. Many if not most workers at companies are specialists at what they do, and without them, the company probably would not be able to function.
Most businesses don't tend to hire a lot of interchangeable nobodies with no expectation that they have or will ever have skills that would be important to the function of the company -- except maybe for really crappy entry-level positions that require no training or experience. Everybody else in the company has a good chance of serving some function -- otherwise, why bother employing them?
Sure, some or even most get paid what we think of as more than they're actually worth, but those companies are in a position to pay them so much because of their CEO.
Actually, several recent studies (like this one [forbes.com]) seem to suggest that larger salaries and benefits may actually HURT a company's chances of getting a valuable CEO.
If they're not good enough, they get fired - it happens all of the time.
Yeah, actually the CEOs, like heads of federal government organizations, tend NOT to be fired because they're "not good enough." They get fired because bad stuff happens. It doesn't really matter if they are responsible when the company fails to perform -- it could be a bad economy or a bad business to begin with or crappy products or actual bad management at the top... if the business does bad enough, the CEO takes the blame.
That's pretty much the CEO's job: make random decisions and take the blame for really big problems (even when it's not his fault).
I'm not at all saying that there aren't good CEOs out there. But I think you're vastly overestimating how important their talents are compared to other people at companies. If you start reading around in some recent studies on this stuff, you'll find some folks who understand randomness and probability noting that claiming that CEOs largely get promoted or hired or fired according to random whims of the economy. Yes, they can make really terrible decisions or really good ones, but often those are mostly just lucky. And if they're lucky, they get promoted or hired at an even bigger company, if they aren't, they get fired.
It's mostly the mid-level management folks where you tend to find a sprinkling of real talent that is driving the company forward on an everyday basis. CEOs with exorbitant salaries are just a fixture in companies because we think we need them. I think the jury is actually out about whether that's the best form of governance for successful companies -- in many cases, you'd probably be just as good choosing any random CEO at that level (or maybe even just putting a magic 8-ball at the helm).
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From the summary:
So he wants move away from taxing labor. Less tax on labor. That will mean less tax for people doing labor. Less labor tax. And to replace that tax, he wants a progressive tax on consumption. Progressive means rich people pay more th
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Consumption taxes are inherently regressive. A poor person has to spend (consume) all his income, a rich person can afford to use it to get more money instead. Not to mention that when time comes to consume it, the rich guy can buy his yacht in New Zealand, or wherever they don't have a consumption tax on yachts.
It would also be horribly intrusive/impractical to make an increasing consumption tax, they would need to keep track of everything you buy.
The charitable interpretation is that Bill Gates doesn't ha
Overrated... (Score:3, Interesting)
Re:Overrated... (Score:5, Interesting)
There only idea that matters is the core thesis that r>g.
Everything else comes down to framing that. And Gates' consumption tax idea kinda does the opposite of addressing that. It's regressive as hell to tax the people who need things more than those who can just sit on their money and let it grow. You buy the land, and eat marginal gains on laborer/robot creation. And those laborers are going to lose out since their own budget is mostly going to things that are consumption taxed, leaving them with very little to invest in their own capital.
Every long-term 21st century economic policy needs to look at r>g and find a healthy stabilization point where r=g that allows free flow from labor to investor and back and work towards it.
Re:Overrated... (Score:5, Informative)
The founder of Capitalism was very clear that the failure of Mercantilism was due to unregulated monopolies which resulted in a 2 class system. The upper class could, and did, fix prices to maximize profits creating false scarcities and reducing wages in the labor pool. Capitalism was intended to be regulated to prevent a two class system, yet we have seen large reductions in our regulations over the last few decades. Hence, we are moving further toward yet another two class system which will end in predictable results if not checked.
I kind of agree with you, but don't agree that you have only two variables. Capitalism is supposed to have a third variable which can move toward either end of the scale. The mobile variable is supposed to increase productivity and allow class mobility. The stability factors are supposed to be the top and bottom ends, primarily due to what Socrates discussed with the Artisan and economics.
Paraphrasing Socrates pretty heavily here, but the logic will remain. Jobs paying too little result in a labor shortage and hopeless class of society. Jobs paying too much result in not just a lack of productivity by the wealthier class, but frees the same people to meddle in everyone else' affairs to gain until the point at which revolt is necessary to balance society again. The Government's job is to ensure that people are secure, which having no caps on wealth does not allow.
As we have seen deregulation occur, we have also seen wealth disparity change drastically in favor of those who already have wealth. Meanwhile the middle class has been reduced drastically and rates of poverty have increased dramatically in the US.
Before anyone claims "but that is unfair to rich people" Consider that up until Nixon, anyone making 1,000,000 a year in personal pay was paying 90% income tax (true since income tax was implemented). In 1968, making 100,000 a year was a very healthy wage, many times the average and very few making 1M/yr complained. Reagan reduced taxes further, so any wealthy person paying into the tax system paid a lesser rate than the average worker. Today, we have a guy admitting to make millions and pay 9% tax(Rupert Murdoch), compared to a person making 100K paying 30% tax. (It should go without saying that the income tax incentive was not just to prevent massive personal wealth, but to ensure that profits from companies went back into the company instead of a person's pocket).
Nixon promised that reducing taxes on the Rich would stimulate the economy, and Reagan claimed the same thing. Yet we have not seen any such stimulation and wealth disparity has moved in the exact opposite direction as promised.
This looks like a nasty trick. (Score:5, Insightful)
a progressive tax on consumption
Not sure how that's going to promote demand for goods and services. It looks to me like a recipe for rewarding not-spending. And not-spending is exactly what's sucking the liquidity out of the economy now, locking it up in the vaults of the wealthy, who refuse to spend at all unless it means that they wind up with ever more in their vaults, and construction of the (was this term ever more apt?) vicious cycle is complete.
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Yup, exactly. Taxing consumption would disincentivise spending, and when people aren't spending, businesses aren't making any money and hence going out of business.
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I think the greater concern for consumption tax approach is that it could driven the emergence of a huge black market. But, since that might mostly include lower end items and benefit lower income folks, it might be an acceptable flaw.
We either
Taxing consumption is archaic. (Score:2)
Also, for people with low income, taxing consumption is actually worse than taxing income, since the lower your income, the higher the percentage of it you must spend on consumption in order not to starve or freeze.
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That would be fantastic. Most of my spending goes to food (at fancy restaurants) and housing (mortgage on a million dollar mansion), so yay! No taxes for me!
(The above is not actually a true statement, sadly, just an example.)
Progressive tax on consumption (Score:5, Insightful)
Brilliant idea. That way, instead of spending their money on things that people have to make, the wealthy will invest in owning a larger share of the world by way of financial instruments which produce more income.
This will, obviously, reduce inequality.
summary contradicts itself (Score:5, Interesting)
Contrast that with what Gates wrote:
thanks to the rise of the middle class in countries like China, Mexico, Colombia, Brazil, and Thailand, the world as a whole is actually becoming more egalitarian, and that positive global trend is likely to continue.
Well, ok, so that's the exact opposite of Piketty. He then attacks directly Piketty's point that wealthy people increase their wealth. He suggests that the also spend their money, both on consumption and philanthropy, and that rentier families tend to lose their money. To back up his point, he looks at the Forbes 400:
About half the people on the [Forbes 400] are entrepreneurs whose companies did very well (thanks to hard work as well as a lot of luck). I don’t see anyone on the list whose ancestors bought a great parcel of land in 1780 and have been accumulating family wealth by collecting rents ever since.
Finally he goes on to give his own ideas about taxation. In other words, Gates is using this book as a stimulus for his own ideas, and he found it very stimulating.
And now I've done a review of Gate's review. I feel so meta.
Finally, we can agree with Gates' main point! (Score:4, Funny)
$640k/year should be be enough for anyone
What I found most interesting (Score:5, Insightful)
Was a video I saw that addressed the degrees of this issue. That is, they started showing a graph of what people polled thought income inequality looked like in terms of relative distribution of wealth. They showed what people thought it should be, people of different ends of the political spectrum. Then they showed what people thought was a healthy or acceptable distribution..... and then the real one.
The thing is, everybody seems to agree that some inequality is ok. Everybody seems to agree that there is more inequality than there should be. Everybody also underestimates how much inequality there is, showing the real numbers were as far removed from what people thought it was as what they thought it was was from what they thought was ideal.
Youtube /TED Talk :Thomas Piketty (Score:4, Informative)
Problems with taxing consumption (Score:3)
I'm not claiming to be an economist, but I'd imagine there are some big problems with taxing consumption as well. As people will point out, taxing something often has the effect of discouraging it. Depending on how you structure the tax, it could encourage a pack-rat mentality, where people just stuff their money away. That's not all bad, since it serves a purpose of encouraging savings, but when you cut consumption, you have the potential of also cutting economic growth. In addition, a tax on consumption might hit poorer people, since everyone has a minimum amount that they must consume. For example, poor people and rich people both need to spend a minimum of $[X]/year on food just to survive. As the amount of income increases, that $[X] becomes a vanishingly small percentage of income for rich people, while it remains a substantial amount of money for the very poor.
Taxing consumption could also (again, depending on how it's structured) simply drive money out of the US. In its simplest form, it would become much cheaper to make money in the US (since income and capital gains wouldn't be taxed) while making it much more expensive to spend money here. The "smart thing to do" would be to make your fortune here and spend it elsewhere, where the tax is not on consumption.
And that also doesn't begin to confront the source of a lot of the problem: wealth and power represent a self-reinforcing cycle. To oversimplify a bit: Poor people have no power to promote their own interests, while rich people can use their economic power to develop other forms of power, which they can, in turn, use to reinforce their economic power. The obvious example of this is that they can contribute money to politicians, supporting politicians who will support their economic interests. Those politicians can change trade policy to benefit the wealthy person's business, or rewrite the tax code to allow the wealthy person to avoid paying taxes.
If we started taxing based on consumption, how long do you think it would take for an exception to be written into the tax code for private yachts?
And this immediately raises the question in my mind, how to we anticipate tracking "consumption" and deciding what should and should not be counted as "consumption"?
Now, I'm not ruling out the possibility of someone developing a plan that deals with these issues appropriately. But I've heard the suggestion of taxing consumption before, and I've never heard an adequate explanation of how all of these things would be addressed. It seems a bit... I don't know the right word-- silly? creepy? Well, it seems noteworthy to me that Bill Gates starts and finishes his argument by talking about how rich people should be treated differently based on how charitable they are. It suggests that his main motivation is to argue, "I'm one of the good ones. You should leave me alone and let me keep more of my money. Yes, yes, by all means, tax rich people more to deal with this income inequality issue, just so long as you don't tax me."
Re: (Score:2)
Re:That should read 'income INequality' (Score:5, Insightful)
It's the result of a lot of things, really. Income inequality was the result of unchecked feudalism, unchecked mercantilism, unchecked slavery, unchecked command economies, and even a lot of "traditional" economies.
Unfortunately, income equality is not a natural state of societies. It can be a goal for a system, but even that's not a guarantee.
Three things you can tax, and consumption is bad (Score:3)
You forgot a simple head tax. One head tax based on your place of residence (or split among localities if you have more than one residence over the tax period based on time spent at each). There'd be one of these for city, county, state, and federal paid once a year. Pay one each quarter so they aren't all due at once. No other taxes other than severance taxes and perhaps excise taxes. No vehicle license taxes, no boat taxes, no property taxes, no sales taxes. Nothing else. No corporate income taxes. They r
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It is NOT fair in any way shape or way. It simply refuses to admit the many many benefits that the wealthy get from the government, that the poor don't.
The poor don't care if the government is overthrown and someone confiscates half the wealth. The wealthy do.
The poor don't care if their house burns down (and no one dies), the wealthy do. (at least not to th
Re:Inequality isn't harmful (Score:5, Insightful)
It does seem to be negatively correlated with economic growth.
That depends, doesn't it, on whether the shift in income from wages to capital kept your income from growing over your working lifetime. If inequality has a net positive sum great enough for "trickle down" to lift all boats rather than just the yachts, well and good. If it's a negative sum (the top gets increases, the bottom loses money) then the picture changes.
This isn't an ideological question, but an empiracal one.
Re:Inequality isn't harmful (Score:4, Insightful)
Re:Inequality isn't harmful (Score:5, Insightful)
Inequality is harmful when it persists without merit.
That is, the Walton family has made a lot of money from Wal-Mart, but the wealth of the youngest Waltons isn't money that they earned, it's money that came to them because of how they were born.
Sounds like a landed gentry, to me. I have zero problems with Warren Buffet being rich, but it seems unreasonable that his children would also be multi-multi-billionaires just because he made a lot of good decisions. And Buffet agrees with me, since he's giving away most of his money and leaving his children with a lot, but not much in comparison to the total value of his fortune.
The vastly wealthy horde money over generations, and the fact is that money begets money. If you have a million dollars and invest it in something that returns 7% a year, you can live off of that forever if you're careful. You don't have to work or do anything at all--money and markets do all the work for you. If you're a multi-millionaire, you've made some money by your efforts but far more because after you have a lot, the rest is easier to come by.
Actually, it is harmful in a number of ways (Score:4, Informative)
From http://en.wikipedia.org/wiki/E... [wikipedia.org]
"Effects of inequality researchers have found include higher rates of health and social problems, and lower rates of social goods,[81] a lower level of economic utility in society from resources devoted on high-end consumption,[82] and even a lower level of economic growth when human capital is neglected for high-end consumption.[83] For the top 21 industrialised countries, counting each person equally, life expectancy is lower in more unequal countries..."
Because they cannot contribute to the economy (Score:5, Insightful)
OK, here's your answer, as simplified as I can make it based on your premise:
Because the guy with the net worth of $100 is unable to contribute to the economy. He is too poor to pay taxes, he's too poor to buy food for his family and therefore has to rely on government help to feed his children.
Meanwhile, the rich guy with the net worth of $5000 has used his immense wealth to manipulate politics and has a sneaky accountant, so he also pays practically no taxes, compared to the middle class.
So it's up to you and me, the guys with a net worth of let's say $250, to help out the poor guy with the net worth of $100. But that $5000 guy is cutting our jobs and shipping them to india, so we have an ever shrinking population of $250 net worth people, and a growing segment of $100 net worth people, since the only jobs available are minimum wage.
Following me so far? With less and less people buying socks and shoes and food, and paying taxes, the economy shrinks. Meanwhile the very rich do not go to walmart and buy 10,000 pairs of jeans, so their contributions to the overall economy are minor compared to their immense wealth.
Please see the documentary "Inequality for all", you can find it on netflix streaming, and it will describe it a way that everyone can understand, even Fox News watchers.
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The guy with $5000 can do a lot more than the guy with only $100. A lot more, but not 50x more, because economic freedom doesn't scale linearly with wealth. Perhaps working with "real" numbers will help illustrate this point. If you have an annual income of $15K (minimum wage, full time), you can't do much. I'd argue that you can't even live on that kind of money, but apparently many people do, so let's just say you c
Re:Income inequality is bad because ... (Score:5, Informative)
I have yet to see someone actually explain why income inequality by itself is a bad thing.
It isn't. But excessive income inequality can be.
History is full of examples, like feudalism. Basically, really concentrated money tends to go with really concentrated power, and that rarely ends up well for the poor people.
When I hear folks talking about this, what I really hear is, "since one person doesn't need that much money to live, the government should take the difference and use it to make MY life better,"
Yeah, the only people who say that are truly crazy extreme egalitarians, not the majority of political and economic theorists.
Very few people talk about taking "the difference" and redistributing things until we're all equal. In such a situation, there's no incentive for anyone to work harder or do better than anyone else, and thus innovation fails. This is bad for everyone, but especially the poor, who tend to benefit the most from continued improvements in overall infrastructure, standard everyday access to things that lead to a better quality of life, etc.
One of the more popular formulations in political theory is John Rawls's "difference principle" (or "Maximin" principle). In Rawls's formulation of Justice as Fairness [wikipedia.org], he discusses two primary criteria for a just society: (1) basic liberty, and (2) basic equality. The second does not imply that everyone has equal outcomes, but rather incorporates two additional elements: (1) equal opportunity for everyone, and (2) inequality will not lead to degradation of the worst-off (this is the "difference principle").
There's a lot to the theory, but the basic idea is that allowing some inequality gives an incentive for innovation and hard work and in general improving society overall, which will include benefits for the poorest members.
But at some point, the additional accumulation of wealth among the richest will stop raising the standard of living among the poorest and can even decrease it.
Rawls postulates that inequality is beneficial as long as that inequality is raising the overall standard of living for everyone. When greater inequality ceases to do so, it's no longer just. You can think about this on a smaller scale in terms of running a business -- to some degree, paying management and executives more will draw more talented and skilled people who will make the company do well, and if the company does well, all employees will reap the benefits in terms of better salaries, working conditions, and job stability. But at some point executives can become a drain on the companies resources if they take too much, which hurts everyone else, but generally especially those at the bottom.
And that is generally the point at which we should say that we need to tax the rich a little more or put in place some sort of regulations to redistribute some to the worst-off.
Someone explain this harm to me, because from where I'm standing in a first world country, it seems to be just so much complaining over sour grapes.
In the real world, not everyone is born equal. Some people are smarter, or have more valuable natural talents, or whatever. That's the justification for Rawls -- he says to imagine you had to design a just and fair society without knowing in advance where you'd fall within it. (Rawls calls this the "original position" or the "veil of ignorance.") You might be the smartest and most talented person, or you might be a complete idiot compared to everyone else in that society. You just don't know.
And if you were in a position, how would you come up with fair rules for society? You probably wouldn't want to set up a system so if you were the dumbest person that you could be enslaved and exploited for your entire life, right?
Rawls thus formulates his "difference principle," which allows inequality to exist for the talented or skilled, but only if it results in society's improvement overall.