Taxing Top Incomes in a World of Ideas [pdf] • Hacker News Board

Re: Taxing Top Incomes in a World of Ideas [pdf]

#11

Post by dahfizz » Fri, Jan 11, 2019, 9:35 AM UTC

yorwba wrote: post #10

mirajshah wrote: post #9

Earlier quoted context omitted.

The paper assumes that innovation is incentivized by the "top" income received through it by the innovator. Under this assumption, since taxation reduces "top" income, it thus disincentivizes innovation. The introduction further clarifies the author's definition of the type of innovation that gets disincentivized. "Basic research", i.e. innovations in our understanding of our world, are readily funded by the redistri…

My immediate question is what the innovators do instead of innovating when the tax rate is higher. Taxes reduce income, but they do so monotonically without affecting the relative ordering of options, which is what matters for income-maximizing decision making. The "top" income may be numerically lower, but it remains at the top.

The absolute values do matter. If Jeff Bezos expected Amazon to be much less profitable as it is for him, he may have decided to just stop and retire once it provided enough passive income to let him live comfortably. He would be paid more for the added time and stress of continuing to grow Amazon, as you say, but if that marginal income approaches zero, it just isn't worth it (and we are left without Amazon).

Re: Taxing Top Incomes in a World of Ideas [pdf]

#12

Post by dahfizz » Fri, Jan 11, 2019, 9:41 AM UTC

dlp211 wrote: post #8

darawk wrote: post #7

Earlier quoted context omitted.

Totally, but the point of this paper isn't the people who already have $10mm. It's the people who want to get there , and what they're willing to sacrifice to do it. Building a massive business like say, Amazon, takes enormous personal sacrifice and risk. The high incomes that result from it incentivize that sacrifice/risk. They cause the person who currently has relatively little, to risk what they do have to produc…

Considering that Bezos derives the vast majority of his wealth through capital gains as opposed to income, I'd say yes.

That's avoiding the issue. If the tax code were such that capital gains and all other income was captured, your parent's logic holds. The loopholes of the current tax system doesn't affect theoretical considerations.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#13

Post by sooheon » Fri, Jan 11, 2019, 9:56 AM UTC

dahfizz wrote: post #11

yorwba wrote: post #10

Earlier quoted context omitted.

My immediate question is what the innovators do instead of innovating when the tax rate is higher. Taxes reduce income, but they do so monotonically without affecting the relative ordering of options, which is what matters for income-maximizing decision making. The "top" income may be numerically lower, but it remains at the top.

The absolute values do matter. If Jeff Bezos expected Amazon to be much less profitable as it is for him, he may have decided to just stop and retire once it provided enough passive income to let him live comfortably. He would be paid more for the added time and stress of continuing to grow Amazon, as you say, but if that marginal income approaches zero, it just isn't worth it (and we are left without Amazon).

Since this is a claim asserted without basis (nobody can claim to know a counterfactual, let alone someone else's mind), I can also assert the opposite: Bezos didn't get to where he was without having a hell of a drive for success, and that drive is not 100% driven by monetary reward. Prestige, power, influence are all incentives built into us at the biological level, and if he gets to be the all powerful CEO of a $800B company instead of a $1T company, I don't imagine he'd throw in the towel.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#14

Post by olivepistacchio » Fri, Jan 11, 2019, 9:58 AM UTC

after decades in Silicon Valley, I think that execution matters much more than the idea. Uber was not alone, Amazon was not the only bookstore, Google was not the only search engine.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#15

Post by sooheon » Fri, Jan 11, 2019, 9:59 AM UTC

dahfizz wrote: post #12

dlp211 wrote: post #8

Earlier quoted context omitted.

Considering that Bezos derives the vast majority of his wealth through capital gains as opposed to income, I'd say yes.

That's avoiding the issue. If the tax code were such that capital gains and all other income was captured, your parent's logic holds. The loopholes of the current tax system doesn't affect theoretical considerations.

Regardless, the theoretical considerations are a straw man. No serious progressive tax scheme results in a hard cap of income at something as low as $10m.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#16

Post by sooheon » Fri, Jan 11, 2019, 10:00 AM UTC

darawk wrote: post #7

ForHackernews wrote: post #5

Earlier quoted context omitted.

> up until I can afford to live the rest of my life comfortably without continuing to work for someone else. There are probably a few exceptions (i.e. 19 year old superstar athletes who just signed their first major league contract) but I would generally assume that when we're talking about people with annual income in the > $10MM range, then those people already have more than enough wealth to live comfortably forev…

Totally, but the point of this paper isn't the people who already have $10mm. It's the people who want to get there , and what they're willing to sacrifice to do it. Building a massive business like say, Amazon, takes enormous personal sacrifice and risk. The high incomes that result from it incentivize that sacrifice/risk. They cause the person who currently has relatively little, to risk what they do have to produc…

Why do you equivocate progressive taxation with "truncating" income at a certain level? It's not a low-pass filter.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#17

Post by sooheon » Fri, Jan 11, 2019, 10:02 AM UTC

darawk wrote: post #4

nobodylovesmeee wrote: post #3

People talk about how much they make pre tax. I think past a certain level of income, you gain the same status per marginal dollar and the actual additional purchasing power does not matter...

That is true, but the numbers are probably higher than you think. At least for me, I think wealth at least (as distinct from income) makes a non-trivial difference to me up until I can afford to live the rest of my life comfortably without continuing to work for someone else. Now, above that level, there are actually some other emotionally satisfying wealth strata, such as: - Ability to invest in or personally found/…

> I'm not saying that everyone needs to achieve these things to be happy. But I would say that I think it's easy to look up to say, 2-3x your own income and say "how could anyone ever want more than that", but then when you get there, you find that actually there's a lot of interesting stuff that you might be able to do if you made 5-10x more still, and at least for me, it's mostly not about luxury. It's about being able to pursue interesting things with autonomy.

This is called the hedonic treadmill and is pretty much built into all humans. Spoiler alert: it never ends.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#18

Post by kgwgk » Fri, Jan 11, 2019, 10:03 AM UTC

yorwba wrote: post #10

mirajshah wrote: post #9

Earlier quoted context omitted.

The paper assumes that innovation is incentivized by the "top" income received through it by the innovator. Under this assumption, since taxation reduces "top" income, it thus disincentivizes innovation. The introduction further clarifies the author's definition of the type of innovation that gets disincentivized. "Basic research", i.e. innovations in our understanding of our world, are readily funded by the redistri…

My immediate question is what the innovators do instead of innovating when the tax rate is higher. Taxes reduce income, but they do so monotonically without affecting the relative ordering of options, which is what matters for income-maximizing decision making. The "top" income may be numerically lower, but it remains at the top.

Taxes may not affect the relative ordering of the (ex-post) outcome of the different options. But they can affect the relative ordering of the (ex-ante) expected value of the different options.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#19

Post by soVeryTired » Fri, Jan 11, 2019, 10:08 AM UTC

There doesn't appear to be any empirical justification for anything the author has done here. Does anyone really believe that 1/ the "stock' of ideas can be measured by a real number and 2/ national output is proportional to some power of the "stock" of ideas?

Like, how do you even measure an idea? The paper feels like the author has done a load of maths and shoehorned one particular interpretation onto his equations.

Re: Taxing Top Incomes in a World of Ideas [pdf]

#20

Post by cjg » Fri, Jan 11, 2019, 10:20 AM UTC

What this fails to account for is that the tax raised by taxing the top incomes also has benefits for society - through government spending.

It's a trade-off: higher tax revenues vs higher innovation.

I suspect that the impact of higher taxes on innovation would be relatively small compared to the benefit of higher tax revenues.