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Taxing Top Incomes in a World of Ideas [pdf]

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

#21

Post by ForHackernews »

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…

> He threw that away to take a massive personal risk to build Amazon. Would he have done that if you capped his potential reward at $10mm?

The unexamined premise of this question is that society at large benefits from the existence of Amazon and should want to encourage the creation of similar Amazon-like enterprises.

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

#23

Post by nabla9 »

soVeryTired wrote: post #19

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…

That's exactly what he has done and there is nothing wrong with that when it's done right (Charles I. Jones is a top man).

>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?

System dynamics can be modeled with numbers that can never be measured or are hard to measure. The exact number of working hours and capital spend to produce innovation is hard to measure and approximations (like what companies announce or number of patents) don't capture the whole picture. It's still reasonable to assume that the number exists.

Optimal taxation and economic growth are big subjects and this paper is not trying to solve it or propose a policy. The paper explores the dynamics of taxation and growth under three conditions mathematically ignoring the rest. Trying to see how big effects small changes can have is interesting.

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

#24

Post by alkonaut »

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).

But does Amazon provide a large net value? Google I can understand provides a service we didn't have, but amazon just provides "selling stuff" - something that was possible before too. If anything, Amazon now sells tons more stuff using a lot fewer jobs, so what is the net contribution Amazon does to the US economy in terms of job creation, tax revenue, and the Global ecnonomy?

If anything, a lot of the megacorps just seem to kill smaller business while at the same time being better at not paying taxes.

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

#25

Post by mbrumlow »

sooheon wrote: post #13
dahfizz wrote: post #11

Earlier quoted context omitted.

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 $8…

I think you underestimate how much welth is used as a proxy to guage prestige, power, and influence amung the super rich.

People with drive don't do it to just be one of millions to reach a given milestone. People with real drive don't enjoy doing something that many before them have done.

Guys like Jeff clearly set out to be the best. Breaking the score bord could very well prevent something like Amazon, and we might have ended up knowing Jeff as the guy who has the largest POG collection.

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

#26

Post by rollthehard6 »

alkonaut wrote: post #24
dahfizz wrote: post #11

Earlier quoted context omitted.

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).

But does Amazon provide a large net value? Google I can understand provides a service we didn't have, but amazon just provides "selling stuff" - something that was possible before too. If anything, Amazon now sells tons more stuff using a lot fewer jobs, so what is the net contribution Amazon does to the US economy in terms of job creation, tax revenue, and the Global ecnonomy? If anything, a lot of the megacorps jus…

Whilst I sympathise with this view, it does ignore AWS and the value it provides to the businesses that use it, many of whom are SMEs/startups that might have struggled to get going otherwise.

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

#27

Post by nabla9 »

mirajshah wrote: post #9
jacknews wrote: post #6

"by slowing the creation of the new ideas ... top income taxation ..." Is this proven anywhere? I don't believe high taxation reduces innovation, in fact perhaps the opposite is true overall.

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…

Applied innovation is risky requires investments into new devices, training, new logistic chains etc.

>Hall and Woodward (2010) provide a different perspective. Using an extensive data set on venture capital funding from 1987 until 2008, they show that the returns to entrepreneurs are extremely skewed: nearly 3/4ths of entrepreneurs receive nothing at exit, while a few receive more than a billion dollars. An entrepreneur with a coefficient of relative risk aversion of two values this lottery with a certainty equivalent of only slightly more than zero. An implication is that the tax rate that applies to the successful outcome can have a substantial influence on entrepreneurial activity.

I find it hard to see how taxation does not disincentivize applied innovation in the margin.

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

#28

Post by wj »

alkonaut wrote: post #24
dahfizz wrote: post #11

Earlier quoted context omitted.

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).

But does Amazon provide a large net value? Google I can understand provides a service we didn't have, but amazon just provides "selling stuff" - something that was possible before too. If anything, Amazon now sells tons more stuff using a lot fewer jobs, so what is the net contribution Amazon does to the US economy in terms of job creation, tax revenue, and the Global ecnonomy? If anything, a lot of the megacorps jus…

Efficiency. By using Amazon I save time and can use the time saved to create something of value or to bill more hours or something else that will lead.to more tax revenue.

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

#29

Post by ip26 »

mbrumlow wrote: post #25
sooheon wrote: post #13

Earlier quoted context omitted.

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 $8…

I think you underestimate how much welth is used as a proxy to guage prestige, power, and influence amung the super rich. People with drive don't do it to just be one of millions to reach a given milestone. People with real drive don't enjoy doing something that many before them have done. Guys like Jeff clearly set out to be the best. Breaking the score bord could very well prevent something like Amazon, and we migh…

Ok so he's a guy with insatiable drive, a hunger for success, a need to be the best- aw, hell, tax rates are a bit too high, why not throw in the towel?

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

#30

Post by alkonaut »

rollthehard6 wrote: post #26
alkonaut wrote: post #24

Earlier quoted context omitted.

But does Amazon provide a large net value? Google I can understand provides a service we didn't have, but amazon just provides "selling stuff" - something that was possible before too. If anything, Amazon now sells tons more stuff using a lot fewer jobs, so what is the net contribution Amazon does to the US economy in terms of job creation, tax revenue, and the Global ecnonomy? If anything, a lot of the megacorps jus…

Whilst I sympathise with this view, it does ignore AWS and the value it provides to the businesses that use it, many of whom are SMEs/startups that might have struggled to get going otherwise.

Yes I was considering only Amazon the online store and its value compared to having multiple other/smaller stores - both physical and online.
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