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Why Inequality Matters

gatesnotes.com

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Re: Why Inequality Matters

#141

Post by LLWM »

mkempe wrote: post #56
GuiA wrote: post #46

> Take a look at the Forbes 400 list of the wealthiest Americans. About half the people on the list are entrepreneurs whose companies did very well (thanks to hard work as well as a lot of luck). Contrary to Piketty’s rentier hypothesis, 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. In America, that old mon…

Maybe these "older countries" should try --for a century or two-- laissez-faire capitalism and a government limited to the protection of individual rights.

It would probably make more of a difference if they tried for a century or two expanding into a sparsely populated, resource-dense area many times their current size.

Re: Why Inequality Matters

#142

Post by humanrebar »

yequalsx wrote: post #131
brandonmenc wrote: post #118

Earlier quoted context omitted.

My grandmother's uncle left an estate over five million. She then burned through the entirety of her share paying for her stay in a nursing home when she couldn't speak or wipe her own ass, so the taxpayers didn't have to. Everything's not as simple as you think.

I suppose you think your grandmother ought to have been able to keep the millions while having society pay for her care. Does that seem fair to you? The estate tax issue is not in any way related to the issue of health care for the elderly.

Nobody said that. It's a fair point that five million dollars isn't as much money as it seems, especially when accounting for healthcare costs.

If the government took most of that money, this grandmother would have burnt through the remaining money quickly and ended up on government-assisted healthcare with much less choice about the kinds and quality of care. It's very pertinent.

Re: Why Inequality Matters

#143

Post by k-mcgrady »

harmonicon wrote: post #121

I have a lot of respect for Bill Gates because of his philanthropic efforts. However, I am very skeptical of the consumption tax argument. To me that sounds like a sales tax and sales tax is regressive. i.e. Tax on French baguette hits the poor more than the rich, since as a group they consume way more baguette. Even if it is just a special sales tax that targets the rich only, discouraging spending by people with mo…

People seem to be having a hard time with the consumption tax argument. I may be completely wrong but here's how I interpret it:

1. Like income tax you have various 'bands' 2. The more you spend/consume they higher the band you are in 3. Lower bands pay less 4. Someone with little money buying just the essentials consumes e.g. $10,000 per year. Band 1 (a tax of say 10%) starts above $10,000 and thus this person is exempt. 5. If you buy Ferrari's, mansions etc. and consume $5m per year you would be in one of the higher bands and would pay a higher tax rate (say 40%).

In other words the little people keep all their money as it's only spent on essentials. People who have disposable income pay back a percentage of what they spend.

Your argument that it would discourage spending and be bad for the economy is fine but I don't think it would hit as bad as you think. Say I can afford to spend $1m on a car but because of the 40% consumption tax it will actually work out as $1.4m at the end of the year will I still buy that car? Chances are that $0.4m isn't a big deal to me. Sure I might not like it but I probably have enough disposable income that I'll pay it.

The key is getting the tax bands correct so that your disposable income is still high enough that after the tax you will still buy the item. You will have less purchasing power but the money going into the tax system could be used to offset the decline in economic growth.

Re: Why Inequality Matters

#144

Post by peteretep »

mkempe wrote: post #56
GuiA wrote: post #46

> Take a look at the Forbes 400 list of the wealthiest Americans. About half the people on the list are entrepreneurs whose companies did very well (thanks to hard work as well as a lot of luck). Contrary to Piketty’s rentier hypothesis, 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. In America, that old mon…

Maybe these "older countries" should try --for a century or two-- laissez-faire capitalism and a government limited to the protection of individual rights.

    > Maybe these "older countries" should try --for a century
    > or two-- laissez-faire capitalism and a government
    > limited to the protection of individual rights
I used to work at an 800 year old pub. American tourists would helpfully come along and tell us we'd gotten the location all wrong.

Re: Why Inequality Matters

#145

Post by brandonmenc »

danielweber wrote: post #133
brandonmenc wrote: post #95

Earlier quoted context omitted.

> I’m also a big believer in the estate tax As a third-generation American, I find the estate tax, even in its current form, extremely offensive, because it strives to reset every generation to zero instead of letting families establish themselves over time by building on the sacrifice and efforts of the parents. The current level of taxation, even though it's been recently, "graciously" increased, greatly extends th…

> People will say, "wow five million dollars, that's a lot!" Not really. Yes really. I have many issues with the estate tax (and I also have many issues with not having an estate tax), but when you find yourself complaining about how little a million dollars is, you really need to stop before you lose your entire audience.

Yes, a pile of five million dollars is a lot.

An estate worth $5M, which is then taxed at 40%, the remainder of which is distributed amongst any number of heirs, each of whom may then be obligated to pay an additional income tax on that - ends up being far less.

Especially in a country where you're expected to pay for your own education, health care, and retirement.

Re: Why Inequality Matters

#146

Post by saalweachter »

simonh wrote: post #90
saalweachter wrote: post #42

Earlier quoted context omitted.

The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about. People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. They're worried about maint…

Interesting argument, but surely you don't think the world needs less investment? So if you're going to tax away money that would otherwise be invested in creating businesses and jobs, what do you think should be done with it instead? Or do you think the state is a more efficient investor of capital? I do agree that wealth is a potent weapon, but that's why capitalism works best when markets, and politics are well re…

If your issue is the social problems associated with extreme inequality, it's ultimately just a question of whether the tradeoff is worth it, rather than whether it grows the GDP faster or slower. There are a million ways we could restructure society, with a million consequences for the economy and the social good. It's all a matter of picking the tradeoffs we can all live with.

That being said, wealth redistribution doesn't necessarily need to mean less private sector capital investment. If you take a billion dollars away from someone who would have invested it and give a thousand each to a million people (whether through highway robbery or through raising taxes here and lowering them there), there's no reason they can't invest it all. Hell, they could invest it in a fund managed by the former billionaire, and you'd have the same amount of investment managed by the same people.

That situation is unlikely, but it also discounts the value of investments besides the sort that billionaires tend to make. While some redistributed wealth might be reinvested or 'wasted' on consumption, there are also be a lot of small investments that happen when you share the wealth. Children eat better, which improves their futures in pretty much every way. People start more small businesses, bodegas and farm stands and hair salons and startups. People spend money on education, for themselves and their children.

That sort of investment is also vital to our economic future, no less than the capital liquidity provided by the billionaires.

Re: Why Inequality Matters

#147

Post by Omniusaspirer »

brandonmenc wrote: post #95
r0h1n wrote: post #10

I must say Bill Gates, in his post Microsoft avatar, continues to surprise me constantly. This is a refreshingly candid and sanguine review of Piketty's book from someone who was a ruthless capitalist not so long ago. Gates rightly (and self-servingly) also points out that Piketty does not consider philanthropy as a means to correct some of capitalism's imbalances. Here's a few of Gates' conclusions: > Piketty is rig…

> I’m also a big believer in the estate tax As a third-generation American, I find the estate tax, even in its current form, extremely offensive, because it strives to reset every generation to zero instead of letting families establish themselves over time by building on the sacrifice and efforts of the parents. The current level of taxation, even though it's been recently, "graciously" increased, greatly extends th…

It's just a different mentality towards life and entitlement- there's nothing sad about it.

Hitting all your points in order:

1) 1 million dollars is a lot of money to come out of nowhere. It's simply dishonest to pretend that isn't a life changing amount for a middle class family. At the very least it's going to be like you said- modest home paid off(100-500k), car loans all paid off(50k), and student loans paid off(300k if your kids went to expensive schools and you have 3 of them). I'm really not seeing why anyone should be entitled to never work again simply because their parents made a lot of money. (With that said, my parents didn't choose to bury themselves in debt and could have retired instantly if they received this inheritance when combined with the investments they already had)

2) It's absolutely a lottery. Trying to cloud this issue with "oh well the parents potentially weren't there as much and that emotional cost is easily worth a few million" is disingenuous. It makes the assumption that money has no influence on the quality of the child's upbringing and "time spent with kids/day" is the only metric worth mentioning.

3) Being taxed when you're dead isn't a tax to me. At all. I understand this is a personal opinion but you should have the same understanding regarding your own opinion here. When I'm dead I no longer feel entitled to anything I gained in my lifetime- it's not like I'm ever going to use it again. I also don't feel my kids are entitled to it just because they happened to be born (effectively via lottery) to me.

To suffice:

Let the fruit of my efforts benefit society/humanity as a whole. It was my goal in life and ought to be in death.

Re: Why Inequality Matters

#148

Post by m0th87 »

humanrebar wrote: post #120
ska wrote: post #87

"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." What you do see though, in the same Fortune 400 list is that 6 of the top 10 people on that list didn't build their companies (in the sense that Bill Gates did), they inherited them. I don't know how much the current crop Kochs or Waltons are responsible for t…

> What you do see though, in the same Fortune 400 list is that 6 of the top 10 people on that list didn't build their companies (in the sense that Bill Gates did), they inherited them. But 10 out of the top ten did not have billionaires for grandparents. The Kochs and Waltons are second-generation billionaires. They're not the product of hundreds of years of steadily accumulating wealth. So there's a flaw in the thes…

Piketty addresses this specifically in pointing out that wealth had to be reconstructed almost from scratch following WW2. If you buy his thesis, then this wealth will be inherited by third- and fourth- generation billionaires next, unless another shock at the scale of WW2 happens.

Re: Why Inequality Matters

#149

Post by pjc50 »

jdimov wrote: post #104
saalweachter wrote: post #42

Earlier quoted context omitted.

The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about. People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. They're worried about maint…

You shouldn't be afraid of the Gates and Buffetts of the world. These guys have found their place, they know their value and their worth and they know how to create wealth for themselves and for others. They are secure, confident, valuable human beings. You should be FAR more afraid of all the incompetent "big shot" politicians who somehow have access to power but, due to their insecurity and low IQ, only use it to b…

What about the Kochs and Murdochs of this world? Since you mention Russia, what of the high level of corruption and organised crime that seems to be required to be rich there?

Re: Why Inequality Matters

#150

Post by humanrebar »

Kalium wrote: post #128
humanrebar wrote: post #124

Earlier quoted context omitted.

No, it just makes subjective value judgements on what is "good" and "bad" capital. Oversized primary residence? Subsidized. Equivalent amount of money in a retirement account? Subsidized. Equivalent amount of money in a stock? Not subsidized.

Or you could just tax capital without judging it. That's also possible.

I'm skeptical considering that income and spending isn't taxed that way. And existing capital taxes (property taxes, estate taxes) don't work that way.
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