Are super-rich people just better at making money? • Hacker News Board

Re: Are super-rich people just better at making money?

#91

Post by imgabe » Thu, Dec 22, 2022, 9:44 AM UTC

gjulianm wrote: post #43

dhruval wrote: post #11

This smells misleading / overly simplistic but I can’t quite quite put my finger on precisely why? Some thoughts - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win) - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggreg…

Some counterpoint thoughts: > - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win) Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which…

In the real world, there is more than one sandwich seller and they compete with each other. When was the last time you non-consensually bought a sandwich?

Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice.

Indeed, sandwiches are abundant and affordable.

Re: Are super-rich people just better at making money?

#92

Post by WalterBright » Thu, Dec 22, 2022, 9:44 AM UTC

gjulianm wrote: post #24

bloodyplonker22 wrote: post #4

The example that is used in this blog post is completely and absolutely wrong. He portrays wealth accumulation as a zero-sum game with people coin-flipping against each other. In reality, someone does not have to lose for wealth to be created.

No, but it's a decent approximation. Even in the case of "creating wealth", the person with more money usually gets a bigger share of the money simply because they had more money. This being Hacker News, I think we all are too close to the tech startup model, which is certainly far more equitable than others; but a lot of companies do not share fairly the value created between workers and owners.

> simply because they had more money

It's because they took on more risk. The bigger the risk, the bigger the payout. The safer the investment, the lower the payout.

> do not share fairly the value created between workers and owners.

They do if one considers risk.

Re: Are super-rich people just better at making money?

#93

Post by simonswords82 » Thu, Dec 22, 2022, 9:44 AM UTC

bmitc wrote: post #79

dismantlethesun wrote: post #73

Earlier quoted context omitted.

If you are wealthy and refuse to earn an income, then your savings will eventually deplete and you’ll become bankrupt. Additionally they wealth already taxed in a previous era, and is currently taxed in this era any time they spend it via sales tax. If of course you are spending all your money on personal groceries as a billionaire, then I’m 100% fine with not taxing you.

I don't think any individual should be a billionaire. There's no conceivable reason for a single person to need or have the right to be a billionaire.

I'm not saying I agree or disagree with this stance but at a practical level it's interesting to think about.

Let's say life is a computer game, and once you max out at $1bn in earned wealth (presumably this includes liquid and illiquid assets such as properties, cars etc), you cannot accumulate more wealth.

How does a government enforce this stance? You cannot stop say Bill Gates shorting Tesla and earning millions from the trade, can you?

Can you stop a landlord renting out their properties to block further income from them?

What about interest generated from bonds or savings accounts?

Do you simply tax the shit out of people if they have over £1bn in wealth?

The big challenge I see for all of this is that rich people have the best (and most expensive) accountants/lawyers money can buy. If you try to tax the shit out of them, their accountants and lawyers will find a way around it.

Also, if one government is too heavy handed, they'll just move assets to another more lenient government.

Re: Are super-rich people just better at making money?

#94

Post by SilverBirch » Thu, Dec 22, 2022, 9:44 AM UTC

bawolff wrote: post #47

smilekzs wrote: post #21

Earlier quoted context omitted.

One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income. Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and be…

As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.) I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate. And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of th…

Is this really... true? I get that there's this idea in people's heads that you couldn't tax for example some incredible rare art collection, because who is to say it's true value and you damage the owner by applying such a tax burden they actually have to sell the art. But let's take a step back. Where is the real money? Bezos, Gates, Buffett, Page, Brin, Ellison, Ballmer, Bloomberg, Zuckerberg. Further down the list the same thing is true - the people with wealth actually have the vast majority of their wealths in companies. It's not difficul to liquidate, it's not difficult to value them, it's actually quite comically easy. Even the guys who actually do have enormous art collections are almost all art dealers, they can and do liquidate their investments all the time.

On to the core question: how much is the stock in the non-public company you work at really worth? I don't know, sell it and we'll find out. A SWE with illiquid stock probably actually has a much shorter timeframe of when they want a liquidity event than the US government has.

The truth is that the reason it's difficult to tax rich people is because the first thing anyone does in this conversation is talk about how hard it would be, without thinking for a second if it actually would be hard. Let's lay aside any talk of real wealth taxes, and just stick to our current tax system, Elon Musk borrowing against his Tesla stock is not a taxable event. Let's change that today. It's specific, easy, would immediately drive revenue, and doesn't require any innovation around true wealth taxes. But... we won't, because it's not difficult, the government just doesn't want to do it. What does that mean? The burden of tax is primarily put on income not wealth, meaning your SWE with non-public stock is already getting absolutely pounded with taxes on their income instead.

Re: Are super-rich people just better at making money?

#95

Post by wizofaus » Thu, Dec 22, 2022, 9:45 AM UTC

oli5679 wrote: post #45

The model is zero-sum, there are no gains from trade, the people just speculate. In this context, trading is harmful and this type of activity should be banned, or at least heavily taxed. If economic activity is valuable, but leads to inequality, then you need some framework to trade off the value created vs. the social benefits of greater equality.

I did think that but even if you extended the model to be one where money could be created via "successful" investments, I suspect much the same result would transpire - wealth would concentrate fairly rapidly if everyone kept re-investing %x of their wealth, such that a certain % of investments would result in wealth creation and others simple loss of funds.

Re: Are super-rich people just better at making money?

#96

Post by [deleted] » Thu, Dec 22, 2022, 9:45 AM UTC

dismantlethesun wrote: post #73

smilekzs wrote: post #21

Earlier quoted context omitted.

One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income. Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and be…

If you are wealthy and refuse to earn an income, then your savings will eventually deplete and you’ll become bankrupt. Additionally they wealth already taxed in a previous era, and is currently taxed in this era any time they spend it via sales tax. If of course you are spending all your money on personal groceries as a billionaire, then I’m 100% fine with not taxing you.

[deleted]

Re: Are super-rich people just better at making money?

#97

Post by gabesullice » Thu, Dec 22, 2022, 9:45 AM UTC

This is a dishonest piece. It ignores that it's based on a zero-sum game and the world isn't zero sum. The quoted economists know that very well.

I like that the coin flip game illustrates the concept of compounding interest, but it doesn't model wealth creation at all.

Most new ventures aren't I-win-you-lose, they're we-win-or-I-lose. Wealthy people really can take bigger bets more frequently like the article suggests, but it's not necessarily at the expense of everyone else.

A more accurate illustration would be a game where each round you have a choice: bet 25% of your money or recieve $0.30. After each round, you must pay $0.25 to play again. Some people start the game with no money, some people start with $1.00.

If you think this game through, you'll still end up with super wealthy outliers and bankruptcies, but the players in the game actually have some agency.

Re: Are super-rich people just better at making money?

#98

Post by bmitc » Thu, Dec 22, 2022, 9:45 AM UTC

nemo44x wrote: post #28

bmitc wrote: post #3

To solve all this, it's pretty simple, and the U.S. actually used to do it: heavily tax the super rich. Heavy taxation and then appropriate use of those funds for education, R&D funding, infrastructure, etc. is actual trickle-down economics. And mega corporations should be heavily taxed instead of holding the country economically hostage. They jumpstart their companies off of government funding and R&D and then act a…

The problem with this live of thinking is that in reality most taxes are paid by wealthy people. The majority of people actually pay 0 taxes and in fact receive credits above their burden of 0. Whine there’s certainly room to address fair taxation rates we should seriously consider how we spend tax revenues today. A 1.5 trillion omnibus is being rushed through Congress that’s full of pork and special interests. We ju…

That's not a problem at all. The concern is not the absolute dollars paid. The concern are the percentages and the concentration of wealth. That the rich pay a lot of tax is basically immaterial except that it points out just how skewed the wealth distribution is.

The "rich pay the majority of taxes" is an excuse.

Re: Are super-rich people just better at making money?

#99

Post by lelag » Thu, Dec 22, 2022, 9:46 AM UTC

bmitc wrote: post #76

bawolff wrote: post #47

Earlier quoted context omitted.

As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.) I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate. And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of th…

The rich buy stuff, do they not? Tax those things to force realization and thus tax of unrealized wealth. Buying a second, third, fourth home? Here's your increasingly high tax and interest rate penalty. Instead of throwing up our hands with "they don't have cash", force them to realize investments into cash and deincentivize being able to keep everything hidden being investments and purchasing things with unrealized…

> Buying a second, third, fourth home?

It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.

Re: Are super-rich people just better at making money?

#100

Post by vladvasiliu » Thu, Dec 22, 2022, 9:46 AM UTC

bawolff wrote: post #47

smilekzs wrote: post #21

Earlier quoted context omitted.

One thing I've noticed consistently, is when politicians talk about "taxing the wealthy", they almost always follow that with "earning more than $xxxk a year". This is conflating wealth with income. Being within this tax bracket myself, I do not deny that I am biased, but I do hope this bullshit gets called out hard whenever someone brings up yet another underhanded measure to milk us (typical SFBay SWE) above and be…

As a practical matter, it is very difficult to tax wealth (and even harder to do it fairly.) I don't think the issue is lack of will but lack of plan that actually works in the face of assets with unclear value and/or difficult to liquidate. And this doesn't just affect the ultra rich but people like SWE too. How much is the stock you have in the non-public company you work at really worth? SWE are probably one of th…

But as far as I understand, the stocks, and other difficult to liquidate assets, as log as you hold them in that form, are worth "nothing". You can't go buy bread with that, not even a house.

At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.