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Bill Gates: Piketty's Attack on Income Inequality Is Right
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.
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.
As always, all IMO. Insert "I think" everywhere grammatically possible.
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.
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.
The guy who said the election was rigged won the presidency with the second-most votes.
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.
Lacking <sarcasm> tags,
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.
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%.
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.
--- Most topics have many sides worth arguing, allow me to take one opposite you.
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.
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.
Inequality isn't a problem because rich people MAKE more than poor people. We should encourage people to create as much wealth as possible.
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.
~ Whence do you come, slayer of men, or where are you going, conqueror of space?
That's right: for example, cost of goods sold is a deduction from gross income. So is business rent and utilities. Eliminating Schedule A itemized deductions (i.e., deductions from *net income*) is a relatively trivial simplification of the process. Sure, a flat tax may be somewhat simpler for most people who can file, say, a 1040-EZ or 1040A, but the vast, vast majority of tax issues and audits relate to what exactly constitutes net income. Can or should I deduct business-related meals? To what extent? Promotional expense? Sure, most would agree that office rent is a proper deduction, but who decides if a suite at the local ballpark for the purpose of marketing to clients is a legitimate, deductible business expense? What is the most effective way to amortize/depreciate capital assets and equipment? How about compensation? What's "reasonable?" That is indeed 99% of the complexity of the tax code, and would not be touched by a "flat tax."
TANSTAAFL
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...
Posted from my Android phone. Oh, I can change this? There, that's better...
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."
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.
"I opened my eyes, and everything went dark again"
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.
Lacking <sarcasm> tags,
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/
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.
[Fuck Beta]
o0t!
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.
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.
The guy who said the election was rigged won the presidency with the second-most votes.
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.
If telephones are outlawed, then only outlaws will have telephones.
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.
The best thing about UDP jokes is I don't care if you get them or not
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.
I dont read
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.
-Clio
Karma: Bad (mostly from not giving a fuck)
Blog: http://clintjcl.wordpress.com
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.
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.
-Forrest Cameranesi, Geek of all Trades
"I am Sam. Sam I am. I do not like trolls, flames, or spam."