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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.
The rich, depending on how rich, spend ridiculously small percentages of their income. The poor spend every dime. A consumption tax will immediately transfer the bulk of taxation to the poor and middle class. The Ultra rich like the idea of consumption taxes because 99.999% of their money is sitting in long term trusts making 10% and will never ever get spent.
Contrast that with what Gates wrote:
thanks to the rise of the middle class in countries like China, Mexico, Colombia, Brazil, and Thailand, the world as a whole is actually becoming more egalitarian, and that positive global trend is likely to continue.
Well, ok, so that's the exact opposite of Piketty. He then attacks directly Piketty's point that wealthy people increase their wealth. He suggests that the also spend their money, both on consumption and philanthropy, and that rentier families tend to lose their money. To back up his point, he looks at the Forbes 400:
About half the people on the [Forbes 400] are entrepreneurs whose companies did very well (thanks to hard work as well as a lot of luck). 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.
Finally he goes on to give his own ideas about taxation. In other words, Gates is using this book as a stimulus for his own ideas, and he found it very stimulating.
And now I've done a review of Gate's review. I feel so meta.
"First they came for the slanderers and i said nothing."
The tax code already encourages people to go into debt. And to speculate, and to set up shell corporations around the globe. Apple borrows billions rather than re-patriating the billions they already have parked offshore. Because they can deduct the costs of borrowing, but have to pay taxes when they re-patriate.
And that's not an argument for not taxing corporate profits, it's an argument for closing stupid loopholes. Governments need revenue (yes, they do), and somebody's got to provide it. How much revenue is not relevant to this discussion of inequality - sure, you should spend more than you take in, okay. What matters is the best way to generate the money you spend in order to have a society that works well for the biggest portion of the population.
Gates' idea of a progressive consumption tax may address the issue as he sees it, but it's completely impractical to implement - as well as not really being very progressive, because as noted by others here, the richest people consume the smallest portions of their wealth. Perhaps the most efficient and fairest form of wealth taxation is the estate tax. To ask how that tax has been recast as the murder of all that's American (think of the family farms!!!! what family farms?) is to ask what's wrong with the corporate, think-tank formulated framing that the corporate, lazy media spit back unfiltered.
But at least Gates is acknowledging the problem, and laying blame where it belongs - at the feet of unregulated Capitalism.
Posted from my Android phone. Oh, I can change this? There, that's better...
The summary has it wrong. Piketty argument is not against "unchecked capitalism." His argument is that lower growth leads to wealth inequity, which implies a host of social ills such as increased income inequity, class stratification, etc. He goes on to argue that the current golden period of income equity and class mobility – 1950s to the 1980s was due to a golden period of growth. He believes that we are returning to a more normal growth rate of 2% - which was the norm for the past 300 years. If we can't increase the growth rate – which he thinks we can't – the only way to avoid the social ills is wealth redistribution via taxation.
I think his arguments that lower growth leads to greater wealth inequity are very persuasive. He has posted his very extensive research on his website. I think his other points are valid and interesting but I give them less weight.