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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.
Come and see the violence inherent in the system!
Faster! Faster! Faster would be better!
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,
The Fair Tax solves this by giving everyone a subsidy equal to the amount of taxes that would be paid at a certain income level (directly related to the poverty line, I believe). Everyone essentially pays no taxes on necessary food/housing/etc... So it's actually better for the poor than the middle and upper classes. I'm sure that most consumption tax proposals do something similar.
I don't want to achieve immortality through my work. I want to achieve it by not dying. - Woody Allen
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.
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.
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.
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."
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 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 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!
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
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