It's absurd to put together hedge fund managers making $30 million a year with the established doctor who works two blocks from your house making $250k. These are entirely different phenomena.

You can see it by the section where they realize, shockingly, that the most common workplace among the 1% is the doctor's office. Well, duh. That's what makes it so clear that the 1% is much too broad of a target.

When people (innumerately) rage against the 1%, they're not thinking of real estate agents and local doctors and lawyers and dentists and university or hospital administrators. But that's who the 1% is.

Another issue is that said narrow group is incredibly skilled in exploiting whichever rules are enforced, buying elected officials from all three branches of US government under the current campaign finance rubric and generally making sure their interests are first.

Folks whom have tax accountants, tax attorneys and investment managers are able to hyperoptimize purposefully-byzantine tax code while grandpa does TurboTax (in the US, take a look at the 1040 (full, non-EZ form) for all the odd, special interest tax deductions which clutter up forms and have the own extra forms (Schedule _)). Complexity is a game to catch the unweary, confuse most people and create an official "elite qualifying miles" gambit to reduce taxes in "certain" situations.

It comes down to whom has the most influence over collection, allocation and redistribution of taxation.

Today a successful entrepeneur can go directly international, and with a client base that includes not only the US and Western Europe but also a huge (and quickly growing) middle class all over the world. This is several orders of magnitude the potential reach than 50 years ago. Successful entrepeneurs make billions not millions anymore.

So it's not absurd that we end up with more extreme wealth in the top .01%, and I think it is kind of structural to a modern, global society.

If we focus on the 1%, or rather the delta between the 1% and the 99%, I think we are rather observing skill supply/demand mismatch. In the US and Western Europe there is an oversupply of unskilled or low-skills labour, driving their wages down (relatively to skilled labour). So they will do worse than the more sought after skilled labour. It can partially be mitigated with better education. But part of it is also structural. Not everyone can be a good programmer or engineer. Unless we find a way to change IQ distributions, we may have a long term problem here that we may not be able to solve.

I think the truly disgusting income inequality is at the top 0.01-0.001%. The overpaid CEOs who make absurd amounts of guaranteed cash. We have a tax code that absolutely incentivizes CEOs to look out for their salaries and one time cash bonuses rather than any stock grants they get.

We used to have a tax code that favored capital gains in the extreme, but now we overly favor income. Which would your rather have? A grant of 10 million dollars in a volatile asset that has a one year lock out period and a 20% haircut, or a guaranteed 10 million dollars with no lock out and an effective haircut of ~40%. You're losing only 20% of the money as a guarantee. Most people seem to be interested in the latter option.

Whenever we have debates about raising capital gains tax Republicans rightly point out that capital gains tax doesn't actually generate that much revenue for the US government. They're right, but that's insane, given how much wealth we generate every year.

I'm all for paying people well, but make them earn it!

The 'wedge' on the first dollar earned by a minimum wage worker is 15.3%.

And then don't get me started on the deductions, Mitt Romney's IRA etc. that mean those guys can don't even pay the 15%.

I don't think your math adds up...in NYC a huge cash bonus gets taxed at > 50% combined Fed, state and local. The CEO will always take something that's structured as future capital gain, not in 1 year, but whenever he decides to cash out.

The tax system and rent seeking in this country is a disgrace.

Capital gains is now 20%.

http://www.fool.com/retirement/general/2015/12/14/long-term-...

the idea that minimum wage earners aren't paying taxes is a nonsensical talking point with no basis in reality. It only works if you disregard FICA, which is economically unjustifiable and not done in other contexts (like quantifying big government's size and tax bite). The bottom line is there is a 15.3% wedge between what the minimum wage employer pays and what the employee receives, and that's what has economic impact. The EITC offsets a part of the wedge, but only a part of it.

You're right, but the reality is that even skilled workers rarely make it to the top 1%. In fact, they might not even find a job in their field.

Even if you're super-high-skilled and work in Silicon Valley as a programmer, your net income probably doesn't come close to the entry bar of the top 5%.

http://www.kiplinger.com/article/taxes/T054-C000-S001-your-r... suggest that it was ~$180K in 2013 (this is presumably on a per-return basis, which is neither individual nor household income, but likely much closer to the latter).

Top 5% household income is $220k.

As of the 2014 census.

At Google or equivalent, programmers can hit the household 5% bar ($220,000) within 2-3 years.

I am not saying it is easy, and perhaps the technology doesn't allow it yet, but undoubtfully this is a next step in the medical profession.

Sounds like "H1B visa holders are cheaper" to me. High quality engineers should be commanding on the order of $250k. In the absence of H1B visa holders lowering wages, that's what high quality engineers would command as an average salary; same as a good doctor or lawyer.

The main reason doctors and lawyers cost that much: you can't H1B them. Lawyer skills are too specific to a locality and subsection of the trade; for whatever reason, law school doesn't actually help with this -experience, networking (particularly for criminal law) and apprenticeship is how it ends up working. LLD is just a hoop that needs to be jumped through to get such apprenticeships. The AMA is the most effective labor union in America, keeping out highly skilled doctors from abroad by denying their skills validity.

Um... that is the definition of cheaper. In your own justification sentence. H1B must (should) be paid at your prevalent rate -- and this may not be what you consider a "reasonable" rate.

It seems grotesque when human beings in Silicon Valley are left with no viable option but to live in their cars or under a bridge, while folks tool around in their latest Lamborarri/Ferrambo. If some people can't be meaningfully trained or can't find a means of self-sufficiency, we cannot just allow them to freeze to death on the street. It's not civilized. (I asked and found out that a male on street without disabilities in Santa Clara County receives only ~$5/day in cash and ~$4/day for food.)

Certainly more people in the upper brackets may need to pay something more than now in order for all reach a minimum standard of living, but perhaps not quite as much as billionaires. A gradual tax on all income seems like the fairest, least complicated and straightforward method... say tax starting at $25k USD (adjust for inflation/cost-of-living) , then slope up to something like 35% for most people and 50% for the top end. It's a question really of what quality of infrastructure and social investment is desired, because debt isn't free.

I've also noticed the gradual labor oversupply in first-world, white-collar jobs... there's just not enough work to go around. China, India and others also have tons-tons-tons of unskilled labor as evidenced by frequent usage of more people in-lieu of mechanical equipment for small- & medium-scale jobs. This labor supply/demand imbalance seems attributable to peak global population and increasing productivity/automation.

Perhaps an underestimated crisis is the desperate need for more entrepreneurs to create new businesses which add more jobs in order to utilize more untapped, idle value, especially of groups which are traditionally marginalized from interviews, not just because of PR value, but some groups are really good at some things. (Autistic spectrum personalities seem to be quiet good at sorting/organizing/labeling, etc.)

They're just earning most of their income as capital gains or qualified dividends instead of ordinary income, so it's taxed at a lower rate. It's not really all that complicated.

Kill 3 birds with 1 stone.

Second, this is a part of doing business - you can leverage anything (real estate, stocks, bonds, etc)

Another example of an instrument that has benefited tremendously from our recent ZIRP + rising equity markets is the Grantor Retained Annuity Trust, which will likely leave a worse taste in people's mouths compared to Ellison's maneuvers. [1]

It is a fair point for people to ask whether these legal maneuvers should remain legal.

[1] http://www.bloomberg.com/news/articles/2013-12-17/accidental...

People like talking about fair and unfair, and the “spirit of the law”, but that all means something completely different to whomever is reading the law. What might seem fair to someone, won’t seem fair to others. I would assume a ton of “normal” people (i.e non entrepreneurs, income tax paying people) consider the loan thing to be unfair, but wouldn’t consider it unfair if they releveraged their own primary residence to achieve a similar result.

Second, if governments want to limit tax avoidance, they should learn to make proper laws (i.e. no half way, rushing something out of the door). A lot of laws are made in a half assed way. Stuff like this comes to mind: http://www.bloomberg.com/news/articles/2014-11-03/malone-gai.... ("He avoided paying taxes on his remaining stake, worth about $260 million, by exploiting IRS regulations meant to block a different loophole.")

Spot on! For the less finance lingo savvy, that simply means take a second mortgage/home equity loan or home equity line of credit (HELOC) for a vacation, to invest in another property, pay for college or other large expense, etc.

Though for better or for worse, we seem to be headed towards an age of populism, which may actually start to affect the consensus manner in which the laws are read.

And thanks for the article. :)

Debt != income

Explanations exist; they have existed for all time; there is always a well-known solution to every human problem — neat, plausible, and wrong.

We can ask all we want, so long as wealthy people buy politicians nothings drastic will happen.

raise capital gains taxes will hit everyone's retirement accounts including those least able to withstand it. the fun of indirect taxation is that when attempting to punish one group there is a lot of collateral damage

Changing how we tax dividends will cause a massive change in how the highly productive structure their income, and if it reduces risk, it seems to follow it reduce productivity.

For instance, our doctors who invest in their local firm might instead take a salary position at the local big box medical conglomerate and put in their 32 hours a week with Friday for golfing. Instead of 70 hours a week they were putting in at their local firm not counting early morning rounds at the hospital to check on patients.

0.0001% of 6 billion = 6000 people.

I would say that 6000 people easily control anywhere between 20% and 50% of the worlds wealth. Especially considering that if you research "How many billionaires are there?" You come up with something like this:

"A total of 1,645 people made the 2014 billionaire list, representing combined wealth of $6.4 trillion."

So taking the top 1000 billionaires, or perhaps even the top 100 or so, and then you have the families who really have enough money to control things. These would be the people that are impossible to get much information on, but who definitely hold a lot of sway over the planet.

I think these families are the ones we should be concerned with. Either them or once again a small proportion of them, numbering anywhere between 5 families and 100 families.

The 62 richest people in the world own as much as the poorest 3.6billion. In 2010 it was 388.

The 1% owns more than the rest of the world.

https://www.oxfam.org/en/pressroom/pressreleases/2016-01-18/...

All you're really doing here is observing that the 3.6bn poorest people are really poor.

This does not support your statement that "the 1%" owns more than the rest of the world.

However, that statement happens to be true. If you look at the Credit Suisse wealth report that those oxfam figures are cherry picked from, you'll find that the 1% (globally) comprises about half the population of the US.

It's you, in other words.

I agree, however, that "62 richest people own as much as poorest 50%" is really not that interesting. It might give a more astounding number to get the point across in the media coverage, but i. e. "x richest people own 50% of total wealth" would be much more interesting.

What is interesting though is that the number changed from 388 to 62 in just a few years. And the trend that the super rich become much richer even compared to very rich people. Take a look at this graph for example:

https://en.wikipedia.org/wiki/File:US_Census_income_discrepa...

(income discrepancies within the top 1.5% of households)

The problem is that since a few decades only a handful of people raked in all productivity gains.

http://www.newyorker.com/magazine/2009/06/01/the-cost-conund...

If your point was that nurse practitioners won't help that siutation a lot, then I agree (although I think nurse practitioners are still a great idea for other reasons). But I believe it's wrong to suggest this is not a real problem.

Similarly, salaries for top college and hospital administrators are routinely equally and exceeding that of your $30M hedge fund manager. Perhaps even worse, they justify this based on the size of the organisations they manage, which are easily inflated by hiring lots of non-teaching, non-clinical administration staff (not to mention mergers, which also give hospitals especially more market power to extract rents). It's all financed by easy money from student loans and from insurance/Medicare that doesn't have a choice.

So I totally disagree that looking at the 1% is unhelpful, because all of the things above are real problems that need to be solved even if you think inequality doesn't matter. Anyone born after about 1980 and anyone who has medical insurance or pays taxes is getting fleeced, and they're not getting better services for their money. Fixing that will make a much bigger difference in most people's lives than confiscating a bit from the hedge fund manager (though of course there's no shortage of screwed up incentives in finance to fix either).

Doctors work in an industry where compensation is strongly influenced by government policy. The government is the largest single payer for healthcare services due to Medicare and Medicaid which makeup roughly 40% of heath care costs in the US. The AMA lobbies the government heavily to ensure favorable rates on procedures paid for by those programs and thus ensures a high income for their members. So in the sense that a lot of their economic prosperity is derived from their political influence they aren't all that different from any other wealthy person who lobbies the government for tax breaks and other economic advantages.

In the past they did create wealth, by actually founding those successful businesses. Of course that might have been luck and markets aren't perfectly fair, so maybe they don't deserve 100% of the profits. But still they did create something of value, at one point in time. A thing which continues to produce value today. It's not like Walmart just materialized out of the aether and Sam Walton just happened to find it first.

Of course deontological arguments are silly and it's impossible to know who "deserves" what. I think a consequentialist argument is much stronger, that taxing rich people and redistributing the money to everyone, creates more benefit to society than it harms.

You see where this is going. If Fred really was underpaid relative to the value he produces, why isn't he getting a better offer elsewhere? You could postulate there are lots of Freds bidding for his job, keeping wages low. But then were are the new companies being created for the simple purpose of hiring boatloads of Freds and making 10x their pay?

Being underpaid seems like an unstable state in a free market.

Someone taking $10/hr for $100/hr creation in value in order to get the job over the guy who offered $11 is what is actually happening.

Often when the greedy capitalist loses, everybody who works for him also lose. People talk about the risks capitalists take and try to compare them to workers using sheer dollar values. That valuation completely sidesteps the diminishing marginal utility of cash.

If a capitalist goes out of business and his $10 million factory ends up getting sold off for a net of $3 million after paying his debts, we can say he lost at least $7 million. His workers, on the other hand, don't lose anything but their jobs. However, those workers might have been living from paycheck to paycheck, leaving them far worse off than the capitalist who still has $3 million in his pocket.

Why would an owner do that?

Bob, Ted and you convene secretly and agree you won't poach each others employees or pay them more than $15/hr? And since you're the only game in town and can afford to undercut any competition until they're run off, everyone's forced to deal with it.

For example, suppose I have a machine that, when a lever is pulled, it manufactures a gold nugget. A worker is needed to pull that lever - but is the bulk of the value being created by the worker or the machine?

It gets down to how one does the accounting for productivity. Get it too far wrong and one is likely to go out of business.

Unions have sometimes priced themselves out of the market, meaning the business closed. Didn't that happen with Hostess?

Not everyone has good information about this market. I don't get to see how much someone paid for Fred's labor. That means someone is likely to underbid for my labor if I'm in the same business, to which I must take time to convince them otherwise. I can also try to get them to overbid for my labor, to which they must convince me otherwise. And off we go to the negotiation. Why is it good that we have different people producing similar levels of output and are paid differently?

As a Fred, assuming you want to continue to be an employee, you should sell your labor to the employer who gives you the best overall deal for you. As an employer of Freds, you should seek to get the best mix of Freds you can for the lowest sustainable rate. Bringing in other actors to arbitrate and equalize pay doesn't add anything that the actors in the system can't already do, IMO.

(Maybe Fred1 values that his employer allows dogs, or has bike parking, or is a short walk from his house. Maybe Fred2 likes his employer's stance on social issues, or benefits package, or likes working 4-10s instead of 5-8s. How will the central pay authority value those things better than independent actors making their own choices?)

If the market was actually fair, it would be a lot easier to do a startup or a small company and start competing.

I was thinking more along the lines of ALDI, which never took a loan or credit, and was started by the two brothers taking over a tiny store from their father, and later expanding into a global chain.

And one way to do that is to put taxes on taking exorbitant capital returns as personal income; build something you want in the world with it instead (and in the process put it back into the economy). Another way, and one I'm partial to, is to institute a basic income, that way people will never work for exploitative wages, will always have a base of capital to pull from, and will bring the labor market to something much closer to a free market (where price discovery will actually work).

And this very same difference applies not only to financial investment but also to how young people approach the topic of careers: with a golden spoon fat enough to feed them and their future children for the rest of their life, people can focus 100% on aiming high. In fact they even have to, because it's their only chance of ever getting any sense of personal achievement. The lower ranks however have to split their attention between big dreams and ensuring basic hirability for when the big dreams fail. This distraction alone should be enough to keep the dynastic wheel rolling.

And maybe another thought, I don't really want it to be part of my argument, because I think it is too speculative, but I think it is an interesting idea to consider: there might be a little Dunning-Kruger at work here as well. What if the most intelligent 99ers would focus the strongest on hirability/food on the table, due to being least delusional about actually making it into 1% territory? Then the only people who are both intelligent and aiming high would be golden-spooners who got lucky with both brain and parents, while their less intelligent peers would duke it out with equally not-so-intelligent risers. Certainly no rule as in "refuted by a single counterexample" (as I'm sure there are many), but maybe one of the forces at work nonetheless.

Edit: see "Edit" in https://news.ycombinator.com/item?id=11364978 , totally missed the part about 1% vs 0.1%. This all applies much less there, but still somewhat, because the "rich dentist" from the original article would surely be closer to middle class than to dynastic wealth in most aspects. Offspring will enter the workforce knowing that they will eventually need to put their own food on the table and personal investment strategies will still revolve around sustaining a given lifestyle until the end, not around concentrating power.

Very insightful. This may get me pilloried in this thread, but that's the exact amount and structure of wealth that I'd like to give my kids (it will never be 0.01% level, but with the right structure, I think it's possible to provide a private "basic income" to them). I don't want them to have a golden/silver spoon, but in my own life and estate planning, an important goal for me is that I want to provide them with support, love, education, and a basic financial nut to underpin their life-nowhere near enough to do "nothing", but enough that they can take some risks and pursue what it is that they want to do, not what they must do to put food on the table and keep the lights on.

If you think in term of investment opportunities, clearly there are many investments that are only accessible to wealthy people, because of the amount of risk they involve, or because owning a tiny fractional share of a company is a sort of anomaly. Most investments (building, company, project) have few and require few investors, not the least to ensure proper governance.

But at one point the marginal benefit of the accumulation of wealth becomes zero. I don't think someone who own 1 billions lives much better than someone who owns 50 millions.

You are severely underestimating the importance of peace of mind. When you are poor, you are always worried about making rent. When you are middle class, you might be a few paychecks (or a hospital bill) away from insolvency. The wealthy don't have to worry about those things.

John Scalzi has an awesome post about the cost of being poor[1] on his blog.

http://whatever.scalzi.com/2005/09/03/being-poor/

Edit: d'oh, my reply is off-topic because I misread GP's post - missed that the distinction is between 1%ers and 0.1%ers. Considering that; I suspect the difference is in influence (my guess is the 0.1% are likely to be more 'politically involved' or better connected)

See https://en.m.wikipedia.org/wiki/Alice_Walton#Automobile_inci...

As others have said, even most of the top 1% isn't immune. They have to work to make money. Many people who are not billionaires probably spend more than they earn making them vulnerable to losing almost everything if they have to spend a year or two in prison.

In many places in the U.S. "look like they will" is synonymous with "having dark skin". What a horrible attitude and personal choices these people must have.

0: https://www.reddit.com/r/AskReddit/comments/4bpjxo/what_item... 1: https://www.reddit.com/r/AskReddit/comments/4bpjxo/what_item...

https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_i...

If you make most of your financial returns from capital gains, rather than income, you are in the 1%

In theory, if you own and live in a £1m home in London you are very wealthy, you could sell it and live off the proceeds in a cheaper place. But in practice you are not really wealthier than someone who owns a £200k home in a village. That home is likely much smaller and the population of London is not going to migrate away from London. Real estate bubbles have made parts of the population much wealthier on paper but they still live in the same houses than before the bubble.

Actually income has a similar bias. You can earn twice the median salary in the UK and still not afford to live on your own in central london. Most junior bankers live in flatshare, but are on paper earning much more than an average family in a cheaper village.

These bias are what I think make comparisons of nominal wealth or income between countries a pointless exercise, and in a country as vast and heterogenous as the US a difficult exercise.

Or they could buy a huge rental house in a student town and make around £60k to £90k a year in rent.

If they rent cheaply themselves and put all the profit into more property, they can easily double the £1m in less than a decade without having a day job at all.

Repeat for another couple of decades, and they have a sizeable property empire. With some medium risk/return investing they can be well into the high net worth bracket well before retirement age.

This is the point of being in the 1%. Beyond a certain level you don't need to contribute anything useful in the way of imagination, creativity, or talent. You just need to own stuff and have cash to spare. As long as you take some fairly simple steps the money grows itself with very little effort or skill on your part. It's a classic feedback loop, and it will work for you as long as you let it.

Compare this with someone in poverty, where it's likely that whatever they do they will remain in debt once they get into debt. Unless they start dealing drugs, or winning the lottery, or building an unusually successful app or business (in their spare time while working three jobs at once), the feedback loop pushes them down and keeps them down.

Real estate investing may not fit a tight definition of "day job", but the part of it that you describe above is absolutely hard work, IMO.

Yes, you absolutely 100% are. You could sell your London home, move to that village, and live off the proceeds.

Saying you aren't wealthy because you happen to live in your biggest asset is delusional (and part of a dominant political narrative promoted by the homeowner class).

Consider what would happen if a major financial bill struck each family (like, $500k). The London family might be forced to sell their flat and move into an apartment (or move out of London). The village family would lose everything they own and still be in debt.

I would much rather own a $1m house than a $200k house. Pretending otherwise is just ridiculous.

The additional option available to you is brought to you by your wealth

I'd say they were more wealthy for their property value and converted that value into liquid wealth by moving locations.

It is very true while real-estate in the abstract is liquid enough, nobody likes to move so owner-occupiers are hard to compare to landlords, traders of real estate, etc.

And it's not like there are high barriers of entry. Everybody can call local Bloomberg office and arrange for trial terminal subscription (I did it once). Or pay around $75/month for realtime market data feed and test strategies on it. Compare it to, say, becoming a dentist.

There will always be problems when trying to draw these lines.

Of course putting someone who makes $30MM vs $250k is absurd. What about $1MM vs $250k? $300k vs $250k?

There's an inordinate amount of conversation about this subject on HackerNews, which has some irony, since I'm sure the demographics here skew "wealthy". Everyone wants to believe they're in the "99%", but the fact is the vast majority of the population in America, and more so the world, would consider people here the 1%. $250k is more than most people need, in terms of sharing the wealth, even in a household. If there's a populist shift, your doctor may find some empathy for that kind of salary; the guy who coded the latest photo app won't.

"The 1%" is just a simplification for the benefactors of gross income and wealth inequality.

Four years of school, many of residency, maybe specialty, those salaries are to a large degree paying off accumulated debt and opportunity cost.

It would be cruel to try to take even more of that highly delayed income in taxes.

Before he got divorced and moved to Florida, anyways, and the glut of dentists there has him making around $250,000/year max so far (lived there about 4-5 years now.)

He's planning to retire when he is 50 and he's 44 now. He got his pilots license in the last few years and now flies between his practices in Florida and owns his own plane (just a small little Beechcraft Bonanza.)

But either way, he's made great money in his lifetime through dentistry. Unfortunately my other brother that is a dentist I don't talk to that much so I have no idea of his earnings, but I know he also does very well.

I just think OP was being a little bit generous with who is in the 1%, particularly if you look at net worth which is a better metric.

To be in the top 1% nationally, you had to have earned $383,000 in 2015.

In some cities that number is as low as $175K, very doable for a doctor or dentist.

I'm sure Elko, Nevada has some doctors, but probably not many investment bankers. With less representation from other well-remunerated occupations, a doctor in Elko is likely to be in the top 1%; however, a similar doctor in Manhattan probably isn't.

Asset wealth may make more sense.

Feel free to cite a better source.

This paper gives a more up to date chart on P. 62 in Table C.3: http://www.federalreserve.gov/econresdata/feds/2015/files/20...

  Table C.3. Net Worth Fractile Thresholds (Thousands $)
  SCF Bulletin Wealth, HHDs 
                      1989   1992   1995   1998   2001   2004    2007   2010   2013
  90th Percentile      364    357    381    494    740    834     910    953    942
  99th Percentile    2,251  2,318  2,460  3,793  5,787  6,356   8,360  6,815  8,155
  99.9th Percentile  9,703  9,207 13,898 15,346 20,338 25,109  30,826 27,488 30,894

The summary, in case the chart is hard to read, is that for 2013, the 90th percentile threshold for household wealth is about 1 million dollars, the 99th is about 8 million, and the 99.9th is about 30 million. The adjusted estimates (see the paper) are generally 10-30% lower.

No one gets to save 100% of their income from their entire life.

tl;dr, the things this article points out are definitely bad, if only for the immediate justifications given rather than the article's thesis.

Actually that's not true at all. Even if those people are just under/barely millionaires, they're still getting most of the advantages over poor people.

They're probably also not paying rents, in debt as much, and probably had higher educations.

Nobody is mad at the concept of being able to improve your situation with hard work.

I think sometimes a picture really does say 1,000 words. This short info-graphic video makes is pretty clear how dramatically top heavy wealth distribution in the U.S. is:

https://youtu.be/QPKKQnijnsM

It also does a nice job of comparing the "ideal", to the "perception" to the actual.

When people complain about billionaires, they don't think that $1.1Billionaires are monsters and $0.9Billionaires are middle class.

I give my money away to the Ronald McDonald house and my time free to the Lords Dinner, a local organization the provides free meals to anyone.

Im not better than anyone else, theres a lot more I could do. But I realized a long time ago its not the .1% thats the problem, its the 99.9% of us that do nothing. That starbucks you have in the morning would go a long way overseas towards education.

This immediately reminded me of Viktor Belenko [1] who flew his MiG-25 to Japan and defected. He wrote (I think, in his autobiography, it could have been an interview) of the amazement that dawned upon him when he entered a Western supermarket for the first time.

edit: found it.

"Once I bought a can which said "dinner." I cooked it with potatoes, onions, and garlic-it was delicious. Next morning my friends ask me, "Viktor, did you buy a cat?" It was a can of chicken-based cat food. But it was delicious! It was better than canned food for people in Russia today. And I did test it. Last year I brought four people from Russia for commercial project, and I set them up. I bought nibble sized human food. I installed a pâté, and it was cat food. I put it on crackers. And they did consume it, and they liked it. So the taste has not changed." [2]

[1] https://en.wikipedia.org/wiki/Viktor_Belenko

[2] http://www.videofact.com/english/defectors2_4en.html

But, getting back to the core, I think all of these capitalism vs communism juxtapositions distract us from looking at our collective goals. That is, we often put ideology in front of the desired effect.

Capitalism has succeeded in being a much, much better allocator of resources than large-scale central planning. I think most of us get that. Allowing capital to flow dynamically has allowed resources to flow to where there is most demand, and it has incentivized people to play the resource allocation game.

As a society, we have generally accepted some inequality in the process, as long as the system has generally benefited most people. Traditionally, in the west, this has been 'progress' - the optimism that one's quality of life and the quality of life of their descendants will get significantly better over time.

In countries that have adopted capitalism, it's been great, as long as per-capita grown rates have been high (say > 4% annually). But, when standards of living start to decrease over time, like they have started to over the last 30-40 years, people lose faith in the system. That, coupled with most economists predicting long-term global growth stagnation, it's time to think about novel new models that achieve social goals.

As hackers, I'm surprised that there has been so much focus in HN comments on dueling ideology. Where are the innovative minds that come up with new systems to replace the old ones?

The old European systems of Social Democracy already solved the issues.

Give everyone a minimum standard of life, ensuring that everyone has an opportunity at improving themselves. Give everyone a second chance.

If everyone has similar chances at getting quality education, at getting into good jobs, then people's status only depends on their own merit.

For the American dream to work, we need a social market economy. Not just in the US, not just in Germany, but in every country we gave a free trade zone with.

But much of the world does not live under those kind of conditions and national barriers are apparently very much an artificial construct. Would social democracy work in Iraq? In Somalia? But we share the same world as Iraq and Somalia. So what do we do? (real question... I don't know).

Do you honestly think that 99.9% of people "do nothing"? This world-view is flawed and self-righteous. Anecdotally, I am from a small, southern USA town (per capita income of ~$22K) where most of the people I know donate their time and money to others on a weekly basis (much more than 0.01% of my town's total work-hour output).

The fact that you needed to include "Im not better than anyone else" seems to be a bit of a Freudian slip...

S. Korea didn't outperform N. Korea, Taiwan didn't outperform China, and W. Germany didn't outperform E. Germany because their people demanded a fairer distribution of resources.

It starts with us helping each other locally and creating tighter communities of people around us. We are being divided by this very .1% by envy and our own greed.

With the money from higher taxes for the rich you could feed a lot of poor people.

The reality is millennials will have a worse standard of living than their parents. OK, maybe not the worst thing in the world. But what about my kids? Will they be worse off than me? What about my grandkids? There is a reason trends are important (just like global warming). Waiting until Antarctica melts before we do anything about it, is extremely stupid and short-sighted.

Additionally, the same argument you made can be made against the 1% (or 0.1%). Tax the shit out of them, it shouldn't matter since their living standard will still be much higher than every other American. Why should the 99.9% be subjugated to a protestant work ethic, while the 0.1% are encouraged and celebrated for acting as ruthless capitalists?

The top 1% outperform significantly everyone else in every scenario. The app store? Twitch streamers? Youtube videos? Facebook pages? Athletes?

It's a natural phenomenon. If you fight it, you are practically fighting nature. You don't fight earthquakes by trying to stop them. You prepare and help the affected instead.

This vague idea (which seems to be incredibly popular) that "everyone with more money than me took advantage of poors and cheated" is unfounded

This is not a new idea, the penultimate paragraph addresses this directly by quoting Smith: Smith warned against local trade associations which were inevitably conspiring “against the public…to raise prices,” and “restraining the competition in some employments to a smaller number than would otherwise…occasion a very important inequality” between occupations.

My other problem with these arguments is that they seem to point to some bad behavior, and the solution is usually higher taxes, that punish everyone, not just those supposedly engaging in the bad behavior.

I read it. The penultimate paragraph suggests that they do cheat. Did you read it? Heck, even the title is "Make elites compete", you could not have missed that.

This is not true...well, I'm no more biased than the article under discussion. I'm simply quoting the article and what I got from it.

The much deeper problem is the degree to which much of "the system" itself is captured by these sorts of dynamics. Look at the amount many large companies and wealthy individuals spend on political lobbying of myriad forms. We're talking countless billions of dollars.

Money, power and connections are used at every level of government, from local to state to federal to subtly and not-so-subtly tilt the pinball machine in far too many and complex ways to attempt to enumerate, but anyone who has been in or near the workings of power understands intimately how this works.

One salient point for me is witnessing similar phenomena in other countries to a varying degree, down to e.g. official government border guards, law enforcement and civil service officials in some countries who openly shake people down for bribes to perform their normal duties, either expeditiously or at all.

So my takeaway is, this sort of subtle corruption is endemic and impossible to completely end in any human society, but nonetheless the degree and character of the corruption vary hugely from country to country, and the US seems relatively unique in the "first world" in allowing this corruption to grossly undermine basic foundations of modern western democracy to the point people are getting ready to grab the pitchforks.

One of the main things elites and intellectuals took away from the rise of fascism and communism in the 1930s/cold war period was the need for democracy, no matter how corrupt and sold out, to provide some sort of floor beneath which it would not allow its citizens to fall, and some sense of forward progress and shared success, even if not equally shared ... a sense of we're-all-in-this-togetherness. This is the principle that both political parties in the US have now effectively abandoned, rhetoric aside, and the consequences are unfolding before our eyes.

The elites were closet supporters of fascism until they weren't. Then we had this anomalous period from the end of WW2 until the early 1970s when the Keyensians were dominant and governments pursued full employment economies via fiscal policy. The elites really can't abide sharing with labour, and capitalised on the early 1970s inflation/oil shock to promote their essentially neo-feudalist policies in the guise of neoliberalism/monetarism. The narrative of how all this came to pass is largely forgotten by mainstream economics, but there is an excellent series of posts, if dense at Bill Mitchell's blog[1] that cover this, and is much better than my crude paraphrasing.

The logical end-point for rentiers is feudalism. Without communism as a viable alternate force, I think they are seeing how low that floor can go.

[1] http://bilbo.economicoutlook.net/blog/?p=32776 Part 10, 11 and 12 are particularly relevant

You're correct that democracy will always be captured by money. In a very real sense, our political system isn't democracy. It is capitalism.

The only way to prevent this is to stop trying to enforce so many rules with centralized democracies and move to a decentralized enforcement mechanism instead. Individuals act in their own perceived interests, so if individuals enforced our rules instead, you'd have to pay everyone to look the other way, which is a perfectly acceptable outcome.

So what is a decentralized enforcement mechanism? Trade. When people spend money, they're trading access to everyone's work. You and I give that money its value, and as individuals, we can take that value away from people who break the rules. We can stop accepting money that was traded by people who broke our rules.

You and I have the power to restore democracy by punishing the people who use their wealth to manipulate our democracy.

I believe that is a mischaracterisation by omission. When you have business interests of the few [effectively] dictating fiscal policy, the system is either crony capitalism or flat out plutocracy.

> You and I have the power to restore democracy by punishing the people who use their wealth to manipulate our democracy.

The best approach I can think of is propaganda warfare[~] via art and satire. Keep pushing and highlighting the idea that laws are up for auction. Turn it into subversive art and comedy; eventually the idea will catch on with larger population by mere osmosis. Only then can the topic become politically flammatory enough to drive a change.

[~]: Propaganda, advertising campaign or lobbying - I make no distinction between them, they are all aiming to sell ideas and change what (or how) people think. So when using a term in context, might as well be honest about it.

Centralized democracy is fundamentally vulnerable to capture by capital. There is no way around it but decentralization.

One example is the internet. Why do large centralized entities seem to 'winner takes all' in many markets in software for example?

Another example is the bay area. Because the area is so balkanized, there is no unified transit system for the entire metro area and caltrain, bart, ac transit and muni all work badly together, with bart not being built as it was supposed to because 1 or 2 counties decided not to play ball.

Those free people will last all of about five minutes against an organized armed force raised up by someone who doesn't care about idealism but does come in at the beginning of your system with plenty of resources.

Sitting around the campfire singing songs about the dignity of trading labor for money is incompatible with reality.

This might sound crazy, but we just haven't had the technology to implement this sort of system until recently. It requires a decentralized ledger of all payments, which is a pretty new thing. Now that we have it, you can decide to only accept money that has been traded by people who follow your rules. If the people choose to do so, they can make it impossible to be subjugated by money.

My email's in my profile. Open to talking about this any time. I know it sounds crazy, but I truly believe that this new capability we have can be used to liberate people.

Wealth is a social construct, and we now have the technology to modify that social construct without anyone's permission. If we wield it carefully, we might be able to build a better society with this power.

If anything, democratic governments are able to curtail this power somewhat, though obviously not keep it in check entirely. I think that the US is indeed unique in the levels of power it affords the rich precisely because its central government is weaker than in other Western democracies. The freedom companies like Google have in the US is getting closer to direct, pre-government political power, as opposes to modern, mediated political power.

What do you propose as an alternative. We have to somehow prevent Atlanta from pumping away all of Alabama's water no (yes, its a strawman. treat it as such).

Who, specifically? Who is taking bribes, in what form, from whom, and to do what? Give names, instances, and evidence. You're making very serious allegations with all of the intellectual rigor of Fox news.

1- Capital is the main driver of productivity, and productivity is the only long-term way to increase the standard of living.

2- Capital is very mobile. Static analysis of taxation doesn't just fail, it fails miserably. It can move offshore. It can be structured so that its gains are realized in years or ways that avoid taxes.

3- Taxes on capital affect everybody, not just who they are intended to affect. If you want to tax those with very high incomes, directly tax those with very high incomes. Remember, ALL taxes are paid for by people by definition. A corporation doesn't really pay taxes, but shareholders take a hit in the form of a lower stock price and lower dividends, employees take a hit in lower pay, the jobless who would have worked there aren't hired, the suppliers take a hit in less production, and the customers take a hit in higher prices. Most people hurt are those that aren't the 1%.

The US has one of the highest marginal tax rates on capital, and it has only exasperated the problem because capital is what improves the lives of those at the bottom. Tax it, and the wealthy will find ways to shield themselves, but those who can't afford sophisticated tax strategies will be hurt the most.

STOP TAXING CAPITAL. The single best thing the US could do to raise the standard of living for everybody is to entirely eliminate all corporate and capital gains taxes. They collect so little money for the damage they do, and when you count in the cost of enforcement, they barely pull in their cost.

The FICA 'wedge' on the first dollar earned by a minimum wage worker is 15.3%.

How is that fair, that Warren Buffett's secretary pays a higher tax rate than he does?

And furthermore there are all kinds of ways of reducing the 15%, and all kinds of incentives for investment in the form of accelerated depreciation, deductibility of interest etc., and all kinds of easy ways to make labor income a dividend or capital income.

Think of labor income as a return on human capital and the human as deserving of the same tax treatment as the factory or the tools.

This notion that income from capital shouldn't be taxed or should be taxed less than income from labor is rent-seeking of the worst kind.

Can a doctor can say, all human welfare, progress, income depends on health, etc. and I have mobility and can work anywhere in the world, so don't tax me? It's madness. Capital flows to places that have security, infrastructure, public health and education, and the taxes that pay for them.

2- FICA is 20% an insurance policy and 80% a retirement plan that you get back when you retire. You actually get a better deal (you get more per dollar contributed if you are less wealthy). What you are really saying is you want the wealthy to pay for health insurance and retirement for those lower on the income ladder. You should really just own that position instead of trying to hide it.

3- > rent-seeking of the worst kind

You and a large chunk of people don't seem to really understand that concept. Me buying a factory and in turn buying labor from people and making a return on that investment isn't anywhere close to rent seeking.

2 - it's a retirement plan when it's convenient to view it that way, a tax when it's not. Government views it as a tax when including it as tax revenue when calculating e.g. budget deficits. Right-wing pundits view it as a tax when talking about the size of big government. In terms of economic impact and incentive to work for wages I believe it acts mostly as a tax, just as you think incentives to invest are impacted by capital gains taxes etc.

3 - building a factory is not rent-seeking, saying your income from it should not be taxed is very transparently so

and productivity growth increases surplus, it does not determine which factor of production the surplus accrues to. capital investment does not directly increase wages. labor supply and demand does. increasing productivity should usually shift labor demand higher, however trends in labor supply or structural factors that impact labor's bargaining position can sever the connection between productivity and labor demand (monopolies and monopsonies, import substitution, labor regs, labor's ability to organize etc.).

For most income earners, defining money as income is easy and taxing it is easy. For high income earners, it is not. Is this a revenue, profit, personal income, capital gains, etc? Capital is mobile, you're right. So are cash flows from that capital. A lot of that is for reasons to do with legal structures: jurisdictions, corporate law, etc. It's hard stuff to change, especially if your goal is "raise more tax next year."

This is why the upper middle classes pay so much tax. They're easy to tax.

Anyway, I agree with you to a certain extent. It's hard to tax capital gains, or other incomes that are not "salary from job X." But, I don't think the "improves the lives of those at the bottom" argument holds water at all. So is "Labour" and so is "Natural Resources" or any other economic fundamental.

The result was a massive shift out of relatively unproductive tax shelter investments into more productive ones. Although I've never seen this opinion in print, I suspect a lot of the economic growth that resulted was a consequence of this shift in investments.

In order for this to work, we would need to include a way to tax assets as well, as otherwise people could just put their money into assets.

The IMF found if income share of top 20 percent increases, GDP declines over medium term. Conversely, if bottom 20 percent increases, GDP goes up.

It makes sense - rich people invest their money, which may or may not drive economy. Poor people spend, which absolutely drives economy.

If that incredibly wealthy person goes and spends his money ostentatiously -- basically why we generally hate the rich in the first place because of the social stratification caused by them have bigger and better things -- then a sales tax with luxury tax or high profile items would quickly bring them back into the category of those most taxed.

If that incredibly wealth person didn't spend a lot of money and lived well below his means, then why do we care? He is basically producing for free for the rest of use to consume. If he invests his money or just puts it in a bank account, he is helping to increase capital formation and drive society forward. Even if he just burns his money or buries it, he is basically giving everybody else in the world more purchasing power -- and in this case he literally is working for free. I never understood this who argument about the rich sitting on their money: it means they are working without consuming and that means they really aren't being paid.

Income taxes are okay to an extent too. But they are just so much more difficult to get right. Defining income is difficult, and some people have very volatile income streams earning $200k one year and $50k the next. Should they really be taxes more (and a great deal more) than the guy who make $125 in two years? A sales tax or VAT is just easier from an implementation point of view. And there is nothing stopping you from excluding items like food and medical bills and nothing stopping luxury taxes either.

Because wealth is many different things. Too the poor, wealth is food. This can be increased, within reasonable limits. Too the middle class, wealth is access to inherently limited resources, like properties with a non-atrocious commute. Too the rich, wealth is power and that, by nature, happens at the expense of others. Capital accretion is power accretion, even more so when the rich lives like a monk. And the power you give one person is freedom you take from another. Once they have used their power to own all nice spots of land and use the food to run their boats and jets on "green" fuel, it turns out that all the supposed wealth you have given the lower classes was just money.

Taxing capital suddenly looks dead easy when you compare it to taxing power.

The rich aren't hated because they drive nicer cars, they are hated because it's their greed that causes a lot of suffering.

> it means they are working without consuming and that means they really aren't being paid

Our economy relies on consuming. And even if they never consume their assets, they do consume the interest it generates. Sometimes for generations.

The way our politics are structured for the time being (and have been structured for basically all our history), under your hypothetical those getting the 10x increase would see their influence in government increase roughly five-fold or so. The current wealth disparities in most of the developed world are already stretching the legitimacy of democracy to its limits - if what you suggest came to pass what is left of it would evaporate.

IE, I agree with the orthodox position (EG Milton Friedman) that taxing person A to provide services to person A is generally a bad deal for person A.

If there was a policy whereby tax is raised and groceries are provided by central buying organisation and distributed back proportionally to their contribution, almost everyone would loose. The production of groceries would be worse. etc. But, that doesn't mean a progressive redistribution would harm everyone.

In my groceries example the reality is that the vast majority would be far worse off. It's a very bad policy. My point is that the argument for progressive taxation is in my opinion very hard to dismiss from an economics perspective. A dollar is not of equal consumption value in different hands to the same extent that it is not of equal productive value in all hands. Consumption does not have the same market forces funnelling it to its highest value use, a consumption equivalent of Coase theorom or somesuch.

The advantage of redistribution of wealth at point of consumption is (again, IMO) real and it grows bigger as wealth becomes more unevenly distributed.

Capital gains taxes make up about 4% of total revenue. For that 4%, we pay almost half of that on enforcement. So, for 2% of our revenue, we do some pretty nasty damage. There definitely are better ways.

If they truly never use it---spending it or using its mere existence for leverage---they might as well be burning it. Literally the economy is being shrunk for nobody's gain.

The economy literally got a lot of free stuff and obviously people are much richer than before. Money is a promise, if someone is forgetting the promises others made to them (burning money) others benefit as they just got free stuff.

The Veil of Money was used to describe the question of whether money was important to the real economy, and it brings up how money can confuse and hide.

Money is just an accounting mechanism, literally an IOU -- a claim on future production. Remove the money and see what happens: The chef and I down the clean exchange services and we agree on an equal exchange, one hour of her time for one hour of my time. She cooks for me for 5 hours, but she doesn't have any need for my help yet, so I write her an IOU saying I'll help her with her stock portfolio when she needs me. She decide to die in a horrible fire, taking with her the house and IOUs. Now I have 5 hours of free cooking and the world is no worse off for her not consuming. In fact it is much better.

If somebody worked and produced so much more than anybody else in the entire world and produced half or everything but never spent a penny and one day burned everything, yes, the dollar would double in value overnight -- fewer dollars chasing the same amount of good, deflation. All the government would need to do is produce the little green pieces of paper or double everybody's bank accounts overnight, and the world would now have all that stuff for free.

Don't tax "capital" in the form of money, certainly don't tax labor.

Why punish productive effort? Punish use of resources. This will make people strive for efficiency and go a long ways towards eliminating problems like pollution, encourage recycling etc.

Real estate for example is very inflation sensitive and your tax bill would be all over the place if you taxed the capital gain on that. Then what do you do when the land falls in value? Do you really think the government would give a rebate? And then when it rises again, hopefully they wouldn't tax it again (the basis for the last taxation should have been raised), but I wouldn't put it past legislators grabbing for money by saying you can only back back 5 years or something to determine the tax basis.

What's your definition of capital?

"and like to cause a lot of social issues."

Which parts of this article on land-value tax do you disagree with?

https://en.m.wikipedia.org/wiki/Land_value_tax

https://en.m.wikipedia.org/wiki/Land_value_tax#Assessment.2F...

In particular, the "Value can be computed by capitalizing rental streams." (Is someone renting the land, or are they renting the office skyscraper that's on the land?)

"Further, valuators in the home-and-contents insurance industry do so in order to calculate an insurance premium, separating the value of the home from the value of the land."

My experience is that's done in a straight-line percentage method ("the land is 20% of the purchase price in this area"), which doesn't distinguish adequately enough for taxation valuation purposes, IMO, but does provide some basis for insurance company purposes.

"Another approach is the residual method: the value of the site is the property's total value minus the depreciated value of buildings and other structures."

So, the land I own under a rental property gets more and more valuable each year (as I depreciate the buildings and structures)? Then, I sell it to another investor and the land value drops again to a low baseline and starts to rise as THEY depreciate the buildings? That doesn't make any sense to me.

The article admits that the whole valuation topic is a hard problem and I agree with that.

I'm not going to argue for/against capital taxes, but what are your thoughts on those who are in the top x% and avoid high income wages and make money other ways, or the whole Warren Buffet/secretary thing?

2- A lot of these legal tax avoidance systems are a result of known breaks put in place for one intended use, but wind up being useful is so many many more ways. It is kind a game with many numerous complex rules where the winner winds up being the person with can find the most effective way of getting around those rules. To me this says the rules need to be made simpler and many tax breaks reconsidered, but obviously that isn't politically easy. Politicians tend to favor the group that makes the most noise, and when you try to take away a favorite tax break, those people will make a hell of a lot of noise. I think if pols made the decision to actually go against that, the electorate as a whole would support them, even some of the vocal few.

3- If he's being really truthful, I think its pretty bad. One of the big issues how you count payroll taxes for Social Security. When trying to analyze tax fairness, I don't think you should include them. After all, they are retirement program that comes back to you, and when you do retire, the more you paid in the lower your rate of return, so saying they are a regressive tax is completely discounting the nature of the tax. You should also then include everybody's retirement savings too (not possible I know).

I favor progressivity in taxes, but the way some people go about doing the accounting, they seem to be very disingenuous and really want to just soak "the rich" as a matter of principle regardless of how it affects the entire economy. They would give up 20% of everybody's wealth as long as they could bring down the wealthy by 50%.

There is one obvious, government mandated reason that the 99% don't have access to high-yielding investments such as hedge funds: Investors in these funds are required to be accredited investors. This means they must be already wealthy by law. For example, while researching I've found a hedge fund that makes small business loans and yields 11% with no risk to capital. But in order to invest, one must be accredited, which means they have $1,000,000 of net worth outside of their home equity, or, have earned at least $200,000 household income in each of the last 2 years, or, have earned at least $300,000 last year. So by law, the 99% (I am using that term somewhat loosely here) is not legally permitted to take advantage of high-yielding opportunities.

Thanks to the Web and Internet tech in general, opportunities are becoming available. For a $2,500 minimum, any investor can put money into peer lending and earn >10%.

But I believe what really separates the 1% from the 99% is financial knowledge more than anything else. It's actually a pretty involved effort for the majority of the population to become wealthy. Involved in that there is a lot that needs to be understood about earning, budgeting, saving and investing. That knowledge then needs to be applied for the long term (decades), and then one must hope that there is no divorce, illness or major college bills that can derail a well-run effort.

This is so true, and yet so many people overlook this point. I was fairly unaware of it myself for many years, but looking back on it, I now realize that when I graduated high-school, I knew essentially nothing about investing, stocks, bonds, even compound interest. I thought (like a lot of other poor people did and probably still do) that most of those things were "for rich people". That is, there's a perception that you have to already be rich (or at least, not poor) to benefit from Wall Street.

In hindsight, and given changes since my youth, that's totally not true. With services like Sharebuilder and/or low-fee online brokerages like e-trade or Schwab, almost anybody who isn't literally dead-broke can invest in the stock market and benefit from the mechanisms of capitalism.

Everybody keeps engaging in this false dichotomy between "Capital" and "Labor" when, in reality, most laborers do own at least limited amounts of capital, and they have the option to invest that and let it grow. But... how many of them know that that is possible, or know how to evaluate investments wisely, or understand why people say "put your money in index funds and leave it there", etc.

Assuming the average Joe Blow who graduates from the public school system receives approximately the same kind of financial education I did (which is to say "almost none") then the percentage of average Americans with that kind of financial knowledge is probably staggeringly low.

All of that said, this article makes an excellent point about how poor people are cut off, by law, from certain classes of investments. So basically, you're being penalized for being poor in the first place!

But it seems that most people would rather avoid substantive discussions about issues of this nature, and instead just run around talking about "Robber Barons" and how evil "the 1%" are, and promoting socialist-like policies.

    >>> 1.07**40
    14.974457839206984

    >>> 1 + .07*40
    3.8000000000000003

    >>> 1.02**10
    1.2189944199947573
    >>> 1 + .02*10
    1.2

Then again, we also have mortgage-loans that are at 10% interest.

You will not find a combination of a stable currency and high guaranteed interest rates anywhere.