The Greatest Threat

The greatest threat the world faces today is not terrorism, or global warming, or nuclear weapons*. The greatest threat facing us today is income inequality. And it’s easy to fix. We just need the willpower to do so. And we need to convince the very people being screwed to ask it to stop.

This is difficult to do, and it presents a bit of a paradox. Every Sunday, millions of people who don’t have much money send what they can to televangelists who have millions. It’s no coincidence that this is the same demographic that thinks rich people should get more tax breaks. The trickling down is supposed to happen from both the heavens and Wall Street. That it doesn’t does not shake anyone’s faith — the money keeps moving from the impoverished to the scandalously rich.

Whenever I see a paradox in human behavior, I don’t assume it’s faulty wiring; I assume the wires were soldered down in a different time for a different purpose. We overeat because we were made for a time of scarcity and infrequent feasts. When a stash of sugar was found thousands of years ago, it paid to gorge and sock energy away in fat. That same wiring gets us diabetes today. It used to serve us well; it no longer does. This is the very sort of thing I write about at length in my WAYFINDING series. Much of human suffering follows the same pattern.

In my upcoming WAYFINDING entry, I go into detail exactly why I think people vote against their obvious best interests. But here on my blog, I want to concentrate on the financial outcome of our modern economy, why I think it’s going to get worse, and why we need to act on this right now and not a moment later. We are in the same place we were with global warming three decades ago. Most of the damage had been done, but it would’ve been a good time to change course. Now is a good time when it comes to income inequality.

The arguments against redistributing wealth should be familiar to the reader. One is that the poor today have never had it so well, and this is true. Global poverty is plummeting even faster than our most optimistic estimates from just two decades ago. Fewer people live below the subsistence level; women are gaining freedoms around the world by taking more control over their financial well-being; fewer children are being forced to work. The pockets where progress is slowest are coming into stark relief precisely because it’s becoming more rare. All of this should be acknowledged and applauded.

But absolute wealth is not the key to human happiness. Relative wealth is.

There are dozens of game theory experiments which bear this out across cultures and age groups. The concept of fairness is wired into our DNA. Children shown shapes of different colors being unfair to other shapes take sides without prompting. They do the same for puppets acting out various scenarios of ill dealing. And in a classic experiment where two people are presented with a sum of money, and one gets to choose the split while the other gets to take or leave the deal, almost no one gets away with screwing the other party. If the split is too great, the person who can accept refuses, and nobody gets anything. People are willing to harm themselves a little in order to spite someone who is being unfair.

In nature, prey often signal a warning when spotting a predator. This puts the caller in greater jeopardy but saves the flock or herd. Such altruism is often explained by group selection (the individual shares DNA with the rest). But this theory isn’t accepted by all. And there are rewards for those who shirk, just as the group will often punish shirkers when found out. Even in nature, no one likes a freeloader. But you often find animals doing the equivalent of paying too little for a shared pizza, so that even among friends, the till comes up short. Good people often try to do as little good as possible. What’s important for the group is that fairness is maintained by punishing those who attempt to get away with too much. Even if everyone in the tribe is stuffed, if you have one person larding away ten times as much for the lean days, resentment will build. This resentment should not be underestimated. Society is more likely to crumble from this threat within than any threat without.

Think about what money represents for a moment. Money is just a symbol of work someone has performed. It might not be the person holding the money (maybe it was given as a gift or inherited), but when it was originally handed over in a transaction, it was because the person giving it accepted goods or services from the person receiving it. I need my roof fixed. My roofer needs groceries. The grocer’s roof is just fine, but he is having trouble sleeping at night. So I pay the roofer, and he can pay the grocer, who buys one of my books. Now we all sleep well at night.

The most important thing for any economy is circulation. There’s a classic example that bears this out: A college professor has her students dump out their bookbags, purses, and pockets onto their desks, everything except for money. Now the students walk around and see what everyone else has. If they wish, they can trade any of their items for anyone else’s items. Trades invariably happen, and since both parties agree to each trade, both feel that they are getting the better end of the deal (one boy’s trash is another girl’s treasure). At the end of the experiment, the same amount of items are still in the room, and yet everyone feels richer. That’s the beauty of trade. It’s not zero-sum.

This is compounded, of course, when actual things are made from raw materials. That might be programming code from the raw material of intellect and time. Or a network of train tracks built from steel and sweat. The more productive the things we build, the more reward we expect to see for society as a whole (though rarely for those doing the building). There’s a balance to be had, of course. The railroad tycoon is risking his entire fortune to build the rail, all for the hope of great reward. The immigrants dying for peanut pay are escaping terrible conditions at home for the hope of freedom in a democracy. The pay is not equal, but neither is the risk nor capital. Some balance needs to be figured out.

There are those who think the answer is a flat tax, that the wealthy and poor should pay the same rate. As an argument for simplicity, this works. In practice, it would lead to far greater income inequality and more social strife. It seems like a good deal for the wealthy until their country is burning down around them; there are unintended externalities not only to polluting factories but polluting policies. The flat tax is a terrible idea, whatever the revenue generation models tell you, because of the psychological effects of inequality. The game theory results that reveal people are willing to harm themselves in order to bring ruin on the unfair should serve as a warning. A grave warning. Ignore the psychology of human behavior, and you’ve ignored everything that matters when it comes to the economy.

I have changed my mind 180 degrees on this issue. I used to think the wealthy should keep what they make. They earned it. Why should they be punished? And they are job creators. I had all the lines down. But it’s all bullshit.

My instruction began as a yacht captain. I worked for billionaires who had yachts that cost upward of $20,000,000. That’s twenty million. I think typing out all the zeros is useful. I’ve seen owners who use their yachts a few weeks out of the year. Sure, they created jobs for the boat builder, and for the crew on the yacht, but you still had $20,000,000 of people’s time and energy tied up in a big piece of plastic that was barely used. The yachting industry didn’t shake my previous conviction, though. I still saw the 1% as job creators. Just wasteful and largely unhappy ones.

In my next career, I installed high end audio video equipment in the second homes of the very wealthy, and my education continued. Mind you, there was zero envy on my part, just curiosity and bewilderment. I never wanted the things that these people had. My convictions weren’t shaken by comparing my lot to theirs, but by seeing how much capital was being tied up rather than circulated. There was no trickle down. There were giant buckets, puddles, pools, and reservoirs. Lakes, even. And with celebrity rags, the paparazzi, and social media, more and more people could see the inequality building. Societal unrest (even the poison of societal discontent and unhappiness) were the natural result.

What really sealed the deal in my conversion was a story in the newspaper about the modern fine arts trade. Granted, this was just the straw that broke the camel’s back; I was already coming around. Then I read about warehouses full of paintings that no one could see. It turns out that paintings are now an investment commodity. They go for tens of millions, and then are put away in dark rooms to appreciate (all based on speculative bubble-blowing). It’s not the artists’ hard work that I saw wasted here, but rather all the work from all the people who paid a dollar or pennies at a time into the pockets of billionaires. All that pooled money, trickling up from so many consumers, investors, and builders, was ending up in warehouses of art that didn’t even go looked at.

There is a problem when the hours being put in by so many people are ending up in yachts no one is driving, houses no one is living in, and art no one is seeing. The solution to this is very simple, and it would not only fix most of the social unrest (including a lot of race relations), but will also finance the fixing of many of our other major issues. Instead of that money sitting in warehouses full of art, imagine it sitting in a new smart power grid, high speed trains for shorter commutes, higher wages for teachers, or a guaranteed income for every American. There is easily enough wealth for all of this. And no, you are not going to remove incentive if you levy higher taxes on the wealthy.

The impetus for working hard and having more than your neighbors will always be there, as long as some inequality is possible. Inequality in itself is not bad. Trying to remove all of it is a terrible fucking idea, as evidenced by every attempt to do so in human history. You can’t motivate people to work if the level of their hard work is not commensurate with how much they earn. Those who work the hardest and take the most risks should enrich themselves. Those who agree with this need to come around to the idea that there’s a limit to how much this is a good idea. It doesn’t do the wealthy any good for the rest of society to not be able to afford their wares and services. And as the classroom example and the art warehouses show, the key to a healthy economy is for wealth to shuffle around.

The highest federal US tax bracket is currently around $415,000. That’s not nearly high enough. The difference between making $400,000 a year and making $400,000,000 a year is ENORMOUS. An individual making $400,000 a year in New York City is upper middle class. But take 41% of that money in federal taxes, and 6.85% in state, plus all the sales taxes, tolls, gas taxes, etc, and you’re living off less than $200,000 in a city where modest rent can take up a third of that. Compare that to someone making $400,000,000 who is paying the SAME federal rate. That makes absolutely no sense in the world. We need more brackets, and we need a higher rate for the top brackets.

This isn’t about punishment for success, either. The wealthiest are being rewarded the most for the changing economy. The tools being built are benefitting them disproportionately. There are dozens of examples, and they all follow the same trend we see in entertainment (a trend I’ve been on the winning side of myself). It’s a blockbuster model. Working backwards from the present, you go from having a Facebook founder in Mark Zuckerberg who has hundreds of billions, to dozens of media CEOs who have mere billions, to hundreds of local media tycoons who have millions, to tens of thousands of similar niche and local forums and social networks where people were making a solid wage, to salons and bowling alleys where people were congregating and socializing in person.

Hundreds of billions, to billions, to millions, to hundreds of thousands, to a regular wage. That’s what you see when you scrub back through time in just about any industry today.

Work backwards from Amazon, where you have a hundreds-of-billions founder making what used to be mere billions by CEOs from a dozen mega retailers, to millions from those who owned regional chains, to hundreds of thousands from those who had a few locations, to a liveable wage for mom and pop stores. The same is true for Apple, Microsoft, and so on. Increases in efficiency, global networks, computer systems, the appeal of brand recognition, scales of economy, all work to push more and more of those dollars, which represent hours worked, into fewer and fewer pockets.

There’s no stopping this trend. There’s only redirecting the percentage of flow. Because that’s what economies are all about, flow. Keeping the items moving around the classroom, the dollars circulating through the purses and pockets. There’s no trickle down, there’s trickling everywhere. How we divert that flow will fund all our great infrastructure needs while also making sure those with the least don’t feel like burning that infrastructure down. Again, game theory tells us that people are willing to harm themselves if it means punishing the unfair. Ignoring this is the height of folly. I implore flat taxers and those of a Republican sway to consider these effects.

A number of the billionaires who have benefitted most handsomely have signed on to divest themselves of most of their wealth. One of the responses you’ll see by those who are angered by my argument here is that, “If you believe that, then give all your money to the IRS. They’ll take it.” This is just an attempt to silence the debate, for no amount of overpayments by a handful will correct the overall system. In the presidential debate last night, Donald Trump bragged both about making over $600,000,000 (MILLION) last year and NOT paying a dime in taxes. He’s not alone. All that wealth is going into things like warehouses full of art. It’s a lot of human capital that should be kept in flow and put to better use.

All it would take is more tax brackets with higher rates. And lower the rates at lower brackets. We should be debating these numbers, and not the principles behind them. A top bracket of $200,000,000 with an 85% rate would be my starting point. Work down to a tax bracket of $2,000,000 with a 40% rate. Lower the rate for those making between $400,000 and $600,000. Those making less than $60,000 pay no federal taxes at all.

Tax capital gains at the same rate. Close corporate loopholes. Get rid of all subsidies (including for farmers). When you get to keep the first $60,000 you make, that’s a subsidy for everyone, across the board, with almost no red tape, no forms to fill out. Streamline the IRS as a result. Punish companies who attempt to park profits overseas. And offset the offshoring of cash and the emigration of the wealthy by offering instant citizenship to anyone who moves to the US and puts down a certain figure on a home here (say $400,000), or sets up a business here in the US with initial capital in a certain range (say $5,000,000), so that the people who leave to hide their wealth are more than made up for by those who want to live in the US and enjoy our infrastructure.

If you think that’s naive, look at California. It has some of the highest tax rates, and yet it’s one of three states seeing massive explosions in businesses founded (Massachusetts and Texas being the other two). A great climate, amazing universities for recruits, and other allures more than offset the higher state income tax. You aren’t going to chase off wealth with higher taxes and more brackets, just as you aren’t going to remove the incentive to work hard. People will still want to be millionaires so they can buy Ferraris. They just won’t be able to afford a dozen of them. And that will be a sign that we’re achieving the right balance.

There is absolutely no greater ill facing the world today than income inequality. And it can be fixed by adjusting a few sliders. All it will take is the half of the populace that wants to reward wealth with more wealth to realize that their wiring is not based on reason, or even their own emotions, but evolutionary urges that no longer make any sense. Again, I’ll be exploring those urges in my next WAYFINDING piece. In the meantime, I humbly ask that you start looking around at the places that dollars are pooling, no longer circulating, in things that aren’t being used, or art not being seen, or luxuries not being enjoyed, or taxes outright not being paid, and see if your way of thinking might not swing around to what many of us now believe.

And what we believe is that income inequality has gone too far, is being hastened by modern technological advances, and it must be corrected before it gets much worse. We need to start thinking about a post-work economy, where everyone is guaranteed a living wage as more jobs are automated, disrupted, or devalued by the tools and innovations that are concentrating wealth. This will not be a bad thing. Everyone can prosper. As long as our wealth isn’t stagnating, but is free to trickle in every which direction, with some pools and puddles bigger than others, but to a degree that does not stifle innovation and does not inspire an uprising. That balance exists. Let’s at least look for it.

 

 


 

*Your chances of dying at the hands of a terrorist are slim. Poor eating habits and humans texting while driving have a much greater chance. Hell, ladders do. Even crazier: You have a greater chance of dying in a car while abroad than being killed by a terrorist abroad. Global warming is a major problem, but one that’s on its way to being solved by the plummeting costs of solar and looming population declines. A handful of nuclear strikes by a North Korea would be locally devastating, but income inequality threatens to burn us everywhere all at once.

 

COMMENTS (38)

Interesting concept. Still, the thought of paying 85% of my earnings….it rings false to me.

So I would only be keeping 30000000 ( which I grant is a lot of money) out of 200000000 earned…giving 170000000 to a Government that routinely misuses revenue generated as it is. Just sounds like a bad idea.

Anyway, food for thought…

Hopefully the incentive here would be to NOT make hundreds of millions of dollars, but pay higher wages to employees, invest more in your business (which actually builds things) etc. You want to have fewer incentives for taking this kind of pay, which is the opposite of our current scheme (low rates on capital gains for instance).

Ok…I didn’t pick that up in my first reading… so you are saying to generate the same revenue, but invest a much larger share in such a way to reintroduce it into the active economy… hmmmm, again a interesting idea.

It would generate much more revenue.

If it’s an 85% bracket that kicks in at 200 million, then no, you’d keep a lot more of your 200 million than 30 million. In Hugh’s example, the part between 2 million and 200 million is taxed at 40%. I don’t know if he’s talking about a graduated tax bracket, where the first 60K is not taxed, and the next x dollars is taxed at a higher rate and then continuing up until money earned that is OVER 200 million is taxed at 85%, or if he’s talking about a situation where once you hit 200 million, ALL of your income (down to dollar zero) is taxed at 85%. But if it’s the former, I think it’s eminently fair, and equal for everyone. It’s basically a flat tax but one based on dollars earned and not on the taxpayer. And is close to what we have now, but with higher tax brackets on those stratospheric amounts…

Usually, tax bracket rates refer to marginal rates, i.e. the rate you pay on amounts over X dollars, not on the total. Under Eisenhower the highest marginal rate was 92% and the economy flourished and we built the federal highway system.
At high marginal tax rates it costs less to donate to worthy causes.
Even at 85% of the total, how much money can one spend?

Ike’s GOP TAXED TO 90%, spent on public works and USA and ALTRUISM THRIVED, until Reagan’s GOP took it down. Get it?

I could see that working, if I trusted that the money would then go to where it should. Like roads, power grids, internet grids, and such. Right now I don’t feel like the government is trust worthy with any money, and there isn’t anyone watching them to tell them no, that isn’t a good idea to spend money on.

So yes, your idea could have merit IF the government was trustworthy. But that is too big of a if.

You always have the option to spend the money directly yourself on a public project if you don’t trust the government to handle it properly (like Rubenstein who recently spent several million on restoring the Lincoln Monument). Take the charitable deduction for that, and reduce the tax paid.

Mark, not trusting government is not a good reason to refuse to fix income inequality. Trustworthy government is a separate problem, but it can also be solved. Get the money out of it by paying for campaigns and elections from taxes. ONLY. No money from anywhere else. And then pay attention to the people you elect. Tell them what you need. Watch how they vote and what bills they put forward. Do this at every level of government. And maybe hold an office yourself. Government is only as good as we force it to be.

The government is made by us. It’s not some abstract entity. If we were able to pass legislation to end income inequality that would mean we changed current finance laws That allow politicians to be bought by companies. If we had a system were politicians weren’t bought, were they simply worked to improve the country rather than push for legislation that benefits the companies they represent, then there would be no logical fear to be had about them miss using tax dollars.

I don’t think there’s a paradox here at all. People often vote for reasons other than self-interest, which I think is entirely rational — perhaps they’re for or against taxpayer-funded abortions, or for or against toppling foreign dictators, or for the advancement of civil liberties, or what-have-you. Maybe they want to leave a better world for future generations, even knowing that it might involve present sacrifice on their part. Plus, “obvious best interests” turns out to be not so obvious — some people are fully convinced that incentivizing job creation in this way is a good idea, and is ultimately in their own best interest (maybe they’re wrong about that, but nevertheless they are pursuing their own self-interest as best they can figure). In any case, I would much prefer that people vote additionally on the basis of broader policy issues, rather than purely on self-interest.

This is a very good argument! Implementation without revolution would be a big challenge as those with 7 zeroes in their income control the very strings that would need pulled to change it.

Last night’s debate shows the glowering attitude of the ultra rich when D.T. gloated about paying zero taxes. As a business owner there are a lot of good tax breaks that have propelled my businesses forward. My businesses will never get me that kind of wealth though UNTIL I pulled it all out and began investing it into the stocks and bonds and then leveraging those gains as hard as I could. At that point the game is not one of growing your wealth for business strength and stability but rather for the greedy point of building excess wealth.

Income equality will eventually cause rioting leading to full-blown revolution. Whether the time frame is a dozen years to a century, there will be a time when heads of the ultra rich will only be welcomed on the end of a pole. At that point everybody loses!

The only way forward in my opinion is one where the sub $1,000,000 class of earners become educated about how rigged and corrupt the political system is and demand change in the form of: 1) term limits for all congressmen/women; 2) No lobbying $ contributions allowed in any form; 3) no campaigning more than 6 months prior to an election (let a candidate be elected on the value of their person in real life vs the persona created in years of campaigning); and 4) an overhaul of the tax system much like what you envisioned.

Thank you for a great article. It will be shared!

Love your passion and perspective, Hugh. I continue to be shocked by how prevalent it is that Americans feel they need to keep paying lower taxes. They’re already paying lower taxes. It’s the rich in your country that aren’t paying their fair share, as evidenced by Trump and his self-congratulatory comment, “because I’m smart,” when Hillary pointed out that he didn’t pay income tax (that one year that we know of).

Americans want better infrastructure, good health care, good education and security at home and yet they don’t want to pay taxes. Where do they expect the money to come from? It boggles my mind. I’m a Canadian; I’m middle class, I pay high taxes but I don’t mind because I’m contributing. Whether it’s to help pay for our donations to help refugees, or make better highways, build better hospitals, airports, affordable education, or contribute to some country when there’s a world disaster. It all comes out of taxes.

There seems to be a sense of entitlement for too many, especially for that group at the top, the one per centers. Enough with greed. How much does one person need? I’m glad to see that Hillary has adopted some of Bernie Sanders’ ideas. I hope she wins and she can implement some of those ideas. If Trump wins, then there will even be less for the majority, more for him and less for those who think he’s on their side.

To be honest, it often doesn’t feel like we as Americans are paying low taxes. After income, FICA, sales and property taxes, it feels like a paycheck is pretty much gone. Add to it the cost of health insurance and it IS pretty much gone. I’m a dentist, I always thought I made a good living, but I’m treated the same, tax-wise, as someone making a million. Or 200 million. Worse, in fact, because the amount of income coming from investments and gains and such is a negligible part of my total.

I have no problem being treated differently from someone making 30 or 40K a year, no problem with paying more taxes by total and by percent than that earner. I have a problem with the guy making a million paying significantly less than me by percent, and perhaps very little more by total… I’m completely with Hugh on this one.

Income inequality is in many ways the issue that defines my adult life. As a blue collar, industrial worker I’ve effectively bootstrapped myself through an economics degree, and I’m working on a master’s degree in data analytics… My end goal is to be involved in the application of policy to manage economic inequalities and to advocate for the welfare of labor in the US.

I HIGHLY recommend reading Thomas Picketty’s book, Capital In The Twenty First Century. I’ve listened to it on my commute, and while it did not change any of my existing positions, it did inform them with some simplifying vocabulary and concepts. I suspect that you will have the same experience.

I have a single policy prescription that I hope to bring to the national stage. It is the development of an agency similar to the Federal Reserve, with a dual mandate of maintaining full employment and modulating inequality to a target. If you are familiar with the functioning of the Fed, you will recognize that the full employment mandate is already prescribed to that body. In the case that this new agency were created, this mandate would be relieved of the Fed and replaced with a mandate to pacify financial markets.

The Fed is currently directed to meet it’s two mandates and afforded a tool kit to do so at the discretion of Congress. It’s chief officer is subject to a periodic appointment and confirmation. I recommend a similar structure for this new agency, with a tool kit initially composed of a range of short and long term taxation tools.

My proposal follows from the undeniable success of the Federal Reserve and other central banks around the world over the past roughly 80 years at managing their mandates. A careful review of the recent history of fiscal policy (Congress) in the US reveals that policy makers have essentially abdicated their responsibility to managing the economy to monetary policy makers (the Fed) since the astonishing success of Volcker. It seems obvious in retrospect that a well-managed and overseen agency of technocrats would do a better job of running an economy than a body of lawyers… adept in their own craft but not at economic policy.

I think you have some good points, but I disagree with your main thesis that rich people horde money, and that the government would be a good vehicle for redistribution. I don’t have any studies to cite, but I’ve never seen any numbers that weren’t atrocious when it comes to government burning through tax dollars.

On the other hand Zuckerberg whom you mentioned is committed to giving away nearly his entire fortune for philanthropic purposes. Things like eradicating disease worldwide. I’d rather have him give billions to solve the world’s biggest problems than divy up his cash amongst extra unneeded government jobs and subsidies.

A world in which I would not be *able* to acquire enough land to plant a house in the middle of so that I have no idea that there are other humans out & about in the world…is not a great world. Freedom from others should be available, but there is no way to ensure such freedom without the *possibility* of accumulating absurd amounts of cash / pools of resources.

This also needs to be considered: money can be thought of as representing work done, but that is to glide around the fact that it is nothing more than an agreed-upon fiction. It’s paper. It’s metal. It’s ones and zeroes. Regarding it as representing work done gives it a *greater* fictional ontological presence than simply recognizing that it is a tool to be used — for instance, the moment when you realize that crazy people are happy to give you a car if you give them paper or a series of ones and zeroes that your bank assures them they have access to. Awesome. This is impetus to get more ones and zeroes, to trade with the crazy people for stuff. Going further, and pretending that money has *actual value* because of what it represents, is hanging far more on it than the idea can actually bear in practice.

I just finished a great book called Rise of the Robots that touches on this subject. I think you’d like it if you haven’t read it. https://www.amazon.com/Rise-Robots-Technology-Threat-Jobless-ebook/dp/B00PWX7RPG

Not to reintroduce the rampant and ill-advised government spending (at all levels of government), how would you propose to address the inequality when it comes to the pay rate of jobs? Professions, including teachers, mental health care workers, senior care workers, firefighters, where we would assume that their importance to society exceeds that of the entertainment industry (including sports), are consistently paid many magnitudes less. Not saying that entertainment isn’t important in its way, either, but does your idea take that into account?

Greater tax revenues mean higher wages for public sector jobs. And punitive tax rates at the top will motivate boards to reduce CEO wages and increase worker wages. There should be a disincentive to taking home more than $10 million a year.

Not necessarily true. It opens up the potential for higher wages..but then again the money could go to some other politicians pet project….

Hugh

If you pay $10,000,000 for a piece of art … the ten million does not end up in a store house. Within minutes of the transaction the bank has distributed it down through the money chain in various amounts until it has been reduced to pea nuts (literally) that the poor man has to collect and boil and sell on the side of the road in the Appalachian Mountains for a dime a packet. That dime is then spent back into the money chain which someone else combines with other dimes until they become dollars which eventually amount to millions that someone else is going to use to buy another piece of art, or a super yacht or whatever. If I pay $100,000,000,000 for a ton of gold bars and hide them under my bed … the money still circulates. Reducing your taxes by Investing more in your business and paying your employees a better wage makes no difference to the “have nots.” The money gets spent in different ways (on smaller pieces or art like garden gnomes and remote controlled sail boats) that eventually lead back to the guy collecting pea nuts or rice or scraps from some dump in South America … and the process starts all over again. The idea that you can redirect money / wealth / taxes doesn’t hold water … it all end up back in the money chain again … not to mention that you will put boat builders and artists out of business. It won’t be Elon Musk who puts man on Mars … it will be the guy who is prepared to collect peanuts at a dime a bag and sells it back up the chain which will.
You mention several times about the world population diminishing in numbers. I’d like to hear more on this and what ideas you have to support your theory?
Love these posts

Check out the population study done by the UN a few years back. They have three growth curves projected. It looks like the world population will max out around 2050 or 2060. Interestingly, the inflection point happened back in the 70s and 80s, right when the “population bomb” terror was spreading. Right now, we are coasting toward a stop and a fall back to earth. That is, velocity is still positive, but acceleration isn’t.

There was just an article yesterday about China trying to get people to have more kids. There was a pay-for-more-children program in Iran recently. Japan is facing a massive demographic challenge. People just aren’t having enough people anymore, except in the areas yet to fully develop (sub-Saharan Africa). Those areas are coming out of poverty as well, and will see their reproductive rates go down. This is actually going to be a big problem, because population growth is a key component of economic growth. Robots and AI might get here just in time!

You’re right about the theory of monetary circulation, except that paintings and yachts are a sign that money isn’t circulating enough. When people have hundreds of millions to squander, it means they have massive pools while others have none. The banks aren’t getting those pools; yacht builders and artists are getting them. Unless they are spending all their money on other goods, you have human capital tied up in underutilized items. The signs right now are that capital is being WAY underutilized.

From a macroeconomic perspective, look at the amount of money that’s being printed in qualitative easing without any appreciative measure of inflation. There’s a reason for that: all those billions are not in circulation (a lot is being held by foreign investors). That means the Fed is printing a replacement for the actual hours being worked by others, and those hours are not moving about but going to finance debt.

The basic problem of this is that governments are untrustworthy. They would be free to spend the money as they wished, which will not always be beneficial to the population, and sometimes it may be harmful.

And, personally, I wouldn’t feel too motivated to work if the government took most of it away; although, I may have a happy life on benefits.

Yes, there should not be any maxmum bracket: all high incomes should be taxable. I am probably naïve but surprised this is not the case: is it not so in some other countries?

Noticed Wool was #144 on all Amazon last night. If you’re really sincere about doing something about income inequality, how about telling us where and how you’re advertising your books lately?

I don’t advertise. I did get a Google Alert yesterday. A laptop reviewer at CNET mentioned WOOL in a Macbook Air review of all things:

https://www.cnet.com/news/get-a-refurbished-macbook-air-11-6-for-499-99/

And I saw some people Tweet the price drop (it went down to $1.99 for half the day)

WOOL has its own momentum. I can’t explain why it sells the way it does, but I get emails every day from readers who are just discovering it and say they’re going to tell everyone they know about it.

…because it is awesome? :-)

But yeah so are your other books too… I guess Wool was the break!

How did you manage to reduce the price on Wool for half a day? Kindle Countdown Deal?

It was a bug, actually. Wasn’t supposed to be reduced. When it happened, and the CNET mention went up, and I got the Google Alert, I inquired about what was going on, and it was “fixed.” I didn’t care if the price stayed that way, but it was put back. It would be interesting to see what would happen if I made the price of the full novel 99 cents and left it there for a month. I think a shitload of copies would go out the door, and the rest of my sales would go up quite a bit. I might try that.

Another facet I guess is corporate taxation…

I have just been moved to see that “the pursuit of happiness” as written in the Declaration of Independence, does not necessarily refer to “material expansion” but refers to “delight in the Law” which is a very old saying about reading scripture and having “Christian” values. Perhaps Western Christians of today are being attacked as “infidels” when their Christianity is very much not in evidence. Perhaps God DOES punish the wicked who do not follow His commandments in a “delightful” manner, being directed by i-phones and my phones and the godless “thought-for-the-day”.

Agree, agree, agree!!!! But Hugh, in a plane crash going down, you need to put your oxygen mask on before you put on others. We need to tax the rich more here in this country but we also need to address the unfair practices of other countries towards the US. The degree of unfair (UNFAIR) treatment to the US by other nations – CHINA!! MEXICO!!! feeds into exactly what you are discussing. We feel other countries cheating us to gain more wealth from us. That needs to stop too. Trade deals must be renegotiated so we feel the fairness. This imbalance is global and we can’t tax other nations. Unless we renegotiate trade deals. They need to pay their fair share too. I believe it’s evolutionary. But we are now a global world with global evolution.

I am quite astounded by the number of people that assume that a redistribution of the tax burden requires that more taxes be collected or that we become a socialist state. What’s also not been mentioned is the Payroll Tax (FICO). It is absolutely ridiculous that we continue to pawn off Social Security and Medicare as retirement investment programs when they are quite clearly welfare programs funded by an onerously regressive tax scheme. Tacking that 4%+4% all the way up the income scale and into unearned income would completely fix the finances of Social Security and Medicare.

There are also many viable areas for government to spend a surplus, subsidizing higher education comes to mind. All of the land grant institutions in the US should be getting support from the Federal Government, because the states are falling down on the job.

Then there is local taxation, which is based almost entirely on consumption and housing. Yes, the wealthy spend more on these things, but not proportionally to their income. The lower someone’s income, the more of it that is spent on housing(renters pay tax in their rent) and other goods like fuel. This is yet another way our tax system is actually regressive rather than progressive, and it absolutely should be progressive. All capacity for massive income is made possible by the stability that our government provides. Just as income is related to the value someone brings (no one works hard enough to have earned $1M+/year, it’s all based on value received which is a favorable multiple on their effort due to the dynamics of the economy), taxes should reflect this value that is being delivered to business owners and wildly successful entertainers. They have had value delivered to them, so they should be expected to pay for that value they received.

Everything you say here makes very good sense. But: “It will take half the population to realize that their wiring” is the result of adaptations that are obsolete. My question to you is this: how do you overcome the–apparently–naturally selected attribute that all but prevents people from admitting they’re wrong? I have to assume this piece of wiring has to do with survival depending on single-mindedness, etc. What I see from leaders of all kinds as well as the rest of us is a concerted application of intellect and thought to justify strongly held opinions, not to hold them up for critical thinking. Figure that one out, and you’ll be on to something.

Though I feel an 85% top rate would be too high, I support the general idea of a clean and simple redistribution through a progressive tax code that turns negative at the lower end (i.e. pays out to the poor). One twist you might want to consider is to differentiate between consumption and investment. If what you don’t like about the rich is the way spend their money on champagne, yachts, and luxury watches, you could always just tax consumption rather than income. So if a billionaire spends $20 million on a luxury yacht, she pays a large tax. But if she reinvests that money — cooks to run a restaurant, programmers to build apps, etc. — she pays a much lower rate.

In response to Loco Coyote, when one speaks of tax rates one usually means marginal tax rates especially when referring to one’s bracket, i.e. 85% on every dollar over X amount. The term effective tax rate refers to the % of the total. This blog doesn’t specifically specify marginal, but in context that’s how I read it.
There would be much less fuss over repairing our infrastructure, improving education, protecting our environment, etc. if we did not have to increase the national debt to do it. Government investment has resulted in the internet (hmm), cures for diseases, and many positive societal benefits. In all human organizations there is waste and corruption.
Thank you for this articulate article and yes it’s about the right balance. I believe the climate problem is not to be dismissed as on its way to solved. In fact, FEMA costs will be going up and we need to invest now to avoid horrendous costs later not only in dollars, but in the livability of the planet. Here is where we particularly need to for the wealthy to step up or at least step down from ensuring tax laws leave them their fortunes untouched.