Ask HN: How exactly apart from taxes, can income inequality be reduced?

https://news.ycombinator.com/item?id=11645441

by max_ • 10 years ago

7 26 10 years ago

news.ycombinator.com

kwikiel• 10 years ago

By making everyone poorer by hurting free trade

"You can't prevent great variations in wealth without preventing people from getting rich, and you can't do that without preventing them from starting startups. "

http://paulgraham.com/ineq.html

smt88• 10 years ago

Paul Graham deeply misunderstands the argument against inequality, and he's also dead wrong that starting startups is what makes most people reach. Most wealth is institutional and/or based on rent-seeking. Starting startups is not rent-seeking.

After writing this article, Graham was justifiably annihilated by journalists, fellow VCs, real economists, and founders.

YC-funded founder: http://www.inc.com/jeff-bercovici/paul-graham-wrong-inequali...

Mark Suster: https://bothsidesofthetable.com/why-i-don-t-celebrate-income...

Harvard sociologist: http://qz.com/586563/paul-graham-just-accidentally-explained... and also https://medium.com/@girlziplocked/paul-graham-is-still-askin...

Roundup of several economists: https://www.washingtonpost.com/news/wonk/wp/2016/01/14/what-...

Kratisto• 10 years ago

I don't know the answer, but I think education should be the first step. For me that's the best way to give everyone a "fair" chance. I don't know near enough about policy to suggest how to stop the top 1% from getting even bigger until they own everything.

MrTonyD2• 10 years ago

Actually, I don't think that will work. I understand that the increasing wages for education over the past decade have been a chimera. In fact, those wages have been stagnant compared to economic growth in the USA, while others wages have fallen. So there is the impression of higher wages for more education only because we look at wages relative to other peoples wages.

In addition, I think the requirement for education for everybody to do well just doesn't make any sense for a society as automated as ours. We should be able to have a great life for everybody - with much fewer requirements that everybody get advanced degrees. Our focus on education is a symptom of our broken economic system.

tmaly• 10 years ago

We did not exactly get a fair shake when it came to those trade deals like NAFTA that Clinton signed back in the 90s. It hollowed out all the decent jobs in manufacturing that were supporting families in this United States.

I am not arguing for protectionism, but just go and try to do business south of our border in the same way they do trade with us. The trade deal is not symmetric on both sides.

People who craft these trade deals do some in secret, just look at the TPP deal going on now that is very controversial. Then the deal is rammed through approval, and there is little transparency.

How about making things a little more transparent? How about letting the public take a peak and have a little more time to digest what is being written?

dragonwriter• 10 years ago

We did not exactly get a fair shake when it came to those trade deals like NAFTA that Clinton signed back in the 90s.

Minor nitpick, but NAFTA, as a deal -- that is, the agreement between the US, Canada, and Mexico -- was signed by George H. W. Bush. The US law implementing the agreement was signed by Clinton.

manopeace2• 10 years ago

Tarrifs on any goods coming from countries whose environmental and labor laws do not match or exceed our own.

What good are our laws to protect our environment when the goods that are sold here destroy some other part of the world?

What good are our labor laws when your sneakers are made by a ten year old across the oscean?

Don't like tarrifs? Then raise your standards to ours. It's not protectionism, you can lower these barriers with a few pieces of legislation. It's on them to fix the problem not us.

Fair trade not free trade.

MrTonyD2• 10 years ago

We live in a time of Big Data. I think of Walmart - where they use hidden cameras with facial recognition to track all their employees (as well as monitoring every call.) This makes me think that money and power in a society should come with obligations - and one obligation should be to submit to monitoring. We need to track the wealth of rich people - and all their backroom deals to avoid taxes, manipulate laws, influence politicians, and their use their money in our society. Our society should have a say in all those decisions, since they impact and define our society. This would also allow our society to put a fee on their transactions.

We need much less monitoring and regulation of typical citizens, and much more monitoring and regulation of those who control our lives. That will help us get control of many of the non-transparent tricks used to hide their huge wealth - offshores, derivatives, fake accounting, charities, trusts, and offshore payoffs with under-valued stock.

shams93• 10 years ago

Not only that but we need to look at just how much of the current tax income is diverted into the military industrial prison complex around the world, if that money went back to ordinary people you wouldn't necessarily need to raise current tax rates to support basic income.

manopeace2• 10 years ago

Break up corporations that have grown to large and powerful into smaller chunks, turn the chunks into worker co-ops.

IMO, regulating bad behavior of huge international corporations is a losing game. It addresses the symptoms of the size of corporations, but not the problem.

If you're a small government fan:

Doesn't it make sense that governments have to grow to compete in power with these huge NGOs? If they were smaller, the regulation of these entities could be passed onto city and/or state level governments where the people are (supposedly) better represented.

sharemywin• 10 years ago

You could start by making option pools bigger than 10% for employees. Right now facebook is work 340B and has 13k employees that's about 26M per employee. Adding an extra 10% for employees that went deeper into the workforce would have transferred a lot of wealth.

zaro• 10 years ago

Well changing the main focus of human existence from making profit and consumption to something else will help a lot :)

Broken_Hippo3• 10 years ago

1. Universal, affordable health care and strong policies to help families out. This reduces this sort of inequality of life.

2. Fair and equal access to both preschools and end-of life care. For example, Norway's nursing homes cost 80% of your pension, no matter what your pension is. And you are only eligible after you need more than a (free) nurse coming to your home 6 times a day... because it is cheaper.

3. Fair and equal access to quality schools, including college, university, and trade schools. This should be decoupled from the property / income taxes of an area. One school might have higher maintenance needs one year, while another does not and providing it at a large scale makes it easier on all.

4. Job contracts for all, no matter if you work part-time in a fast food place or you are the head of a coopration. In addition, unions being available for all - including management. This reduces some strife between the two since it is the different unions that are actually negotiating.

5. Being able to easily find out other people's pay and tax rates. This is going to be uncomfortable for many, but it will encourage transparency.

6 Support for those that aren't making enough to fill their individual needs so that they have access to all the tools that are needed for the modern world - this includes cell phones, clothing, computers, and internet access. This also would mean that caseworkers have the ability to make exceptions for those that have higher expenses for whatever reason. Strict poverty lines are rough for many folks and leave lots out in the cold.

eecks2• 10 years ago

How does number 2 work?

If I have saved my whole life into a pension, 80% gets taken for my end-of-life care. If I only saved for the last 5 years of my career, 80% gets taken. Not sure how that makes sense.

exolymph• 10 years ago

A pension is dispensed by your employers or by the government. It doesn't come out of your own savings.

Broken_Hippo3• 10 years ago

It isn't taken as a lump sum, like out of your savings, though there is probably something in the law about your house... though they won't kick your family out of your house either (after a death, a widow or widower can live in the house the rest of their life, for example).

But that monthly check you would get each month - what your "pay" is after you stop working - they take the 80% from that part. It is automatic, much like taxes. The other 20% goes into your account, and who has control of that money depends on how able-minded and stuff you are.

For most folks, there is a minimum pension they get so long as they work long enough in the country or simply live in the country long enough and age old enough to get the minimum pension. And they take 80% out of that.

Everyone simply has the same price for the state facilities. There are a few private facilities with different pricing, but it really isn't such a big deal if you don't go there. Just some differences - in-house cafeterias instead of centralized kitchens, for example.

DrNuke• 10 years ago

Basic universal income and let machines do the menial work.

miguelrochefort• 10 years ago

What's wrong with income inequality? I see no reason to attempt to reduce it.

The goal is to become the very best, not accept mediocrity to please the less-ables.

Surely, you wouldn't like the idea of penalizing smarter students just so that everyone get equal grades. What's different about income?

ralmeida• 10 years ago

People don't die over a low grade. Also, the talk is about reducing income inequality, not eliminating it.

I take it you want meritocracy to prevail, but are you against moderate redistribution in order to establish a "minimum threshold"?

Broken_Hippo3• 10 years ago

Some income inequality is natural and needed. Some people strive for that sort of success. Others are perfectly happy making less because their life focuses on other things - like artwork and family and other such things.

But when income inequality grows to the point that people are having trouble even getting what the "best" have decided is needed to make it in the world, or even having enough healthy food to eat, it becomes a big problem.

And you are mixing things up - it isn't about giving everyone the same grades. A smart student would be challenged more, and the dyslexic student would have education so that they can keep up. The thing boils down to having unequal access to basic things in life and unequal access to opportunities. Health care, choice in healthy foods, which college you go to and the quality of your education are often linked to what your family income is when you are young. Even those sorts of things up, and the inequality in income doesn't matter as much.

In countries that have helped those sorts of things greatly, the bottom level isn't so low. You can still get filthy rich and other such things, but you get more responsibilities in the form of taxes. It just winds up that this sort of system winds up with less of a difference between people's incomes, but if you can do it without fixing the income thing, income itself won't be an issue.

Spooky23• 10 years ago

Introduce moderate inflation. Make it a losing proposition to hoard wealth.

Tax estates at a level that breaks dynastic wealth building. Cap retirement generational tax-exempt IRA rollovers.

Require more transparency for LLCs and other corporate structures to use the banking system. Corporate ownership should be conpetely transparent.

Reduce the ability of large real estate holders to harvest losses.

meric2• 10 years ago

We want inflation in wages, deflation in assets like houses, stocks bonds. i.e. the opposite of what's occurring, and what's occurring is the suppression in interest rates. Raising interest rates will cause the inflation you're talking about over the long run - predicted by the Fisher equation: nominal interest rates = real interest rates + inflation. (Real interest rates are constant over the long run).

https://en.wikipedia.org/wiki/Fisher_equation

lsiebert• 10 years ago

Taxes actually encourage spending, whereas low taxes seem to encourage holding onto wealth. If you can spend X to build your company and write that off, that's better then giving it to the government. There is the persuasive argument that when rates were super high (90%), this spurred investment and jobs.

Also make exec compensation a bigger issue to stockholders. I think I read the Norwegian capital fund is trying the latter.

insoluble• 10 years ago

We must first consider the purpose of money and the purpose of employment. Money's purpose is to allow distribution of credit based on the amount of value that an individual or other entity has provided to society. Employment's purpose, in the broader sense of the term, is to allow an individual to provide services to society while expecting fair compensation in return. By "fair", I mean not unbalanced like slavery, where slaves indeed were compensated (with food and shelter) but not in a manner commensurate with their production.

Perhaps the biggest problem with common understanding on the topic of value is that people fail to distinguish not only how much value an entity produces but also what type of value an entity produces (or doesn't produce). If I buy a bank repo house for $50k and sell it for $250k after doing essentially nothing but posting some pictures and descriptions of the place Online, then the only value I actually created is in the pictures, descriptions, and paperwork that I did. Say I spent 30 hours doing all these tasks. Then say the average person would agree that a fair pay rate for this type of work (papers, pictures, descriptions, and some phone calls) is $50/hour. The real value that I would have created would thus be 30x50, or $1500. Yet the sale of this property would net me at least $180k, after any expenses. Note the difference between value created (<$2k) and net gain ($180k).

The problem here is the discrepancy between value created and money "earned". It seems that a large portion of society is okay with this discrepancy. For example, many people see nothing wrong with gambling or Lottery, despite both involving accumulation and distribution of money without any value being created. Until the majority of society agrees that people shouldn't be paid more than the value they personally create, we can expect extreme income inequality to exist and persist. If ever society can change its mind on this matter, we might expect the following:

1. There is an income cap, based on the realistic maximum amount of value that a human can create. The actual value is based on scientific investigation into the amount of value (not money, but actual value to society) created by the smartest and most skilled humans. The cap would be somewhere in the ball park of this maximum value (perhaps a little higher, just for good measure). For example, I am willing to bet that a human is not capable of creating more than 100x that of the average (median) human in terms of real value. Every time we look at a scientific advancement of the past, we see that although person X came up with the idea first (and hence usually got all the credit for it), there were a bunch of other people working on the same idea, many of which only a handful of years behind X. Not only that, but the person usually was in the right place and right time, with the right connections, to achieve what he or she did. If you took random other persons and put them into that exact same situation, many would have accomplished a similar feat. Certain discoveries were meant to happen around certain times.

2. All now known and future known types of exploitation are prohibited. Any accumulation of wealth where the person gaining the wealth is not producing significant real value is outlawed. Such accumulation of wealth is deemed to be in the same category as counterfeiting since it funnels money from the actual producers to someone else. Examples such as the real-estate investor described above would be eliminated by government programs whose purpose is to deal with such situations as bank repo properties in a responsible and production-centric manner.

3. There are well-funded government programs whose purpose is to facilitate relocation of individuals currently working in non-productive positions into positions that make a positive difference for society. These programs are optional for these individuals, but nevertheless any non-productive positions are phased out of society.

4. Inheritance is capped at half of one lifetime's worth of median income (based on society in general). Hence, if the average person makes $6M in his or her lifetime, then $3M would be the maximum allowed by anyone to be passed on to any heirs. Remember: The goal is to promote productive individuals, so we cannot have people born into a life that doesn't require being productive.

I'm sure a bunch more changes would be needed for the best result, but the above may serve as food for thought.

meric2• 10 years ago

The gold standard. The decoupling of currency to gold corresponded with increasing income inequality. Decoupling currency from gold put control of interest rates in the hands of central bankers, who lowered those rates as times passed. The inflation of the prices of financial assets and lowering of yields as a result of lowering of interest rates meant it became harder and harder for the working class to save their way into financial independence. The group of people who originally held the assets reaped the benefit of higher asset prices, allowing them to borrow more against their assets to purchase more capital, and as prices rose, it was like the ladder to financial independence slowly lifted away from the ground, too.

Ask HN: How exactly apart from taxes, can income inequality be reduced?

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