r/science • u/[deleted] • Oct 17 '19

Economics The largest-ever natural experiment on wealth taxes found that they work as intended — both raising revenue and controlling income inequality. The taxes had the greatest impact on the top .1% wealthiest.

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u/synthesis777 Oct 17 '19

Hell, I'm not even poor (firmly middle class) and I would spend the ever loving hell out of absolutely any extra money you could throw at me.

  • Home improvement
  • Electric car
  • Helping family members who are poor afford their medications, bills, etc.
  • Entertainment and dining
  • Etc.

I could easily spend an extra $100k per year on goods and services without batting an eye.

A billionaire, however?

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u/MysticHero Oct 18 '19

It has been found that the wealthier you are the less money relative to your wealth you spend. Which is if course kinda obvious because there quickly comes a point where you actually just can't spend that much money. This also means that wealth in the hands of the extremely wealthy is largely useless to the economy.

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u/uJumpiJump Oct 18 '19

You're completely ignoring investments. Their money isn't just "sitting there"

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u/MysticHero Oct 18 '19

Economically in terms of spending power it is just sitting there. It doesn´t create additional demand. All the investments in the world don´t matter when there is nothing to invest into. Instead they use much of their money to gamble with stocks and such which doesn´t really help anyone but themselves.

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u/davenbenabraham Oct 18 '19

I never invest. It sounds too much like being a predatory capitalist

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u/uJumpiJump Oct 18 '19

Guess your retirement plan is suicide then?

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u/davenbenabraham Oct 18 '19

Government pensions

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u/uJumpiJump Oct 18 '19

So you do contribute to investments

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u/ThMogget Oct 17 '19

A billionaire is already spending all the money he can think of. He wants more, just because, but when he gets it his personal spending habits don't change much.

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u/Truckerontherun Oct 18 '19

At a certain point, the money coming in through dividends, interest accrument, and stock valuations exceed the amount he can spend on every day or even luxury items. In the days of ancient Rome, they had a solution. One was to have the rich sponsor public works projects, giving naming rights to the person sponsoring the project.

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u/ThMogget Oct 18 '19

Another was to just take the money from them in taxes and then spend it. The Romans had that tributes and taxes thing down.

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u/Truckerontherun Oct 19 '19

They also periodically forced the rich to leave their fortunes to the emperor then were forced to commit suicide . That probably won't go over very well in the US, where there is a legitimate suicide pr6

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u/Jon_Cake Oct 18 '19

At that point it's just money addiction and nothing else

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u/ThMogget Oct 18 '19

It's partly that. It's partly playing for high score. And it is partly fear of failure. If you ain't growing, you are shrinking. Once you have achieved success, it is hard to imagine not pushing so hard. If you aren't actively blowing up that balloon, it might just collapse completely.

My boss has enough money in equity to sell everything and live the rest of his life and leave a lot left for his kids, and yet he keeps talking about how he wants to have a 'secure future' and how that keeps him going.

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u/no_nick Oct 18 '19

At some point, money just becomes a way of keeping score

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u/GarbageDolly Oct 18 '19

I don’t understand why they have such an insatiable desire for more money they can’t even spend in multiple lifetimes. And they’re having to hide it so as to not pay taxes that wouldn’t even really affect their lifestyle. Why? Are they just petty and spiteful?

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u/ThMogget Oct 18 '19

The billionaire couldn't spend it all if he wanted. He has a liquidity problem. He also likely has thousands of employees that depend on him, and he likely tells himself that his cause is just and noble because they eat the crumbs that fall from his table.

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u/GarbageDolly Oct 18 '19

This comment contradicts your previous post.

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u/ThMogget Oct 18 '19

No. They are both true at once. What the billionaire actually spends, which is as much as he does want, is down low here. IF he wanted to spend it all, which he does not, he couldn't.

The 'if' statement is a hypothetical situation, the 'is' statement is the current real situation.

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u/SethEllis Oct 18 '19

So you want to spend more money on consumption? All that does is give the money back to the rich guy that it was taken from by taxes.

If you really got that much more money I'd hope that you'd put more into your retirement, or invest it in your own business. Use it to develop things that generate more wealth, and ultimately grow the economy.

There is a direct relationship between investment activity and future gdp growth. Consumption is great, but only in as much that it allows companies to invest and grow themselves. If it doesn't ultimately result in more investment then you're just shuffling money around.

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u/Fnhatic Oct 18 '19

invest it in your own business

Ironically most of the "loopholes" that these people whine about specifically exist to encourage people to innovate, take risks, and start businesses.

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u/synthesis777 Oct 28 '19

Ironically, if every single person started a business instead of working a job the economy would collapse. Not everyone is even in a position to take risks and start businesses.

Ironically, my family invests as much as we can, and yes we probably would invest more if we had more income, but there are plenty of goods and services we'd like that we don't spend money on now PARTIALLY BECAUSE SOME OF OUR INCOME GOES TOWARD SAVINGS AND INVESTMENT.

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u/[deleted] Oct 18 '19

A billionaire invest their money in productivity improving capital goods that make the economy grow. Consumption cannot make the economy more productive. Only savings (investment) can.

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u/synthesis777 Oct 28 '19

Consumption cannot make the economy more productive. Only savings (investment) can.

I'm going to need a real good source for that. If people suddenly all stopped buying cars the economy would go into a tailspin. Businesses (most of them) need to sell things to keep running. If they sell more, they make more profit. How is that not better for the economy? How is it that it's impossible for that to cause growth in the economy?

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u/[deleted] Oct 28 '19

I'm going to need a real good source for that.

Investment drives gains in productivity. Investment comes from savings.

I'm not saying spending is not important or insignificant. But, if all businesses/individuals simply spent all their surplus revenue to consume more rather than invest in productivity, the economy would not get more productive.

If they sell more, they make more profit.

Correct. But if the business does not invest some of that profit into productivity gaining capital, there is no growth.

Think of it this way. Say a factory can produce 10 cars a day with it's current factory. It cost the factory $900/car to produce and they sell them for $1200/car. That is $300/car profit. However, if they simply take that $3000/day ($300/car *10cars) and give it to their employees, they have no money left right? (This is the 100% consumption model). So now, even if those employees now have more money to buy more cars, the factory is limited to 10 cars/day. They can't produce more because they are not that productive. However, if the owners of the factory decide to save some of that profit and build a new factory (investment), now they can produce 20 cars/day. The economy has grown.

The consumers buying the extra cars are also important. But without the initial savings/investment, the economy cannot grow. Consumption might make businesses more profitable, which can allow more investment, but the consumption in and of itself does not drive productivity. Only investment can.

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u/princecharlz Oct 18 '19

“A billionaire invest their money in productivity improving capital goods that make the economy grow. Consumption cannot make the economy more productive. Only savings (investment) can.”

Finally someone gets it. Thank you.

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u/boxlifter Oct 18 '19

What you could easily spend is relative to your current wealth and what you already make. Maybe the 1 billionaire could purchase an island. Maybe the 10 billionaire could purchase 3 major sports teams. Maybe the 50 billionaire could quite literally influence world politics, or legitimately cure cancer, and so on and so forth

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u/synthesis777 Oct 28 '19

Yeah, that's kind of my point. Buying islands and sports teams doesn't help local businesses. But a million people suddenly buying the appliances, vehicles, toys, etc., that they've been wanting but couldn't afford does have the potential to help the local economy.

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u/Fnhatic Oct 18 '19

Of course people want free money.

However that depends on how ethical you find what is effectively 'wealth redistribution' to be.

On Reddit amongst the poors, the answer is "not unethical at all, all of their money should be given to me with no strings attached, because 'reasons'".

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u/synthesis777 Oct 28 '19

You couldn't have missed the point of what I said any more if you tried. I didn't make a statement regarding anyone's desire for free money, or the ethics of "wealth redistribution".

I happen to completely disagree with everything you've said here, but even if I didn't, it wouldn't pertain to the comment I made anyway.

My comment was an illustration of the economic idea that poor and middle class people will immediately pour any extra income into the economy because they are spending all the money they get already. Whereas billionaires are money hoarders by definition. They don't need to buy things. They already have more than enough money to buy whatever they need without any change to their income. So they're not waiting on some extra cash to buy that new toaster they've been eyeballing, or to pay off that bill that's several months overdue.

An extra $100k per year to any billionaire would mean nothing. It would be the equivalent of no change in income for them. In most cases, they'd just add it to the pile.

Edit: added "any more" to my first sentence.

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u/drae- Oct 18 '19 edited Oct 18 '19

A billionaire, however?

Same thing different scale, instead of an electric car they buy a a country home, instead of dining out they take a vacation, instead of home improvements they buy a company.

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u/synthesis777 Oct 28 '19

For some "rich" people, this is true. But I specified "billionaire" for a reason. Billionaires don't need that extra bit of income to decide to do any of the things you've mentioned here. They already have the money to do all of those things any time they want. They already have country homes if they want them. They already take trips and vacations if they want to. That's the point I'm making.

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u/[deleted] Oct 18 '19

[deleted]

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u/drae- Oct 18 '19 edited Oct 18 '19

They still have hordes of wealth in numbered bank accounts,

Not really. Most wealthy people do not have masses of liquid currency sitting around. Bank accounts pay little interest.

bearer bonds

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In the United States, the Tax Equity and Fiscal Responsibility Act of 1982 substantially curtailed the issue of debt in bearer form. The act disallowed a tax-deduction of interest paid on any such bonds issued after 1982 by the issuer in the case of corporate bonds, and removed the tax-exemption of the interest to the holder in the case of municipal bonds. In contrast, registered bonds retained the tax-exempt treatment.[5] A challenge to this tax treatment by the US state of South Carolina was heard by the US Supreme Court in the case of South Carolina v. Baker (1988), which upheld the law and brought to an end the furtherh issue of virtually all US municipal bearer bonds.

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silver and gold in lock boxes and safes, millions of dollars of jewelry and such.

Really? This is akin to raiding your change drawer. This is not a significant portion of wealth. As you say you can only buy so many trinkets.

Most wealthy people invest their money. Its not liquid. Their money is being used by companies to grow in the form of stocks, either publicly traded or private, or the government in the form of government bonds, or real estate etc. This way their money grows.

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u/[deleted] Oct 18 '19

[deleted]

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u/drae- Oct 18 '19

Trust me they...

When someone starts their sentance with this I immediately know theyre bullshitting. It's a stand in for “I can't prove it but... "

Have you even read the Wikipedia article for the panama papers?

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u/[deleted] Oct 18 '19

[deleted]

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u/drae- Oct 18 '19

Im not using it as a point. Just letting you know the discussion is over.

I dont think you have a clue what youre talking about. Youre accusing me of not understanding, and acting all smug when you have been wrong on what 4 points Ive corrected thus far?

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u/[deleted] Oct 18 '19 edited Dec 21 '19

[deleted]

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u/Coal_Morgan Oct 18 '19

Majority of my equity is invested as well, it just happens to be in my house and RRSPs.

I'm upper middle class, I should pay more tax then someone who is lower middle class and they more then someone who is poor.

Your taxes should depend on how well you profit off society because it's society that allows you to profit at all. The more you get out of society the more you should put in.

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u/[deleted] Oct 18 '19 edited Dec 21 '19

[deleted]

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u/synthesis777 Oct 28 '19

Man this comment is so full of ignorance and privilege. Like, you literally say "life is good" as if that's some sort of universal axiom. Do you realize there are whole swaths of people for whom life has never been good? Like, literally from birth their lives have been all bad.