[sdhgaiojfsa]

> If the goal is to spread wealth more evenly . . .

If the only goal was to spread wealth more evenly, then what we should do is simple appropriate all wealth beyond (num_wealth / num_people), and give it to all the people who don't have that much wealth. Then it would all be even stevens. :)

But there is not just one goal. Another important goal is to still have a functioning economy after applying your policy choices. All tax policy must at a minimum consider efficiency as well, from a purely pragmatic standpoint. Otherwise you end up in a situation where you have destroyed your economy by eliminating important incentives.

There is are also moral arguments about what is "right" (for those who believe in such a concept). If Bob and I both did work worth $10k, but Bob used the money to have a fancy vacation and I saved the money against future needs, should I be taxed more? Maybe! It depends on your moral outlook, and also your beliefs about how spending and investing affect the economy -- both are needed to some degree or another.

Historically, wealth taxes have been tried. They are generally not very popular, and do not raise very much money. They have a tendency of hitting middle and upper middle class retirees, as well as high income people. They also can't be very large in magnitude without seriously degrading investment returns (and thus incentive to invest). They also tend to target a group of people who are a "flight risk." Unlike income, which is often not possible to relocate out of a given nation, wealth is easily transported across national lines to jurisdictions without a wealth tax. Read about France's wealth tax on Wikipedia for more information on this.

[Applejinx]

Yes you should. Bob supported a host of vacation-related workers and kept the economy moving. You sucked money out of the economy and sat on it.

Saving capital so as to be wholly self-sufficient outside the functioning of a society is not in any sense a societal benefit. It's sort of the 'eat your own dogfood' issue: let's say you don't think retirement on Social Security is bearable, and you're alarmed by public healthcare and the state of roads. So, you do everything possible to suck all the capital you can out of that whole system, in order to privately retire off your own capital, going to better doctors and flying between them in a helicopter.

You're hardly going to be working to better the state of the public sphere, as you're constructing a walled garden for just you: is this the moral purpose of your saving money for years? You end up in direct competition with the public sphere, and we've seen this dynamic play out for decades, pretty much my entire lifetime and I'm 50.

You're basically ruining money velocity, and should indeed be punished for that choice. There is nothing moral about hoarding, especially when your argument (maybe not specifically yours…) is 'the public sphere is horrible and ruined, therefore abandon it and ruin it more'. That's the argument of an economic saboteur.

[sdhgaiojfsa]

> Yes you should. Bob supported a host of vacation-related workers and kept the economy moving. You sucked money out of the economy and sat on it.

Eh. I'd rather say that Bob diverted labor toward supporting his luxury consumption, whereas I made capital available for increased production (of cars, houses, food, etc.). The truth is somewhere in between. I think your read on this is a little too simplistic.

[pjmorris]

It seems to me that the burger Bob bought (and the check the restaurant wrote to its supplier for the ground beef, and the check the supplier wrote the farmer for the cow) is a direct payment into the food production system, while 'making capital available' may or may not land anywhere near the real economy. What's the sophisticated view here?

[sdhgaiojfsa]

There's an enormous amount of complexity here. For one thing, it's not like there is an infinite amount of beef available at a fixed price. Bob's eating that burger probably on the margin increases the supply of beef, but it also on the margin increases the cost. Now everyone else has to pay 0.0000001c more for their hamburgers.

Or what if Bob bought a filet mignon instead of a hamburger. Maybe farmers will now be (on the margin), breeding cows that produce less hamburger but more steak. This could increase the price of food that poor people eat. If Bob buys a Tesla, maybe Bob helps expand the supply of Teslas, but now buying a Corolla is slightly more expensive, because there are slightly fewer economies of scales in sedans. (This is actually happening, BTW, as Americans buy larger cars.) I also spoke of Bob taking a vacation. He spent a thousand dollars on plane tickets, which has serious deleterious environmental effects, and for the most part represents a purchase of oil, not labor services. Oil workers wages may have gone up a bit, but most of the money just went into the pocket of whoever owns the oil.

These are just some examples of possible things that could happen. Without empirical testing, we could not know what the exact impacts of any given decision are, and realistically, we do not have the resources to track the impacts of each decision through the economy.

[zebrafish]

You make a lot of good points. I think we should also consider the fact that if you invest your money rather than spend it, the firm may not invest directly into capital projects for increased productivity. So much money is returned to shareholders via buybacks and dividends these days. So in those cases, your wealth isn't transferred to labor, instead it's transferred to other shareholders who already have wealth and a flywheel effect occurs. This creates more and more distance between labor and capital.

I could be completely off here but am interested in opinions on this.

[sdhgaiojfsa]

You're not wrong that that effect can exist. And I'm not saying that investing is a totally altruistic, virtuous action. However, the criticisms of the stock market as not being "real investing" are largely off-base. Liquidity encourages investment -- illiquid investments are universally less preferred than liquid investments, all other things being equal. Even if non-IPO investors/subsequent issuance investors are not directly providing capital to a company, nobody would participate in IPOs or other stock issuances unless they were confident of a market for that stock in the future. Therefore participation in the secondary market for stocks is necessary for a primary market to exist in any meaningful way. (In a similar way, if the public market did not exist, there would be much less private investment, much fewer startups, etc.)

[pjmorris]

You raise fair points about the spending of money on physical assets/consumption. Can you elaborate similarly on the potential problems with how saved/invested money is allocated?

[sdhgaiojfsa]

Well, at a very high level, banks can use saved money to lend to businesses or individuals at a given multiplier. If a bank has insufficient deposits, it can't lend any more money. This is called fractional-reserve banking. https://en.wikipedia.org/wiki/Fractional-reserve_banking So when you make a deposit, you are effectively causing a fraction of that deposit to be available for lending. This is what you're getting paid for when you get interest.

On the other hand, when you invest in a stock, you're providing liquidity to whoever held it last. That doesn't directly provide money to a company. But it has an important function: people only buy stocks when they are confident they can later sell it. If there were no buyers for stocks in the secondary market, nobody would participate in IPOs.

As far as which is better for the economy, this is beyond my knowledge. However, any normal person with any financial savvy knows that market returns are much better than deposit returns, so most of the time when such people say "save" they mean "invest in the market."

[perl4ever]

Having $X in a bank account is not the same as taking $X in capital machinery and shoving it somewhere to rust "out of the economy". In fact, it's kind of the opposite, which is why the financial system exists and saving is a good thing.

[tonyedgecombe]

>You sucked money out of the economy and sat on it.

Presumably they invested it and in doing so helped businesses to grow, employee more people and better serve their customers.

[AnimalMuppet]

> Bob supported a host of vacation-related workers and kept the economy moving. You sucked money out of the economy and sat on it.

Maybe sdhgaiojfsa invested it in the hotel that Bob stayed at on vacation. (If Bob spent $10K on vacation, he's probably not staying in a grass hut.)

[pjmorris]

There are certainly bad ways to move toward wealth equality. In terms of implementation, I was actually thinking more of either a George-ian land tax [0], or through some form of encouragement for the wealthy to spend their money into the physical economy rather than the financial abstraction economy. If I figure that part out, I'll run for office.

[0] https://www.economist.com/free-exchange/2015/04/01/why-henry...