> When Professor Cost left his job at Wachtell, Lipton, he took what I estimate to be an 85% pay cut. What would motivate a man to do such a thing? From a government accountant’s point of view, Professor Cost has made a terrible mistake. Whereas before he had earned, say, $2,000,000 in income annually, now he was earning only $300,000 annually. Such irrationality! In a socially just world he would be punished for costing the government $700,000 in tax revenues per year.
What nonsense. The writer assumes that the final goal of the goverment is to increase revenue. That is how corporations work, not governments. The goal of government is to represent its citizens to try to achieve the society that citizens want. The goal is to maximize well-being (whatever is each person definition), not cash.
From there on, everything falls into this kind of missing the point arguments.
> The goal of government is to represent its citizens to try to achieve the society that citizens want.
This is something we tell ourselves even though we know it isn't true. Take something like the Iraq War, which had abysmal support for many years yet continued on for no good reason. Or what percentage of our CIA operations would the general public feel represents their interests? And how many billions of taxpayer money is wasted on special interests that only a tiny fraction of people care about?
This article is looking for meaning in the tax system where there was never any to find. Whatever your philosophy, taxes are arbitrary. There is some broad consensus that we can't tax people who have no money. People act as though a lot of questions in the tax system have been settled but it takes very little thought to realise it is a stack of conventions with flimsy justifications and questionable incentives. Nobody with the power to change things seems to have a stack of evidence of why any particular configuration is expected to lead to better outcomes. If they do they really should talk about it more.
There are groups who believe that the tax system should encourage certain objectives. Which specific group has power keeps changing (a much deeper trend than mere political parties). The tax system is a jumble of competing ideas. Sometimes, if something is grossly unfair, the rules change. Other times they don't.
Not all taxes are arbitrary. You can't argue that taxes on natural resources are arbitrary. Take mineral resources as an example. I think it's very difficult to find the idea of taxing the use of these resources as absurd in a similar fashion to those presented by this article. Same can be said about radio spectrum.
If we applied the same philosophy to land, we'd need much fewer "arbitrary" tax types and percentages.
Our tax systems are indeed deeply flawed and arguing that any system is arbitrary and equally absurd/paradoxical/inefficient is incorrect since there are examples of ethical (and I would argue necessary) taxes.
I see a couple of straw-mans in the reasoning. First is the claim that taxation assumes that working you get paid for nothing - "When I work hard to earn money, I’m not getting something for nothing. I’m getting something for my time and my time has value." - that is not at all the point, the IRS doesn't assume that. You get paid for your time AND your skills AND your willingness to exchange both for value, whatever value you choose to receive.
Which takes us to the barter part of the essay.
There is a major difference between paying someone to do your chores or doing them yourself. What's the difference? The value you are willing to exchange not to do the chores yourself, of course. Be it lack of skills, lack of time or valuing that time spent doing something else more than what you're giving in exchange.
In other words: the IRS recognizes that you own your own time and are free to do with what you want, but when you exchange it for something of value - money, services, goods - you will be taxed on that value.
Not entering the discussion on taxes: both the lawn mowing person and the house cleaning person recognize that there is more value in the other's time for a given task than their own time, if and how much that differential in value should be taxed it's a different conversation.
"You get paid for your time AND your skills AND your willingness to exchange both for value, whatever value you choose to receive."
Still leaving out one major part: the willingness of some other entity to trade your input for money at a mutually agreeable rate. You can be willing to trade 55 hours a week of high-quality work for $3 million a year and not find an employer.
The truly wealthy are making much of their money passively, income tax isn't really something they think about. The government would need to increase the estate and capital gains taxes to actually balance/unburden things.
It is kind of absurd, especially once you get into the messy bits around bartering and gifting. But then all sorts of elements of modern society are absurd when you look at them closely.
It seems that once you get into the world of macroeconomics, everything is absurd in some way or other. It's all just a great weird fiction that we all buy into because it keeps society running. Money itself is a weird social construct. GDP is completely mad.
What does the author suggest we do instead? Something that isn't as absurd?
It's a tongue-in-cheek essay, I'm not sure the author intends to suggest an alternative.
The way I think a out the barter rules is that they are there to keep people from using barter terms to describe non-barter economic activity. In other words, if someone lives their entire life avoiding cash or instruments of cash, but trades units of work for goods to deliberately avoid income taxes, the rules allow the IRS to say nope, we see through you, you're putting in 32+ hours and getting what other people pay roughly $50k/year for, so what you really have is a full-time $50k job, and you owe taxes based on that.
A world without such rules might be a world in which many, many more people "barter" time for goods and services in just that way.
Income tax is absurd - we should tax wealth not work.
By penalising those who work hard, it destroys social mobility and entrenches the establishment landowners and conservatism.
Income tax and VAT should be replaced with wealth tax, Land Value tax, property tax, inheritance tax, gift tax, etc. - i.e. tax the accumulation of wealth itself and use that to help level the playing field and promote economic activity (startups, technological disruption, etc.).
And wherever possible/feasible, tax should be replaced with fees. A company that uses public streets a lot compared to another one should pay more, even when they have the same revenue/profit.
I think of it more as a hack than an absurdity. It's a defined point when a defined amount of cash is transferred from one place to another.
Ideal time to tax.
If you suggest something like a land value tax then people will worry about how you value something without a market price. It is in some senses abitrary what your land is worth (Not actually a problem in practice but makes the point why a hacky system might prevail in the real world).
Higher income people buy more stuff with a higher price tag. VAT is the most fair way to tax. You can reduce it for essentials such as baby formula and increase the rate for luxury cars, etc.
So disincentive saving to a ridiculous degree? If you managed to spend every single cent you earned you'd pay no taxes. Save or invest anything for the future pay a 80% tax on it (you have to compensate all the lost revenue somehow...).
It does sound like a great way to increase consumption and short term GDP growth...
Different people have different consumption patterns. Corporations are incentivized to maximize profit (shareholders want a return), individuals are not...
While societal control is maintained by pushing financial obligation to the masses, both debts and taxes represent the nuclear upgrade to capitalism that unilaterally enforces the system.
Debt grants its users a taste of what they can not yet afford, subsequently reinforcing the notion that work is equal to progress while also ensuring continuous participation within the larger financial system.
Taxes guarantee the debt-free still participate in commerce. One cannot simply be self-sufficient when property taxes are due annually.
Within this system, every citizen must participate in some form of commerce to meet those obligations. Neither goats nor gold can satisfy this bill; hard currency is required.
This construct does not benefit the majority, only those who hold power and seek to keep it. Neither currency nor commerce represent the underlying problem; they are merely instruments designed to thieve power from man.
Taxes don’t really have to be fair or just. In German, the noun for „tax“ is the same as the verb for „steering“ even!
In Order for our societies to work in practice, taxes are needed. What to tax and by how much is up to political debate…
But there is evidence that high taxes combined with a great welfare state and some redistribution allows even capitalist societies to thrive. It even gets better when you specifically use taxes to reduce the difference between rich and poor.
There might be less billionaires in such situations, but everyone else is MUCH happier and well off.
So, from a consequentialist standpoint, more taxes, especially if progressive and hard enforced, are better.
Every counter argument to that seems to construct some reasoning from pure egoism and assuming someone is not a product of his environment - and ignoring the very first thing I said - taxes don’t have to be fair or just
[+] [-] hourago|3 years ago|reply
What nonsense. The writer assumes that the final goal of the goverment is to increase revenue. That is how corporations work, not governments. The goal of government is to represent its citizens to try to achieve the society that citizens want. The goal is to maximize well-being (whatever is each person definition), not cash.
From there on, everything falls into this kind of missing the point arguments.
[+] [-] yucky|3 years ago|reply
[+] [-] ralusek|3 years ago|reply
[+] [-] ploppyploppy|3 years ago|reply
[deleted]
[+] [-] roenxi|3 years ago|reply
There are groups who believe that the tax system should encourage certain objectives. Which specific group has power keeps changing (a much deeper trend than mere political parties). The tax system is a jumble of competing ideas. Sometimes, if something is grossly unfair, the rules change. Other times they don't.
[+] [-] ovidiu|3 years ago|reply
If we applied the same philosophy to land, we'd need much fewer "arbitrary" tax types and percentages.
Our tax systems are indeed deeply flawed and arguing that any system is arbitrary and equally absurd/paradoxical/inefficient is incorrect since there are examples of ethical (and I would argue necessary) taxes.
[+] [-] fabbari|3 years ago|reply
Which takes us to the barter part of the essay.
There is a major difference between paying someone to do your chores or doing them yourself. What's the difference? The value you are willing to exchange not to do the chores yourself, of course. Be it lack of skills, lack of time or valuing that time spent doing something else more than what you're giving in exchange.
In other words: the IRS recognizes that you own your own time and are free to do with what you want, but when you exchange it for something of value - money, services, goods - you will be taxed on that value.
Not entering the discussion on taxes: both the lawn mowing person and the house cleaning person recognize that there is more value in the other's time for a given task than their own time, if and how much that differential in value should be taxed it's a different conversation.
[+] [-] dsr_|3 years ago|reply
Still leaving out one major part: the willingness of some other entity to trade your input for money at a mutually agreeable rate. You can be willing to trade 55 hours a week of high-quality work for $3 million a year and not find an employer.
[+] [-] DarkNova6|3 years ago|reply
[+] [-] texaslonghorn5|3 years ago|reply
Regardless, I found the anecdotes entertaining.
[+] [-] leoedin|3 years ago|reply
It seems that once you get into the world of macroeconomics, everything is absurd in some way or other. It's all just a great weird fiction that we all buy into because it keeps society running. Money itself is a weird social construct. GDP is completely mad.
What does the author suggest we do instead? Something that isn't as absurd?
[+] [-] pwinnski|3 years ago|reply
The way I think a out the barter rules is that they are there to keep people from using barter terms to describe non-barter economic activity. In other words, if someone lives their entire life avoiding cash or instruments of cash, but trades units of work for goods to deliberately avoid income taxes, the rules allow the IRS to say nope, we see through you, you're putting in 32+ hours and getting what other people pay roughly $50k/year for, so what you really have is a full-time $50k job, and you owe taxes based on that.
A world without such rules might be a world in which many, many more people "barter" time for goods and services in just that way.
[+] [-] nivenkos|3 years ago|reply
By penalising those who work hard, it destroys social mobility and entrenches the establishment landowners and conservatism.
Income tax and VAT should be replaced with wealth tax, Land Value tax, property tax, inheritance tax, gift tax, etc. - i.e. tax the accumulation of wealth itself and use that to help level the playing field and promote economic activity (startups, technological disruption, etc.).
[+] [-] valenterry|3 years ago|reply
[+] [-] sam_lowry_|3 years ago|reply
[+] [-] ZeroGravitas|3 years ago|reply
Ideal time to tax.
If you suggest something like a land value tax then people will worry about how you value something without a market price. It is in some senses abitrary what your land is worth (Not actually a problem in practice but makes the point why a hacky system might prevail in the real world).
See also, taxes on purchases, estate taxes etc.
[+] [-] smitty1e|3 years ago|reply
The correct amount stabilizes a system. Too much kills it; too little lets the system self-immolate.
I was actually thinking of an AskHN just ahead of seeing this item: "Why aren't all the Really Smart People in tech demanding serious tax reform?"
[+] [-] jacooper|3 years ago|reply
[+] [-] Axien|3 years ago|reply
[+] [-] johlindenbaum|3 years ago|reply
Make below X based on last year’s tax return? Here’s a quarterly cheque to offset the average individual’s sales tax.
[+] [-] blitzar|3 years ago|reply
[+] [-] qwytw|3 years ago|reply
It does sound like a great way to increase consumption and short term GDP growth...
Different people have different consumption patterns. Corporations are incentivized to maximize profit (shareholders want a return), individuals are not...
[+] [-] rationalist|3 years ago|reply
[+] [-] mantas|3 years ago|reply
[+] [-] shanebellone|3 years ago|reply
Debt grants its users a taste of what they can not yet afford, subsequently reinforcing the notion that work is equal to progress while also ensuring continuous participation within the larger financial system.
Taxes guarantee the debt-free still participate in commerce. One cannot simply be self-sufficient when property taxes are due annually.
Within this system, every citizen must participate in some form of commerce to meet those obligations. Neither goats nor gold can satisfy this bill; hard currency is required.
This construct does not benefit the majority, only those who hold power and seek to keep it. Neither currency nor commerce represent the underlying problem; they are merely instruments designed to thieve power from man.
[+] [-] morelandjs|3 years ago|reply
How else does one explain the concentration of wealth over time? Progressive income tax is needed to stabilize wealth from collapsing in on itself.
[+] [-] KqAmJQ7|3 years ago|reply
[+] [-] anonyfox|3 years ago|reply
In Order for our societies to work in practice, taxes are needed. What to tax and by how much is up to political debate…
But there is evidence that high taxes combined with a great welfare state and some redistribution allows even capitalist societies to thrive. It even gets better when you specifically use taxes to reduce the difference between rich and poor.
There might be less billionaires in such situations, but everyone else is MUCH happier and well off.
So, from a consequentialist standpoint, more taxes, especially if progressive and hard enforced, are better.
Every counter argument to that seems to construct some reasoning from pure egoism and assuming someone is not a product of his environment - and ignoring the very first thing I said - taxes don’t have to be fair or just
[+] [-] nivenkos|3 years ago|reply