Should there be a wealth cap?

[mindstalk]

Note, not a wealth tax, though one could use one to approximate this, but a cap, an attitude that "enough is enough for one person, we're not acknowledging ownership of any more". You can imagine a hard cap, a progressive wealth tax that strongly discourages further accumulation, or some other mechanism, whatever makes you most comfortable.

Numbers for context:

Average American worker income of about $40,000. (Mean per capita is $46,000, median is rather less, workers have some advantage.)

Lifetime earnings of such a worker: $2 million over 50 years, ignoring taxes or living expenses.

One estimate for total US wealth: $60 trillion. Which leads to about $200,000 per capita.

Income of hard-working and highly-skilled people who provide services on a direct basis, like doctors and lawyers: around $200,000 I think? $400,000, 10x average, is probably a good approximation.

GDP of the US: about $14 trillion

Federal budget: about $3 trillion

Income you can get from having lots of money: 1% over inflation if you play it safe, up to 7% with diversification and risk. I'll tend to use 1-3%.

[Poll #1775671]

$40 billion: I seem to recall when Bill Gates having $10 billion was freakish and unique. Now this is the working megabillionaire level: Gates, Buffett, Soros, Walton. Actually Wal-Mart has produced multiple kids who *inherited* $20 billion. The average worker has to work 1 million years to get this level. You can probably get $1 billion a year in fairly safe interest. You can own and run a small town of 10,000-70,000 servants.

$400 million: If you had 100x the average income, and worked for 100 years, you'd get this. Safest interest is twice the average lifetime earnings. You can have 100 full-time servants, or a handful of high-end lawyers and doctors who exist to attend to your every fart. Note this is only 1% of the megabillionaire level, who can spin this off as interest. This is my upper bound for a cap; it still feels obscene, but if one grants a need for high end incentives, I can't see more than this being useful. Nor see this cap as hurting society.

$4 million: 20x the average wealth. One could argue that having a lifetime's earnings to play with all at once, and the ability to earn average income without working, is reward enough, and wanting more is filthy greed. Probably low enough to be noticeable in effect though, changing urban property value and distribution.

Comments

[notthebuddha.livejournal.com]

Individuals own wealth? No!

the ability to earn average income without working, is reward enough, and wanting more is filthy greed.

I think approaches the same mistake about money that your more hardcore libertarians make about property. Your money and my money are connected by the economic flow just like Fred's land and Barney's land are connected by the flow of wind, water, game, traffic, etc. Taking away 90% the wealth of a guy who has 10,000 servants will put people out of work, starting with 9000 of those servants. But Bill Gates has more like 200,000 highly educated minions so he's obviously doing something more than sybaritism with his wealth.

Gates is also a pioneer in deniable ownership; he gifted billions in assets to his foundation, but retains important controls including voting rights for stocks either explicitly or through his oversight of the foundation's high-level administration. Any cap is going to encourage more of this nominal divestiture, off-shoring, and more family business structures like the Walton Family, doubtless with membership agreements to let the others buy Sis out if she goes off the reservation.

This can be prevented with enough govt intervention but that costs money, which generally means the enforcement arm becomes a seizure-funded tool to be turned against interests who are less than supportive of the seizers and their masters. I think a much more productive use of political capital would be to increase transparency and visibility into the dealings of gigawealthy interests with each other, with their employees, with all levels of domestic government, and with all foreign interests that are beyond domestic law enforcement.

But realistically, this will require a collapse of government first, because fabulously wealthy people are almost completely secure in their ongoing process of regulatory capture. The mice can't even vote to bell the cat, because the cat has been round to the parliamentarian's nest with an offer he couldn't refuse.

[mindstalk.livejournal.com]

"Taking away 90% the wealth of a guy who has 10,000 servants will put people out of work, starting with 9000 of those servants"

In the short term. The wealth isn't destroyed though, just distributed, so those people should be back to work soon enough.

"Bill Gates has more like 200,000 highly educated minions so he's obviously doing something more than sybaritism with his wealth."

I assume you mean Microsoft employees; MS isn't entirely Bill Gates, and MS also has more than a whiff of monopolistic practices about it. And it's not just sybaritism that's the target, but concentration in general.

"fabulously wealthy people are almost completely secure in their ongoing process of regulatory capture"

Perhaps an argument for less plutocratic/oligarchic countries to avoid letting such robber barons arise in the first place.

[notthebuddha.livejournal.com]

Perhaps an argument for less plutocratic/oligarchic countries to avoid letting such robber barons arise in the first place.

That's why I advocated for transparency rather than a wealth cap.

The wealth isn't destroyed though, just distributed, so those people should be back to work soon enough.

You whole point is that money is too abusively effective in large enough piles. Dividing it into smaller piles inherently removes some of it's effectiveness, so wealth has to be destroyed if your plan is executed; this is even before percentages are raked off in the form of "legitimate" administrative expenses and inevitable graft, pork, corruption, etc.

[mindstalk.livejournal.com]

Transparency by itself won't prevent the concentration.

The large piles are abusively effective for the selfish purposes of a few individuals. Dividing it into piles reduces its effectiveness for those purposes, moving it to others; instead of buying yachts and lobbying for plutocracy, it can buy houses and lobby for public goods, or at least private ones with a broader base.

There might be some loss of wealth creation due to economy of scale loss, but there can also be gains from less distorted politics, less oligopolistic rent-seeking, broader investment in human and public capital, and a healthier and happier population.

[nancylebov.livejournal.com]

I believe you're assuming that if there's a wealth cap, the money which is taken will be fairly distributed or used for something benign.

If you've concerned about disproportionate power, the power of the government vs. the average citizen as well as the power of wealthy people vs. the average citizen should be considered.

In completely unrelated news, records about the CIA having rendered people to Libya to be tortured are turning up as a result of the revolution there.

[mindstalk.livejournal.com]

More equal distribution and benign use is certainly a real possibility, especially in a democratic country less distorted by the presence of the ultra-rich. The government has more power but is also more accountable; exactly how much so depends on the government.

[richardthinks.livejournal.com]

Paraphrasing nancylebov here, you've got a really interesting mix of an abstract ethical question and a dollar figure going on here - "should there be a wealth cap and how much?" sounds like a natural segue but it demands a set of other questions, since it immediately deviates us from the pure ethical/aesthetic question into grubby practical concerns.

And so then we're into "how would it be enforced?" and "what would happen to the money so capped?" and "how do we define wealth anyway?" and you can't handwave those because you let the practical in.

[februaryfour]

I'm going to be the weirdo here and basically say that setting any arbitrary cap is an infringement of the basic rights to the pursuit of happiness. As long as they earn it morally/ethically, and as long as they aren't doing people harm, what's wrong with having over $40 trillion? (We're being purely theoretical here...)