Comment by AnthonyMouse | Hacker News Reader

Comment by AnthonyMouse | Hacker News Reader

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> That is the most logical as a fine is supoosed to be a deterrent and it does not deter if you are super rich.

That is why that system doesn't work. For most things the required amount of deterrent doesn't depend on your income. For example, if it costs $100 to dispose of motor oil properly but $0 to dump it in the sewer then the fine has to be at least $100. But that means it needs to be at least $100 for everybody, or there will be people who find it profitable -- even to the point of setting up a "motor oil disposal" company where they dump everyone's motor oil in the sewer and then just pay the fines. But if you set the amount high enough that it deters the lowest income person and then scale it with income, you end up with unnecessarily draconian penalties on ordinary people.

It also becomes an obvious arbitrage opportunity. For example, if a rich person wants to travel fast by car then they get a low-income chauffeur so that the speeding fine is less. Income-based systems are always susceptible to this, where the super rich pay the cost of doing the arbitrage and what the system really ends up doing is hammering the middle class because they can't justify the arbitrage so they end up paying higher rates than the rich. See also corporate income tax, paid by local businesses but not huge international ones.

Finland only gets away with it because they have much less income inequality, and in particular much less poverty, so the ratio typically doesn't scale to the point that it starts causing huge problems like this.

I'm not really seeing the downside of arbitrage. Do you have a better example?

Rich people deciding not to drive and hiring professional drivers and/or using Uber, Lyft, or a taxi doesn't seem like a problem. The incentive worked. I doubt people driving as a business are all that eager to lose their license.

> I'm not really seeing the downside of arbitrage.

The downside is that you're failing to do the thing you set out to do. In theory the rich person (say $1,000,000 in income) places a high value on their time, so you impose a higher fine on them (say $20,000) to try to deter them. But the Uber driver only makes $20,000 total, so the fine for them is only $400. Meanwhile a middle class person making $50,000 pays $1000 -- 2.5X what the rich person incurs (assuming the fine the Uber driver pays is amortized over the fares).

> Do you have a better example?

Name basically anything that incurs a fine. A rich person who wants to do it and is "deterred" by the high fine just hires a poor person to do it for them. This is often what they do anyway because it saves them the labor independent of lowering the fine.

> I doubt people driving as a business are all that eager to lose their license.

But that has nothing to do with the fine, it's a separate penalty which doesn't exist in most other categories, apparently isn't sufficient (everybody speeds anyway), and the incentives of the driver and passenger are already aligned. They both want to get there faster, the passenger to save time, the driver so they can get another fare sooner.

It does create jobs. And I didn't think the goal was to eliminate speeding, but rather to not do worse than average.

A progressive fine isn't going to solve inequality.

> It does create jobs.

Poverty-level jobs, by definition, because the prerequisite to being a good fine-sink is having a low income.

> A progressive fine isn't going to solve inequality.

The problem is that it makes it worse by effectively imposing higher fines on middle income people than the super rich.

I think you're presuming the loophole here a bit too quickly. It shouldnt be difficult to determine when it is that a wealthy person hired a less wealthy person to do the unsavory thing in order to exploit the lower fine.

More to the point brought up about Finland's lower wealth inequality: yeah, that should be what we're shooting for. Say we return to a robust progressive income tax system where if you make over say, 10 million dollars a year, you get taxed 90%. The arbitrage loophole doesnt work because, what, are you going to split up your 10M/Year income between 20 different less wealthy people and have them spend your money for you in order to avoid the tax?

What am I saying, of course the rich would find a way to skirt taxes. It's like, their whole shtick. I loathe the whole "Of course I'll do every shady, up to and including illegal things, to pay less taxes because if theres a loophole I want to exploit it". No, in fact you are acting being an anti-social cretin who neglects to give back to the society that produced the material conditions that allows for your wealth.

> It shouldnt be difficult to determine when it is that a wealthy person hired a less wealthy person to do the unsavory thing in order to exploit the lower fine.

How? You would have to prove collusion between them rather than just a normal contractor-type relationship where the contractor does something unsavory entirely of their own volition.

> Say we return to a robust progressive income tax system where if you make over say, 10 million dollars a year, you get taxed 90%. The arbitrage loophole doesnt work because, what, are you going to split up your 10M/Year income between 20 different less wealthy people and have them spend your money for you in order to avoid the tax?

Of course. That's exactly what happens in those types of situations. As soon as you hit the 90% rate, the next thing you know the spouse is on the payroll, or the kids, the parents, brothers and sisters, in-laws, cousins, friends of the family etc.

> What am I saying, of course the rich would find a way to skirt taxes. It's like, their whole shtick. I loathe the whole "Of course I'll do every shady, up to and including illegal things, to pay less taxes because if theres a loophole I want to exploit it". No, in fact you are acting being an anti-social cretin who neglects to give back to the society that produced the material conditions that allows for your wealth.

Right, which is why you need policies they can't avoid instead of ones like this which they can.

The best way to do this is a UBI funded by a flat tax. The rich can't arbitrage a flat rate and the UBI makes it progressive (meaning net transfer from rich to poor).

To the first point, good question. I dont know how we could solve that problem writ large.

As to UBI, I am all for it but I have concerns as well. Like a super basic one being what is to stop commodity prices inflating proportionately to the new lowest possible income set by UBI. Say UBI is 20k for every human on Earth. Great, but what's to stop the rise in prices of commodities to essentially UBI adjusted income + original price of commodity? Im genuinely curious what you think.

> Like a super basic one being what is to stop commodity prices inflating proportionately to the new lowest possible income set by UBI. Say UBI is 20k for every human on Earth. Great, but what's to stop the rise in prices of commodities to essentially UBI adjusted income + original price of commodity? Im genuinely curious what you think.

So this is always the argument people make against a UBI because it sounds plausible and the answer is complicated.

The first thing to notice is that the same concern is present for any method of reducing poverty/inequality whatsoever. If the poor have more money then they'll want to buy more stuff and by supply and demand the higher demand raises the price of certain products. It's a thing that happens.

But the only way it eats 100% of the money is if everything has zero price elasticity of supply. Which it doesn't. For example, if people want more land, well, sorry, the supply is pretty much fixed. But if people want more housing, that we know how to construct, so if more people could afford it then we could just build more. (If we have asinine laws against building more housing, well, that is an independent problem with an independent solution.)

And most of the things people want are not practically limited in supply. If more people could afford a sailboat then businesses would make more sailboats. If more people could afford new clothes then businesses would make more clothes. It's not as if there is an insufficient supply of wood or cotton -- for many products the dominant cost is the R&D or some other fixed cost and having more buyers could make the unit price come down.

This is not an insurmountable hurdle. For people too poor to afford even the lowest fine, you can do something like community service at an effective pay rate of minimum wage in lieu of the fine.

In the case of breaking the law for hire, you can make the employer jointly liable, as is already the case for most crimes.

> For people too poor to afford even the lowest fine, you can do something like community service at an effective pay rate of minimum wage in lieu of the fine.

The problem is the opposite of that -- it isn't that the fine on low income people is too high, it's that it's too low to be a deterrent unless you make it high enough that scaling it makes is unnecessarily harsh for middle class people.

> In the case of breaking the law for hire, you can make the employer jointly liable, as is already the case for most crimes.

At which point you might as well just disband all large enterprises immediately because you've set up a system where you multiply the base rate of misbehavior by both the number of employees and the company's total revenue, which are both just proxies for size and so the penalty isn't just proportional, it's N-squared.

You also can't avoid the problem unless you go all the way to the root of ownership or people will just outsource the activity to a shell company, but then you end up imposing a billion dollar fine for littering because the offender works for a company which is owned by a mutual fund.

> [The problem is when the fine is] too low to be a deterrent unless you make it high enough that scaling it makes is unnecessarily harsh for middle class people.

Easy fix: Set the fine as "N times daily wage, but at least X".

> Easy fix: Set the fine as "N times daily wage, but at least X".

At which point low and middle income people all pay the same fine or as close to it as makes no difference, rich people avoid it through arbitrage and you have a system with no significant effect (except maybe that the super rich still pay less than the upper middle class).

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