Comment by seibelj | Hacker News Reader

Comment by seibelj | Hacker News Reader

We all agree that people in general act in their economic self interest. We also agree that people prefer to donate money to specific causes they support rather than pay extra in taxes - I think this is a fair statement. Redistribution as a concept has widespread support, but the mechanism to do so has wide disagreement, so each person tends to prefer selecting their own mechanism of redistribution through donations to non-profits rather than pay extra to the government.

Therefore, any solution proposed through the (long, compromised, imperfect, special-interest ridden, full-of-holes) government legislative process will be relatively easy to bypass by motivated rich people with the means to pay professionals to structure their assets accordingly, as has been the case for centuries. And the rich won't necessarily do it with sinister intent - they may still give a huge amount of money to causes they support, but simply disagree with giving it to the government as a blank check. Or maybe the rich are just greedy and self-interested. But either way, the government will be unable to take this money.

I don't think any redistribution mechanism implemented by the government can attack the rich long-term. They may get snagged initially, then quickly reorganize their assets to avoid such issues. The true people who get snagged are the middle class, who actually do pay taxes (while the poor often have negative-taxes and receive the redistribution), but do not have the means to restructure themselves to avoid the taxes.

So we are left with 2 options - the first are broad, universal tax increases (which no one advocated for in the US election except Bernie Sanders) rather than (inevitably-failing) soak-the-rich taxes, and the second being to restructure society to provide the same or more services to people using less taxes.

I prefer the latter - we should be adding efficiency to the state, while giving people more choice on how to help each other. I don't want to delve into the details in this comment. But my overall point is that taxes targeting the rich and super-rich will fail, as they always have and always will, so we need some other solution if we desire to reduce inequality.

> I prefer the latter - we should be adding efficiency to the state, while giving people more choice on how to help each other.

Agreed. The state has become much too inefficient. Sadly, much of that is the state’s own doing by continuously adding layers of bureaucracy and complexity. Many of the problems could be solved with technology at scale. We could use software to measure government like we measure every other business process.

We can and must enforce checks and balances.

Citations for your claims? As I understand it most inefficiencies we see in government come from stripping resources out, not from wasteful allocation.

No, both the inflation adjusted revenue (receipts) and spending (outlays) of the Federal government have been constantly increasing — the latter unfortunately more rapidly than the former: https://www.taxpolicycenter.org/statistics/federal-receipt-a...

Another example, inflation adjusted per-pupil education expenditure has seen a constant increase over time: https://nces.ed.gov/programs/digest/d19/tables/dt19_236.55.a...

> Agreed. The state has become much too inefficient.

This is frequently stated as fact, but no evidence is provided.

> We could use software to measure government like we measure every other business process.

Perhaps we could get SoftBank to measure government efficiency. They seem to be trusted with vast sums of money so they must be particularly good at evaluating business efficiency.

I mean, when a corporation is unable to collect enough money to continue operating, it goes out of business. When a government program is unable to collect enough money to continue operating, we increase its budget.

SoftBank is a good example; as long as they continue to lose money, they lose the confidence of shareholders. If their track record continues, they risk going the way of other big banks (Bear Stearns, Lehman Brothers).

Ask yourself how many companies from the 20th century are now defunct vs government programs. Efficiency is a byproduct of change & evolution. Inefficiency is a byproduct of institutional sclerosis.

> when a corporation is unable to collect enough money to continue operating, it goes out of business

This is different from saying an organization is inefficient. From my experience in the corporate world, some businesses can be VERY inefficient compared to other businesses and still be getting enough done to move the ball forward to the satisfaction of stakeholders. As much as people complain about bureaucratic government organizations being too inefficient, I'm not convinced that they are less efficient than many "successful" large corporations. The difference is that they are essentially like a non-profit and complaints are made without sufficiently measuring the value of their work (especially in comparison to massive for-profit organizations). I'm not saying more nimble organizations cannot produce more per-capita value, but there are disadvantages with size and also sometimes advantages such as economy of scale.

It’s not different, because businesses that are “VERY inefficient” often end up dying. There’s no structural permanence baked into the corporate system that guarantees that a corporation will exist forever. On the other hand, governments and state actors are largely static. The institutions and systems that govern them seldom change. And the larger the polity, the harder it is to build up the political will for democratic institutions to evolve/change. It is very difficult (IMO impossible) for an inefficient government to “go out of business”, so to speak.

> There are disadvantages with size and also sometimes advantages such as economy of scale

This is absolutely correct, but the market system ensures that whichever corporation becomes large enough to deliver on those economies of scale is selected as a function of their ability to deliver (for the most part). Ask yourself what would happen if we democratically granted Sears a legally authorized monopoly to essentially exist in perpetuity like states and state programs exist today. Would they have been able to efficiently continue delivering value as the world changed? Would we have allowed them to die and be replaced? The fact that they were defeated to the point of bankruptcy by Amazon et al is a feature of the system that is notably lacking in state institutions.

In fact, the state institutions that perform the best are the ones that are the smallest/most decentralized: https://www.reuters.com/article/us-health-coronavirus-podcas...

> It is very difficult (IMO impossible) for an inefficient government to “go out of business”.

The Soviet Union will be glad to hear that.

As with most data distributions in life, there are notable exceptions/outliers. You can probably count the number of inefficient governments that “went out of business” in the last 50 years on one hand.

You’ll need several people to tabulate the set of corporations that have gone bankrupt, defunct, or M&A’d out of existence over the same timespan, in the US alone.

I believe there are studies of the U.S. Medicare program that show it to be more efficient than private insurers. (Maybe someone knows a weblink to info on that issue offhand . . . ). Moroever, my understanding is that Medicare could be even more efficient if it were not handcuffed in various ways (e.g., legal inability to negotiate pharmaceutical prices).

So full disclosure: I work in claims processing.

First of all, Medicare is only “more efficient” on account of price controls. “Legal inability to negotiate pharmaceutical prices” is just a euphemism for “inability to force pharmaceuticals to charge anything other than a defined amount of money”, or in other words: price controls. If a law was passed today that forced private insurers to use the Medicare fee schedules, they would be just as “efficient”. Whether price controls are an efficient way to run an industry is a separate issue entirely.

Second of all, Medicare is separated into “original Medicare” (which is the government-run insurance program), and “Medicare Advantage aka Medicare Part C” (which is private insurance offered to Medicare beneficiaries). The data we have right now shows that Medicare Advantage is actually the part of Medicare that’s working the best in terms of raw efficiency and outcomes[1]. 34% of Medicare beneficiaries have elected Medicare Advantage instead of “Original Medicare”, and that number has been growing[2].

[1] https://freopp.org/medicare-advantage-a-platform-for-afforda...

[2] https://www.kff.org/medicare/fact-sheet/medicare-advantage/

Thanks for the clarification. Regarding the Medicare Part D provisions, which you call "price controls" . . . to many that term may imply that pharmaceutical companies have had to lower their prices for Medicare. My understanding is that a common complaint against Part D is that these prices are set at levels that are very favorable to the pharmaceutical companies (i.e., high), and that if there were free negotiation for drug prices the size and market power of Medicare would allow it to negotiate better prices. Curious if you have any comment on that.

Yeah, by price controls, I was referring primarily to the Medicare Fee Schedules: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Paymen...

Every payer (public & private) has “fee schedules”, which is just the list of prices for all treatments and/or drugs (in the case of PBMs), and Medicare’s fee schedules are often (but not always) lower than those of private payers. The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”.

Re: Medicare Part D, the federal government is actually not permitted to negotiate drug prices directly (unlike the VA), and that’s a really contentious issue on its own. Medicare doesn’t actually pay for Part D drugs. Ironically, with Part D, the opposite happens: Medicare doesn’t do the negotiating, and Part D providers rely on private insurer leverage.

>The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”.

If doctors/hospitals were forced to accept Medicare's lower fee schedules for private insurers, too, that would mean Medicare is not more efficient. Efficiency would lie partly in the ability of Medicare to negotiate lower prices because of its size. If private insurers could free ride and get the same prices, then Medicare would not have an efficiency advantage. I think the complaints back when this was set up (i.e., when Part D was created) were that George W.Bush gave up the farm and could have negotiated much lower prices.

Right, exactly. Which is why it’s really just a price control, not really “efficiency”. The government setting fees as a monopsony buyer is just price controls with extra steps.

It’s also worth noting that Medicare Advantage carriers use their own fee schedules, not the Medicare ones. You might think that this means that Medicare Advantage plans cost more per capita than Original Medicare (the core thesis behind “Medicare is more efficient because monopsony price controls), but...the results have been complicated/unexpected: https://www.commonwealthfund.org/publications/issue-briefs/2.... It’s sometimes cheaper (depending on the geography), and that’s without the forced use of Medicare fee schedules.

Where does the issue of higher drug prices in U.S. vs. lower prices outside of U.S. issue fit into this? Any links to info on that?

I recommend checking this out: https://www.forbes.com/sites/avikroy/2020/07/24/trumps-most-...

As I mentioned earlier, Medicare actually largely relies on private insurance leverage to determine drug prices, BUT there is an incentive baked into Medicare Part B that has a really underrated impact on some of the high prices, known as "ASP plus 6".

When an Original Medicare beneficiary visits a physician and that physician prescribes drugs, the drugs are paid for differently from the actual services (which follow the standard fee-schedule model). Rather than operating on a fee-schedule structure, Medicare decides that the cost of a drug that it will pay to a physician is the "average selling price plus 6%". Medicare basically takes the average selling price for a drug that a doctor prescribes, and pays that amount + 6% margin (it's actually 4.3% after some budget sequestration, but that's not important). 6% margin to the doctor is fair, right? The issue is that it introduces an incentive for physicians to try and prescribe the most expensive drug to the patient, because they know that Medicare will cover 80% of the cost (plus 6%), and the doctor stands to make the most money. Pharma companies know this, and for drugs that are predominately used by seniors, they market the price as high as possible since Medicare will just pay for (most of) it.

Fortunately with the Medicare Advantage plans, the private payers have their own rules for how much they will pay for a drug, and they are incentivized to pay as little as possible because the private Medicare Advantage payers get to pocket the cost savings as profit.

More info on ASP plus 6, and how it favors higher-price products:

https://www.healthaffairs.org/do/10.1377/hpb20171008.000171/....

https://www.healthaffairs.org/do/10.1377/hblog20190611.58590...

2/3s of the increase in cost of government services can be explained by decreased productivity: https://www.jstor.org/stable/30024147.

Alon Levy has an ongoing study into US construction costs in particular, which are almost entirely focused on government funded and executed infrastructure projects: https://pedestrianobservations.com/2019/03/03/why-american-c...

>> Agreed. The state has become much too inefficient.

> This is frequently stated as fact, but no evidence is provided.

an in-depth analysis is beyond this particular computer nerd, but does it not suffice to observe that, dollar-for-dollar, US public services seem to do much worse than elsewhere in the world? education is a good example. per-student, the US spends roughly the same amount as or more than other OECD countries, yet seems to get much worse outcomes.

> This is frequently stated as fact, but no evidence is provided.

Indeed.

Last I heard on the subject, government does a great many things people don't think of at first, for example facilitating R&D that wouldn't otherwise occur, and large scale administration and maintenance of infrastructure, and much of its activity is ludicrously efficient as a multiplier for the economy compared with how people think of it, and cost effective or at least competitive with the private sector on many things that it does.

> This is frequently stated as fact, but no evidence is provided.

I was referring to the U.S.; if you don’t live here I could see how you might come up with the conclusion That the state here is efficient. If you do live here it is more than apparent that there is no equilibrium of supplies and demands.

Come spend a month in San Francisco, pay our taxes then tell me if you think the state is anywhere remotely close to efficiency.

>Perhaps we could get SoftBank to measure government efficiency...

Lol, or we could from the private sector build the tools necessary for the public sector as sort of a public good. This would be a great way for companies like Google and Facebook to have some positive PR when it comes to privacy.

SoftBank is less a company but more of one man’s ego with capital. “Businesses” like that never last from generation to generation unless they have dumb luck. Again, I don’t think I need to cite lots of sources here for you when common sense makes things apparent.

This.

New York City charges its residents almost 4% tax from salaries over $50,000. It's huge money. What do the citizens get in return?

Clean streets? Nope.

Free museums? Nope. (Hello, London!)

Best in class public transportation? Good joke.

Effective homeless rehabilitation programs? Affordable healthcare for everyone? State of the art digital services for the citizens? Low crime rate? Bueller? Bueller?

Of course, just a bit more taxes will fix everything! /s

> almost 4% [...] It's huge money.

No it isn't, compared with the scale of the things you want to spend it on.

In places that deliver even a half-assed version of the things you described (e.g. London - no effective homeless rehabilitation), the tax rate on salaries is much higher than 4% to pay for what they do provide.

That's not inefficiency. You have listed a bunch of things that cost more than that to provide at the scale implied in "for everyone".

And you effectively cherry-picked. You haven't listed hundreds of other "hidden service" things that the money is really needed for which are actually being provided, but people don't think of, yet are essential to the health of the place. For example collecting and processing the garbage, recycling, street signs, police, fire service, food vendor safety inspections, child welfare services, those sorts of things tend to be well run in the ways meant by "efficient". And many services need to be paid for that not every individual needs at every stage in their lives, and people just don't realise how much of it there is. E.g. the schools for kids with learning difficulties? They are needed, and sure aren't being paid for out of every parent's personal money, and anyway some of those kids don't have living parents.

It sounds reasonable: we all know taxes should be collected to pay for community services and such.

Then at some point you realize that other places which do not collect 4% tax still have street signs, garbage collection, police, fire service and all "those sort of things". Often of a higher quality than those in NYC.

Many of those other places have those provided for by taxes at a different level—state, county, etc—or have much higher property taxes.

I think it's also worth noting that attempting to compare nearly any other city in the world to New York City in terms of "but they can provide XYZ" is going to have problems. NYC is staggeringly large in terms of population—and particularly in terms of population density. For goodness' sake, it's got more people in it than all but a dozen states in the US. It's got a larger population than the bottom eight states combined plus the District of Columbia.

And it's a single city. Less than 500 square miles. Less than 1/3 the size of Rhode Island, the smallest state. Smaller than Guam.

And you whine that it has to charge more taxes than, say, Syracuse.

Maybe think about it in perspective.

> NYC is staggeringly large...

So if anything, I'd expect there to be an economy of scale. High population density means there are less streets to clean and less trees to groom.

>We also agree that people prefer to donate money to specific causes they support rather than pay extra in taxes - I think this is a fair statement.

I don't think this a fair statement at all.

Imagine you polled Scandinavians and asked if they would prefer their government abolished socialized healthcare and returned the money to them, with the caveat that it must be given to charity. Do you really think they would support this idea, on average?

I would much rather the US offer a public healthcare system, and I would gladly pay a disproportionate amount of money out of my own pocket to fund it. It's desperately needed but far beyond any charity's ability to provide.

In the US, that public healthcare system would almost certainly cost you less than you are currently already paying for private healthcare insurance, or the expectation cost of healthcare in the long run if you're not insured.

It's not like it would be adding a new tax where you end up with less take home pay.

One way or another, you'd end up with more take home pay. Even if you don't currently have private healthcare insurance.

It's effectively free money.

> I prefer the latter - we should be adding efficiency to the state, while giving people more choice on how to help each other. I don't want to delve into the details in this comment.

I may or may not agree with your details, but I love the goal.

> But my overall point is that taxes targeting the rich and super-rich will fail, as they always have and always will...

Is that true though? Not long ago taxes on the wealthy were much higher and income inequality was lower.

Personally I have a kinder eye towards government; it’s A) not efficient by design, it’s meant to be comprehensive, and B) less wasteful then I think most people believe it to be.

During the supposed golden-age of high income taxes, rich people found many ways around it. For starters non-income compensation was astronomical (company car, company house, company domestic help, company lunches and dinners, company clubs, company-paid memberships, company outings / vacations) which were replaced with normal monetary compensation when the outrageously high taxes ended.

I'm not sure everyone here understands exactly what I'm saying. If you can sometime, talk to a tax accountant / estate planner who specializes in tax minimization. If you are a W2 employee with some equity compensation, none of this applies to you. But if you were worth Nx millions of dollars there is a lot that can be done fairly easily.

Can you show me on the following graph when did the era of high tax on the rich end? https://fred.stlouisfed.org/series/FYFRGDA188S

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