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Comment by dane-pgp | Hacker News Reader

> While that spurred more than 130 countries to agree a deal to ensure big companies pay a global minimum tax rate of 15%, aimed at making it harder for them to avoid taxation, the millionaires said the wealthy still needed to contribute more.

For too long we've let the supporters of inequality get away with arguments like "Well if you increased taxes on the rich / corporations, they'd just move somewhere else". While such claims may be true up to a point, they miss the fact that these coordination problems can be solved, even in the face of vested interests trying to profit off defecting from the common good.

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The fundamental question nobody wants to answer is what is corporate tax supposed to be on? People keep saying "profit," but it's an international supply chain. Is the "profit" attributable to the jurisdiction where the product is designed? Where it's manufactured? Where it's sold? They're all in different countries. There is no principled way to attribute a specific portion of the profit to a specific thing -- they're each inherently necessary in order to make the money.

Nobody wants to say "we are going to tax them in the place where they make the products" because then low tax jurisdictions would have a huge advantage to attract manufacturing. But it's the same thing if you say you're going to tax them in the place where the product is designed or sold or anything else. Making a choice allows them to arbitrage that choice. But not making a choice is even worse because then they get to arbitrage everything.

The best one is to tax them where the customers are, because it's really hard to move the customers. But then "corporate tax" is just VAT. Which everybody hates specifically because it works, and therefore causes lower retirement account returns and higher consumer prices by the combined amount of money which is now going to the government.

And that's really what the problem is. To have it not wreck the economy the change needs to be revenue neutral. Combine it with a tax cut for the working class in the same amount. Because then you might actually do something good. But most of the people asking for it are asking for it because they want to spend more money.

Not true - nations compete to attract talent and capital, and one means of attracting these things is lower taxes and favorable regulations.

Are you arguing that nations should stop competing for talent and capital, because the taxes get a little too low in some places?

> the supporters of inequality

Opposing taxation is not the same as "supporting inequality". In fact, considering where the bulk of government spending goes, giving the government less to spend would probably reduce inequality.

> giving the government less to spend would probably reduce inequality.

If you have some data comparing inequality and tax revenue (as a percentage of GDP) for countries around the world, I'd love to see if there is some sort of correlation. Of course, a correlation wouldn't prove causation, but it would give me more confidence in what policy to support than your "probably".

> these coordination problems can be solved

If you focus too much on _punishing_ the companies rather than solving real problems such as government finance, you'll end up with ridiculous ideas like this.

If I'm running a country and every other country in the world is taxing someone at 15% and i currently get $0, why shouldn't I offer to tax them at 10% if they moved their business to my shores? I get something instead of nothing plus other sources of taxation _because_ they're in my shore.

AND even if that weren't the case, I as the sovereign, get to decide how much the tax should be. Not a bunch of edicts from people who can't run their own finances properly.

>If I'm running a country and every other country in the world is taxing someone at 15% and i currently get $0, why shouldn't I offer to tax them at 10% if they moved their business to my shores? I get something instead of nothing plus other sources of taxation _because_ they're in my shore.

Are you sure, what about a potential competing country that reduces taxes to 9%? The paradox of competition states that you will get none of the benefits of increased competition in a zero sum game like this. Taxes will be cut to 0%.

So you can now either get rid of corporate taxes entirely or form a global consensus. The former is preferable but it would require land value taxes which are an even bigger threat to the rich than corporate taxes which are just a formality that is easily avoided.

> Not a bunch of edicts from people who can't run their own finances properly.

It is mathematically impossible to run government finances properly. Why do you think, does the US have a structural deficit?

> what about a potential competing country that reduces taxes to 9%?

If a country can manage its finances just fine while taxing corporations at 9%, what about them?

> Taxes will be cut to 0%.

As unrealistic as it sounds, this is bad exactly how?

> It is mathematically impossible to run government finances properly. Why do you think, does the US have a structural deficit?

No point in arguing with you then.

Yeah that tax can't come soon enough, and I think it will happen at this point. It's probably too little, but a good start. I wonder if there have ever been any calculations for different countries, on how much they've missed out through this kind of tax evasion that has been going on. It's probably hard to quantify, but I'd still be curious to know in what ballpark it might be.

Are you in the U.S.? If so what specifically do you feel that tax revenue is going to do for you? The government is currently running a $1T-$1.5T deficit, meaning they haven't cared about tax revenue as it relates to spending in quite some time.

I'd love to reduce wealth inequality but I just don't think throwing all that money at the government is a viable path towards that goal.

> Are you in the U.S.?

No, I'm not. I'm in the EU where those US tech giants successfully dodge paying any tax, which just isn't fair, especially for local businesses who already have a hard time competing without them having that advantage.

So what solution do you offer? It's just reactionary to oppose a solution.

The anti-government stuff needs some support and nuance. Government isn't all good or bad; it is what we want it to be. If we want it to invest in our people, such as through education, health care, housinng, etc., nothing is stopping us. We're not powerless at all.

The government giving you $100 for school is strictly worse than the government just giving you $100. You can spend it on school if you want to go to school, on housing if you want better housing, on child care if you need child care, or on whatever it is that you need. Which you know better than a committee of politicians who have never even met you.

For anyone paying more than zero taxes, this is the same as a $100 tax cut. For anyone who is paying zero taxes, we can still do the same thing by giving them a tax credit (e.g. increase the EITC) and letting their effective rate be negative. This is better than subsidizing student loans (thereby inflating the cost of college) or any of the other bad ideas politicians have had over the years.

But it forecloses the majority of political corruption. Which is why it's good, and also why it's unpopular.

> Which you know better than a committee of politicians who have never even met you.

If you haven't met your local elected representatives, that might be on you. It's not hard to meet them, and usually IME they make an effort to know voters.

> The government giving you $100 for school is strictly worse than the government just giving you $100.

We the people might be willing to fund schooling, but not other things. Regardless, I tend to agree with giving cash for charitable purposes. But where is this coming from? Who disagreed?

> Which is why it's good, and also why it's unpopular.

How do you know that? School vouchers are popular, and people could have said the same about them.

These rants about government - that we see commonly - are somehow given a pass for establishing a factual basis and making strong arguments. But they don't really say much except express frustration.

> If you haven't met your local elected representatives, that might be on you. It's not hard to meet them, and usually IME they make an effort to know voters.

Most of these proposals, and the things people object to, are at the federal level.

A Senator from New York has 20 million constituents. If she met with each one for one minute, sixteen hours a day every day of the week for her entire six year term, she would have met with ~11% of them by the end of her term. And still not really know any of them.

> We the people might be willing to fund schooling, but not other things.

We the people are the ones receiving the money. If you want to spend yours on schools, go for it. Someone else wants to spend it on books, or private tutors, or compensating one of the parents to take time off of work to teach the children themselves.

> But where is this coming from? Who disagreed?

The existence of many of these programs that don't work like this.

The government will subsidize your student loans, which inflates the cost of education, but you don't get the cash equivalent of the subsidy if you work your way through college busing tables instead of borrowing money, or attend a less expensive school. You can't get the money if you want to buy the books yourself and then follow along with the lectures on OpenCourseWare.

> How do you know that? School vouchers are popular, and people could have said the same about them.

I should say popular with elected officials.

School vouchers are popular with the public and yet most states still don't have them.

> These rants about government - that we see commonly - are somehow given a pass for establishing a factual basis and making strong arguments. But they don't really say much except express frustration.

The general problem with government programs is that there is a powerful incentive to direct money to politically connected groups.

Why do we subsidize ethanol? Because it's made from corn grown in Iowa, which is the location of the Iowa caucuses. Why are the swing states the largest per capita recipients of federal money?

To get at the root of this, you need to look into the details of thousands of pages of federal legislation. Because the complexity is purposeful. There is a broad class of programs whose general goal is to transfer resources to the poor. That entire class of programs could be replaced with a single cash money tax credit, but it isn't. Because the purpose of most of those programs isn't to help the poor, it's to create jobs for government employees or subsidize specific products which the public is then forced to buy if they want the subsidies even if preferable alternatives are available in the market.

The complexity keeps people from rooting it out. Ordinary taxpayers don't have the time to look through the details of that much legislation to find just exactly how the corruption and inefficiency is costing them.

So you end up with just a general feeling that the government is ripping them off and no obvious path to correcting it.

> So you end up with just a general feeling that the government is ripping them off and no obvious path to correcting it.

But we have a great way of correcting it. We've corrected oodles corruption; our government has become measurably less corrupt over time. Of course it's not perfect, but we haven't stamped out cancer and car accidents either; we've made enormous progress and there is no need to stop now.

The defeatism serves the corrupt - and I guarantee you that they are the ones spreading it. What is amazing to me is seeing people, who have power, abandoning it because they are told they have none. It's like sports team walking off the field, when they are far superior to the opposition.

Most people don't want corruption. The only way for the corrupt to thrive is to get those people to quit.

> A Senator from New York has 20 million constituents.

Lol. Your example was a person with one of the 5 biggest constituencies in the country. Just go talk to your local rep. It's not hard. And it turns out, because so many morons believe what you tell them, they don't try to meet with the reps and they aren't so busy as they could theoretically be.

> Government isn't all good or bad; it is what we want it to be. If we want it to invest in our people, such as through education, health care, housinng, etc., nothing is stopping us. We're not powerless at all.

You're obviously living on a different planet than I am, because on the planet I live on, ordinary working people are basically powerless in determining where government spending goes. The government talks a lot about "investing in our people" and other such rhetoric, but its actual track record over decades is very poor.

I think the more hyperbolic the statements, the less basis in reality. Voters have plenty of influence where I live, but how do you measure it? What do you mean?

What is stopping us from having influence? It's pretty straightforward - politicians who anger their constituents enough get replaced. Generally they stay within the limits. I see that defeatism and quitting prevents you from having influence. It's amazing to see people give away their power, but that's their choice.

The biggest problem I perceive is manipulation of the public through disinformation. The defeatism is the biggest source of disinformation. You have all the power, but your enemies have convinced you that you are powerless, to drop your weapons - and you went along with it!

> The biggest problem I perceive is manipulation of the public through disinformation.

I agree that this is a problem, but I suspect we disagree sharply about where the most dangerous disinformation is coming from.

Disinformation isn't a matter of opinion, but crucially a matter of fact. If we disagree about what is disinformation, there's a good chance you are wrong.

> Disinformation isn't a matter of opinion, but crucially a matter of fact.

If you mean that disinformation involves either misrepresenting facts, or (much more common and much more insidious) carefully choosing which perfectly valid facts to highlight and which ones to ignore, yes, I agree that's true. But the excuse disinformers always hide behind when called out on this is that choosing which facts to present always involves matters of opinion and judgment--after all, there are so many facts that it's impossible to present them all, so everyone has to pick and choose. And that is true: there are too many facts to present them all. That's why disinformation is so hard to combat: because there can never be an objective test for it. It's always going to come down to one person's opinion against another about whether a given presentation is a fair one or not.

> If we disagree about what is disinformation, there's a good chance you are wrong.

Huh? I'm the only one who could be wrong if we disagree? Who gave you papal infallibility?

The facts! Attempting to cast facts as opinion is classic propaganda. You are entitled to your own opinion, but not to your own facts.

> Attempting to cast facts as opinion is classic propaganda.

So is stating your opinions and claiming they are facts. And so is shouting out certain facts loudly, in order to distract attention from other facts that you don't want people to pay attention to. And so is accusing someone else of doing one of these things, loudly, in order to keep people from noticing that you are doing another.

> So what solution do you offer? It's just reactionary to oppose a solution.

This argument is only sound if you assume things can't be made worse than the status quo. They obviously can.

No, we have problems to solve, and we have a responsibility to solve them. Just shooting down what other people say is not acceptable in any serious situations - for example, if that's what you do at work you'll find yourself on the outside looking in. It's also a signal of an argument with no real effort behind it.

I wasn't shooting it down. I was asking you what the government realistically was going to do with that money to solve wealth inequality, but you never answered that. Based on the last several years of obscene spending with little results I'd say it's a tough question to answer.

I see lots of results. What do you mean? How do you measure it?

Again, what is your solution?

Wealth inequality is relatively straightforward to measure, and it has steadily been getting much worse. So I am not sure what results you are seeing.

That is the topic of the post you originally replied to anyways.

I see lots of return for government spending. I wasn't addressing inequality in that statement. Also, it could be much worse; we don't know what it would be without the current government investment.

> For too long we've let the supporters of inequality get away with arguments like ...

They always have arguments, but history shows that we can successfully tax wealthy people. It's not hard.

This is not historically accurate. Tax avoidance was worse in the past than it is now. Many of the loopholes were closed in the 1980s.

But that's also around when we stopped enforcing antitrust, which is where the recent concentration of wealth actually came from.

How do you avoid land value taxes? Oh right, by preventing them from being implemented in the first place, because that is the only way.

This is not evidence that land value taxes were commonly used historically and something changed to make that no longer the case. They were never common, outside of as a component of ordinary property tax which is still present.

But also, the way to avoid land value taxes is to build tall buildings on a small amount of land. Which is kind of the point -- an incentive to make more efficient use of scarce land. But then the guy who builds a skyscraper in a small town is paying the same amount of tax as the single family home next to it.

I'm still not sure what the Georgist solution to that is supposed to be. Like, alright, if you cover this town of 100,000 in single family homes you have enough housing for everyone, but with LVT there is a large tax incentive to replace 20 homes with a single building with 20 condo units in it. This continues until local rents fall to the level that they can't recover the cost of constructing more tall buildings, i.e. land values crash.

By then the town is 5-10% 20-unit buildings and the rest abandoned lots. Because the local demand for real estate square footage is completely satisfied so there is zero profit in building any more buildings there, but you've still only used 10% of the land. No one can make money by building more buildings on the other lots (construction cost exceeds collectable rents), but if they still have to pay a non-zero amount of LVT, that makes the lot have a negative value. Which implies that the end result is a land value of zero and therefore LVT revenue of zero.

That could still be worth doing -- it would eliminate rents attributable to land value -- but how would it generate any revenue? (And if the answer is "use zoning to prohibit construction of tall buildings" then you're just taxing the poor by making housing artificially scarce.)

> Tax avoidance was worse in the past than it is now. Many of the loopholes were closed in the 1980s.

I'm pretty sure the first statement is false, as IRS enforcement has been cut back and tax evasion is at record levels, which was the basis if a recent attempt to fund enforcement (rejected by the GOP who want to 'defund the IRS').

The 1980s tax law changes greatly reduced the portion paid by the wealthy, if I understand correctly.

> I'm pretty sure the first statement is false, as IRS enforcement has been cut back and tax evasion is at record levels, which was the basis if a recent attempt to fund enforcement (rejected by the GOP who want to 'defund the IRS').

The main problem with IRS audits is that they choose taxpayers at random to be subject to an expensive time consuming audit which the taxpayer doesn't get reimbursed for even if the IRS finds nothing wrong with their returns. Small business owners are generally the ones this happens to because they're the ones who exceed the income threshold to get audited and they're the ones with complicated tax returns that are expensive to audit. Democrats have figured out that if they encourage this, Republicans have to spend political capital preventing it or their constituents get really mad.

This could be easily solved by having the government pay the taxpayer's time and expenses for the audit, but neither party really wants to do that because it would "cost money." (It costs money either way, but that way it would have to be formally accounted for and spread evenly among taxpayers instead of subjecting random unlucky ones to a disproportionate expense.)

But tax evasion is different than tax avoidance. One is illegal, the other is restructuring your activities to minimize your taxes while still complying with the law, e.g. by arranging for profits to accumulate in a subsidiary in a country with a low tax rate. It's typically the latter that corporations and rich people do to have low tax burdens.

> The 1980s tax law changes greatly reduced the portion paid by the wealthy, if I understand correctly.

Before the 1980s the highest nominal tax rates were higher, but nobody actually paid them because there were so many loopholes. People were literally deducting the cost of their personal vehicle from their taxes etc. They closed the loopholes and lowered the top rates at the same time, which basically canceled out. Federal revenues as a percent of GDP have been essentially flat since the end of WWII:

https://fred.stlouisfed.org/series/FYFRGDA188S

It's a bunch of complicated empty claims to justify something, and the facts show that the something is rich people evading taxes at unprecedented rates, and the GOP preventing enforcement.

People are so concerned with law enforcement reform - when it's against rich criminals. Where's the law and order crowd? Get tough on crime!!!

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