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Comment by danmaz74 | Hacker News Reader

Very interesting analysis. But they don't consider at all one very relevant change that happened during the last 30 years in most wealthy economies, especially the USA: That the taxation of the rich and the highest-earners in general was massively lowered. This contributed a lot to the concentration of wealth and capital in fewer hands.

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Taxation for the purpose of running a government and providing basic services seems to be long gone. Most of the discussions these days are more about what the 'right' and 'fair' level of redistribution should be.

But, the rates of taxation are so arbitrary. Legislators get together to determine fixed rates and tiers of taxation.

Aside from the complexities of accounting (which should be simpler with computers), couldn't it make more sense to tie tax rates to real mean wages? Then, the very rich would have incentive to increase jobs and increase mean wages.

As much as I like this idea, there's an equally strong incentive, for those who can afford to do so, to engage in "tax optimization".

>couldn't it make more sense to tie tax rates to real mean wages?

How would that work in practice?

Your point has one tacit component that you failed to mention. If what you say is true, then before "taxation of the rich and the highest-earners in general was massively lowered" occurred, the concentration of wealth stayed constant. So, if we've now reduced the transfer from the rich to the power a-la the taxes you mention, then that must mean that before, and now after, wealth has always been naturally (if you want to use that term) flowing towards the already rich.

> If what you say is true, then before "taxation of the rich and the highest-earners in general was massively lowered" occurred, the concentration of wealth stayed constant

Actually, it only means that with that taxation system, the concentration of wealth was slower than without that taxation system.

Regarding the wealth "naturally flowing towards the already rich", define "naturally".

The UK in the 70s had a tax rate of 95% thus encouraging payment of much higher salaries to make it worthwhile for talented staff. If the tax rate is thereafter lowered to something sensible then the differentials are going to be significant. Quite a number of higher earners now have an effective tax rate of 60% which is not exactly low - but that's in the UK.

95% is crazy, but today there are lots of multi-millionaire CEOs who as a percentage of their income pay less taxes than their secretaries...

I see no problem with that, that looks perfectly legal. Democracy and legislation has decided that certain forms of income are to be taxed at a lower rate than others. And the CEO does lots of that "other" form of income, hence the lower rate.

Why, what problem do you have with Democracy, err, I mean this tax-rate?

s/Democracy and legislation/vested interests and cronyism/

I beg to differ, democracy and legislation allowed vested interests and cronyism to occur/take place/take hold. So it is also to blame for what most, including you, blame on "vested interests and cronyism".

Of course, this sort of thing would never happen in a "True Democracy". Maybe they have it in Scotland, run by the Scots, perhaps?

I wasn't really invoking that fallacy, but congratulations for being aware of it and showing us how smart you are!

Ostensibly, representatives and senators decided to modify the tax code in this way. Unfortunately, the commercial entities that wanted it really didn't give them a choice in the matter - so it was no decision at all (reduce them: get re-elected; don't reduce them: don't get re-elected).

It all comes down to who holds the purse strings ... on campaigns.

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