Source
r/politics•
WackMachine

Question to you Redditors, would you support financial cap on the rich?

Note: This is a serious idea and should not be taken as trolling. If you don't agree with it, please refrain from silly comments such as "lol this would never work" and explain why you disagree. Otherwise it makes you look stupid and uneducated.

I had an idea last night which I'm still playing with. What if the government put a "financial cap" on everyone, so that no one can become as rich as a billionaire?

In general (this is a fresh idea) what I'm suggesting is that once a person reaches a certain amount of personal property (money, cars, houses, etc) the government gets every leftover money that person earns. Hopefully, the money will be spent on things like education, opening new businesses and generally improving the general population's life.

As far as I can think of, this would mean the following things:

  1. A single entity will never be utterly richer than the general population, you would still have millionaires but not billionaires.

  2. This means that there will be less influence made by a single entity on the government. You would need to form a large group to actually make a difference (which is more democratic than what we have right now where a single entity like an oil giant can make a big change, or prevent needed changes).

  3. More money is spread throughout the economy, huge amounts of money are not held by single entities.

  4. It might cause some rich folks to escape the country that chose this kind of economy, but in the long run they will be replaced by other people who don't mind just being millionaires and not billionaires. This could also mean "better people" running these industries.

  5. What I'm suggesting is not a communist nation, you will still own property and the economy will still be capitalist based. This is an idea to improve capitalism to change its current flaws.

  6. The way I see it, there is no real value to having a single person disproportionally richer than everyone else. We, the people, are the ones who should decide how money is spread in our country. That is part of the idea of democracy; the many rule over the few. Right now it is completely the other way around.

There are probably other factors that need to be taken into account here. As I said this is a fresh idea which I haven't fully thought of, but what better way to build an idea than to put it into debate in front of the good people of Reddit :)

Thank you for reading and I'm sorry that there is no TL;DR on this. You actually have to read it to understand.

P.S. My native language is NOT English.

EDIT:

  1. Someone brought up the idea that corporations can still be billionaires and that it would mean that owners will just keep the money there. I think that a financial cap on corporations can also be part of the idea. If a company can never become a giant it can never become a monopoly over too many fields (you will have limited funds to do so), I believe this would mean more competition between companies and more innovation. To you personally this means an easier entry to fields otherwise you would never have a chance to succeed in.

  2. A hard cap is not a requirement for this idea, but an incredibly high tax (say 90-95 percent) is also an option.

  3. I do find it disappointing that people downvote my comments without even trying to explain why they disagree. I'm not expecting a circle-jerk here, I'm expecting a real debate. I thought reddit was a more professional place than this.

Posted Jul 24, 2011, 1:33 PM UTC · edited

026
brock_lee•

Would corporations be allowed to be worth billions? If so, then "rich people" would simply keep their wealth within their companies and use what they wanted.

2
WackMachineOP•

This is a good point. But what if corporations are also capped? Wouldn't that mean more room for competition? (since smaller companies can more easily keep up with big companies and you won't have a single company running too many fields)

0
den31•

Capping corporation value might have severe negative impact on their efficiency and ability to produce value for the people. Some investments like microchip fabrication facilities easily cost tens of billions. Though I'm in principle in favor of personal net worth cap or something similar. This would become quite complicated and there should be a way to evaluate individual net worth realistically and some way to spread the ownership when a company grows.

1
WackMachineOP•

What I'm thinking is that if corporations are capped they will have to get investors (like they do now anyway). But instead of one or two huge investors that get all the pieces to themselves this would mean better chances for other people to get a piece of the cake of producing something like microchips. This means money is spread more evenly around the country.

Think about the story about the cleaning lady who owned parts of Google and is now a multimillionaire.

1
jakdak•

How do you do that without breaking up control of the company?

This would force every high profile CEO (Steve Jobs, Larry Ellison, Mark Zuckerberg, etc) to give up controlling stake in his corporation.

1
jakdak•

Can you outline how you feel this could actually be implemented?

Would every taxpayer be required to submit a net worth inventory at tax time each year (rather than just an income statement)?

Particularly at high net worth, valuations of illiquid assets becomes increasingly vague.

Say I am sole owner of a non-public company, own some collectible art, have restricted stock from an IPO that I am not permitted to sell, etc.

By what process would you value my net worth and by what process would you force me to get below the cap.

2
WackMachineOP•

This is a good (and big) question. Upvote for being practical.

Honestly speaking, I am not a financial expert and it's difficult for me to answer this question fully. That is part of the reason I put this into debate to understand better if this idea is feasible. However I do know that there are methods to evaluate a person's total wealth (at least in my country the tax agency does that to people sometimes if there's a suspicion to tax breaking or money laundering). It's possible to require people to do this only after they rise above a certain tax bracket (then it's easy to afford someone to do it for you). It shouldn't be difficult to "catch" tax criminals if they have very high amounts of money (Example: if you have 100 million dollar in your bank account you're not likely to live in a two room apartment in the slums). It won't be worth to hide it too much because then you can't enjoy the money. Small tax crimes will obviously occur though.

As for how you'll have to submit forms etc, big companies and rich people already do that to get tax breaks. I've never been a rich person and never owned a huge company so the fine details are unknown to me, but the method of doing that exists already.

0
jakdak•

Mark Zuckerberg would almost definitely fall over your net asset cap. How would you value his Facebook holdings? Would you use the current private market valuation even though he could necessarily actually sell the company at that price? Would you force him to sell a large fraction of his stake in Facebook to get under the cap- thus possibly forcing him to give up a controlling interest in the company (and possibly forcing him to take the company public to create a market for him to liquidate his assets)

The Mona Lisa was assessed at $100m in 1962. For sake of argument, lets say it is now worth $1b. Would this mean that no US individual could ever own this piece of art?

As for how you'll have to submit forms etc, big companies and rich people already do that to get tax breaks

I wasn't talking about the physical process of submitting the tax paperwork- how would the net worth assessment be done. Who would be responsible for audits and what methodology would they use. (A asset cap isn't necessarily a revenue source- so the IRS wouldn't necessarily be involved)

1
mrhymer•

Let's start with this:

  1. Your plan solves a perceived problem that is not an actual problem. The problem you perceive is rich people + government = bad. When you limit rich people then the bad will be corporations + government = bad. Limit corporations it will be political parties + government = bad. Eventually you will make it to bacon + government =bad. The common denominator is government. Government = bad. It is why this country was created with separated powers and checks and balances. When we started ignoring those at the start of the twentieth century is when government went bad.

  2. Your plan eliminates freedom and removes unlimited opportunity as a motivator. Communism failed not because it was a bad idea but because humans do not work that way. Forced mediocrity, even with every need met, makes humans not function well. "Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave." - Ayn Rand

  3. Your plan takes money from proven success and gives it to a non-producing spender. The government does not produce anything of value. Everything it does is a cost. The bulk of the rich man's money is not in his pocket. It is invested and used to grow the economy. Sucking the rich man's wealth from the economy and giving it to a spender (government) at best keeps the economy stagnate.

2
WackMachineOP•

Let me see if I can challenge this perspective:

  1. The difference between political parties = bad and corporations = bad is that you don't vote for company owners, but you do vote for government. This isn't the answer to life, the universe and everything. It's an attempt to improve the current system.

  2. Technically, you don't have unlimited freedom. You can never have it anyway, otherwise murder would be legal. It's true that this lowers freedom further, but since humans are not animals and are able to see beyond immediate personal gain I don't believe this is an impossible way of life. Look at countries like Sweden where taxes are very high, but you get free education, get paid by the government to study and get very low interest rate loans. (In this particular example) In the long run everybody wins since you don't get to live alongside uneducated people that will just ruin your country by their ignorance and there is a higher chance of someone coming up with the next amazing idea which is of high value nowadays.

  3. What you're saying is completely true. But of course given this kind of economy this would require a social government that will spend the money on its people. I realize that this is not "the American way". I'm not only talking about the US here. However I don't agree that it will cause the economy to stagnate since by offering people good education and good basic needs it gives chance for people with amazing ideas to grow the economy. A lot of folks don't even try because the risk is way too high.

0
mrhymer•

The difference between political parties = bad and corporations = bad is that you don't vote for company owners, but you do vote for government. This isn't the answer to life, the universe and everything. It's an attempt to improve the current system.

You do vote for corporations to succeed or fail and you do not have to wait years to boot them out of existence. Every corporation exists because people (the ones that also vote for government) choose to make them exist. But that is not the point of what I wrote. The bad thing is government and if you remove the incentive and ability to game government by shrinking it's power to the point that the effort does not matter then the wealthy and corporations gain no advantage from government.

Technically, you don't have unlimited freedom. You can never have it anyway, otherwise murder would be legal.

I did not say you have unlimited freedom I said unlimited opportunity. In other words people can make as much money as they can make.

It's true that this lowers freedom further, but since humans are not animals and are able to see beyond immediate personal gain I don't believe this is an impossible way of life.

You join Marx, Stalin, Lenin, Mao and many others who had the wrong idea about the nature of man. Your out of whole cloth plans always end in mass death and people striving for freedom in Gulags.

Look at countries like Sweden where taxes are very high, but you get free education, get paid by the government to study and get very low interest rate loans.

What you do not realize about Sweden is that if you made Sweden a state in the United States it would be the poorest state - worse than Alabama or Mississipi. These euro-dream countries have the best liberal stats and the highest suicide rates.

In the long run everybody wins since you don't get to live alongside uneducated people that will just ruin your country by their ignorance and there is a higher chance of someone coming up with the next amazing idea which is of high value nowadays.

You have no compelling evidence, given the current state of the world, that the well educated are making things better.

What you're saying is completely true. But of course given this kind of economy this would require a social government that will spend the money on its people.

This is a completely bankrupt idea. You just described Greece. More people have escaped poverty and bettered their lives by means of business and wealth invested in a growing economy than by anything that any government has ever done. Government has never solved poverty. The best government has ever done is locked the poor into poverty for multiple generations.

However I don't agree that it will cause the economy to stagnate since by offering people good education and good basic needs it gives chance for people with amazing ideas to grow the economy. A lot of folks don't even try because the risk is way too high.

The basic needs thing is slavery by percentage. The Europeans that work in the countries you extol the virtues of give have of their labor for the sake of others. They are half-slaves. Education no longer gives a likelihood of success because it is disconnected from the engine of success - business.

2
greenascanbe•

I am against a cap but I am for a very progressive tax system. A cap would make people not want to be innovative, Microsoft as an example. If you loose everything above a certain amount then why work. No, their will always be richer people then others because of how different we are and what we value as individuals and that is a good thing. However taxes need to be applied in a progressive fashion.

1
WackMachineOP•

If your company stops working and producing goods you will eventually run out of money. This is actually supporting the idea because right now once a person becomes a billionaire he is more likely to "stop working" because he is so rich he doesn't need to work or innovate. If you had the chance to be a millionaire and basically have everything you wanted (other than golden plated boats) wouldn't you take it? I know I would.

0
greenascanbe•

If making a certain amount of money makes you happy fine, but as I said we are all motivated by different things, and if you want talent to stay and contribute they need some incentive. People do not stop working after they reach a finical goal because one usually has several more goals not money related.

1
WackMachineOP•

Having 100 million dollar in your bank account is not a good incentive?

0
greenascanbe•

Nope, I already got that for work done, further work will require further compensation. That's why a progressive tax system is the answer.

1
meatball402•

I'm very very to the left, and I wouldn't be a big fan of the financial cap. A hard cap seems too much of a line in the sand.

On it's face it's not a bad idea. It would limit innovation on things like derivatives and predatory lending, which can collapse a whole economy, while still retaining opportunities for entrepreneurship, etc. Because money isn't the only motivator for people who want to start a business. It's a big factor, but unless they're making millions at a time, it won't affect them.

I would be cool with a few higher tax brackets, with the top one at say, anything over $5million approaching 90-95%. That way, people can still make money, but after a while, you are working so hard, that you might as well just take it easy. More of a soft cap, if you will. Hell, I wouldn't be opposed to a 10million bracket at 90% instead of 5.

You're take home at the end of the year would be something like 3-4million. This is personal income; if your wife can make 3million a year too at the cap, bully for you. If you can't make ends meet on 3mill a year after taxes, the tax rate isn't your problem.

This won't affect people who do it for the love of the thing, like baseball players and movie stars. I imagine most of them will still be willing to play for 5million over a few years instead of 15million. If you want to buy 7 houses in the Caribbean, or two Learjet, you still can - but you have to save your money for them. I imagine the market for $50 million dollar boats will tank though.

I remember an interview with Ronald Reagan where he was bitching about the 90% tax bracket in the 40s/50s. He was saying about how he'd stop making movies after the fourth one, since he'd hit the cap. I remember thinking to myself, "Why is that a bad thing? Now he has leisure time. Plus, weren't his movies shit?"

This type of thing always begs the moral question "Is it possible to have too much money?". The short answer is yes. With enough money, you can turn the free hand of the market into a glove, directing at your will (Ahem, Rupert Murdoch). With enough money, you can affect political situations around the world, just look at how monied interests have corrupted America's politics.

In the wrong hands, the profit motive can give people incentives to destroy economies, kill thousands of people, and bankrupt more. Any ability to contain these things would be a boon to the greater society.

edit: for people talking about corporations, there would be a soft cap there too, but the brackets would be changed, since a corp can make more money. One would want to put the soft cap at a point where large successful businesses can thrive, but be small enough to not become a walmart and crush every other store out there. I don't know enough about finance to make any educated number, but maybe just turn the millions into billions. a 5billion dollar corporation is pretty fucking successful.

1
WackMachineOP•

Yeah this is an excellent idea. An incredibly high tax is just what I'm talking about.

If people go for these industries just to make money it would probably mean their innovation is expendable. Like pop culture vs classic rock. Wouldn't you prefer artists who do it for the music than artists who do it for the money? Or an engineer who does it for improving mankind than one who wants to build you another shitty device so that you will have to replace it next month? I know I would.

0
[deleted]•

[deleted]

2
jakdak•

Yeah this is an excellent idea. An incredibly high tax is just what I'm talking about.

No it isn't- you were talking about a "wealth cap"- A high income tax is a very different thing.

Most of the super high net worth individuals got there because the own a large portion of a very successful company. Owning a company that has grown doesn't necessarily mean you have a high taxable income.

1
WackMachineOP•

You're right that they're not exactly the same idea. What I meant is "to come up with a way" to limit the profits these people make so that they cannot become "too rich for the general population's own good". After all it's the people who decide how the economy works. That's democracy. At least that's how it should be.

I am not entirely convinced that just taxing is the best option available. However it's a better option than what we have now.

0
DoItForFreedom•

Anyone over a billion dollars net worth is no longer considered human and could be killed without it being considered "murder". If you kill that person you will get to keep his money but again you become a non-human.

1
WackMachineOP•

lol... I believe this is trolling but it brought a smile to my face.

1