the Gini index. (It now stands at .48)
Abraham, getting ready to switch to the goat.
(I think the goat can tell)
In this essay the problem in consideration is the economy. The Gini curves of income and wealth are the economy's thermometer, and they continue to bend steeper over time. For those unfamiliar, the Gini index is a concave plot showing disparity. There should be some uneven distribution of course. Some people through hard work, perseverence and initiative are more successful than others and deserve the fruits of that labot. Others just get lucky, or unlucky. It's very unlucky to be born poor. (More on that later.) What is the "right" amount of income or wealth disparity?
My thesis here is that there must be some level that would be too extravagant, and we're way past it. For comparison, the US is tied with China for third worst in the world, behind Brazil and Mexico. These are not countries whos social and economic systems we typically like to compare ourselves to, right? Maybe you’d still be suspicious it’s a bad thing to have a high Gini Index, so let's consider our own historical trajectory of this number. Now days, the Gini Indicator shows a dynamic range not seen since the Great Depression. That's the plot at the top of the page. During America's "golden age" after WWII, it was lower than ever.
Another related measure of economic opportunity is Mobility: the chance to change your social class. Low mobility would mean if your parents are wealthy, you will be too, and same if they are poor. Excepting only Great Britain the US is at the bottom of the developed world in this measure of opportunity. That means the “American Dream” is something of a fiction: maybe you can lift yourself up, but you would literally have a better chance of it if you lived anywhere else. Mobility and wealth disparity are statistically correlated too, everywhere. I suggest that's no surprise because the system is mathematically unstable. What that means is that there's a snowballing effect where extra wealth seems to enable accumulation of MORE which I hope rings true? If you have a little extra, you can save it and it will grow.
Ok that’s the problem: what do we do about it? I think we should directly measure and control these parameters. Instead of arguing what’s the right tax rate, just change it (cautiously) in response to the feedback we get from measuring the economy. I’m a fan of equalizing income and capital gains taxes for instance. People who have more wealth are able to invest it, so they make capital gains, which are lightly taxed and consequently enable spiraling capital gains. This powers the snowball effect, so closing that loophole would help put the brakes on it. Also, income and capital gains taxes are types of “derivative control” which respond to the problem by tamping down change. Income is the rate of change of your wealth. A proportionate control is also needful, one that would tax the value of (not the change in) wealth. Property tax is one example and another is the much maligned and overlooked inheritance tax. Proportional in this case means the more you have, the greater proportion is taken.
That’s the thesis: the inheritance tax should grow from zero to 100% as incremental inherited wealth exceeds a few million dollars. Just to put a cherry on top of it, it should be a total, not “per child” amount.
These may seem like radical proposals. This is an extreme situation! As a species, we humans have exceeded the design goal we received from evolution, (go forth and multiply) and are now forging unknown territory, the hegemony of humanity breeding and consuming like it was still a 50/50 bet whether we or the baboons would dominate the savanna, ...and our chromosomes aren’t able to learn from success: only failure wipes out a characteristic. We ought to design better behaviors for ourselves before evolution gives us a hard negative lesson through collapse. I am saying we should use our brains, through policy, to affect the future instead of being only hapless objects of natural selection.My thesis here is that there must be some level that would be too extravagant, and we're way past it. For comparison, the US is tied with China for third worst in the world, behind Brazil and Mexico. These are not countries whos social and economic systems we typically like to compare ourselves to, right? Maybe you’d still be suspicious it’s a bad thing to have a high Gini Index, so let's consider our own historical trajectory of this number. Now days, the Gini Indicator shows a dynamic range not seen since the Great Depression. That's the plot at the top of the page. During America's "golden age" after WWII, it was lower than ever.
Another related measure of economic opportunity is Mobility: the chance to change your social class. Low mobility would mean if your parents are wealthy, you will be too, and same if they are poor. Excepting only Great Britain the US is at the bottom of the developed world in this measure of opportunity. That means the “American Dream” is something of a fiction: maybe you can lift yourself up, but you would literally have a better chance of it if you lived anywhere else. Mobility and wealth disparity are statistically correlated too, everywhere. I suggest that's no surprise because the system is mathematically unstable. What that means is that there's a snowballing effect where extra wealth seems to enable accumulation of MORE which I hope rings true? If you have a little extra, you can save it and it will grow.
Ok that’s the problem: what do we do about it? I think we should directly measure and control these parameters. Instead of arguing what’s the right tax rate, just change it (cautiously) in response to the feedback we get from measuring the economy. I’m a fan of equalizing income and capital gains taxes for instance. People who have more wealth are able to invest it, so they make capital gains, which are lightly taxed and consequently enable spiraling capital gains. This powers the snowball effect, so closing that loophole would help put the brakes on it. Also, income and capital gains taxes are types of “derivative control” which respond to the problem by tamping down change. Income is the rate of change of your wealth. A proportionate control is also needful, one that would tax the value of (not the change in) wealth. Property tax is one example and another is the much maligned and overlooked inheritance tax. Proportional in this case means the more you have, the greater proportion is taken.
That’s the thesis: the inheritance tax should grow from zero to 100% as incremental inherited wealth exceeds a few million dollars. Just to put a cherry on top of it, it should be a total, not “per child” amount.
It won’t be easy, transcending your genetics. Everyone reacts more strongly to inheritance tax than income tax. I bet you did too. Why? It’s the same reason the binding of Isaac churns our guts: we’re far more ready to bear some burden ourselves than harm our progeny. It is evolution’s greatest mandate.
Yet this sacrifice for the common good is precisely what we need to do and it’s not hard. Your advanced monkey brain can calculate that $5 million is a nice inheritance, but your lizard brain can’t do math and acknowledges no limit to how much you should be allowed to get your kids ahead of everybody else. This is the instinct that's wrong in a world of law and inheritable property. Some may say we shouldn't try to transcend this survival of the fittest to which I answer, we already have! Consider the mobility statistic. That is the degree to which YOUR blood sweat and tears are irrelevant in comparison to your family's historical advantage or disadvantage. It's hardly a measure of fitness! We must restore mobility to really be a land of opportunity. That's tautological. We cannot accept both our gut instinct of limitless inheritance and still “hold it to be self evident, that all men are created equal.” It’s time to live up to our constitution. We SAY we want initiative, drive, boldness and perseverance to be what distinguishes winners so let’s prove it by leveling the playing field. If we can do that, if we transcend our cave-man programming, (just a little bit!) then we will really enable people to succeed or fail on their own merits, and that will be a just society.
Much of conservative politics is founded on a sense of injustice derived from slackers taking advantage,yet the structure of inheritance creates the greatest freeloader class of all. This is hypocrisy; living a lie. Instead, we should all work hard to reconcile that in ourselves, not by justifying it, but through action to square the accounts. Let’s change the system to make it more fair. People should definitely get what they deserve in life, but they should also deserve what they get.
An effective and fair method to do that would be to cap inheritance.
