For those looking for a different, and maybe deeper perspective on this; this was an interesting podcast. It is maybe the latest example of the shock doctrine / disaster capitalism pattern where disasters often lead to profits for those with access to capital.
The source really undermines itself with the starting sentence - both the crypto-bros and the dystopia assertion without any text elaboration.
That sounds kind of obvious from a capital standpoint alone. Disasters cause expensive damages so anyone in a position to repair stands to make money. Anyone who lacks the reserves and needs loans and financing would be needed. I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse.
Now other associated unethical practices may be involved like price gouging, and probably happened with certainty given both the breadth of history and human greed. It goes without saying that causing the bad situation and then benefiting is an ethical failure even without any bad intent. Deliberately causing it being clear evil.
Price gouging drastically reduces shortages because anyone with supply will be tempted to quickly move in to capture the high price on the curve. It also encourages people to actually plan ahead so the entire population isn't trying to buy a full tank of gas the same day.
You think price gouging is unethical, I think price capping is unethical and harmful since it encourages hoarding and shortages.
After a hurricane, water sometimes goes for $100 per bottle. While that seems like price gouging...
At $100 a bottle I'm going to be loading up my SUV with as many water bottles as fit and I'll be driving to the disaster area. I'll take work off, maybe even risk getting fired for that type of payday.
Is it unethical? Some people would say so, I did make tens of thousands off of a disaster. But on the other hand, if people were dying because of a water shortage, I made tens of thousands of dollars saving lives. I probably wouldn't have done that without the financial carrot.
That's true only if you can readily bring in new supply to compete with existing suppliers. But if market entry is difficult or impossible--on an island and unable to quickly arrange transport--then no price is sufficient to bring new supply to bear on the market.
Price gouging in this context might imply existing suppliers with more than enough supply to keep water at affordable rates until new supply comes online, but who choose to charge exorbitant prices simply because they can. Or more realistically, they charge just below the price at which outside suppliers could profitably enter the market given the temporarily enormous transaction costs (e.g. transport) in emergency situations.
Furthermore, when discussing essentials such as water, society cannot tolerate a system that explicitly puts people into conflict. Maintenance of law & order requires a minimal degree of equal treatment regardless of circumstance as part of the social contract. And while we can argue that a $100 bottle of water might help to ensure that, e.g., only the severely sick receive water because, facing imminent death, they or someone close them is willing to pay the price, often the price may far exceed what the impoverished are capable of affording, no matter how they value it. Again, maintenance of the social contract--incentivizing the impoverished not to begin violating property rights--is often a collective action problem and not something free markets can ensure.
I agree that people use "price gouging" far too liberally and don't appreciate how price signaling works to moderate supply and demand, but there are situations where free markets cannot adequately serve a population.
Even if you can't quickly bring new supply into a market, allowing prices to rise to reflect the new supply/demand equilibrium prevents (or dramatically reduces hoarding).
No one goes to a ballgame to stock up on $5 bottles of water...
Force retailers to keep bottles of water at $0.50/bottle and the sensible thing to do post-disaster if the water supply is uncertain is to buy all of them. In the worst case, you bought something at a normal price that won't spoil essentially ever. In a not unexpected case, you have secured a supply of water for yourself and family and have something that may be barter-able for other supplies that you might need.
Congratulation, you just noticed obvious problems of a rule like "don't change prices at state of emergencies". Thus, no reasonable/battle-tested actual regulation will have such a rule. Surprisingly, simple principles like "free market", "planned economy"/"communism", "free speech", "equal opportunity" etc cannot solve every problem on their own and we tediously need to balance all of those tools for the best possible outcomes for society.
Here a compromise might be something like caps on price increases (maybe max 500%) and some mild rules to prevent hoarding. I remember reading something like that in actual law, but it's been a while and I'm not sure about details anymore.
It's also interesting many forms of disaster relief are provided by the governments or non-profits instead by the free market directly. This development seems like a good indicator that free markets might have significant drawbacks in such situations.
And yet, you have people like the AG of Texas threatening to investigate any business who raised prices by more than 10%. Actually happened; not theoretical.
[Illegal to sell] fuel, food, medicine or another necessity
at an exorbitant or excessive price
The only thing that might be worse than leaving the standard so open-ended is actually specifying hard numbers.[1]
I wonder what the caselaw looks like, and what are some actual price multipliers involved in successful and failed prosecutions.
[1] Sometimes vague standards like that are deliberately designed to incentive conservative behavior while permitting equitable treatment (give defendant benefit of a doubt) in actual disputes. Being scared you could easily run afoul of the law is partly the point. That works better when designed for enforcement by private plaintiffs where quantifiable harm must plausibly have occurred. It's prone to abuse when enforced by regulators preemptively as there's no limiting factor of manifest harm. If everybody was happy to pay $50, no harm no foul. If somebody's grandmother passed out from dehydration because she couldn't afford a bottle even though the shelves were full, then not only do we have harm but we have a concrete context to gauge "excessive". Preemptive enforcement lacks these contextualizing facts.
SUV perhaps wasn't the best example, because SUVs often can't get to places that need water - if they could, SUVs would be bringing water to that place.
At a $100 water bottle price though, I can literally afford to use a helicopter to bring in water. At $20 per water bottle, I'm not sure I could afford to use a helicopter to bring water in, especially if I have to use hours of fuel in each direction.
I agree that you have to keep order. People who think their life is at risk will get violent and reckelss, and we need to limit that. But if you hit a point where water is worth $100, you are probably already past the point of keeping order.
You're missing the fact that under a scenario where supply is restricted, increasing prices also discourages those who already supplied themselves from exausting the supply. I mean, if water is 0.10€/bottle then I'll gladly buy the whole supply with my pockey change just to avoid any chance I might feel slightly peckish.
How does price-fixing solve that problem?
However if the same bottle is sold for 1€ or 10€ then I'll think twice before pulling out the bottle, and I might even open a stand to sell part of my provisions for less to undercut the competition.
You forgot to mention any downside possibilities. You made tens of thousands selling water to people who had spare money and maybe just kept the water in reserve doing nothing, when people with no on-hand money potentially died for lack of clean water.
IMHO, market transactions work poorly when both actors can't walk away from the transaction. ie. when the free market has significant constraints in the "free" precondition.
Allowing gouging means resources go to people with money in an completely disjoint optimization function vs an optimization for valuing human life in an emergency. I think that's not only inefficient, it's unethical.
In one system, water is apportioned according to ability and willingness to spend, and the supply goes up as sellers arrive to take advantage of high prices. People also don't waste water they don't need (e.g. for washing) even if they have the money; they sell it.
In the other system, water is apportioned according to who can get to the store faster, and supply never goes up because nobody has a reason to restore it. People use drinking water for washing if they have it, because it's not like you can sell it anyway.
In both scenarios the is significant inequity (whether by money or ability to get to a store fast and fight/negotiate for water). But overall, many more people suffer in scenario 2. This is obvious given all the suboptimal water use in scenario 2.
It's hard for me to understand why you'd prefer a scenario where obviously more people suffer.
What about people that literally can't afford to spend? In disaster areas with price gouging the people that pay the premiums are the rich and more well-off. The poor and those often most affected by hurricanes not only can't afford the gouging, but they also suffer the most by price gouging.
If a poor family only has $500 to their name and has to spend $100 to buy water just to survive, they've blown 20% of their total networth just to survive. A middle-class family spending $100 of 15,000 is far more likely to not be affected.
It's hard for me to understand how many people on HN can't fathom that price gouging affects the people most hurt by disasters. I don't care if price gouging means you'd gather up more supplies and head to a disaster zone because you're still taking drastic advantage of the poor for personal profit. Countries like Japan don't pull this same shit, so it's too bad that we rationalize our greed as being 'for the greater good'.
The bizarre libertarian point of view that you are arguing with says that poor people have the freedom to not be poor, and should be happy to sell all of their earthly possessions so a hero selling $100 bottles of water can be compensated for his bravery.
We all have a moral duty to use our franchise as citizens to keep these points of view out of government.
But we have that problem as a capitalist society with or without “price gouging”. And we have a solution for that problem too – charities and the government giveaway or subsidize essentials for people who can’t afford them.
If we allow the price of water to rise when supply is constrained, people who can afford the higher prices will use water more conservatively and board less, and people will still give it away to those who can’t afford to buy it. But people won’t have to wait in line all day to get their ration of water, and there will be incentives to create temporary channels to improve the supply of water even if those channels couldn’t be supported by the normal price of water.
The choice isn't between spending 20% of their net worth on water and getting it at usual prices. The choice is between spending 20% and not getting any water at all.
Another issue is that it starts to become more coercive a well, especially with vital resources. Taken to an extreme it amounts to literal duress. For instance you can't demand that someone sign over all of their wealth to you if you rescue them when they are in distress or else you'll leave them to die in the desert. An extreme example admittedly but illustrative of why there needs to be an upper limit somewhere. The precise agreement of 'when' is subject to some debate itself.
That proposition is not so extreme, and people do awful things when set loose from the rules by disaster or war.
There are thousands of stories where death, rape, theft, looting, etc have used by folks in positions of power to get what they want in these situations.
The obvious answer is to have competent government actors who can act quickly and protect human life without a financial incentive and disengage as situations improve.
> For instance you can't demand that someone sign over all of their wealth to you if you rescue them
You can demand all that and more if in the US healthcare market if the medical GoFundMe category is any indication. But that is perhaps too much of a digression...
But you can; whether you should, or if it is a decent thing to do, is a different matter.
Placing an upper limit means that you are less likely to be rescued at all, if the potential rescuer happens to not be a nice person (or is very risk-averse and rescuing you involves some risk).
In other words - if the person is nice, you do not need to have any limits, as they would not abuse the situation anyway. If they are not nice, with the limits they will not rescue you, but without, there is a chance that they will be overcome by greed and so will rescue you.
when you price cap what you are doing is telling shop keepers and warehouse owners that there is no purpose to risk your safety and open back up until things return to normal because you cant make extra profit so they just stay home and no one gets the needed supplies. When you let them profit at least those with money get supplies. The choices really are either no one gets supplies with price caps or only those with money get supplies when gouging is allowed. If supply was capable of reaching everyone then prices would quickly return to normal. There is no fair system of delivering limited supply and high demand without raising prices. If you come up with one please claim your noble prize as you would have the solution to world hunger and poverty
> when you price cap what you are doing is telling shop keepers and warehouse owners that there is no purpose to risk your safety and open back up until things return to normal because you cant make extra profit
As a side note in this debate : the choice isn't between selfish people that wants to make money and nice caring people sharing water for free. You can have both of it : no price cap => free marketer and good samaritans supply water from the exterior of the zone AND the state helps poor people / those who can afford to buy more bottles can share them with their poor neighbors (might even pay them back later in their life if they make it : arrangement between people is not the concern of the water supplier).
> At $100 a bottle I'm going to be loading up my SUV with as many water bottles as fit and I'll be driving to the disaster area. I'll take work off, maybe even risk getting fired for that type of payday.
So would hundreds of other people, which would get in the way of actual relief efforts and probably cost lives. In fact, for enough money, you could even lobby the government to ensure that you would profit off of future disasters.
> I probably wouldn't have done that without the financial carrot.
Probably not, but others would have. And those organizations, whether private or government are also willing to help the people where there is no financial incentive to do so.
In the example you give, the result would be those that have the financial resources would stockpile the water, while poorer folks would simply die.
There are some areas like disaster relief, education, and the provision of medical services where the free market has shown itself to be woefully insufficient.
> which would get in the way of actual relief efforts and probably cost lives
or that people would not need to have any "actual relief effort" because the savvy businessman will respond to price signals and bring in the needed goods by themselves.
In this case, the free market is a poor substitute for proper disaster preparation. Compare the results of hurricane Katrina in Cuba and the U.S. for example.
My country is literally one bad storm away from turning into Atlantis. Puerto Rico is not a disaster, hurricanes are a part of the weather over there and every American should be ashamed of what happened. Sing God bless America because it sure as hell isn't going to be saved by its people.
It's certainly true enough that high prices activate substitution & rationing, and are a powerful motivating force to bring more supply to bear.
Whether shortages necessarily follow that depends heavily on whether there is any other motivating force in play along with institutions prepared to respond to it. In other words -- does a given society only have markets, or does it also have values?
And of course, the higher the prices, the larger the number of people to whom whichever commodity we're speaking of is simply inaccessible. At some point practical effect isn't distinguishable from hoarding/shortage and it's not obvious that discriminating by price is ethically superior.
I've been alive a decent amount of time now and I've seen no evidence that price controls during disasters are anything more than political fluff for easy points. Everyone - even otherwise reasonable folks - love their 2 minutes of hate on "price gougers" even if the facts don't make much sense.
As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk.
And I'm not even in the generator selling business. Someone who is I imagine could be quite incentivized to keep the factory open a few more shifts and ship a bit more if profits were there to offset the additional expense and risk.
Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't.
The response of course to my complaints is rationing, which of course brings up a whole other giant can of worms.
>Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't.
What if the single dude has 1000$ and the family has 10$? The single dude can obviously just buy all the water and the family still gets none.
> As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk.
If you were really willing do to this, could you be so kind as to share your prognostication for where future disaster will strike with disaster planners? For you see, that task would require you at least 5 days of advance planning (assuming you were a champ at locating and ultimately selling them), probably more than a week in any actual executable plan. Even for well-forecast hurricanes, that is pushing it for advance notice.
When it’s physically not possible to increase supply sufficiently (in the relevant timeframe) to meet demand at a price affordable by everyone who needs a good in order to survive; and if you want to distribute those goods in such a way that the maximum number of people do survive; your only option will be price controls and rationing.
If it were possible to increase supply sufficiently AND the markets were perfectly efficient (and cows were spherical), price controls wouldn’t be necessary - but these controls were typically introduced after disasters where people died because other people were jacking up prices to levels most couldn’t afford.
Even if it truly is possible to increase supply you may nevertheless have price increases because disasters induce demand and encourage hoarding. The solution here IMO would be to cap prices but subsidize them in order to incentive suppliers to increase supply.
The market forces that make the option inferior don't disappear just because price caps are implemented.
The "pro price gouging" faction just points out that caps provide even worse market incentives for increasing supply and lowering prices than allowing arbitrary and free pricing (i.e, "gouging").
In reality profiteers attract a criminal element, both in terms of street criminals hawking $100 bottles of water and corruption of government and commercial officials.
IMO controlling the demand side via rationing is the most ethical approach.
By capping prices, you're saying only those who live near water stockpiles deserve it (because that's what price caps lead to: first-come, first-served), which means more wasted water & fewer people surviving.
You can solve the waste issue by rationing. But more to the point, prioritizing rich people is every bit as arbitrary as prioritizing those who live near water stockpiles.
You're 100% correct. Rationing by wealth leads to equal misery as rationing by who happened by the grocery store sooner. However rationing by wealth is the surest way to increase supply quickly.
Not true. You can set limits on how much people can purchase. And you're assuming that more would be wasted by the first to get there, and assuming that the rich wouldn't waste any.
Can you explain how Japan's recovery efforts post-disasters are insufficient, considering how speedy their recovery seems to be with zero price gouging or taking advantage of victims?
Japan has a very strong culture of mutual aid. It is basically unique in the degree to which it works. If your argument is "Well then we should be more like that", then sure, that'd be great. But that doesn't seem very practical. And even if it were, price gouging will be more effective at allocating resources to the problem. Sure, if you happen to have water in Japan, you may share it with others. But you're not going to buy truckloads of it and drive it across the country. On the other hand, if you have the opportunity to sell those bottles of water for $20 each, you may do just that. Money is extremely effective at mobilizing resources.
Can you actually cite and back up your claims? As far as I'm aware Japan is one of the most efficient countries in terms of mobilizing people and resources for disaster response. Are you saying that a country with price gouging will be more efficient than a country without?
You still haven't explained how Japan's response is insufficient compared to other countries either.
> Can you actually cite and back up your claims? As far as I'm aware Japan is one of the most efficient countries in terms of mobilizing people and resources for disaster response. Are you saying that a country with price gouging will be more efficient than a country without?
It'd be next to impossible to study this, because you can't readily compare disasters. I don't know how efficient Japan is, it may be that there culture is as strong as the price mechanism, or stronger. My argument is that the pricing mechanism works quite well, and that you can't simply snap your fingers and imbue say, Iowans with the essence of Japaneseness. Whereas you can snap your fingers and say "sell things at their market value".
> You still haven't explained how Japan's response is insufficient compared to other countries either.
I didn't intend to. What I said was the Japan's cultural attitude is not easily replicable and transferable, whereas markets are.
Exactly. Price controls result in famines and shortages.
Allow gouging, and the gouger will soon have competition to drive the price down. Very quickly, the price will drop to a reasonable level. Conversely, if you price control, there is no incentive to provide the good or service in the first place, and shortages ensue.
Government price control regulations distort markets in a dangerous way.
Puerto Rico, a territory that has nationalized every major aspect of its economy and was running massive deficits as part of vote-buying schemes, as an exemplar for 'disaster capitalism' is the most ridiculous thing I have ever seen.
It's up there with Venezuela and Nicaragua as a self-inflicted victim of the South/Central American 'pink wave' that has caused so much economic devastation in the last decade.
The Dig is like EconTalk for leftists. Even if you’re not onboard with the ideology, the intelligence, researched depth, and interest of the host Daniel Denvir is matched by little else in media today.
Governments should be competing for wealthy taxpayers. And as income sources become divorced from physical locations, they will be forced to do so more and more every year.
I run venture backed businesses. Teams are distributed. So I count days across the world and do not pay taxes anywhere (i am not a US citizen so it is much easier). In the process my company and I benefit from low cost of capital raised in silicon valley, low cost of excellent talent hired in russia, my personal expanded social network in markets in Asia. And it easily pays for itself just in terms of not needing to pay any taxes anywhere.
It just makes sense to live this way once you have high income, are building something that is not physically in one ___location, understand how to be healthy/social/etc while living in many places.
the current tax system has no future. the fundamental reason is that there is simply no point for anyone to pay crazy taxes. the United States (or any other country) just do not deliver enough marginal value from being there for more than X days per year to pay an extra 20-40% in taxes.
to help your community – donate to things you care about and add value for other people that way. i want health research to benefit. it makes much more sense to donate/invest there, than to send the fruits of my work to the NSA to fund them to spy on me.
What is parasitical about GP? I presume they pay for everything: labor, food, accommodation, travel costs. Are tourists parasites? Why do you think they must pay taxes, and to what country, and in exchange for what? Would you pay taxes to the government voluntarily if you legally didn't have to do it?
i pay my way, create jobs for people, fund/promote things i consider valuable for humanity (e.g. medical tech).
i have never claimed a medical, educational, unemployment etc. benefit in my life. and i am a citizen of a country that will never give me any such benefits anyway.
my approach adds more value to society than funding inefficient social programs, armies of bureaucrats and bloated spy agencies.
I guess what is missing from your equation is that the model you are advocating for is not sustainable for large parts of the population. Just imagine everyone doing this, do you think the countries could still exist the way they do? It‘s all and well that you decide to fund some medical tech but what about all the other areas that need attention? Your giving portfolio doesn‘t really strike me as well-balanced in that regard. Additionally, I would question that you are actually giving an amount similar to what you would be paying in taxes. So your argument that you provide more value to society doesn‘t strike me as obviously credible. I would urge you to really do some more comprehensive estimations and analysis before making such a claim – at least if you are interested in the „truth“ and not just making yourself feel good about yourself.
On the other hand, I see the possibility for what you are doing to have a positive impact depending on what you do and what you use your money for (maybe have a look at 80000hours.org to get some inspiration). But you have to keep in mind that this is just a marginal possibility for rather small parts of the population and that this model probabaly wouldn‘t scale at all. So, it might make sense to keep this in mind when you discuss and think about this topic.
> I guess what is missing from your equation is that the model you are advocating for is not sustainable for large parts of the population.
I don't think anytime we'll have more than 0.1% of population living digital nomad lifestyle. Even most people who have the opportunity, still prefer living in one place, with their family.
I think in this thread two things might be conflated. Afaik not all digital nomads dodge taxes or do it purposefully to evade taxes as presented in the top post. So, everything I have been saying is coined to the specific situation outlined in that post. I don‘t want to criticize a digital nomad lifestyle in general.
But back to your point and assuming that the digital nomads you are talking about are the ones dodging taxes. It doesn‘t really change anything about the argument. The problem that not taxing these people seems arbitrary to the normal person because there is nothing special that those people provide compared to the average entrepeneur. The average tax dodging nomad doesn‘t pull his/her own weight => this lifstyle wouldn‘t scale.
The best trolls are the ones where you legitimately can’t tell if they truly believe the shit they say. This one is more “cartoon villain”. It’s a characature—what many people believe an evil, mustache-twirling rich person might say. Pretty transparent, but good effort.
YC alum so pretty sure this is not a fake HN ID :)
i wish people didn't see this stuff as Bond villainy though. this is clearly a failure on my part in terms of communication... thinking on how to remain authentic but reduce that effect.
I think your message is 'for whom it's for.' Based on how the average person is programmed to think/act in society, what you've said is unlikely to be well-received by most, IMHO.
I'm not yet in your (stated) position, and trying to discuss such matters typically raises hackles & hisses. I think this has mostly to do w/people deciding that they'll never be in any position to live the sort of life you've mentioned. Could go one about this for a while, but won't.
Again, salute to you if you are actually living the life.
Totally encourage working on your message. You are likely not going to see much support or agreement by boasting about enjoying the benefits provided by society while dodging paying for it through taxes.
well i don't agree that i am "enjoying the benefits provided by society while dodging paying for it through taxes." i think people who create wealth pay for society already.
i am thinking of working on my message, but i'm not going to change my convictions just because people don't like it.
You pay for society through taxes, which you are deliberately avoiding. Many public services and infrastructure which you and your company take advantage of are paid-for by taxes.
very positive. he is building value for society by:
- bringing cheaper great products to vast numbers of people
- building AWS infrastructure that enables other people to build products cheaper and faster
- creating huge number of jobs (that you might not like but lots of people in the world would like to have)
- funding things he cares about
one of the most useful and beneficial people in the world.
When philanthropy funds the public good, society abdicates responsibility of defining “public good”, and leaves that to a handful of philanthropists. Hundreds of thousands of Amazon employees generated this wealth and billions of customers enabled it, yet one person gets to decide which services or causes are worthy of funding. This is called plutarchy.
it has its challenges, but also lots of upsides. have to train self to be very good with habits, investing in relationships and the like. i've been doing it for the last 2 years and at first it was kind of depressing but now have never been happier.
e.g. last 2 weeks spent in silicon valley having 40+ meetings a week w really smart people i learned a lot from. got fed up w meetings, so now working from beach in tulum for a week by myself. next week working fdrom rome/florence with a really cool girl. then doing a certain plant ceremony in a certain undisclosed country. etc.
I'm not sure why some think the parent is trolling. I read this and I was smiling because I almost literally do the same thing and call myself a "Digital Nomad".
The difference is probably that I'm not as rich or as successful yet. But my business is growing steady and I can manage a remote team on different timezones pretty well. The clients in the US don't even realize I'm not in the states a lot of times and they're happy as long as the work is being delivered.
This life is not for everyone but there are a lot of people who love traveling and for whom settling in one place gets boring (for me at least). Saving bay area rent and spending that on stays in interesting places helps a lot! Also, shout out to some awesome Virtual Office services offering mail scans / check deposits, etc :)
Absolutely. Though nomad lifestyle isnt really for me. Malta has a cool residency program [1]: pay only $15k/yr + territorial tax and live and work from there. Georgia is a good and cheaper option, a more natural and open country but not as developed (developing very fast though). Best thing is ease of getting residency, if you can afford it you will get it. No artificial barrier. So can bring your employees from all over the world and open an office.
So yeah not paying $20+k/yr to any goverment either. The moment I hit that I am out.
I know a few people who practice this -- and as it becomes more common, tax regimes in the world will figure out a way to make it harder. Israel has apparently already addressed this:
If you are an Israeli citizen, and spend more than half the year outside Israel, you don't generally owe any taxes on income generated outside of Israel ... provided that you can prove you are a tax resident somewhere . If you can't, then you are assumed to be an Israeli tax resident. If most countries had such a law, you could still shop around for low rates, but it would make it harder to avoid taxes altogether.
one can be a tax resident of monaco for 0% tax. or give up the israeli passport for something else. it is easy to acquire new passports.
plus at some point it becomes taxation-without-representation and has to be fought more overtly by bringing to power governments that don't do this kind of shit.
people don't realize that a century ago governments provided security and courts for a blended tax burden of under 10%. all the increase since then was to pay for medical services (mostly really dumb end of life care rather than educating people how to live healthy lives) and social safety net (which i would argue adds much less value to the well-being of the average person than technological progress does).
If you're actually serious, I tip my hat to you. Usually when I've talked to people what you've outlined, their eyes glaze over.
So, if you are actually being truthful here, would you mind sharing when you first started out w/this? I mean did you always plan to do this and structure your business dealings accordingly or did you get your money and figure out what do after the fact-- which has never really made any sense to me, but is what I've always been told by the lawyers & accountants w/whom I spoke (I suspect because they make more money that way)?
haven't yet written about ___location changing specifically but will at some point... but you can read about my general approaches on that blog on hackernoon. it is mostly about health, optimizing efficiency, long term planning etc.
Peeked @ your blog... As someone who leans toward medical non-interventionism, I'm looking forward to reading up on your health regime.
And of course, I do hope that you'll consider saying/writing more about how and why you came to develop/adopt your wealth maintenance strategy. For example, when I saw GSB, I thought, "Oh, yeah, that makes sense." But maybe being an alum has nothing to do w/ your approach.
Politics aside, Puerto Rico’s Act 20 is an interesting opportunity for American SaaS businesses. Avoid most federal income tax and employ at least 3 locals in the process.
This is the kind of thing that people mean by "disaster capitalism". PR is wrecked and desperate for money, so it resorts to tax competition - but only for wealthy foreigners, not its own residents. This drives up local inequality while also taking away from the mainland's tax base. And in the end it doesn't quite manage to solve the problems for the rest of PR.
Why is this a bad thing? Last time I checked, most places love patronage from tourists (who don't pay income taxes either), and these “residents” are almost like permanent tourists.
It's tolerated. I'm from another island tax haven and I can tell you that it's part of our culture to act welcoming and happy to see you. It's an act; anyone in any service industry can confirm this. People do this because their choices otherwise are limited.
I'm aware of this, and that's why I don't live in any of the traditional third-world "paradises". The fakeness and the bitterness of the locals is too much for me.
"Sorry 5 'middle class' Puerto Rican families that lost your homes. A rich guy wanted a nice new big second vacation home. So here is a half sized condo at twice the price."
> And in the end it doesn't quite manage to solve the problems for the rest of PR.
As long as the Jones Act is still in place, there is no tax policy Puerto Rico could implement that would solve its economic problems in the long-term.
That is like 99th on a list of 100 of PR's problems. https://www.cnbc.com/2017/12/18/broken-bonds-wall-streets-ro..., poor access to capital/need for capital after Maria, and an apathetic (if not antagonistic) administration are absolutely worse right now.
How much would you really estimate is wasted above what would be paid for non-US flagged ships? How would a race to the bottom in terms of flag-of-convenience destinations be detrimental to the long term interests of the US shipping/shipbuilding industries? Would repealing it have any security impacts? Who would benefit most from it.
I don't expect you to answer those, but they are all complicated questions and worthy of better discussion than this.
> That is like 99th on a list of 100 of PR's problems
Look, I never said that the Jones Act was Puerto Rico's only problem. I said it's a major problem, and that it alone is significant enough to hamper Puerto Rico's economy indefinitely.
As a separate note, it's weird to frame it (as you do) as the aftermath of Maria and the federal government's apathy being worse, when in reality the two are heavily linked. The Jones Act severely hindered the recovery efforts from Maria. (Every other hurricane since Katrina has prompted a temporary waiver from the Jones Act in order to aid relief - including Harvey, which happened just before Maria).
Yes, keeping the residents of Puerto Rico in the dark for a year and without reliable access to shelter and clean water is obviously an immediate problem. I'm saying that even if the lights were turned back on overnight, that still won't fix the long-term problems either.
They waived the Jones Act after Maria, albeit briefly.
I think PR's debt problems are an order of magnitude worse than the excessive cost of shipping. They need to be a full US state, and they need federal aid to fix their balance sheet (beyond PROMESA). I think a Jones Act subsidy would be a reasonable policy to preserve a US shipbuilding industrial base while not doing so on AK, HI, PR, et al's dime.
Ok, like I replied to the sibling comment, the debt crisis (admittedly from a distance) feels like such an overwhelming #1 that the rest are dwarfed. I think PR's situation is entirely unjust, and they deserve full statehood (or independence, based on a referendum).
> Could you explain exactly what about the Jones Act causes the problem, and how it does so? A casual glance failed to enlighten me.
The Jones Act requires Puerto Rico to use only a small number of US merchants for shipping to and from the mainland. Because those few merchants have an oligopoly, they're much more expensive than any of the alternatives. This raises the cost of everything that's not produced on the island itself, which directly or indirectly inflates all prices on the island. As a result, the island's exports become prohibitively expensive as well, which means that they can't really afford to buy much, but they also can't produce anything that's cheap enough for other places to want to purchase them.
While the Jones Act technically applies to all states, Puerto Rico and Hawaii are uniquely affected by it due to their inability to ship anything by ground transit, since they're islands. (Hawaii also suffers due to the act, though they have representation in Congress that has enabled them to secure waivers at times and other exemptions to mitigate the impact. Puerto Rico does not.). Air shipments are not an option - air is always orders of magnitude more expensive than either ground or sea - shipping over water is always the cheapest.
> t seems like the simplest thing to do would be to add an over-water maximum onto the Jones act that would essentially allow PR and HI an exception.
Given how heavily certain group lobbied to prevent the government from issuing just a temporary waiver after Hurricane Maria, I wouldn't bet on this happening anytime soon.
Democrats support the Jones Act because their core constituents do. Republicans have a complicated history with lobbying for Puerto Rican issues. So neither party has an incentive to fix it, and neither party sees Puerto Evans as constituents.
> I bet 99% of their constituents don't even know what the Jones act is or would be perfectly willing to change it.
That's a bold claim. On what are you basing the assumption that many or most Democrats would be willing to change the Jones Act, if they knew what it was?
No more bold than their constituents support it. I suspect that neither of us has viscerally satisfactory direct evidence for their respective positions.
> No more bold than their constituents support it. I suspect that neither of us has viscerally satisfactory direct evidence for their respective positions.
It's not particularly bold to assume that convincing Democratic voters to repeal an obscure law that the AFL-CIO vehemently supports is an uphill battle.
Leadership in many old-line unions and democratic groups is been in sharp contrast with the wants and needs of constituent representation. The most obvious example of this is the recent teachers strikes which were 'wildcat' in that they occurred without formal union leadership blessing.
> Leadership in many old-line unions and democratic groups is been in sharp contrast with the wants and needs of constituent representation. The most obvious example of this is the recent teachers strikes which were 'wildcat' in that they occurred without formal union leadership blessing.
There is literally zero evidence that members of AFL-CIO unions oppose the AFL-CIO's persistent lobbying in favor of the Jones Act. There's plenty of evidence to the contrary, namely (1) the fact that it serves their own interests, and (2) the fact that there has been zero opposition to it over the last century that the AFL-CIO has supported it (in contrast to the example you site).
As I understand it, prices are higher on U.S. islands due to not being able to ship cheaply from the mainland. (They'd be higher anyway, but this doesn't help.)
In theory once you attract a big enough cluster of “tax hackers”, the government can then modestly increase taxes on these folks and that can be a high leverage thing once you’ve attracted a large revenue base.
But many of these people have sufficient mobility that you have to remain under the tax level of your competition. Most of them have no actual tie to Puerto Rico and would leave in a heartbeat if they found a better deal.
Also, it turns out that these super high net worth individuals and entities have a lot of political sway. Once you start talking about raising their costs (taxes), they will put a ton of resources into making sure you are no longer in position to do so.
> But many of these people have sufficient mobility that you have to remain under the tax level of your competition.
Not really. Puerto Rico has no real competition. It's the only place you can live inside of the US without paying federal income tax. If Puerto Rico were to raise its local tax, to say, 10%, it would still be the lowest overall tax jurisdiction in the US by a mile.
It seems like a "repairative spite" game theory move for funding. Cause more tax loss to the mainland when neglected to solve the problem one way or another.
Actually, in addition to the rich-person tax scheme, there's also a pretty reasonable tax-abatement scheme for any person, resident or not, who starts a PR-based business employing five people or more in one of a number of target industries, including online services and recycling.
You're right. Money doesn't flow too easily from the most rich to the most poor without government intervention.
But state finance is separate issue from that. And money flowing to the most poor would not do much to state finance, because the most poor typically are unemployed and hardly pay any taxes.
tl;dr US territories often times have the ability from Congress to create parallel tax systems. Some have made attractive ones.
protip: Some other US territories have favorable tax laws too, if you want to dig. Its nice that they aren't being written about by EVERYONE right now.
Nobody's going to spoil it for you because that'll be spoiling it for themselves too.
ALL US territories have the same catch: they are underdeveloped bad neighborhoods, and changing the laws doesn't get the comfortable New England elites to move from their gated communities. New money MIGHT be interested.
I hope Los Zetas see the opportunity here. They could net a few million from running their playbook on a newly minted crypto-bro thinking he found a "haven" for his money.
What an ironic comment in itself. Those phrases mean exactly the same thing, yet we are all familiar with the habit of the powerful of spinning atrocities with words.
I for one suggest "production assurance security forces" instead of "paramilitary death squads".
I've actually gotten significantly less jaded in 2018. I attribute that to finally doing something about my participation in the toxic cesspool of internet politics, quitting my steady diet of outrage porn, and looking at the big picture.
The absolute best thing we can do for our cynicism is read Factfulness, by Hans Rosling. Once you see the ways our otherwise intelligent, well informed, and good-intentioned minds mislead us, you realize that there's a lot less to be jaded about than you thought. But even before reading Factfulness, I made a lot of progress just by reading a lot more history and philosophy, and a lot less Facebook, Twitter, and Google News.
The whole urgent vs important dichotomy that ruins our ability to manage our work also ruins our ability to manage our understanding of the world.
While I don't disagree with the sentiment, I think we're on the cusp of better things. Maybe that just means I'm ignorant, but I see a lot of potential in the world, and especially in young people.
That or "Absenteeism in democracies is (among others) increased by the fact that those with money have objectively more power, in turn leading to more absenteeism"
In many ways “govt as a business” is apt. Global competition for talent and global competition for capital are just two ways in which governments compete with each other for continued prosperity.
They charge rents (property taxes), protection fees (taxes for military/police),
and collect royalties on every good bought or sold on their turf (sales tax).
The only difference between them and a business is that government gets your money by force (by threatening imprisonment if you don't pay). A business must use persuasion & manipulation to get your money.
However, since govt. uses force to collect revenue rather than voluntary payment for goods/services, they more closely resemble a mafia (protection racket) than a business.
The differences are manifold. Start with the purpose - modern government exists to serve all of society, which it mostly does. The mafia exists to serve the mafia, although it can be incidentally generous with the public. The social contract between the public and the government is that revenue the government takes in through taxes is spent on things that help the public - schools, roads, emergency services, etc. The public has substantial if indirect influence on this balance, via elections. Of course, some people won't be happy with the arrangement, but the majority are generally satisfied.
Additionally, modern government functions in part by a monopoly on the use of violence, which we agree to as part of the social contract. Individuals who refuse to participate in the social contract are subject to government violence, whether they're not paying their taxes, or shooting their neighbors. As part of the contract, the government is not to abuse that monopoly on violence at a large enough scale that most of the public feels threatened by government itself.
The ridiculousness of your social contract idea, is that a contract cannot be binding if it was made on your behalf, before your birth, without your consent. Implied consent is lunacy especially when there's lots of people saying "I do not consent", to which you must reply, "Oh you're just too stupid to know what's good for you".
Before you get upset and too emotionally invested, I will say I am not against government or the state. This is like accusing irreligious people of being against Christianity. I'm not against government, but I cannot in good faith use government's own language to describe the actual, material function of government.
Words like "public good", "social contract", these are propaganda words with more of a religious and spiritual connotation than any truth grounded in reality. They are lofty ideas invented by men trying to justify the French revolution. There's definitely value in their ideas and worldview, but mistaking an ideology or worldview for actual reality, is childish.
Government does not exist to serve society, it exists to preserve the state.
Public services -- healthcare, schools, roads -- all those things are great and helpful to society but the government does not give them to us to "serve the public".
Public services exist for one reason, and for the same reason a birdfeeder exists. A birdfeeder exists to keep the birds all in one place (to study them). Similarly, public services exist to keep us all in one place, to make us more easily accessible, so we can be more easily taxed, and more easily controlled. By giving us public services and a good quality of life, we are willing to give up even our own lives in the preservation of our state, and to kill other humans living under a different state, like the Vietcong, who were doing nothing more than trying to defend their own system against invaders.
The public services government provides, almost always come to us through granting lucrative and over-priced government contracts to their own powerful donors and wealthy associates.
Notice how after leaving office, politicians always go work for a big corporation that donated to their campaign and was recipient of government contracts, grants or tax-breaks.
The alternative to government is government. There's no way around it. Anarchy creates a void which is filled by another government. I'm fully aware of that.
But making government more fair means acknowledging the ACTUAL functions and purpose of government. Being naive about those functions doesn't help anyone but the people who seek to exploit and take advantage of us under the guise of "serving the public">
People who believe government exists to serve us will inevitably cede unreasonable, arbitrary, and vaguely defined (unlimited) power to the government under the false assumption that government intends to use these powers for our benefit.
You see this all the time where a party expands the role of govt, then complains when the next party gets elected and uses this same power for something they don't like. It practically happens every election cycle.
The difference between a protection racket and the government is that the government actually protects you. If your government vanishes or stops performing the protection, another neighboring government will happily annex your state.
Mafia actually does protect your business from thieves, and from government tax collection. Just like government, mafia wants to be the only one with a monopoly on using violence to collect money.
And I'm well aware that a vanishing government simply means another government or gang will take over. I'm not advocating anarchy or some utopian ideology.
Understanding what government is and does, does not mean one wants to abolish it.
However, thinking that government exists to serve the people is foolish and naive. Making a fairer government demands an understanding of how it actually operates, that way you do no cede vague and arbitrary power to government under the assumption "they will only use it for good"
The 'government is inherently evil' argument is sophomoric and goes against my direct experience, so I can't give you that axiom, sorry. Government, at least in the US, is legitimately of the people (for better and for worse) and it is what we make of it. It's definitely made worse by people who believe it's evil and try to cripple it.
This tired crap needs to end. It’s thought and conversation terminating and just fucking lazy.
It’s not original, impressive, ‘seeing through the sheeple’.
You will have a government. When government collapses you get Syria.
Let’s debate about what type we want not ‘all government is bad hurr durr’. We’re not teenagers getting high for the first time.
To be living in peace and relative prosperity when a lot of the world has a lot of failed governments thus war and societies collapsing sitting in your ivory tower with a full belly, leaning back and proclaiming ‘you know, governments are no different to protection rackets’ is just a completely juvenile attitude and practice.
My argument was in response to the idea that government is a business, I said that rather than a business, government is more similar to a protection racket. Not that governments are exactly the same as protection rackets, which seems to be the words you're accusing me of writing.
You are afraid that if we think of governments in a skeptical or cynical way, we must then be advocating for anarchy. That's an emotional argument and it has no place in an intellectual conversation.
Except you have no say in what the mafia does. You elect representatives in government.
Trying to compare government to the mafia is not at all conducive to a civilized discussion, as it brings nothing to the discussion other than a "rabble rabble government is bad".
I'm no expert on these matters, but it's the internet so I have an opinion. These territories face a catch-22: to the extent they raise taxes they become less attractive to the Super Rich (well outside investment in general). You might also end up with a race to the bottom scenario, where taxes go to zero, labor laws go to heck. You actually see all of these issues and more in practice so it is not just theoretical. It is a difficult quandary to escape from. You basically need an engine for real organic growth that doesn't rely on tax gimmicks. Finally, I think Puerto Rico itself also suffers from an artificial handicap with respect to the Jones Act.
> Finally, I think Puerto Rico itself also suffers from an artificial handicap with respect to the Jones Act.
The Jones Act has prevented Puerto Rico from ever building a solid, stable economy of its own. It's the reason Puerto Rico's economy was in shambles long before Hurricane Maria hit. As long as the Jones Act is in place, Puerto Rico doesn't have an economic future.
They've experienced a massive brain drain over the last few decades, because everyone on the island can relocate to the mainland, where everything is cheaper (due to the Jones Act) and there are more lucrative jobs. This creates a vicious cycle which is still ongoing.
The economic problems of Puerto Rico go way beyond the Jones Act. As long as your item is lightweight, you can turn a reasonable profit here - all the Viagra made for the North American market is made here, and other pharma companies have strong representations. CooperVision sells something like 3 billion pairs of contact lenses a year, made in their plant in Juana Diaz.
So it's a disadvantage - and one that has absolutely no relevance to the issues of the twenty-first century and that should long since have been retired (and arguably never passed, or had exemptions made for American islands) - but it's not a showstopper.
No, the real bar to a solid, stable local economy has simply been the ready availability of mainland capital. Anything you see the hedge funds doing in the Midwest was prototyped here first. The entire development strategy of offering tax rebates to relocate manufacturing was invented by Puerto Rico - the idea was that those manufacturing centers would lead to local management and a robust secondary technical and supply economy. This never happened - the mainland companies brought their own managers and continued buying from their established suppliers on the mainland. Puerto Rico was a convenient source of well-trained but very inexpensive labor.
There's a lot of detail. I can't claim to have done more than scratched the surface. But mere abolition of the Jones Act wouldn't be enough, sadly. Not that it will happen regardless.
> But mere abolition of the Jones Act wouldn't be enough, sadly.
I never said that the abolition of the Jones Act would be sufficient. But I am saying it's necessary; as long as the Jones Act is in full force, Puerto Rico has no hope at a stable economic future.
This is true, you didn't say that and I apologize. But I live here in Puerto Rico, and the notion that our stable economic future has to be a handout from the United States rankles a bit.
After all, Hawaii's economic stability doesn't seem to be questioned very often, and they're even more susceptible to Jones Act problems than we are - after all, the Act only regulates shipping between American ports. Plenty of non-American ports just hours away by ship. We don't have to ship everything by barge on the four American-owned, American-flagged, American-built, and American-crewed shipping lines that service the island, two of which are embroiled in a price-fixing lawsuit and the third of which somehow managed to go bankrupt.
> But I live here in Puerto Rico, and the notion that our stable economic future has to be a handout from the United States rankles a bit.
I'm not sure what you're referring to as a "handout". The Jones Act itself is, if anything, outright theft by the federal government. Eliminating it isn't a handout.
I guess it's uncomfortable to say that the fate of Puerto Rico is in the hands of the US government, but on the other hand... that's exactly what colonialism is. The US has colonized and pillaged Puerto Rico for decades, and it's an ugly truth, yes, but it's the truth nevertheless. As long as that systemic exploitation continues, it doesn't really matter what Puerto Rico itself does.
> After all, Hawaii's economic stability doesn't seem to be questioned very often, and they're even more susceptible to Jones Act problems than we are
Well, that's not true - Hawaii suffers immensely from the Jones Act as well, and if you talk to people from Hawaii (people who've grown up there and spent their entire lives there, not transplants), they'll be able to tell you these Jones Act horror stories firsthand. Hawaii is overall in a better state that Puerto Rico, yes, but that's due to other factors which mitigate the effects of the Jones Act; it doesn't mean the Jones Act isn't still a crushing burden for them.
What you do is you hide a land mine inside the law. In this case, I think it's probably the bit about having no significant ties with the mainland. Maybe the number of days on the island, or something to do with the "one minute" rule.
So you let them move in, thinking they legally owe no taxes, and meanwhile, you gather the evidence related to your land mine and then wait. You sit on it. For years. Then you blow up the mine and demand a heaping pile of back taxes. You can then settle for less than the amount you are demanding, so nobody goes to court and no precedents are set, but you still get the cash.
The mistake people make is in thinking they can use the law to put on over on the government, when the government makes and enforces the laws. All those people in the article were getting the best tax deal an American can even dream of, and some were still openly discussing ways in which they could cheat the requirements! It seems like all you might have to do to catch a cheater is just watch someone for a day or two, or record them during a few minutes of bragging.
They say you can't cheat an honest man, but you sure can con a cheater.
This isn't a great idea and there are things wrong with it at a couple of levels.
1) We do not want the government to be in an adversarial relationship with rich people. Most rich people maintain their riches by adding tremendous value to society. While they may be reticent to pay taxes, they are not enemies.
2) We do not want the government rules-lawyering the law. I'll risk being opinionated and say that the law is not meant to contain random gotchas, it is supposed to codify usual and expected behaviour.
The law is meant primarily to be followed, not broken and enforced.
3) As sibling posts mention, people who change jurisdiction to avoid taxes are going to get an actual legal opinion and have sufficient influence to get the law changed. It'd never work in practice.
> "They say you can't cheat an honest man, but you sure can con a cheater."
Reminds me of the three felonies a day business [1]. We want less of that thinking, there are enough problems caused by unclear regulations without adding more on purpose.
There is clear evidence of intent to cheat right there in the article.
1. The government already is an adversarial relationship. The theoretical purpose of it is to act as a cartel enforcer, to shift individual actors away from their selfish Nash equilibrium to a global-optimum that benefits all members in aggregate, albeit less than they might be able to achieve acting independently. I do not accept your premise that most rich people get richer by adding value to society. That stopped being even remotely plausible in the 1980s. While the existence of rich people can add value to a society, it does not necessarily follow--the rich person has to choose to add value. One in the article explicitly declares a moral imperative to pay the lowest amount of tax possible. Without any mention of charity or philanthropy, that person is not adding any value beyond what he spends directly.
2. The law is already rules-lawyering itself. It could simply say that any person who genuinely becomes a Puerto Rico person shall pay nothing for those four categories of tax. All those additional requirements are there because otherwise people would just declare on paper and reap the benefit without providing the actual stimulus the law sought to provide. Just as you don't write a contract expecting that all parties will always honor all their obligations, and you don't write code expecting that there will be no unexpected inputs, you can't write a law that pretends no one will break it. This particular law already has a lot of gotchas, because it is targeted specifically to a group with a known-high proportion of people who believe "little rules are for little people"--people with lawyers who explicitly advise them on how to make the rules not apply to them. A law that cannot be enforced when broken is no law at all.
3. Just because rich people are out of control does not mean it is useless to try to control them. If they change jurisdiction to avoid contributing to the society I participate in, they can sod right off and not come back. If they buy off my government, for their own benefit and to my detriment, they will eventually provoke backlash. Of all the crap we have seen in the last 2 years, the Trump tax cut is what made me angriest, and most willing to throw someone into the surf at the peak of high tide with a flotation device and a pair of flippers, and to erect a guillotine on the beach. We should never accede to government corruption just because humans are fallible, and corruption will always be possible.
The three felonies problem is essentially a matter of code cruft. The law has bloated up to uncountable millions of lines, and the technical debt in it is so overwhelming that refactoring isn't even possible any more. It's full of bugs, though generally referred to as loopholes within the ___domain. This makes it possible to sometimes defy the spirit of the law by following it to the letter. And this becomes an arms race whereby one loophole gets patched and creates multiple new loopholes in the process. People with a specific interest can always locate and exploit the loopholes can always find the new ones and use them before they get patched. Those who do follow the spirit of the law often don't even see the loopholes until they see someone else abusing one. Simply put, the laws are written for the cheaters. The cooperators already know how to cooperate.
You're not hiding anything from rich people. They have lawyers. Or if you want to take a more cynical tack, rich people are the driving force behind these laws in the first place; they were written to specification.
Their lawyers can only advise them to follow the law to the letter, and try to mitigate the fallout when they inevitably just do whatever they want to do, with the expectation that they won't get caught.
These in Puerto Rico aren't the Davos-level or Bilderberg-level rich people. These are the ones who can maybe buy one congressperson, rather than all of them. They are rich enough to fleece a little, but not rich enough to hit back very hard.
I'm not sure why you believe this. Every discussion of PR's tax scheme, the issue of 183 days comes up. Even people with a passing interest are aware of this requirement. Sure, you can lie about it and hope you're not audited, but knowingly lying on your taxes is already broadly known to be a dangerous game.
When they were invented, they did what they were supposed to - in 1943, nobody had ever done this. In 1943, the mean annual income on the island was $142. The economic boom that followed on the tax incentive plan made Puerto Rico's mean income the highest in Latin America, built was was, in 1972, one of the finest electric grids in the world, and led among other things to an automobile-per-capita rate that's even higher than the rest of the United States.
Unfortunately, the heirs of the architects of those policies had no idea why they worked. So as world economic conditions changed, they just doubled down on the cargo cult, and stagnation followed. Then Congress decided it wasn't fair to prop up large businesses who were taking advantage of cheap labor, and yanked the rug out from under the whole scheme in 2006.
Do you honestly hold that opinion, or did you think you were on reddit?
Cities in California (re)assess property values just like they do everywhere else. Go buy a house there and tell me that your assessed value is about right for a house in 1958.
"Perhaps most perversely, Proposition 13 has made it harder, not easier, to become a homeowner. California has one of the lowest rates of homeownership (55%) in the nation, second only to New York and nine percentage points below the national average.
The pernicious incentives that led to these outcomes are obvious in hindsight. With property taxes near frozen, local governments began to see residential development as a liability and commercial development as an income stream. For 40 years, that perspective shaped which new projects cities approved. Homeowners, meanwhile, had a disincentive to move if they had a low property tax bill locked in. Finally, these relatively low property taxes made California an attractive place to undertake speculative real estate investments and leave valuable parcels of land undeveloped."
One thing I'd add, is that Prop 13 also discourages any kind of mobility. For instance, my Mom often talked about moving to a different town, but she didn't, because her property taxes were so darn low. She's lived in the same home for over 40 years and if she relocated, her cost-of-living would go through the roof, due to higher property taxes.
Here's a property for sale in Saratoga, currently on the market for $20M -- paying property taxes of $6k/year (a rate of 0.03%). Tell me more about how California assesses property like everyone else. Happy to subsidize the obscenely wealthy.
The U.S. is a popular tax haven for people in other countries, and the City of London is the center of a whole network of tax havens. It's not just remote islands looking for a way to scrape by.
A great book on how it all works is Treasure Islands by Nicholas Shaxson.
Do you believe every American that benefits from US taxes pays federal income tax?
Do you believe the benefits an American receives should be tied to the tax money they pay in?
Do you believe Joe Blow Puerto Rican gas station attendant, who does pay income tax, cares whether it's federal or Puerto Rico? If you have an issue with tax law, why on Earth would you take it up with anybody other than the people that write the tax laws - the executive and legislative Branches?
>So thanks, 51-day-old Republican troll, but try again.
Don't do this.
" Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive. "
" Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith. "
" Please don't use Hacker News primarily for political or ideological battle. This destroys intellectual curiosity, so we ban accounts that do it. "
Your numbers are a little off. 16 Billion in aid. How much has Puerto Rico paid in taxes? I remember when people where losing their minds in the blue states when federal aid was given to a red state.
Tesla is rebuilding your infrastructure. Tesla get so many subsidizes it's not funny.
Let us not forget how inept your local government is.
Hi, I downvoted your comment, but as is customary here I'll lay out why:
"tesla is rebuilding your infrastructure" <electrek link>
this is categorically false. tesla pr has claimed to be doing "11,000 projects" in PR, the majority of which are likely just solar+powerwall installations. even optimistically this will not add up to 10% of PRs electrical generating capacity. that is also assuming real world numbers approach tesla PR numbers, which has not exactly been the pattern (note: i say this as both a shareholder and a huge believer in the grid storage side of the biz).
Tesla get so many subsidizes it's not funny.
if you think thats funny, I dare you to calculate out the subsidy values of 11,000 powerall projects and compare that to almost anything else. a single mile of interstate highway is more "subsidized". a single right-of-way for the powerlines between a generating station and a city is more subsidized. if you believe in global warming, a single nat-gas generator is wildly more subsidized.
The problem is that once the rich have settled, populist movements will grow to tax them, and the rich being settled as they are, can't easily escape these politically coordinated expropriations.
The result is that the rich begin to slowly trickle out, at a rate that is not fast enough to make the negative repercussions of the involuntary income redistribution that voters support apparent to them.
I think this possibility (inevitability?) is seen pretty clearly by the rich people who move to Puerto Rico. They know the party isn't going to last forever. But, these are the same people who uprooted their lives to spend 183 days per year in PR, so I have a feeling the majority are the type of people who will leave when this happens.
Presumably the loss of a tax base. I think OP is saying the laws slowly drive people out in a way that doesn't make it apparent the reason people are leaving is those laws. Eventually you wind up with a situation that levies high taxes on the rich but no people to actually tax.
For the rich individuals: they either get taxed at high rates, resulting in a loss of enjoyment in their rights, or have to suffer the disruption of emigrating to a new country.
For the former tax haven: it loses out on capital growth, which means less economic growth.
I think that Act 22 folks are often the "barely rich" or "incorrectly categorized as rich", where differential tax policy actually has an effect on their lifestyle (and therefore more strongly drives behavior).
Take someone with $5MM in investable assets. Using a simplistic 4% rule of thumb, that can generate $200K of income per year. Tax that at 4%, and you have $192K to spend. Tax it at a blended 25% and you have $150K to spend. At that level of income, $3500/month is very much a noticeable difference, IMO. ($16K/mo vs $12.5K/mo spendable.)
Now, consider that $150K/yr living in the mainland US goes farther than $150K/yr on Puerto Rico, and someone with $5MM and eligible for Act22 isn't going to move to PR without Act22.
Peter Schiff's quote in the article sums it up very well, I think: “Who would come to a bankrupt island to pay high income taxes?”
That's still $150k for doing effectively nothing. That person could choose to supplement their income with a paid job or a business. I'd love to be in that position, as would the vast majority of people in the world.
Of course! No one ever argued that having $5M investable assets was a poor position to be in. That family absolutely has wide variety of choices they can make, all of them pretty damn good.
The question is Puerto Rico's motivation/justification/choice to offer Act 22 tax advantages to bring the majority of that $192K of spending onto the island or not.
https://www.blubrry.com/thedig/34718421/naomi-klein-and-merc...