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How would brilliant, creative, visionary entrepreneurs be paid in a Communist society?
Generous usufruct grants of government property can be fantastic rewards for society's heroes, and do not constitute property so long as children are not allowed to inherit the usufruct grants
In the USA, Senator Elizabeth Warren has proposed a wealth tax, covered here by Vox:
Most Americans currently pay property taxes to their local government, a form of a wealth tax. The majority of middle class assets are property. Rich people of course own real estate, but they tend to mostly own shares of stock and other financial assets that largely evade taxation. The French economist Thomas Piketty put wealth taxes back on the intellectual agenda with his influential 2014 book Capital in the 21st Century. Many Democrats have talked about the theme of runaway inequality in recent years, but Warren is the first politician to actually adopt Piketty’s proposed solution.
Saez and Zucman are, not coincidentally, former collaborators of Piketty who have gone on to do their own influential research on the interplay between tax policy and extreme inequality. The basic plan is to levy a 2 percent tax on fortunes worth more than $50 million, and a 3 percent tax on fortunes worth more than $1 billion. According to the post, Saez estimates this tax would hit approximately 75,000 families and raise $2.75 trillion over a 10-year period.
What if the tax was 5%?
What if the tax was 10%?
What if the tax was 20%?
What if the tax was 50%?
What if the tax was 90%?
What if the tax was 100%?
At some point we are talking about a Communist society, in which nearly all wealth is held by the government. (Right now the majority of all wealth is held by Americans who hold more than $50 million of wealth.)
I was recently writing about building a pragmatic Communism that could work intelligently and efficiently.
One question that comes up is how to pay entrepreneurs in such a society. Let's assume we expand Senator Warren's idea, so we have a 95% tax on any wealth in excess of $50 million.
So we might have a brilliant, creative, visionary entrepreneur who creates a new company based around some innovative idea, an idea worth billions. The entrepreneur then rapidly grows the startup till it is worth $50 million. What happens then?
The entrepreneur cannot sell the startup to the government, since the government would pay the entrepreneur in excess of $50 million, almost all of which would be taxed away.
So what happens?
The entrepreneur could simply remain CEO and continue to run the company, understanding that it can never grow, as it will be facing the 95% tax. If I was the entrepreneur, I would be sad to see the idea of this company never fulfill its real potential. But the only way for the company to fulfill its potential is for it to become government owned, and thus avoid the tax, and yet, if it was my company, I would not want to lose control of it.
Since the government cannot pay the entrepreneur the correct amount of money, the government should think about how else it can pay. Presumably the government wants to see businesses grow till they live up to their potential.
One answer is to buy the company for $50 million plus the promise that the entrepreneur can remain CEO for some period, perhaps 10 years, or 20, or the rest of their life.
Keeping control of one's creation is a major motivation for most. Entrepreneurs are like artists whose medium just happens to be the creation of new businesses.
Another way to pay the entrepreneur is via usufruct of government property. Perhaps the government owns some very beautiful homes near beautiful beaches — these could be given as a reward to such entrepreneurs, again for a few years, or perhaps for life.
With both "CEO for life" and "Use this beach house for life" the rewards are substantial, while avoiding the injustices that arise from concentrations of wealth. As long as the children of the entrepreneur are not allowed to inherit any of the usufruct grants, then the limits on property are still being respected.
Since the limits apply to all, there will be many things that people crave but cannot buy, that is, many things that can only be achieved as rewards granted by the government. There are examples all over the world of people feeling rewarded with usufruct rights that they hold dearly: park rangers allowed into parks that are closed to the public, professors allowed into university buildings when those buildings are closed to the public, likewise access to university documents that are not open to the public, in Egypt the military officers are paid little but are granted usufruct rights to vast properties. In the latter case, the usufruct rights are associated with corruption, but clearly it should be possible to offer such resources in lawful ways.
More so, there would be no need for death taxes in such a society, so the children of the entrepreneur could inherit the $50 million without paying any taxes.
I think this is the most difficult problem, when considering how to build a society like this:
"How to reward the most brilliant and visionary entrepreneurs in a Communist society?"
But I think there are pragmatic answers. One only has to be creative and think carefully about all of the many ways that a society can reward its heroes.
(Having said all this, I’ll point out, it’s also true, trying to be a purist about “real Communism” is very difficult. It’s much easier to imagine a society which has no maximum limit on wealth, but simply has a sharp wealth tax that makes unjust concentrations of wealth unlikely.)