Bill Koch's Wild West village tells us all we need to know about taxing the rich

It's a simple question: would you prefer lasers or a Wild West gated community?

The Denver Post brings us the news that Bill Koch – one of the Koch brothers, the right-wing billionaires who are trying to buy the American political system as though it were just another corporate acquisition – is recreating a 50-building old West town on his estate.

Nancy Loftholm reports:

There's a new town in Colorado. It has about 50 buildings, including a saloon, a church, a jail, a firehouse, a livery and a train station. Soon, it will have a mansion on a hill so the town's founder can look down on his creation.

But don't expect to move here — or even to visit.

This town is billionaire Bill Koch's fascination with the Old West rendered in bricks and mortar. It sits on a 420-acre meadow on his Bear Ranch below the Raggeds Wilderness Area in Gunnison County. It's an unpopulated, faux Western town that might boggle the mind of anyone who ever had a playhouse. Its full-size buildings come with polished brass and carved-mahogany details and are fronted with board sidewalks and underpinned by a water-treatment system. A locked gate with guards screens who comes and goes.

As Matt Yglesias points out, this is pretty close to the best demonstration of the declining marginal utility of wealth there could be. He writes:

As people get richer and richer, it gets harder and harder to think of cost-effective ways of spending the marginal dollar on amusing yourself. When you take from the rich and give to the poor, you end up generating a lot of extra welfare as people who don't have very much can have their lives greatly improved at relatively low cost.

Money is literally more useful in the hands of the poor than in the hands of billionaires. If someone is struggling to afford enough food to survive, you can vastly improve the quality of their life by giving them enough money to buy a loaf of bread. But while it's possible to imagine that life gets noticeably better when you trade your first class plane tickets for a private jet, the amount of money it requires to get that improvement could make an equivalent difference in the lives of many more people who can't afford air travel.

This is basically the justification for progressive taxation. At a certain – relatively low – level, the discrepancy in marginal utility of income is high enough that it is prima facie just to redistribute. If a marginal pound can do 100 times as much good in the pockets of someone on the minimum wage than in the pockets of someone on £1m a year, then there needs to be a very good reason why it shouldn't be transferred from one to the other.

Thankfully for the millionaires, there is: incentives. The amount of wealth in the world at this very moment isn't the only important thing to take into account; the other is where extra wealth is going to come from.

The facile claim that lies at the heart of the Laffer curve is that, if marginal tax rates are 100 per cent, people won't bother working. So if we try to apply our naïve redistributionism to the real world, we would end up taking most of the wealth of the developed world and sending it overseas, which would most likely end up in the global economy shutting down; not the best outcome for anyone.

If we just ended there, the analysis would be little deeper than the most thought-free attacks on socialism.

But in fact, there is more to say, thanks, again, to the Koch brothers. Just as they demonstrate the existence of declining marginal utility of wealth, they also demonstrate the existence of motivations for work beyond mere wages.

The Kochs don't work for money: they work for influence. Money is a useful means to that end, and it can also enable them to build crazy villages on their estates. But anyone looking at their actions can infer what they really want.

Similarly, do you think Richard Branson would stop Bransoning around (it's a verb now, look it up) if he made less money doing so? Or is he interested in fame, adventures and prestige projects as much as he is in earning his salary?

This is the reasoning behind the French finance minister's announcement two months ago of a potential salary cap for the country's state-owned companies, which include EDF, Areva and SNCF.

Certainly, no one questions the advantage of a salary cap when it comes to the very specific sector of "being a politician"; for all the acknowledgement that we need to attract the best candidates, it is understood that people become MPs for reasons beyond a desire for a good paycheck.

So why not cap salaries? Or, if that's too much, why not copy the lead of the 1974 government, and introduce an effective top rate of 98 per cent – a cap in all but name.

Such a cap would have a number of positive side-effects, including reducing inequality and ending the distortionary effect the "super-rich" can have on a community, but the main advantage it could have depends greatly on how organisations respond to it. If the wage-pool of the top executives were reduced tenfold, that money could be redistributed to other workers, which would be great, or it could be hoarded, which would be not so great.

But there is a third possibility. Yglesias suggests that extremely high marginal tax rates – which fill the same role as salary caps – were responsible for Bell Labs, the famous corporate R&D department which developed, amongst other things, radio astronomy, the transistor, the laser and UNX. [He wrtml):

If you're a corporate executive and you know that 90% of any additional income that you pay yourself is going to go to the federal government, suddenly using the corporate account to buy yourself fun new toys instead looks like an appealing alternative. And what could be more fun than a giant wacky research lab!

And presented as a choice like that, it suddenly becomes a whole lot less clear that high tax rates, at the very top end, are such a bad thing. Crazy gated Wild West vanity project, or lasers? I know what I choose.

Welcome to the Wild West. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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