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.

Getty
Show Hide image

Politics doesn't just connect us to the past and the future – it's what makes us human

To those people who tell me that they’re not interested in politics, I often say: “But politics is interested in you!”

I have long been haunted by a scene in George Orwell’s great novel Nineteen Eighty-Four. Winston Smith, the hero, is forced to watch propaganda films depicting acts of war and destruction. He is moved by something he sees: a woman trying to protect a child by wrapping her arm around him as they are attacked. It’s a futile gesture. She cannot shield the boy or stop the bullets but she embraces him all the same – before, as Orwell writes, “The helicopter blew them both to pieces.”

For Winston, what Orwell calls the “enveloping, protecting gesture” of the woman’s arm comes to symbolise something profoundly human – an expression of selflessness and of unconditional love in an unforgiving world. Scenes such as this we now witness daily in footage from the besieged eastern Aleppo and other Syrian towns, people in extreme situations showing extraordinary dignity and kindness.

I read Nineteen Eighty-Four for the first time in late adolescence. I’d dropped out of sixth-form college without completing my A-levels and was commuting on a coach from my parents’ house in Hertfordshire to London, where I worked as a junior clerk for the Electricity Council. During this long daily journey – sometimes two hours each way – I started to read seriously for the first time in my life.

I was just getting interested in politics – this was the high tide of the Thatcher years – and Orwell’s portrayal of a dystopian future in which Britain (renamed “Airstrip One”) had become a Soviet-style totalitarian state was bleakly fascinating. Fundamentally the book seemed to me to be about the deep ­human yearning for political change – about the never-ending dream of conserving or creating a better society.

Nineteen Eighty-Four was published in 1949 (Orwell died in January 1950, aged 46), at a time of rationing and austerity in Britain – but also of renewal. Under the leadership of Clement Attlee, Winston Churchill’s deputy in the wartime coalition, the Labour government was laying the foundations of what became the postwar settlement.

The National Health Service and the welfare state were created. Essential industries such as the railways were nationalised. The Town and Country Planning Act was passed, opening the way for the redevelopment of tracts of land. Britain’s independent nuclear deterrent was commissioned. New towns were established – such as Harlow in Essex, where I was born and brought up.

To grow up in Harlow, I now understand, was to be part of a grand experiment. Many of the families I knew there had escaped the bomb-ruined streets of the East End of London. Our lives were socially engineered. Everything we needed was provided by the state – housing, education, health care, libraries, recreational facilities. (One friend described it to me as being like East Ger­many without the Stasi.)

This hadn’t happened by accident. As my father used to say, we owed the quality of our lives to the struggles of those who came before us. The conservative philosopher Edmund Burke described society as a partnership between “those who are living, those who are dead, and those who are to be born” – and I find this idea of an intergenerational social contract persuasive.

Progress, however, isn’t inevitable. There is no guarantee that things will keep getting better. History isn’t linear, but contingent and discontinuous. And these are dark and turbulent new times in which we are living.

A civil war has been raging in Syria for more than five years, transforming much of the Middle East into a theatre of great-power rivalry. Europe has been destabilised by economic and refugee crises and by the emergence of insurgent parties, from the radical left and the radical right. The liberal world order is crumbling. Many millions feel locked out or left behind by globalisation and rapid change.

But we shouldn’t despair. To those people who tell me that they’re not interested in politics, I often say: “But politics is interested in you!”

And part of what it means to be human is to believe in politics and the change that politics can bring, for better and worse.

What, after all, led so many Americans to vote for an anti-establishment populist such as Donald Trump? He has promised to “make America great again” – and enough people believed him or, at least, wanted to believe him to carry him all the way to the White House. They want to believe in something different, something better, in anything better – which, of course, Trump may never deliver.

So politics matters.

The decisions we take collectively as ­humans have consequences. We are social creatures and rational agents, yet we can be dangerously irrational. This is why long-established institutions, as well as the accumulated wisdom of past generations, are so valuable, as Burke understood.

Politics makes us human. It changes our world and ultimately affects who we are and how we live, not just in the here and now, but long into the future.

An edited version of this essay was broadcast as part of the “What Makes Us Human?” series on BBC Radio 2’s “Jeremy Vine” show

Jason Cowley is editor of the New Statesman. He has been the editor of Granta, a senior editor at the Observer and a staff writer at the Times.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage