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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Meet the man forcing the Government to reveal its plans for Brexit

Grahame Pigney hopes to "peel away" the secrecy of negotiations. 

Not so long ago, the UK Government was blissfully unaware of Grahame Pigney, a British man living in semi-retirement, in France. But then came Brexit. 

Pigney, who had been campaigning for Britain to stay in the EU, was devastated. But after a few days, he picked himself up and started monitoring the news. He was alarmed to discover the Government thought it could trigger Article 50 without the express permission of Parliament. 

He wasn’t alone. Gina Miller, an investor, was equally incensed and decided to take the Government to court. Pigney (pictured below) set up a crowdfunding campaign to support the case, The People’s Challenge. So far, the campaign has raised more than £100,000. 

This week, the campaign scored its first major victory, when a judge overruled the Government’s attempts to keep its legal defence secret. The case itself will be held in October. 

At a time when the minister for Brexit, David Davis, can only say it means “leaving the EU”, the defence sheds some light on the Government’s thinking. 

For example, it is clear that despite suggestions that Article 50 will be triggered in early 2017, the Government could be easily persuaded to shift the date: 

"The appropriate point at which to issue the notification under Article 50 is a matter of high, if not the highest, policy; a polycentric decision based upon a multitude of domestic and foreign policy and political concerns for which the expertise of Ministers and their officials are particularly well suited an the Courts ill-suited.”

It is also, despite Theresa May’s trips to Scotland, not a power that the Government is willing to share. In response to Pigney’s argument that triggering Article 50 without parliamentary approval impinges on Scotland’s separate body of law, it stated bluntly: “The conduct of foreign relations is a matter expressly reserved such that the devolved legislatures have no competence over it.”

Although Pigney is one of the millions of expats left in jeopardy by Brexit, he tells The Staggers he is not worried about his family. 

Instead, he says it is a matter of principle, because Parliament should be sovereign: “I am not a quitter.” 

While Davis argues he cannot reveal any information about Brexit negotiations without jeopardising them, Pigney thinks the Brexiteers simply “haven’t got anything”. 

A former union negotiator, he understands why Davis doesn’t want to reveal the details, but finds the idea of not even discussing the final goals is baffling: “When I was a union member, we wouldn’t tell them how everything was going but you did agree what the targets were that you were going for.”

He said: “The significance of what happened is we were able to peel away a layer of Government secrecy. One of the things that has characterised this Government is they want to keep everything secret.”