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.

Jeremy Corbyn in Crewe. Photo: Getty
Show Hide image

Is it too late to replace Jeremy Corbyn as Labour leader before the general election?

Make no mistake, replacing the Labour leader now would terrify the Tories. 

Received wisdom states that Jeremy Corbyn’s position in the Labour party is guaranteed, at least for the next six weeks, until the general election on 8 June. However, this belief is in large part down to polls conducted earlier this year among the Labour membership, which showed continued support for him.

In light of the changing political landscape, and the looming General Election, these polls should be revisited. It is clear they offer enough cause for hope to Labour moderates who might be willing to take the risk of removing Corbyn before the country makes this decision for them.

If you listen to pollsters talk about their surveys, one of the most common refrains you'll hear is that the results are "a snapshot, not a prediction". During the peacetime years between elections, this claim is made for solid reasons. With an election years away, polls offer the public a risk-free method to register dissatisfaction or support for a political parties and politician without consequence.

Nowhere is this clearer than in the polls we’ve seen in the past week. In every poll conducted after May's announcement on an early election, there has been a rise in the Tory lead. Elections focus minds and the risk-free toying with another party is no more; the public now need to make a decision about who they'll vote for in a little over a month and this decision matters.

Back in March, just 35 per cent of Labour members thought it likely that Corbyn would lead Labour to victory at the next election - yet they still supported him (PDF). Many commentators and Labour moderates asked why. They couldn't understand why the members would support someone who was so clearly electoral kryptonite.

The reason is relatively straightforward. The election was still years off and Corbyn was doing, for the members, a vital job in repositioning Labour on the left. With an election so far away, it didn't matter how Labour were performing in the polls, it was risk-free to support Corbyn.

The early election changes all that and the question is no longer about whether another leader gives Labour a better chance of winning but whether another leader gives Labour a better chance at surviving.

In the last poll published on Labour members, a majority wanted Corbyn to either step down immediately (36%) or before the next election (14%). Just 44% wanted him to lead Labour into the next General Election. With May’s announcement of a vote on 8 June, Labour's existential crisis has been brought forward by three years and it is likely that 14% who thought Corbyn should step down before the next election would side with those who wanted Corbyn gone immediately rather than those who wanted him to fight on in 2020.

There is also an argument to be made that the 44% who wanted Jeremy to fight the next election assumed he would have three more years to grow into the role and turn Labour’s fortunes around and these members could easily be swayed from their support given the change in terms the early election brings about.

What's more, 68% of Labour members felt Corbyn should go if Labour lost the next election and this includes 42% of those who say they would definitely/probably vote for Jeremy at a future leadership election. Only the most hardcore Corbyn supporters still believe he has a chance of victory in a few weeks. So, faced with the prospect of Jeremy going in June, after a heavy defeat, or now - giving Labour a better chance - many would reluctantly go for the latter.  

So how can Jeremy be removed? There are three things that need to happen. Firstly, pick the right candidate. For a new leader to have any impact with the public, it has to be someone who is not associated with Corbyn. However, to win over the members, the candidate cannot be seen as an instigator in the coup last year.  It would also be wise to choose someone the public are at least partly familiar with. This is a narrow pool but there are MPs who meet this requirement and could get through a leadership election and limit Labour losses.  

Secondly, limit the selectorate to the members. There is no time to vet 10s or 100,000s of new voters and they are unlikely to be favourable to an Anyone-But-Corbyn candidate. Among current members, Corbyn can be defeated and that must be the battle on which any leadership election was fought.

Finally, remove the risk of a centrist takeover in Labour members' minds by committing to a further leadership election in six months' time. Make it clear that Jeremy Corbyn needs to go - but that this isn't the end for his supporters. Any new leader is just an interim measure, someone who can limit the losses and give Labour the chance to fight again. Position yourself like the football manager who comes in three matches before the end of the season, promising to save the club from relegation before handing over to someone more suited to their team.

Make no mistake, replacing the Labour leader now would terrify the Tories. Their attacks on Corbyn will be worthless and new leaders typically enjoy a honeymoon period which would come at the perfect time. There are risks, of course, but the greater risk is in allowing Corbyn to lead Labour to a defeat from which there may be no return.

Laurence Janta-Lipinski is a former pollster with YouGov and now a freelance political consultant. He tweets at @jantalipinski

 

0800 7318496