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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7 problems with the Snooper’s Charter, according to the experts

In short: it was written by people who "do not know how the internet works".

A group of representatives from the UK Internet Service Provider’s Association (ISPA) headed to the Home Office on Tuesday to point out a long list of problems they had with the proposed Investigatory Powers Bill (that’s Snooper’s Charter to you and me). Below are simplified summaries of their main points, taken from the written evidence submitted by Adrian Kennard, of Andrews and Arnold, a small ISP, to the department after the meeting. 

The crucial thing to note is that these people know what they're talking about - the run the providers which would need to completely change their practices to comply with the bill if it passed into law. And their objections aren't based on cost or fiddliness - they're about how unworkable many of the bill's stipulations actually are. 

1. The types of records the government wants collected aren’t that useful

The IP Bill places a lot of emphasis on “Internet Connection Records”; i.e. a list of domains you’ve visited, but not the specific pages visited or messages sent.

But in an age of apps and social media, where we view vast amounts of information through single domains like Twitter or Facebook, this information might not even help investigators much, as connections can last for days, or even months. Kennard gives the example of a missing girl, used as a hypothetical case by the security services to argue for greater powers:

 "If the mobile provider was even able to tell that she had used twitter at all (which is not as easy as it sounds), it would show that the phone had been connected to twitter 24 hours a day, and probably Facebook as well… this emotive example is seriously flawed”

And these connection records are only going to get less relevant over time - an increasing number of websites including Facebook and Google encrypt their website under "https", which would make finding the name of the website visited far more difficult.

2. …but they’re still a massive invasion of privacy

Even though these records may be useless when someone needs to be found or monitored, the retention of Internet Connection Records (IRCs) is still very invasive – and can actually yield more information than call records, which Theresa May has repeatedly claimed are the non-digital equivalent of ICRs. 

Kennard notes: “[These records] can be used to profile them and identify preferences, political views, sexual orientation, spending habits and much more. It is useful to criminals as it would easily confirm the bank used, and the time people leave the house, and so on”. 

This information might not help find a missing girl, but could build a profile of her which could be used by criminals, or for over-invasive state surveillance. 

3. "Internet Connection Records" aren’t actually a thing

The concept of a list of domain names visited by a user referred to in the bill is actually a new term, derived from “Call Data Record”. Compiling them is possible, but won't be an easy or automatic process.

Again, this strongly implies that those writing the bill are using their knowledge of telecommunications surveillance, not internet era-appropriate information. Kennard calls for the term to be removed, or at least its “vague and nondescript nature” made clear in the bill.

4. The surveillance won’t be consistent and could be easy to dodge

In its meeting with the ISPA, the Home Office implied that smaller Internet service providers won't be forced to collect these ICR records, as it would use up a lot of their resources. But this means those seeking to avoid surveillance could simply move over to a smaller provider.

5. Conservative spin is dictating the way we view the bill 

May and the Home Office are keen for us to see the surveillance in the bill as passive: internet service providers must simply log the domains we visit, which will be looked at in the event that we are the subject of an investigation. But as Kennard notes, “I am quite sure the same argument would not work if, for example, the law required a camera in every room in your house”. This is a vast new power the government is asking for – we shouldn’t allow it to play it down.

6. The bill would allow our devices to be bugged

Or, in the jargon, used in the draft bill, subjected to “equipment interference”. This could include surveillance of everything on a phone or laptop, or even turning on its camera or webcam to watch someone. The bill actually calls for “bulk equipment interference” – when surely, as Kennard notes, “this power…should only be targeted at the most serious of criminal suspects" at most.

7. The ability to bug devices would make them less secure

Devices can only be subject to “equipment interference” if they have existing vulnerabilities, which could also be exploited by criminals and hackers. If security services know about these vulnerabilities, they should tell the manufacturer about them. As Kennard writes, allowing equipment interference "encourages the intelligence services to keep vulnerabilities secret” so they don't lose surveillance methods. Meanwhile, though, they're laying the population open to hacks from cyber criminals. 


So there you have it  – a compelling soup of misused and made up terms, and ethically concerning new powers. Great stuff. 

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.