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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Over a Martini with my mother, I decide I'd rather not talk Brexit

A drink with her reduces me to a nine-year-old boy recounting his cricketing triumphs.

To the Royal Academy with my mother. As well as being a very competent (ex-professional, on Broadway) singer, she is a talented artist, and has a good critical eye, albeit one more tolerant of the brighter shades of the spectrum than mine. I love the RA’s summer exhibition: it offers one the chance to be effortlessly superior about three times a minute.

“Goddammit,” she says, in her finest New York accent, after standing in front of a particularly wretched daub. The tone is one of some vexation: not quite locking-yourself-out-of-the-house vexed, but remembering-you’ve-left-your-wallet-behind-a-hundred-yards-from-the-house vexed. This helps us sort out at least one of the problems she has been facing since widowhood: she is going to get cracking with the painting again, and I am going to supply the titles.

I am not sure I have the satirical chops or shamelessness to come up with anything as dreadful as Dancing With the Dead in My Dreams (artwork number 688, something that would have shown a disturbing kind of promise if executed by an eight-year-old), or The End From: One Day This Glass Will Break (number 521; not too bad, actually), but we work out that if she does reasonably OK prints and charges £500 a pop for each plus £1,000 for the original – this being at the lower end of the price scale – then she’ll be able to come out well up on the deal. (The other solution to her loneliness: get a cat, and perhaps we are nudged in this direction by an amusing video installation of a cat drinking milk from a saucer which attracts an indulgent, medium-sized crowd.)

We wonder where to go for lunch. As a sizeable quantity of the art there seems to hark back to the 1960s in general, and the style of the film Yellow Submarine in particular, I suggest Langan’s Brasserie, which neither of us has been to for years. We order our customary Martinis. Well, she does, while I go through a silly monologue that runs: “I don’t think I’ll have a Martini, I have to write my column this afternoon, oh sod it, I’ll have a Martini.”

“So,” she says as they arrive, “how has life been treating you?”

Good question. How, indeed, has life been treating me? Most oddly, I have to say. These are strange times we live in, a bit strange even for me, and if we wake up on 24 June to find ourselves no longer in Europe and with Nigel Farage’s toadlike mug gurning at us from every newspaper in the land, then I’m off to Scotland, or the US, or at least strongly thinking about it. Not even Hunter S Thompson’s mantra – “When the going gets weird, the weird turn pro” – will be enough to arm myself with, I fear.

The heart has been taking something of a pummelling, as close readers of this column may have gathered, but there is nothing like finding out that the person you fear you might be losing it to is probably going to vote Brexit to clear up that potential mess in a hurry. The heart may be stupid, but there are some things that will shake even that organ from its reverie. However, operating on a need-to-know basis, I feel my mother can do without this information, and I find myself talking about the cricket match I played on Sunday, the first half of which was spent standing watching our team get clouted out of the park, in rain not quite strong enough to take us off the field, but certainly strong enough to make us wet.

“Show me the way to go home,” I sang quietly to myself, “I’m tired and I want to go to bed,” etc. The second half of it, though, was spent first watching an astonishing, even by our standards, batting collapse, then going in at number seven . . . and making the top score for our team. OK, that score was 12, but still, it was the top score for our team, dammit.

The inner glow and sense of bien-être that this imparted on Sunday persists three days later as I write. And as I tell my mother the story – she has now lived long enough in this country, and absorbed enough of the game by osmosis, to know that 17 for five is a pretty piss-poor score – I realise I might as well be nine years old, and telling her of my successes on the pitch. Only, when I was nine, I had no such successes under my belt.

With age comes fearlessness: I don’t worry about the hard ball coming at me. Why should I? I’ve got a bloody bat, gloves, pads, the lot. The only things that scare me now are, as usual, dying alone, that jackanapes Farage, and bad art. 

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 23 June 2016 issue of the New Statesman, Divided Britain