Wealth taxes have moved up the political agenda

[applegrove]

Wealth taxes have moved up the political agenda

Some economists are reconsidering their aversion to levies on large fortunes

Finance and economics Oct 3rd 2019 edition

https://amp.economist.com/finance-and-economics/2019/10/03/wealth-taxes-have-moved-up-the-political-agenda?__twitter_impression=true

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The shifting political climate is not hard to explain: taxes on wealth are popular. An analysis of recent survey evidence, for example, found that Americans favour such levies, especially on inheritance. And the case for taxing wealth has become easier to make. Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley, find that the top 0.1% of taxpayers accounted for about 20% of American wealth in 2012, up from 7% of wealth in 1978 and close to levels last seen in 1929. The vast fortunes of the very rich—for example the more than $100bn controlled by Jeff Bezos, the founder and boss of Amazon—make juicy targets, too, for politicians seeking to fund new spending.

Economists have long been hostile to wealth taxes. But not Mr Piketty, Mr Saez or Mr Zucman. Mr Piketty based his case on the argument that concentrated wealth leads to concentration of political power, which undermines democracy. Mr Saez and Mr Zucman agree, and cite other concerns. In a recent paper, for instance, they note that in America the ratio of household wealth to national income has nearly doubled over the past 40 years, mostly because of the rising value of assets. Higher asset values could mean that firms are becoming more efficient—or it could reflect economic sclerosis. Property values could be rising because regulations make it difficult to build, for instance, and higher stock prices could be a sign that markets are becoming less competitive, and profits thus easier to come by. Taxing and redistributing wealth, then, could be a justified response to misfiring markets.

Other economists are warming to the idea. In a new paper* published by the National Bureau of Economic Research, a team of five economists aims squarely at the standard economic argument against wealth taxes. Today’s wealth is yesterday’s income, that reasoning goes, so wealth taxes are bad because they discourage income-generating activities, such as work and investment. Taxes on capital in particular should be spared, because investment is an input into future growth. Taxes that discourage investment mean less output today and a smaller economy tomorrow. In some economic models the optimal tax on capital is a whopping 0%.

But these models often assume that one investment is as good as the next. In practice, say the authors of the new paper, that is far from true. Some people stash their money in low-yield government bonds; others fund startups that become trillion-dollar companies. Shifting the burden of tax from capital income to wealth, they argue, would reward investors capable of achieving outsize returns on their investments, and shrink the fortunes of those unwilling or unable to put their lucre to productive use. Heirs would feel pressure to use their wealth or lose it. Entrepreneurs accustomed to achieving double-digit returns would scarcely notice a modest wealth tax. Designed well, the authors reckon, it could reduce inequality while raising productivity.



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[SeaTownBlue]

1. We Should Tax Wealth

Instead we tax workers.

Its idiotic.

When added up many pay half their income in taxes when you include property tax.

Its bull.