This morning I’m going to comment on two pieces at Bloomberg each of which is summed up handily in a single paragraph. The first is Tyler Cowen’s op-ed in which he expresses his skepticism about the Democratic presidential candidates’ plans to increase marginal tax rates on the wealthiest or impose a wealth tax:
Anyone promoting a wealth tax is in essence saying that there aren’t many ways of improving society within current resource constraints. That is a brand of pessimism which Americans voters have not often rewarded.
Let me summarize my views:
- An extremely unequal America in which the top 10% have much more and get better everything than the rest of the people does not comport with my idea of the U. S. I’d like to be living in.
- Failing to control immigration will inevitably promote greater inequality. People without educations, marketable skills, or a command of the English language will always be at a grave disadvantage. If you disagree with that assessment, please state what you plan to change to make it otherwise because that’s certainly the case now.
- The present emphasis on higher education is a flop. It only applies to a minority of the American people, we aren’t producing enough jobs that require a college education to make it worthwhile, and India produces a lot of people with bachelors and masters degrees, too.
- The only economy that will provide decent livings for most Americans is one that engages in more primary production and manufacturing.
It may be that the candidates are sincere in their views. I doubt it but it’s possible. I think it’s far more likely that the higher income taxes and wealth taxes they’re promising will die with the campaign or that they won’t accomplish the objectives they claim for them. But I’m willing to give them a chance. That’s why I say they should lay out their plans in detail. I think that these promises will follow the PPACA model: an enormous, complicated piece of legislation with lots of loopholes for specific groups whose shortcomings will be blamed on the compromises they needed to get Republican support that never materialized.
Marginal Revolution linked to what is essentially an earlier version of this piece, written by Cowen for the NY Times.
https://marginalrevolution.com/marginalrevolution/2019/01/me-on-wealth-taxes-from-2013.html
It’s a little more about predicting wealth taxes as the next big issue, and a few things are different about the earlier piece: (1) he recognizes that wealth is becoming more important than income, citing Piketty, though he attributes this more to declining productivity; (2) he thinks part of the incentive to look to wealth in many countries is that the wealth-to-public-debt ratio looks better than the income-to-public-debt ratio; and (3) he mentions estate taxes as one of the forms of wealth taxes.
I support estate taxes, but it does seem like death taxes are not popular. I suppose an underlying issue is that any type of tax on a thing that is not producing enough income to pay the tax will result in a forfeiture and bad publicity.
As Macchiavelli wrote in The Prince:
I hold the unpopular view that estate taxes should be set at 100% (everything except for personal property) and it should not be avoidable by any of the present strategies, e.g. trusts.
I understand the instinct to take care of your offspring. Do it while you’re alive and don’t dragoon the state into doing it after you’re dead. Any notion that inheritance is a natural right is folderol.
Query- Suppose you stop immigration, or achieve perfect control at whatever level of numbers of immigrants and kinds of immigrants you want. Immigration nirvana. What changes? Maybe, and I think only maybe, Americans in the bottom 50% are a bit better off. I say maybe because the wealthy have become so good at siphoning off income and wealth. Anyway, maybe the denominator of the inequality ration changes. What happens to the numerator? What changes that? The super wealthy now control our government, media and culture to such an extent I am skeptical we see it change much. Not only do we not hate the wealthy, we elect them to control/govern us.
To be clear, working towards improvement for the bottom 50% is worthwhile anyway so lets work towards that. I just dont think it will do anything to address all of the other negative trends we see that result from catering to the needs and wants of the ultra wealthy.
Steve
“I suppose an underlying issue is that any type of tax on a thing that is not producing enough income to pay the tax will result in a forfeiture and bad publicity.”
That is exactly why many family owned businesses sell.
As far as transferring money while alive rather than “dragooning”……
I don’t recall anyone asking the State to confiscate property. In any event, transferring property while alive is exactly what people would do, within the bounds of gift taxes, which people would quickly bend through their politicians to favor them. Meaning the very rich would still make out, and the upper middle class would get hosed. Estate tax advocates would not achieve their goal; the politicians would be pleased as could be. Outside of gift tax limits you would also be encouraging conspicuous consumption. I’m not sure that’s a good result, although it can be argued that for the child to spend it rather than the parent is a small difference.
Speaking of folderol. Outside the inevitable workarounds that would drastically reduce expected tax revenues, I can’t think of a less worthy group to transfer wealth for stewardship of than a bunch of politicians spending on government programs. That is truly bizarre.
That is exactly what a will is. Asking the court, an organ of the state, to give property to your heirs.
Let me explain that better. While you’re alive can you give your property to your children. After you’re dead you have no way to convey your property to your children. The state must step in to do it for you. You could ask a friend to do it but there’s no way other than the state for you to compel the friend to follow through.
Timing is everything. the topic here is income taxes not wealth taxes, but the concept is the same.
https://www.zerohedge.com/news/2019-01-31/why-its-not-super-rich-will-pay-lefts-radical-tax-plans
Fair enough. But trust law is pretty standard, and you can assign people or institutions to be trustees. Not just your buddy or your sister.
The state enforces the will regardless of who the trustees are. Without the state when you died your property would just be up for grabs.
And the cause of much harumping and displays of club, pike, musket and now rifle marksmanship. To prevent all that (and the loss of tax revenue) the State created rules to ensure property was handed over peacefully and lawyers gainfully employed.
If they want medicare for all and a wealth tax why not expand the existing legislation used to recover medicaid expenses from the estate as explained at medicaid.gov.