Amanda has a comment on a link from Ezra that I'd like to endorse and expand upon. In the face of rising inequality, Amanda asks why we should not tax people in proportion to their share of the national wealth. Why not indeed? There are practical problems with imposing such a tax, but there are practical problems with income taxes and the VAT which is so popular in Europe. It is not clear that a wealth tax faces greater technical obstacles than these other forms of taxes.
Marx said that property is theft. This is a point on which mainstream economists should actually be less quick to disagree than they are. Any form of property is a personal monopoly on the use of some resource, denying its use to all others. It is, furthermore, a government imposed monopoly; while there may be delusional souls who believe their private gun collections are doing some good as well, it's obvious that successful property enforcement relies on fear of the police.
Now, there are obviously huge advantages to allowing people to have property rights, so I won't say the mainstream economists are wrong to think this should be an exception to their usual disdain for monopolies. Giving people property rights over resources encourages them to gather and produce resources. Further, as conservative thinkers are constantly emphasizing, people will put effort into improving resources which they own (this is really just a form of the production issue).
However, not only does it seem fair on an intuitive level that those who are deriving the benefits of property rights should pay for their enforcement, and furthermore fair that those who deprive others of access to resources should pay some recompense for so depriving others, but a wealth tax even makes sense on an economic incentive basis. There are circumstances in which people horde resources of which they are not making particularly productive use.* If people are taxed on their retention of wealth, this provides them with an incentive to only retain such wealth as they need or can profitably employ, and sell the rest, no doubt to someone else who can profitably employ it. Thus, a wealth tax would facilitate trade in resources, even as many of our current taxes hinder such trade.
Indeed, it would help sort out one of the thorniest issues in modern property rights, so-called "intellectual property." It is clear to anyone who is not personally benefiting from the system that the intellectual property system is out of control, with numerous harmful effects. One effect which produces unmixed harm is that older copyrighted works, on which nobody expects to be able to make much money, are frequently horded nonetheless; the copyright holders do not bother to produce copies of the works for sale, because the profit would be negligible, but others are prevented from making their own copies, so the resources are made unavailable for anybody to productively use for no good reason. If there were a general tax on the holding of any property whatever, holders of intellectual property would not be so keen to hold on to every last scrap of it; if they were being taxed for continuing to hold on to items which they could not be bothered to exploit, they would surely be motivated to sell those items if they could, or release them into the public domain to escape further taxes if no buyers were available.
Add in the potential of a wealth tax to help alleviate inequality, and it's obvious that a wealth tax is urgently needed. Let this be my official proposal for how to cover the social security shortfall and reduce the deficit. Well, some carbon taxes are probably also needed, and there are all sorts of reasons for just abolishing the payroll tax, so this is not the end of my desire for tax tinkering. But this one is perhaps my favorite utopian scheme.
* Adam Smith discussed the example of rural landowners, who seemed more interested in enjoying their status as virtual feudal lords than in making any changes which might increase their profit but which would require them to change their lifestyles. Surprisingly, this example is still relevant in many parts of the world; poor countries which engaged in the redistribution of land in the mid 20th century, breaking up large estates and parceling out the land to the peasantry, are considerably more likely than their fellows to be among the no longer all that poor today.
Comments