Created: May 09, 2021
Modified: May 09, 2021
Modified: May 09, 2021
wealth tax
This page is from my personal notes, and has not been specifically reviewed for public consumption. It might be incomplete, wrong, outdated, or stupid. Caveat lector.Thinking through: Why the toughest capitalists should root for a wealth tax (https://www.ft.com/content/e1adf707-b95a-4422-9211-1841cd7ce659)
The claim is that taxing wealth incentivizes people to get higher returns on their wealth. Does this make sense?
- The implicit assumption is that we'd hold the tax burden constant. So, in adding a general wealth tax, we'd remove property taxes, capital gains tax, taxes on corporate profits, inheritance tax, etc. Instead of taxing wealth at transfer events, or a limited tax on land wealth, we'd just tax wealth a little bit all of the time.
- On the margin, by taxing wealth according to how much you hold (a wealth tax) rather than by how much you make (a capital gains tax), on net you disincentivize holding wealth and incentivize making wealth.
- This implies that shifting towards a wealth tax would improve value creation in the economy.
But doesn't it also incentivize consumption? If you're going to consume your wealth, a wealth tax is an incentive to do it today, not tomorrow. Why not just go straight for a consumption tax?