Monday 13 July 2020

Wealth taxes on Agenda in the US

"Young, mega-rich - and demanding to pay more "
This is an interesting article on the BBC. It comes as no surprise that some of the woke community who have inherited a huge amount of money or made themselves fabulously rich have come out to try and push the idea of wealth tax on the US elections.

Of course, this is always the thin end of the wedge. The wealthiest can easily pay such taxes levelled at 1% and indeed their investments return much better than this on average so it has no impact.

But in terms of virtue signaling it pays them really well - they get huge points across the world for showing their moral conscience. What amazing people!

Of course this is the worst way to promote a tax, maybe the second worst. But it does strike me as being at least on the side of truth. As there is no good case in Western democracies to have a wealth tax. Wealth taxes are levied on assets that have already paid their dues, it is double taxation, akin to inheritance tax. Like the equally terrible Land Value Tax, it places the State as the ultimate owner of all goods and all citizens as rentiers. We literally spent hundreds of years getting us to the position we are in now, which also managed to create capitalism and lift more people out of poverty than ever before in human history. The side effect of this is a bunch of rich people, could be worse. 

Practically of course, when recently tried in France they have ended up with a scandal to dwarf our own expenses scandal, with 60 politicians now being prosecuted for tax evasion. After all, a wealth tax is reliant on valuation of assets and these can be gifted, pledged, drawn against - all sorts of things to hide the true position.

The reason I say they make the case well is a wealth tax only works as a moral crusade, a peaen against the unfairness of society and a call to make rich people feel guilty and change their ways. Except of course, they could always give more money to the Government themselves, no one is stopping them.

PS I fixed my browser spellchecker at long last...
PPS Still needed spellchecking, this is slowly creeping up my to do list....


PJH said...

"PS I fixed my browser spellchecker at long last..."

Oh, aye? :)

", it places the State ass the ultimate owner of all goods and all citizens as reniters"

Anonymous said...

Tax the poor then

Graeme said...

"PS I fixed my browser spellchecker at long last..."

Pein? Do you mean paean, although that would not make much sense?

Nick Drew said...

"thin end of the wedge..."

- that's a great line!

CityUnslicker said...

dammit - there goes me relying on a new spellchecker!!

CityUnslicker said...

...maybe it is US spelling...pein!

Matt said...

Which of the young mega-rich are already voluntarily giving 1% to the taxman? That would demonstrate who really was committed to this idea.

andrew said...

There are weaknesses in all methods of taxation.
I see no greater evil in a wealth tax.

Calling something bad does not make it so despite the best efforts of t blair

Matt said...

@ andrew

The evil of the wealth tax is that it makes us all poorer. Less money for investment (capital) means less productive growth for the workers (labour).

andrew said...

Why does a wealth tax that raises x have more of a negative impact than an income tax that raises x?

Raedwald said...

There's wealth and there's wealth.

No point taxing the top 0.01% more - the 6 of them are so wealthy they'll just move

The top 0.1% are probably worth taxing a bit more - three or four more Council tax bands for a start, a new garage tax would be a green option - one-car garages would be exempt and a rebate for EVs. Luxury goods tax much harder to impose; I spend £400 on a pair of shoes that last 25 years, how is that a luxury good compared to a £40 pair of shoes that last 6 months? Better impose a windfall tax on LVMH.

The top 1% are a bit harder to tax more. There are about 420,000 with a mean annual income of £156k. The aspirational rich rather than the real rich.

The top 1%, including all the billionnaires, own some 21% of total UK wealth (HMRC figures)so broad taxes may cripple many.

I'd stick to scraping a bit more from the 0.1% to the 0.01% and tapping the multi billionnaires for charidy fame.

Matt said...

Page 24 onwards give a good summary -

Incentives matter. You tax things that have a large element of discretion (unlike income) then people will change behaviour.

Matt said...

In Nordhaus' paper "SCHUMPETERIAN PROFITS IN THE AMERICAN ECONOMY" ( he estimates "that innovators are able to capture about 2.2 percent of the total social surplus from innovation" (C. Conclusion, Page 26).

In the case of Jeff Bezos, who is worth around USD 188 billion, this means he has generated economic value of about USD 8.5 trillion. He started the business from his home so it's not like this was all family money.

Why would you apply a wealth tax to a man who has generated that amount of value for all of us? The impact would be to likely incentivise him to, at the least, not work as hard and therefore not create as much value.

It's the politics of envy, used by politicians to take ever more money from us all. Yes, he is obscenely rich but that encourages others to want to be like him and come up with the next Amazon which will make us all better off.

DJK said...

Matt: Does Bezos really need $188 Bn, or could he scrape by with $100 Bn? He has way more wealth than could ever be spent in multiple lifetimes, although his long term goal is apparently to colonize deep space, so perhaps he needs all 188 Bn.

I'm very suspicious of conclusions like the one you quote that Amazon has generated 8.5 trillion in value. I imagine you could easily do an estimate and come to the opposite conclusion.

Amazon provide many great services, but they've also destroyed the livelihoods of many people working in small businesses, businessess which actually payed their taxes. Amazon is built on a pyramid of low paid, badly treated workers and rampant tax avoidance.

Bezos can only enforce his claim to own 188bn if the agents of the state enforce the contracts he has. Yet he seems curiously unwilling to pay taxes that fund the legal apparatus that validates his wealth.

BlokeInBrum said...

Taxes which if they were to fall into the grubby mits of the politicians would be pissed up against the wall.

I'm quite happy for Bezos to hang on to as much of his own money as he can. I'm sure it will be spent to greater effect than whatever the Government can do.

And again, the incidence on increased tax on Amazon will fall on to the shoulders of its customers, its employees and its shareholders. Amazon itself will soldier on regardless.

And don't forget, Amazon the retail business isn't particularly profitable. He makes his money through Amazon web services which is the real core of the business.

Raedwald said...

"Dear Mr Bezos

My name is Dr Engineer Akambe Alekko and I hold a senior position with the Nigerian National Space Agency. We have recently completed testing on a long-range deep space exploration vehicle equipped with a revolutionary engine and fuel system. Despite the world-beating technology and advanced design of this module, liquidity restrictions due to the coronavirus are preventing us from importing the final component assembly, sourced from a world class engineering company in New Jersey.

I am therefore able to offer you the unique opportunity of getting in on the ground level with the NNSA in the completion of this galactic vessel. For the sum of one billion US dollars we can offer a 26.4% equity buy-in to the Benin Venturer. All we require at this stage is details of your bank accounts, codes and passwords to allow us to deposit a sum of $4,000,000 in your accounts as a gesture of our good faith ...."

DJK said...

Maybe Bezos could learn from

There's a rumour that this film is a hoax. Surely not?

Matt said...


You can take up your suspicions on the value created with the Nobel winning economics Professor William Nordhaus if you like.

Let us know how you get on.

dearieme said...

"Wealth taxes are levied on assets that have already paid their dues, it is double taxation, akin to inheritance tax."

Surely that's a bogus argument? VAT is charged on money that's already paid income tax.

Furthermore, correct me if I'm wrong but VAT is paid on Fuel Duty which is paid from money that's already paid income tax, so there's a three-deep example. Anyone for four?

Ah, suppose your income includes dividends on which you paid tax, the dividends having already been reduced by corporation tax. Is that four-deep?

andrew said...


I think there are some questionable assumptions in there (germany is not the uk) but I saw other papers that had a similar conclusion.

Anonymous said...

Bezos' billions are theoretical money.

In order to realise this money, he would need to sell his shares. He can only sell them if there are buyers. Who would pay the current price if they were going to be taxed on them as much as Bezos would be?

benj said...

Paying a LVT is the same, in principle, as paying compensation for work, goods and services received.

Of course there are those that do well out of theft and slavery. But most people are against such activities. At least those now living in the 21st century.

So I think opposition to a LVT is can only be due to people not having thought things through.

Wealth Taxes are a bad idea. By a LVT isn't a wealth tax, or any kind of "tax" at all, as properly defined.