As noted above, I don’t accept that behind every fortune, or even most fortunes, is a great crime. Interestingly also, neither does the main economist who got the ball rolling on wealth taxes earlier this decade. The economist who, more than any other, made attacks on the wealthy more generally respected, is Frenchman Thomas Piketty. His 2014 best seller, Capital in the Twenty-First Century, which, incidentally, made him a wealthy man—by January 2015, it had sold 1.5 million copies—gave a sustained argument for heavy taxes on wealth. But even Piketty admits that one can acquire a huge fortune without committing a crime.
Piketty writes, “To be frank, I know virtually nothing about exactly how Carlos Slim [the richest man in Mexico] or Bill Gates became rich, and I am quite incapable of assessing their relative merits.” Translation: even if they didn’t commit crimes, the government should take a substantial portion of their wealth. Addressing the possible relationship between crime and wealth, Piketty continues, “In any case, the courts cannot resolve every case of ill-gotten gains or unjustified wealth. A tax on capital would be a less blunt and more systematic instrument for dealing with the question.” Excuse me? A tax on capital is less blunt than using the legal system to go after those who have committed crimes? That makes no sense. If the goal is to go after ill-gotten gains or unjustified wealth, a tax on capital, i.e., wealth, is a completely blunt instrument.
This is from my latest article for Hoover’s Defining Ideas, “The Assault on Wealth,” December 4, 2019. Read the whole thing.
And notice that I quoted from a popular 1960s song at the start from a group that included my fellow Canadian Neil Young.
READER COMMENTS
nobody.really
Dec 5 2019 at 5:34pm
Robert Nozick, Anarchy, State, and Utopia, at 231. Translation: Even if people didn’t commit crimes, government is justified in taking some portion of their wealth in order to organize society to maximize the position of whatever group ends up least well-off in the society.
Rob Rawlings
Dec 5 2019 at 6:19pm
I think Windows ME qualified a a crime.
Nick
Dec 6 2019 at 5:03am
very good
Larry
Dec 5 2019 at 6:39pm
The wealth tax would in a couple of decades eliminate all billionaires and basically prevent the emergence of new ones(to do so you’d hav to see your wealth grow at >6% for many years. And to stay one, keep it up indefinitely. Boo hoo, right? Once you run out, though, where does the money come from to replace the taxes?
And remember the adage about eating your seed corn? That is exactly what we’d be doing if we spent the money on e.g., paying the interest on the debt, or on health care.
Paying those taxes would mean selling many assets. The buyers would get a discount, but the continued selling would steadily push prices down. Who would want to buy such an asset? Does that end up looking like a spiral? at least it would signal whether or not we have a savings glut.
Gene
Dec 5 2019 at 10:34pm
Nobody.really, is that a representative example of how Nozick writes? If so I’m going to change that book to a much lower priority on my to-read list.
nobody.really
Dec 6 2019 at 10:01am
In fairness, Nozick is setting out a complex philosophy. Earlier chapters are more accessible, as they lay the foundations, including linguistic foundations, for later chapters. So some of the language of the later chapters may seem a bit stilted because it lacks the context of the earlier chapters.
Anarchy, State, and Utopia was written in rebuttal to John Rawls’s A Theory of Justice–which might seem equally stilted.
As far as I can tell, that’s the nature of any field of thought: You start with easily accessible premises, refine your understanding of those premises, and develop conclusions that will seem ever less comprehensible to the general public. Admittedly, some authors do this better than others. We can’t all be a Caplan.
Gene
Dec 6 2019 at 11:42am
My main objection is that the shortest sentence in that paragraph is 31 words; the longest is 108!
If that’s typical of his writing, wow. Life is too short.
Henri Hein
Dec 6 2019 at 2:55pm
FWIW: I generally have the same aversion you do to overly complex writing, and I really enjoyed Anarchy, State and Utopia. Admittedly, part of it was that I was fascinated with his arguments and his lines of thinking. In turn, I accepted a higher level of acedemistic writing than I otherwise would. I did remember mostly enjoying it, and I was impressed with the tightness of the cases he made. I wish you would move the book back up a notch or two on your list.
Thaomas
Dec 6 2019 at 7:16am
I this a wealth tax is an unnecessary alternative to progressive taxes on consumption. The bottom line is to obtain funds for public goods and transfer consumption from those with a lot to those with less.
Alan Goldhammer
Dec 6 2019 at 8:57am
Well thought out column. These wealth tax proposals are unworkable. Let’s get rid of all the tax preferences that favor certain investments over others. Put in place some kind of VAT (maybe it is progressive, I’m not sure) which will generate tax revenue much easier than the individual tax code. Eliminate the corporate income tax which right now is too easily avoided and doesn’t raise all that much as a % of government revenues (they will be picked up under the VAT anyway). Make filing of personal income tax returns a five minute job. This is the true Democratic way forward.
Alan Goldhammer
Dec 6 2019 at 11:06am
This may be a little off topic but it does concern great wealth. I’m a big fan of podcasts and listen to them when walking and in the car. ‘Cautionary Tales’ by Financial Time columnist, Tim Harford, is very good. This week he discusses the fame and fortune (or lack thereof) of John Maynard Keynes and Irving Fisher. It’s about 40 minutes and really worth the listen. He ends up discussing Philip Tetlock’s work on expert predictions and how a willingness to change one’s mind is the most important thing (disclosure: I was a participant in the Good Judgement Project for two years).
Henri Hein
Dec 6 2019 at 2:57pm
Thanks for this, Alan. I am a fan of Harford, and somehow missed his podcast. Will definitely add this to the mix.
David Seltzer
Dec 6 2019 at 4:59pm
The more fundamental issue; A wealth tax is an assault on one’s personhood. Wealth issues from one’s talent, assumption of risk and assiduousness. As one has dominion, authority and jurisdiction of their person, that is to say, property in their person, that person has equal dominion, jurisdiction and authority over their wealth. If the law is violence then a wealth tax is the very threat of violence if one refuses to comply. A case for implied force can be made for adjudicating contracts. Not so for the arrogance of a government that threatens and intimidates when arbitrarily taking what rightfully belongs to an individual. If Piketty and Nozick believe it’s okay to confiscate wealth in the interest of the “greater good,” they do so at their own peril as we are not slaves.
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