There are days when I note that I was way ahead of the Progressive curve. For example, six years ago I mused here twice about why liberals should advocate for a wealth tax ( here and here), noting in the first post:
An excise tax of 1 percent on Buffett’s assets would yield something like $350 million a year. Throw in Gates, the founders of Google, Apple, and Facebook, and the Hollywood moguls, and we’re looking at billions a year. And why not? They can afford it. Oh wait, you’re right. If liberals actually proposed an honest-to-God wealth tax, a lot of those rich Silicon Valley and Hollywood liberals would become Republicans in a big hurry. But this also shows you what craven wusses liberals are today.
And the sequel:
I know, I know, it’s a bad idea on the merits, and would amount to double (or really quintuple) taxation on the assets of people who accumulated wealth the old fashioned way—by saving their after-tax earnings. My purpose was to taunt the left, which—so far—has not embraced the idea. So far. But this may well change soon, and it could provide an opportunity for a wider argument about “fairness” that conservatives manage to flub consistently.
That “so far” is looking prescient, since today we have leading Democratic presidential candidates proposing exactly this.
The practical problems of a wealth tax are immense, including the administrative headache of valuation, and the ill effects it would have on non-liquid assets. But even in the case of Jeff Bezos, whose worth is largely tied up in a highly liquid publicly-traded stock, there remains a practical problem: can the market value of $3 billion of his stock (which is about what Warren’s proposed wealth tax would demand) actually be liquidated into cash that can be sent to the IRS? Someone would have to buy that much stock from Bezos—every year. Are there sufficient buyers out there? What would be the effect on the stock market value of companies like Apple, Amazon, Microsoft, etc if these large annual liquidations are necessary? (My guess is that the whole scheme would collapse price/earnings ratios in ways that would have significant spillover effects that would not be good.) How will it affect credit markets if lots of people with ill-liquid assets like real estate and privately-owned companies have to borrow to make their wealth tax payments every year, and how will this in turn affect retained-earnings reinvestment by privately-held businesses?
There is one possible precedent to check on this. Way back in 1966, a Federal court ruled on antitrust grounds that Howard Hughes had to divest himself of his majority take in TWA, which at the time amounted to about $546 million. It was not easy to find buyers for that large an equity stake all at once, and I believe the court allowed Hughes a long time period to complete his divestment. Will the IRS have similar forbearance in the administration of an annual wealth tax?
Meanwhile, who would have thought that one of the best critiques of the wealth tax would come today from . . . NPR?
In late January, Senator Elizabeth Warren, who’s in the race to become president in 2020, added a new kind of tax to the American conversation, causing anxious pacing on superyachts in every port: a wealth tax. . .
Normally progressives like to point to Europe for policy success. Not this time. The experiment with the wealth tax in Europe was a failure in many countries. France’s wealth tax contributed to the exodus of an estimated 42,000 millionaires between 2000 and 2012, among other problems. Only last year, French president Emmanuel Macron killed it.
In 1990, twelve countries in Europe had a wealth tax. Today, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries—and, perhaps worst of all, it didn’t raise much revenue. . .
[H]aving no exemptions means the U.S. government will have to get very good at valuing art, diamonds, superyachts, and all the other fabulous things the super rich collect. Indeed, Warren’s plan includes a call for “a significant increase in the IRS enforcement budget.” It was the hefty cost of enforcement that played a big part in Austria killing their wealth tax back in 1993. It turns out it costs a lot to track and value rich people’s stuff every year.
Worth reading the whole thing.
But what NPR and many others don’t realize is that wealth tax it not really about raising revenue. It is about punishing the rich. I keep coming back to the old 60s-era lyric of Ten Years After: “Tax the rich/feed the poor/till there are/no rich no more.” That pretty much gives it away, doesn’t it? Shouldn’t it be “Tax the rich/feed the poor/till there are/no poor no more“? Apparently not.
Meanwhile, stay tuned. I’ll do reparations for slavery next, because once again I was way ahead of the curve here too.