I think the assumption that we're looking for an equivalence here is fundamentally flawed and with it the entire post.
For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth.
The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income tax
The big flaw in his argument is that a mere 1% which is actually 20% of annual return is still less than the average income tax rate on workers, levied on people who have a lot more money and in some cases don't do anything resembling work. It's trivially true that 1% wealth taxes represent something in the region of a fifth of the average annual return on wealth, it's rather less convincing when it's suggested that this is harsh compared with income tax when people who pay more than half their much lower income in overall taxes whilst working 60 hour weeks and actually worrying about paying bills.
There are arguments about wealth taxes inducing capital flight and investment disincentives, the difficulty of paying tax bills from illiquid intangible wealth or even quantifying it, and whether it's really a good thing to pressure people building a company to sell much of it off, but telling income tax payers that an effective tax rate of 20% is high isn't one of them...
> There are arguments about wealth taxes inducing capital flight and investment disincentives
If the US and the EU introduced a wealth tax then it would be relatively difficult for the capital flight fears to materialise. But yeah, the trouble with wealth taxes is that wealth (i.e. capital) is mobile.
Which is why land and property taxes are probably the most effective way of taxing wealth.
Switzerland has cantonal wealth taxes, as does Norway and afair Spain. Italy, Belgium, Netherlands have a somewhat equivalent one on money held in securities or savings accounts. It's not that big of a deal if the rate is low enough.
Most of us would not prefer to follow the EU into irrelevancy. If they were the model for how we should be running things how come they are not the ones running the show on innovation?
> Most of us would not prefer to follow the EU into irrelevancy. If they were the model for how we should be running things how come they are not the ones running the show on innovation?
I think innovation is a tricky thing to measure, firstly. Certainly the US benefits massively from the world's largest capital markets, sucking in foreign money from all over the world. Is that innovation? is it stock price, or is it the work of all the academics, engineers, tech people etc?
Like, Europe (and the EU at the time) is where Deepmind came from, without which we'd be vanishingly unlikely to have seen Transformers/LLMs etc. Nokia basically made mobile phones a global category. ASML provides something that neither the US nor China can match.
And just to note, property taxes make up a much larger proportion of state revenue in the US than in the EU, if that's how you're measuring things.
And i didn't say anything about how great the EU was, I just noted that the US & the EU make up most of the richest countries in the world, where rich people like to live, so a wealth tax would probably work relatively effectively at that level.
Obviously that's not going to happen, but land and property taxes could get us a lot of the way there, with much less issues with capital flight and tax collection.
I'm not sure how there is a societal problem with "run-away levels of wealth".
We have societal problems around food costs, housing costs, healthcare costs, &c; but people with extreme wealth are not bidding up sandwiches, studio apartments, &c, &c. If we "solve" their wealth by taking it from them and giving it to the government, what does that help? What good is the government going to do with that? Allocating money through the government has not been a particularly successful strategy for improving the overall standard of living.
> but people with extreme wealth are not bidding up sandwiches, studio apartments
They are, though. Private equity continues to buy apartments and increase rates. States with increasing PE ownership also have increasing rates of cost-burdened renters spending more than 30% of income on rent and utilities, e.g. in Tampa, Phoenix, DFW, and Atlanta. Maybe not specific people, but the ultrawealthy nonetheless drive these changes.
When a PE fund buys an apartment building, isn't that really competing with landlords, not renters? The PE fund is not living in the apartment -- they have to try to rent it out, after all.
It's also a plan to hold onto real estate as market prices rise, flip for profit later, and not deal with all the issues that renters bring (management and maintenance costs, bringing up and keeping to code, potential damages and law suits, etc).
Keeping a floor or two active for Air BnB type short churn rentals while shuttering the bulk of a building can make $$$-sense to a PE.
"Landlords" (aka individual non corporate property owners of more than one residential dwelling) and real estate companies (those with portfolio's of land assets rather than those that just take a commission on sale) can do pretty much the same thing if the numbers pan that way and/or they have no stomach for dealing with Tennants for marginal extra profit.
Ownership of rentable property that is empty is a thing across the board, at least here in Australia where (stupidly(?)) investment rules and returns have made multiple property ownership a sound investment that grows regardless of occupancy.
Don't even need a long ( > 10 year ) time horizon, flipping on a two or five year scale still makes money regardless of renters being present or not.
It seems like you're saying, that PE, landlords, &c, are in a market where a landowner can hold on to property, not rent it out or put it to other productive use, and still make money. That is a problem, but not a problem with wealth or wealthy people per se.
Housing is only a good investment when supply is constrained. These PE firms buy housing because they see that NIMBYs are in control. As they predict rents soon begin to rise. Youve got the cause backwards
> Allocating money through the government has not been a particularly successful strategy for improving the overall standard of living.
What are you even basing this assumption on? Just quickly comparing the highest ranking countries by Human Development Index with the highest government budgets per capita and the highest income tax rates would, if anything, support the opposite conclusion.
This is potentially a long conversation; but why would you start with rankings like this, which only go back a relatively short time?
Broadly speaking, human welfare got a lot better in the last three hundred years, due to productivity improvements that were tied to things like property rights, joint stock companies, availability of credit, &c.
We haven't really found a good alternative to it. It may seem to you that countries like Austria, &c, are doing the right thing by taking very large amounts of GDP out of the hands of private enterprise and using it "for good" instead of "for growth"; but that is just eating the seed corn. It looks good in the short term.
The HDI ranking has been published for 36 years now. And for many of those countries I would feel confident claiming the trend goes back to at least WW2, altough you would of course have to use other, contemporary metrics to support that to get a rigorous analysis.
If the initial step in your theory about human wellfare is to selectively ignore the last 35 or 75 years of history in the highest wellfare countries on earth, I think you should at least consider the possibility that your theory might be somewhat out of date.
Most of Europe post-war was very poor. I'm not sure the trend could go back as far as that.
How are you weighing the trend you highlight relative to overall long run success of private ordering, stock companies, readily available credit, strong private property protections, &c, &c, in raising people's standard of living?
Money is votes into the economy and what it shall produce. The more money you have, the larger vote you have. Taxes are the way the government takes controll over a fraction of the votes. Then the government can use this power to make good or bad decisions. One thing which is clear is that the billionaires is not using their power over the economy to fix any of the deep fundamental problems we are facing
Consumption is a kind of voting in the economy, I suppose; but the economy is heavily geared towards making things that regular people want. How many Corollas are there for every Bugatti?
If what you're saying is true, would it be unfair of me to say that the government is not using their power over the economy to fix any of the deep fundamental problems we are facing?
Is it good policy to take people's money because they aren't doing what we think they should be doing with it?
That's how you end up with an over-regulated country where people doing great things for the country's economy start choosing a different country to build their dreams in.
It's also how you drive the currently-wealthy to other countries to spend and invest their fortunes in.
The possibility of being ultra-wealthy is a huge reason to build awesome shit in the US that creates millions of jobs and brings the US economy ahead.
This nefarious logic has been used for 50 years to justify ever worse austerity and tax breaks for the wealthy. And look at the situation today: pedophile oligarchs rule the world while we fight for scraps. The West has no future, unless we start aggressively redistributing wealth.
Hasn't a rich oligarchy been the status quo for most of humanity? It seems to me most of humanity has had quite a future to look forward to, historically speaking.
I'd be reluctant to call the lords from the feudal system "oligarchs". Really, the people currently called such could only exist in a globalized economy.
But anyway, oligarchs weren't this powerful in the mid-century. FDR's New Deal was successful in bringing down the Robber Barons and ushering in America's golden age. Coincidentally, things started to go to shit with the introduction of Reaganomics and the promise that letting a few private individuals concentrate more and more wealth would be beneficial to the economy.
For most people income is tied to selling their time. It doesn't scale at all. Unless the income comes from wealth.
The societal problem here is a group with self-reinforcing run-away levels of wealth. And to counter that you do need something more extreme than this nonsensical equivalency of income tax