Thomas Piketty, the world’s most prominent proponent of a wealth tax, held forth in the Globe on Elizabeth Warren’s proposal for same. His verdict: Good, but it could go farther!
The debate has only just begun and the proposed schedule could still be extended and made more progressive — with rates rising, for example, to 5 to 10 percent per annum for multibillionaires.
And he puts a welcome historical perspective on this: That the current wealth-worshipping, the-rich-shall-inherit-the-earth attitude of much of our political establishment is relatively new. And he notes that the postwar period of the rise of the middle class was concurrent with much higher taxes on the rich, and public investment for all:
Between 1930 and 1980, the rate applied on the highest incomes was on average 81 percent, and the rate applied to the highest inherited estates was 74 percent. Clearly this did not destroy American capitalism. Far from it. It made it more egalitarian and more productive, at a time when the United States had not forgotten that educational advancement and investment in training and skills — not the religion of property and inequality — were the backbone of prosperity.
What Warren, Sanders, and Ocasio-Cortez are proposing is not “radical” in the least; it’s going back to what we used to take for granted. Wild degrees of inequality are not some state of nature, or a sign of the inherent virtue of the rich. We need not accept these circumstances with a Panglossian wave of the hand — that all that is, is right.
A big part of this game is battling false consciousness and false consensus. Good for Piketty, Warren et al for opening an Overton window.
What is wealth and how do you measure it? I know most will say money in the bank, stocks, land but how do you measure some of the more obscure items which have subjective value. Do you let the marketplace define the value and figure the tax owed?
When I was a kid I had a paper route and occasionally got paid by people who must have used money their parents had laying in dresser drawers. I got Barber head dimes, Indian head nickels, and even got Liberty head nickels in rare instances. It lead to a lifelong interest in coins and when a grandmother died we emptied out a dresser with some silver dollars and I knew immediately they were worth more than face value. But are they really?
When I die my grandchildren are going to receive a map, buried on the land (also being passed on) somewhere will be a box of coins including some Kruggerrands (thanks to Nixon) clues and a fun time finding some treasure. Now theoretically the value could be a thousand face value or it is over the gift limit max. Who will know?
Diamonds (to me) are a horrible investment with artificially inflated prices/values thanks to a worldwide DeBeers conspiracy. Some people will pay $50,000 for a “rock” though. Some rocks are “worth” 25 million. How do you control this?
As it is now even “poor” people scam the tax laws by rearranging ownership of things so when your parents need to go in a home they are and have been paupers for the seven year IRS lookback period. At least I assume most are doing this, if not look into it.
And there is a distinction between wealth and income as Tom reminds us.
To borrow a phrase from United States Supreme Court Justice Potter Stewart. “We know it when we see it.”
It’s really not that hard. For the numbers we’re talking about, it doesn’t have to be exact — anything within +/- 10% is surely good enough.
A perfectly reasonable starting point is to look at the countries that already tax wealth (France, Spain, Portugal, Switzerland, etc).
I strongly suspect that Ms. Warren’s proposal will answer your question.
Ms. Warren is not going to tax your coin collection. Your coin collection is not going to cause your progeny to pay an estate tax when you die.
I encourage you, along with everyone else here, to try a simple exercise:
Plot the following three points on a piece of graph paper or even in an excel spreadsheet:
A: 10,000
B: 100,000
C: 50,000,000
Not worried about myself but as you mentioned above I looked at some of the countries that have the tax. Then I saw some of the countries like liberal icon Sweden, have gotten rid of the tax. Thinking of the way a recent medical machine tax in Mass was established we need to learn from mistakes.
France, Portugal, and Spain are examples of countries with wealth taxes. In France, there is a wealth tax cap in place that ensures that total taxes do not exceed 75% of income. Not all countries have this type of tax; Austria, Denmark, Germany, Sweden, Spain, Finland, Iceland, and Luxembourg have abolished it in recent years.
Wealthy individuals including Ingvar Kamprad, the founder of IKEA, the furniture store, and one of the world’s richest men with a $23bn fortune, have sought to avoid the tax by setting up overseas foundations to control his wealth. Experts in Sweden said the abolition of the wealth tax should halt – or at least slow – this damaging capital flight and make more resources available for venture capital and other early stage investments.
Did you try my suggested exercise? I ask because you are using assets with at most a five-figure value to challenge valuations more than four orders of magnitude larger. It might be difficult to decide whether a given fencepost is or is not inside the high-tide line of a beach-front property. It is not difficult to answer that question for a fencepost ten miles from the coast.
It sounds as though you are arguing that Sweden would be a powerhouse of venture-funded innovation if only it hadn’t imposed a wealth tax. Is that really what you mean?
According to New Times obituary for the late Mr. Kamprad, his net worth was $84B when he died in January of 2018 — more than three times the amount you cited, and still significantly less than the $100B net worth of Jeff Bezos (perhaps you relied on the 2007 report from the Financial Times).
I again encourage you to read Ms. Warren’s wealth tax proposal, which includes a one-time provision to discourage the gyrations that Mr. Kamprad went through in order to evade his exposure to Swedish wealth taxes. I also remind you that Mr. Kamprad was deeply involved with the European fascist movement from the early 1940s for at least a decade.
My cite of wealth taxes in France, Spain, Portugal, Switzerland, Sweden, and so on was addressed specifically at your perhaps rhetorical question: “What is wealth and how do you measure it?”
Whether we agree or disagree about the results of a wealth tax, the fact remains that measuring wealth for the purpose of these taxes has never been particularly difficult.
Well, if “we” is used in a historical perspective, yes. However, most Americans today have forgotten all of that and of course the “liberal media” is doing nothing to remind them, because the media is not liberal, it’s corporate.
According to most reports I have read, the last hurrah of the working class was 1973 and since then, the middle class has been shrinking. Of course the term “middle class” refers to a working class citizen who can fully support themselves in a manner and style in keeping with the times, and funding this all though their labor.
People, especially people under the age of 40, look at me with puzzlement when I tell them that when I graduated from high school in 1973, I took an entry level job at a local company and was paid (in today’s dollars), about $45k, plus full medical, a pension plan, and two weeks vacation. Mind you, back in 1973 CEO/Average Worker pay ratio was about 25:1. Today it’s over 300:1
Politicians, when confronted by these numbers mumble things like “global economy” or “technology” or “skill sets and education” or “remove regulations”, all depending on which side of the aisle they are sitting on and what donors they need to obey.
Again, with the media against us, or at least not on our side, how do working class voters and working class politicians like Warren, Sanders, and Ocasio-Cortez get their message out?
All I can do is keep fighting and smile that it used to be only Warren and Sanders and now it’s Warren, Sanders, and Ocasio-Cortez. Let’s elect the next one and then the next one.
Elizabeth Warren is the only Democrat who has proposed a wealth tax. That’s what Mr. Piketty’s column is about, and that’s what this discussion is about.
You weren’t wealthy in 1973 (neither was I). Those who were wealthy in 1973 were not taxed on that wealth. Americans have NEVER been taxed on their wealth, and that’s why this proposal truly IS radical.
The top rate for the current estate tax proposal from Mr. Sander’s is 65%. This is in contrast to the 76% top estate tax rate from 1940 to 1976. The proposal from Mr. Sanders is, in fact, NOT radical.
One of the most effective ways to help the media stay on message is to stay on message ourselves. That means, among other things, that we must resist the temptation to get sidetracked with distractions like income tax rates and ancient political history.
The wealth tax proposal of Ms. Warren is radical. I think it’s crucial that we keep it in the spotlight front and center.
I was not wealthy in 1973, but 1973 was a time when an 18 year old kid with a high school diploma could get an entry level job that would support him and with a few more years and a promotion or raise along the way, buy a house and start a family.
If I was never taxed on wealth, what is my annual real estate tax and excise tax on my vehicles?
All that aside, I agree with her proposal to start a wealth tax. When I read Pikeetty’s book three years ago, it was something he thought would be the best solution to our current mess.
I still think it misses a point and that is how these people amass such wealth. We also need to address that so that a wealth tax will not be so necessary.
To put it in simple terms, a wealth tax, on personal fortunes of 500 million or billion dollars is the fire extinguisher.
Implementing tax codes, labor policy, trade policy, bank policy and the rest to make such amounts of wealth rare, it able to exist at all, is good house stewardship.
I have a fire extinguisher in my house, but have never had to use it.
Agreed. I like your metaphor.
The house is a raging inferno at the moment. We need a full response from all available equipment.
Here is a 30 second TV ad I’d like to see:
“Each year, more and more Americans are living paycheck to paycheck, working longer hours, with fewer benefits, little if any job security, even for those with a college degree. Our economy keeps growing, unemployment is down, but still, the American dream is fading for most.
It’s not a global economy behind this, not technology, not a lack of education or job skills, it’s the end result of decades of legislation by our government on behalf of the few Americans who today, reap most of the bounty that we produce.
It’s time for real change in Washington. A return to a time when an honest day’s work was met with promise of prosperity and security; a time for our government to listen to the needs of families at the kitchen table instead of paid lobbyists in the dark hallways of our government.
I’m……..and I approve of this message. Paid for without any funding by super pacs or dark money.
This hypothetical ad is off-message for a wealth tax. The first paragraph is true and relevant. The middle two paragraphs are a distraction.
Try this alternative:
It would be great if you knocked off the “off message” bit…..other than that, I agree with and appreciate the edit, but it’s running well over 30 seconds.
Yeah, I once had a job that involved a lot of time composing radio ads and production of television ads . It was a fun gig.
@ it’s running well over 30 seconds.:
Let’s distill it further then. Try this:
I know it can be frustrating, yet I think we make a real contribution when we work together to create a tight message that we both agree on.
My friends and colleagues tell me that I have a great radio voice. Maybe I should record it.
Who knows, perhaps we’ll make a great team.
Every year, more and more Americans are living paycheck to paycheck. For many of us, The American Dream is Fading.
While our economy creates more wealth than ever before, nearly all of it goes to the already wealthy. Today, the richest 400 people in America own more wealth than 160 MILLION of the rest of us …combined.
It’s time for real change in America — a return to a time when every American has a realistic opportunity for prosperity and security.
I’m……..and I approve of this message. Paid for without any funding by super pacs or dark money.
Agreed.
.
Done!
I recommend this post, and I highly recommend everyone look at Dianna E. Anderson’s math on a 70% MTR applied to Dwayne “The Rock” Johnson, the most electrifying man in sports entertainment and the 2nd highest paid actor last year.
The Rock made $65mil in one year. 70% in taxes from the amount over ten million leaves him about $16 million. He already bought a $3 million house, so he’d have enough to buy 5 more such houses.
We need that higher MTR, and we need a wealth tax.
Remember when the wealthy Jamie Dimon and his family sent out a Christmas card with photos of them smashing tennis balls around the house, damaging nice things because they were THAT WEALTHY? We should tax wealth like Sen. Warren has proposed.