Fair and Balanced? Tyler Cowen on Wolff on Wealth Taxes.
Here is the abstract of a new paper by Edward Wolff:
The paper analyzes the fiscal effects of a Swiss-type tax on household wealth, with a $120,000 exemption and marginal tax rates running from 0.05 to 0.3 percent on $2,400,000 or more of wealth. It also considers a wealth tax proposed by Senator Elizabeth Warren with a $50,000,000 exemption, a two percent tax on wealth above that and a one percent surcharge on wealth above $1,000,000,000. Based on the 2016 Survey of Consumer Finances, the Swiss tax would yield $189.3 billion and the Warren tax $303.4 billion. Only 0.07 percent of households would pay the Warren tax, compared to 44.3 percent for the Swiss tax. The Swiss tax would have a very small effect on income inequality, lowering the post-tax Gini coefficient by 0.004 Gini points. The effect of the Swiss tax and Warren tax on wealth inequality is miniscule, lowering the Gini coefficient by at most 0.0005 Gini points.
Here is how Tyler Cowen linked to the paper today on Marginal Revolution:
The effect of the Swiss tax and Warren tax on wealth inequality is miniscule, lowering the Gini coefficient by at most 0.0005 Gini points.
I don’t have a strong opinion on the Warren wealth tax proposal, other than wondering whether it makes sense to push for a tax that may well be found unconstitutional. But one could certainly approve of the tax as a source of revenue even if its effect on overall equality is small, no?
One certainly could, but should one? Our MMT friends would say no, because the idea that taxes raise revenues is, at best, trivial and more likely to be fraudulent when the entity doing the taxing can also print money. On the constructive side, it seems to me that right now in the U.S. the best use for taxes is to rebalance economic inequality, and the quicker the better, which is why I’m disappointed that Warren didn’t start with Eisenhower-level income taxes and go on from there.
R:
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There are perfectly reasonable wealth taxes already available. They are called inheritance taxes and gift taxes. They can and should be raised. Taxes may not be certain, but death is.
By the way on the main point isn’t the reply something like, so the tax won’t make much difference to inequality (i.e. it won’t hurt the rich much). So why are you arguing against it, given that it raises $x.
I agree that the way to deal with intergenerational wealth includes inheritance taxes. Gift tax exemptions are trivial. Capital gains also have to be on the table. There’s a reason that the first two things Republicans go after when they get any leverage are capital gains and inheritance.
If there were a practical way to deal with nepotism salaries, that might be a place to go as well. Trump’s upbringing is reminiscent of Romans who served in the military from the age of 2.