Another example. Somebody lives together with his elderly parents in their home. He is an poor artist, while his parents were lawyers and so have a big house in a good site. When his parents die, the rooms in the house, where his parents lived before, are empty and unused. Neither does he want others in his home, nor want others, who could pay him enough to pay an appropriate wealth tax live in a home with him. So a wealth tax will force him to sell the house.
Another example. Somebody owns a piece of forest. The value is given by similar pieces of forest, where forestry is going on. Unfortunately the most profitable forestry is in monocultures. He loves butterflies and knows that the variety of butterflies in his piece of wood will drop, when the different trees are substituted by a monoculture.
The other question is of course, if you have an income tax and a wealth tax, will with 3% inflation the net income after a wealth tax conserve the principal? If one reduces income tax and increases wealth tax, then the lucky who make more money with their wealth than the average pay a lower share of their income, than the unlucky. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
Someone inherits millions and builds a media empire with them, which he then uses to get himself elected president, with disastrous results for everyone except himself and his cronies.
Someone else inherits millions and uses them to build an international newspaper and TV empire, which he uses to spew racism and banality and to influence the election outcomes of all of the developed countries which don't have equal-time rules.
Someone else inherits millions and uses them to propagandise 'small government.' He wants 'government drowned in a bathtub' and when a hurricane strikes a major city he gets his wish. Meanwhile his cronies plunder the national treasury and start a disastrous - but profitable - war.
I could go on. There's not shortage of examples to choose from.
Politically, trust fund babies like these are poisonous to democracy. They're born with massive power and an equally massive sense of spurious entitlement.
If you're looking for the origins of Anglo-Disease, these are its disease vectors.
Making sure they pay their way and aren't allowed to run around breaking everything they touch is the main reason for high levels of progressive taxation. Not only does taxing them give governments more money to spend on social investment, it also means they have to get a proper job like everyone else, instead of being dilettante politicians, which is what so many of them seem to aspire to.
Berlusconi, Murdoch & CO own shares of the media market, which are huge and were partially not build up organically, but bought together. Nothing would have spoken against forbidding them to buy so large shares of the media market. In Germany the ProSieben-SatEins Media AG (TV), could not be sold to the Springer ("BILD") publishing company, because they already have so much market share with newspapers. That would even work, if those media networks were profitable (what I think they are). As in case of Murdoch we are speaking of a stock corporation (?), how would you value the corporation for the wealth tax anyhow? Isn't the stock market value, which will be low, if the earnings are low, the best measure for the value of a stock based corporation? My personal opinion is, that strong public media is the best remedy for such kind of opinion manipulation. Of course there has to be a layer between the politicians and the media. ARD/ZDF in Germany work rather good. I think BBC in UK is as well OK, but has already a bit more problems to keep itself out of reach of politicians Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
Nothing would have spoken against forbidding them to buy so large shares of the media market.
Except when you already own that much of the press all you have to do is threaten politicians with a negative campaign if they don't pass your favourite 'liberalising', legislation and their careers will be over.
This is part of what happened in the US with media deregulation, and part of what happened in the UK - although Thatcher already had press support before the election, and didn't need to be convinced to hand over democracy to a press thug like Murdoch.
Martin:
As in case of Murdoch we are speaking of a stock corporation (?), how would you value the corporation for the wealth tax anyhow? Isn't the stock market value, which will be low, if the earnings are low, the best measure for the value of a stock based corporation?
It's all Capital Gains and/or Inheritance, both of which are taxed leniently in the Anglo countries, especially on large estates.
Back in the 18th and 19th century English economists were very interested in the differences between English and French law (the writings of J S Mill but also A Smith are full of comparative political economy) and one of the main differences was that in England inheritance tended to go undivided to the eldest son, whereas in France it was equitably divided among all the children. Inheritance taxes and legally mandated division of inheritances work to prevent the accumulation of excessive fortunes in the hands of a few over the generations and are an unqualified social good. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
However, for inheritance tax I don't think it matters, if it is unearned wealth. It is the sole right of the person who makes the gift, not the person who recieves. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
It is not the person who leaves the inheritance that is taxed, but the recipient f it. I said the principle of private property doesn't limit the right to give inheritance, but it does limit the right to receive it.
The question is whether you want a system which amplifies wealth differences or not, quite simply. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
Francois asked me to bring up other examples than gold, for why somebody would not use an asset for producing revenue. He should have asked you, as you brought the idea up, that a wealth tax is better than a pure income tax, because of the incencitive to use the asset. I have invented a rather realistic example. And yes, of course there is the question, what system one wants. And as all the examples others brought up, were about much bigger wealth, the question is, amplifying wealth to which degree, so that e.g. one answer to my example could have been, to speak about a wealth tax only for the people who are much richer than just a selfused property, even if it is a house in Munich. Another answer is to tax appropriately already on that level, as it already means to be much richer than most others. And these answers have different effects and will attract different voters. However, what's your problem? I said, I want something specific. Some comments later you write the question is what I want. That I said in the first place.
From my first diary: "Conservatism means a declining loyalty starting with individuum, family, region, country, (Europe), world." I see property not only as individual property, but as 'clans/family' property. Inheritance is only the formal overscription of the 'clans' property to the next generation, while the real ownership, that one by the clan, does not really change. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
Having clarified our positions regarding dynasties, we have to agree to disagree.
Anyway, to answer your question, taxing wealth is independent of taxing unearned windfall income (be it inheritance, gifts or capital gains). When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
The Wikipedia article on Wealth Tax claims the rate in Switzerland is progressive up to 1.5%, in various US states it varies from 1% to 4%, and in France the Solidarity Tax on Wealth taxes up to 1.8% for wealth above €750k (but the lowest nonzero marginal rate is .55% and the highest rate is only reached at €15M).
None of this seems "confiscatory". When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
Why were you arguing in the first place? Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
I believe redistributive taxation played a huge role in creating the middle class, but I don't know my econometric or economic history to be able to back that assertion. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
A proper asset tax will hit at, say, 10 millions euros at a few percents then at 100 millions euros with annual rates of 20%, etc.
The goal is to prevent anyone from amassing enough wealth to interfere by sheer economic power with the institutions.
Berlusconi would simply not exist in this system.
The first example is a red-herring. Successful professionals. It's worth, what?, 5 or 10 millions euros. Those are not an issue. My problem is with Silvio Berlusconi, the Bush family, Francois-Henri Pinault, those levels of wealth.
Essentially, the division is between people who are well off but fully dependent on society and its common infrastructure for their daily life - police, hospitals, etc. - and those are rich enough to try to isolate themselves and abstract their person from society while profiting from its benefits and influencing it for their sole benefit.
This argument is a common plow in debates about taxation: conflating vastly different levels of wealth as a single issue. The right wing is using it actively, because 1) they are paid to do that and 2) it creates a false solidarity between well-off upper middle class, most of it meritocratic in nature and who are politically influential, and the truly rich, who, by dint of their very small numbers, have no influence except the one they buy. The left wing is also falling for it and helping the right-wing by making the same conflation by hammering the upper middle classes (easy) rather than attacking the truly rich (a far more complex task and, occasionally, a dangerous one).
As I mentioned in another comment, asset taxes, inheritance taxes and very high taxation of very high incomes are not an issue of social justice and redistribution but a matter of institutional stability and democratic health.
"And as all the examples others brought up, were about much bigger wealth, the question is, amplifying wealth to which degree, so that e.g. one answer to my example could have been, to speak about a wealth tax only for the people who are much richer than just a selfused property, even if it is a house in Munich. [...]"
I was asked to bring up examples why somebody doesn't use a viable asset to make revenue from it. Actually I was the wrong receiver, as Migeru brought the idea up, that wealth should be taxed because otherwise productive assets might not be used. You could have said before what dimension of wealth we are talking...
I in general dislike such taxes, but if the wealth is so much that as you say it is a matter of institutional stability and democratic health, I agree that something has to be done, despite one can discuss what. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
Although I think that a case can actually be made for taxing a single person living alone in a two-family house at levels he will find painful.
First, such taxes serve to restrain speculative bubbles in the real estate market - bubbles that do real harm to first-time buyers even on the occasions where they are deflated more or less peacefully, nevermind the cases where they bring the whole economy to a screeching halt.
Second, if you have an apartment designed for ten to fifteen people (yes, we actually have such apartments in Copenhagen), then you have to supply public infrastructure for ten to fifteen people, because infrastructure planning has a somewhat longer time horizon than home-ownership (at least good infrastructure planning has).
And finally, I would remark that living space in cities is a very much finite resource - and I think it's fair enough that people who hold down more than the average share of finite and valuable resources pay through their nose for the privilege.
But that is a somewhat different discussion (then again, this thread has been threadjacked so many times already, so what's one more...)
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
