With talk of a wealth tax, we can expect a lot of demagoguery about how it will be the ruin of the nation. While not going that far, the WaPo editorial board has published an editorial advocating against a wealth tax that, to me, is entirely predictable in its content.
I’ll skip ahead to its best argument:
[A 2018 Organization Economic Cooperation and Development (OECD)] report suggested [that instead of a wealth tax] an optimal system would target capital income and inheritance of wealth, which could be done here by reducing the current code’s favorable treatment of capital gains and eliminating the huge break for profits on the sale of inherited stock, while putting some teeth back into the estate tax. That would discourage what’s most contrary to American ideals, dynastic wealth accumulation, while encouraging what’s most consistent, getting rich on the merits.
I suspect that’s correct – but I have to say, I have not seen much evidence that the WaPo or its editors have been advocating for those alternatives. Part of the reason we hear talk about a wealth tax is because there has been so little push-back when capital gains taxes are cut and estate taxes are slashed. Would it be unfair to paraphrase that paragraph as, “A much better solution than a wealth tax would be to go back to the tax structure the nation had before a series of cuts that our editorial board members mostly didn’t oppose and, in some cases, strongly supported.”
Moving to the board’s shakiest paragraph:
It is questionable, though, whether a flat annual tax on wealth is the best way to tackle the inequity and inefficiency associated with concentration of wealth.
It probably isn’t – but there are two issues that must be addressed. First, due to the manner in which the system has favored accumulation of wealth by the wealthy for decades, if not generations, we can see a massive accumulation of wealth in the hands of a relative few, and we can’t undo that history. Second, there are problems implementing other means of taxing the ultra-rich and, even if there were not, each alternative also has its advantages and disadvantages.
Problems of implementation abound, starting with pricing non-publicly traded assets such as land or rare antiques.
But we do that for other purposes, such as calculation of estate and inheritance taxes, or capital gains.
The tax would create a huge incentive for tax avoidance among a segment of society well able to afford accountants and lawyers.
And that distinguishes it from other taxes… not at all.
The authors of the proposed wealth tax would bolster enforcement by charging people worth more than $50 million to renounce their citizenship, which conveys a certain authoritarian odor.
Even if we pretend that it never happens under the present system, there is nothing “authoritarian” about ultra-wealthy people choosing to become citizens of tax havens. Nobody is forcing them to give up their citizenship in order to avoid contributing to the support of the nation that made them ultra-rich.
Further, who says that a wealth tax must be tied exclusively to citizenship? A wealth tax that extended to assets present within the U.S. and to shares of and interests in U.S. companies would sharply diminish any incentive to flee to a tax haven.
This country has prided itself as a destination for immigrants with great ideas for creating wealth, not as a place that bars the exits to anyone, rich or poor.
Did somebody propose imposing an additional tax on ultra-rich losers who would rather part with their citizenship than contribute to society?