“We Need to Raise a Lot More in Tax from the Wealthy but That Does Not Convince Me That We Need a Wealth Tax”

Yves here. It is gratifying to see that in the UK, there is at least a semblance of a discussion about what to do about rising inequality, and particularly the way the rich keep getting richer. But like Richard Murphy, we have long been skeptical of a wealth tax as an effective means to achieve that end. We did a long-form treatment when the idea was hot due to both Bernie Sanders and Elizabeth Warren presenting wealth tax plans as part of their 2020 campaigns. Some key points are that the super-rich hold a high proportion of their wealth in assets that are legitimately hard to value and reasonable people really do, pretty often, have large difference as to what they might be worth. Another was the one made by Murphy below: a wealth tax would be very costly to administer. If you want to go this route, an inheritance tax can go just as hard at wealth over time at much less cost due to less frequent money-gathering efforts.

And to underscore these reservations: the US has not won a valuation dispute in a large estate case since around 1980. So even with the “better” approach of trying to pluck more feathers but less often, the results are not very good.

By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK

I am aware that my old friend, Howard Reed, has produced the data for the TUC’s proposed new wealth tax.

As the TUC say:

The TUC has called for a national conversation on taxing wealth, as it publishes new analysis today (Friday) which shows a modest wealth tax on the richest 140,000 individuals – which is around 0.3% of the UK population – could deliver a £10.4 bn boost for the public purse.

The analysis sets out options for taxing the small number of individuals with wealth over £3 million, £5 million and £10 million, excluding pensions.

The TUC says these options are illustrative examples of what a wealth tax could look like, using Spain’s existing policy as a potential model.

“It’s time for a national conversation”

I certainly agree with the last point. That is why I have spent much of the summer, so far, working on proposals to collect more tax from those with wealth and high incomes. Sixteen proposals have now been drafted. I think there are eight more still to come, although that number might still grow a bit.

As the TUC says on their proposal:

The TUC says it is publishing the analysis to “kickstart a conversation” about tax – with the TUC general secretary Paul Nowak declaring “now is the time to start a national conversation about taxing wealth”.

According to analysis commissioned by the TUC, conducted by Landman Economics, cumulative one-off wealth tax (excluding pensions wealth) on:

  • A wealth threshold of £3 million with a marginal tax rate of 1.7% would yield £2.7 billion (with the tax payable on wealth above £3 million by 142,000 individuals or 0.27% of adults in the UK)
  • A further wealth threshold of £5 million with a marginal tax rate of 2.1% would yield an additional £3.2 billion (with the tax payable on wealth above £5 million by 48,000 individuals or 0.09% of adults in the UK)
  • A further wealth threshold of £10 million with a marginal tax rate of 3.5 % would yield an additional £4.6 billion (with the tax payable on wealth above £10 million by 17,000 individuals or 0.02% of adults in the UK).

Together this could raise more than £10 billion for the exchequer.

I am very familiar with the data that Howard used to prepare these estimates. I am also using it. And, based on it, Howard’s proposals make sense.

My concerns are threefold, at least.

First, I think this would be an immensely difficult tax to administer, assess and collect. Valuation disputes would drag on for years and be immensely costly. This is not an efficient way to raise additional tax in that case.

Second, there are vastly easier ways to find £10 billion, or much more. Simply introduce tiered interest payments on central bank reserve accounts as I proposed this week and I suspect the revenue saving might be three times that from this proposed wealth tax over the next three years, with very little effort expended.

Alternatively, just remove the inheritance tax exemption on residual sums in pension funds when a person dies and considerable sums might be available. Pension pots of over £1 million have a value of at least £1,323 billion as I also showed this week. Bring even part of that sum  within the scope of inheritance tax and vastly more than £10 billion a year might be raised.

I am not saying Howard and the TUC are wrong. I am saying that this conversation on tax needs to focus on what is most efficiently done. I don’t think that suggests that a wealth tax is appropriate.

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  1. John R Moffett

    We don’t need a wealth tax, we need a system reset that includes purging the government, reconstituting it with people who are not sociopaths and then we need to confiscate 99% of the money that anyone who has more than $100 million owns. You can’t have obscene wealth and democracy. The current situation proves that. As long as sociopaths run the government, the “news”, the think tanks, NGOs and everything else, things will continue to deteriorate as they have with all previous systems that had rotted to the core. A wealth tax is far too lenient on those in charge. This time in history will stand out for the extreme inhumanity of extreme wealth.

    1. some guy

      Confiscate 99% of everything over a hundred million? In other words, if someone has a hundred million and one dollars, confiscate 99 cents of that dollar one-hundred-million-and-one?

      Or confiscate 99 % of all the money that everyone with over a hundred million dollars has? In other words, if someone has exactly 100 million dollars and not a penny more, confiscate none of it? Whereas if someone has one hundred million dollars and one cent, confiscate 99 million and let them keep a million dollars?

  2. chuck roast

    Remember “Lifestyles of the Rich and Famous”. That was 40 years ago. A different time and a different head. I was shocked that people actually enjoyed that exercise in excess and indulgence. Shamelessness was becoming a virtue. Now it’s the norm…everybody wants to be rich (I mean really rich) and famous.

    Earlier this week Steven Shwartzman gave a presentation on “Leadership” at my little athenaeum. The lecture was sold out at $20 a pop. Here is a world-class predatory brute looking good in a bespoke suit buying respectability. Do you think for a moment that the attendees care that he literally lays waste to the economic and human landscape? That’s a rhetorical question. Let’s all be like Steven and work our very own carried interest loophole.

    1. Darryl too

      Ditto the Carlyle
      Group’s David Rubenstein co-founder who’s now preaching capitalism – from lower middle class to oligarch on PBS. Btw, the Biden family uses his Nantucket home during thanksgiving. Can’t make this stuff up

      1. kam

        Cruelly Hilarious, that “wealth” is measured in currency (dollars) conjured out of thin air by the Politburo Monopoly Central Banks (the Fed).
        Capitalism requires a Socialist/Communist Central Bank and Political Protection from Competition.
        We are no more “wealthy” than a generation ago, and the bulk of new toys are the Internet time wasters. The GDP is Government, Services and Hot Air.
        A Spinning Top with Entropy coming in rapidly from the rear view mirror.
        A sign of our times? Raise Minimum Wages so the working poor get moved into higher Income Taxation brackets.

    2. LifelongLib

      I don’t know about famous, but you can’t blame people for wanting to be rich when nowadays it’s the only way to be assured of even the basics of a decent life…

  3. T_Reg

    Why are all these wealth tax proposals so weak? Better to start with a higher wealth amount, say $50 million, and start with 10%. Then keep raising it with increased wealth, untl it’s at least 25% for over a billion. The goal should not be increased revenue, but the elimination of an entire economic class, billionaires.

    Much of that wealth is in financial instruments. That assessment is easy. I’m sure that tangible property assessments could be expedited if the government really wanted to.

    And make the fine for concealing wealth 200%.

    1. Henry Moon Pie

      “The goal should not be increased revenue, but the elimination of an entire economic class, billionaires.”

      Agreed. There’s nothing more dangerous than a warped billionaire like Bill Gates. He’s using his billions to redesign Earth from Frankenplants to robot bees (because he’s killed the living bees) Wait until the whole thing goes blue screen.

      Billionaires, or a least a billionaire consensus, rules the U. S. It doesn’t just set tax or business policy. It now controls public health and the Overshoot response. It runs foreign policy to a great extent. None of them are worth an ounce of admiration, just crass capitalists seemingly incapable of thinking about anything other than accruing more power. But some of them are way beyond eccentric. And whatever crazy idea gets in their head, they have the resources to cram it down our throats if they’re persistent enough.

    2. Yves Smith Post author

      With all due respect, you utterly miss the point. How do you determine the amount that is subject to tax? With private companies and real estate, the owners can very very successfully defend low valuations. The IRS consistent losses on large estate tax cases proves that.

      1. Olde mayte

        As I understand it, the complexity is essentially the difficulty of valuing or revaluing the total assets of the wealthy. This seems like a tricky but not insurmountable problem

        Very wealthy individuals would begin self-reporting their total worth (the bulk of the population could tick the ‘less than $10m’ box), and while there would be an obvious incentive to lie, obfuscate or shift assets, there would also be ways for administrators to simply and at scale identify those likely to be lying, such as by comparing reported income, property titles or insurance premiums to reported assets. Upon detailed follow up if someone was found to be intentionally lying or litigious there would be penalties sufficient to make it a risky choice (I’m critically assuming given the intent of the policy). The transfer of estates during inheritance would also serve as a sense check of the annual figures

        Yes it would be a messy and involved process, probably with a dedicated appeals/tribunal system and perennially recurring issues like foreign holdings, but already much of government is like that but gets along

        In addition to social and fiscal benefits governments would also gain good and comprehensive data on assets holdings which I believe they generally don’t have at present – a major benefit. As the system matures it would become progressively harder to significantly hide meaningful amounts of assets as the big picture is filled in

        There could also be shortcut methods if it was felt too onerous to fully account for the value of assets each year, such as consenting to an automatic deemed rate of growth/fall to different asset classes between years based on market conditions.

        I work in policy and administration and it is always very interesting to see the attitudes of different countries to what is administratively feasible. To be a little unkind, the US and the UK seem to have a very limited confidence in their own administrative capabilities

        1. Revenant

          The solution is very simple.

          Declare the value of your asset for tax purposes. HMRC has the right to buy it at that value. :-)

          I am only half joking, it is just a question of design.

          The point of a wealth tax is the point of a wolf in an ecosystem, to eat a few deer but change the behaviour of all. It is the opposite of making countries safe for billionaires.

          If you exclude all small fry (sub £100m), you massively simplify the problem and you can afford to throw resources at the real targets.

          The argument that it is all too hard is rubbish. The UK enforces inheritance tax on estates at death and, in the case of trusts, at ten year intervals or on any chargeable distribution, which requires a full return of all capital value at the tax date. The UK also has an entire agency valuing real estate, to charge stamp taxes and capital gains taxes on deemed disposals, I.e. when no cash sale takes place. The UK makes these calculations all the time.

          Even if they are wrong and too little tax is collected, the point is not the exact amount of tax but the pressure against Piketty style compound growth of rentier wealth – and the tax rate can be increased to compensate.

          Murphy is arguing against the wealth tax disingenuously because he has preferred political targets of lower hanging fruit, but he is wrong. The man in the street would much prefer to be exempted from inheritance tax which punishes his children and see the billionaires soaked. It would be a vote winner with Tory voters, for whichever party, to move from inheritance tax on the mass affluent to wealth tax on the obscenely rich.

          Thus is not to say that his other revenue raising ideas are not good ones!

          1. Yves Smith Post author

            Please read my post on this topic. Countries around the world that had wealth taxes ended them because they were too costly to administer. As I said in the US, the IRS had lost every large estate valuation case literally for fifty years.

            And specifically, private equity companies have successfully shielded themselves legally all over the world from this type of disclosure despite being mainly funded by governments (public pensions and sovereign wealth funds. The wealthy can leverage this legal foundation for companies they hold outside funds.

            You can put your fingers in your ears and yell “nyah nyah nyah” but wanting things to be different will not make it so.

            1. YankeeFrank

              So what’s the solution then? Inheritance tax is too slow.

              Why do I think it’s “too difficult” because the kleptocrats in government make it that way?

              If they can figure out how to tax every $600 electronic transfer they can surely do this. Not buying it.

              1. Yves Smith Post author

                Let me repeat to you slowly.

                Private equity has shielded itself from disclosure in every major jurisdiction in the world. We have been writing about this since 2013 but it appears you have ignored our substantial body of work on this topic. PE firms disclose only skeletal information about investee companies to their investors, who are legally bound to and do keep it confidential. Every state in the US, for instance, has either passed legislation (in CA it is in the state constitution) or has long standing attorney general opinions backing the secrecy regime.

                This will not change. Not only is private equity perceived to be critical to every pension fund and insurer in the world (falsely) but PE is also the source of at least half of Wall Street, and I would assume Citi fees, as well as on a similar level of fee generation to the top law firm around the world. And they are the biggest source of fees (again more than half) to McKinsey, Bain, and BCG. Private businesses will be able to use the precedents and rules PE has put in place for confidentiality.

                And you are also trying to talk over the fact that the IRS has lost every large estate valuation suit for 50 years.

                You can want a pony too. Does not mean you will get it.

                1. Synoia

                  Tongue in Cheek:

                  Change the rules, and have the investment funds pay for the military’s equipment, such that the military units have the right to declare the funds as Hostile Enemies if they do not pay /s

            2. Revenant

              I did not mean to come across as putting my fingers in my ears and yelling “nyah nyah nyah”. I’m saying that in the UK, about which Richard Murphy writes, the machinery (albeit only annually in specific cases) and bureaucratic will for a true wealth tax exists. The problem is that it is directed at the 90-99th percentile and lets the 1% off scot free.

              This is not because they can play valuation games or offshore their assets, as you hypothesise. UK domiciled individuals pay IHT on their global assets and HMRC is very thorough and aggressive about finding and valuing them and applying exit charges to capital flight.

              The problem is a set of reliefs that enable the really wealthy to opt out of the tax without leaving the UK and to do so entirely legally. Redirecting IHT collection to say £50m estates without reliefs would generate more revenue and forestall more concentration of wealth without needing new inspectors or mechanisms.

              1. Yves Smith Post author

                You are still missing the valuation issues with private equity in particular. Private equity has shielded itself from disclosure in every US and major European jurisdiction. HMRC will not penetrate that. Not only is private equity perceived to be critical to every pension fund and insurer in the world (falsely) but PE is also the source of at least half of Wall Street, and I would assume Citi fees, as well as on a similar level of fee generation to the top law firm around the world. And they are the biggest source of fees (again more than half) to McKinsey, Bain, and BCG. Private businesses will be able to use the precedents and rules PE has put in place for confidentiality.

                1. Revenant

                  Hmm. Maybe but HMRC’s powers are pretty Draconian though and its taxes are typically levied via full disclosure and then reliefs. There is very little discretion not to file a return (*) when a chargeable event occurs. HMRC would probably enforce a wealth tax on UK resident PE managers and individuals who are LP’s by requiring disclosure of the LP valuation reports and charging wealth taxes on that basis. If the managers are lucky, they would not charge uncrystallised profits from fair value gains, only on realised profits.

                  UK pension schemes would likely be exempt because they are exempt from nearly all taxes on their holdings. The pension beneficiaries could be taxed on pension funds in excess of a threshold, as they are currently.

                  (*) i am ignoring non-domiciled and/or treaty resident (or rather non-resident) people. These statuses are another self-inflicted loophole but one that is now enmeshed in a global web of double tax treaties.

                  1. Yves Smith Post author

                    Private equity funds are domiciled in tax havens and on top of that are limited partnerships and hence not taxable. Most of their investors (public pension funds, private pension funds, sovereign wealth funds) are not taxable, on top of seldom being UK tax residents.

                    The principals and the general partner are usually American and hence not taxable by HMRC.

                    HMRC does not have a nexus.

  4. marcel

    The other day a meme was doing the rounds of Twitter/X (at least the rounds of my bubble). It was the story of a 50$ bill that paid the grocer, the grocer using the bill to pay the butcher, … and after many transactions, there was still a 50$ bill.
    But you pay the grocer cashless, the grocer doesn’t have a 50$ bill, but a ’49$ bill’, and the butcher a ’48$’ bill and after many transactions, nothing remains, and “the bank(s)” own your 50$.
    The same can be done for the wealth tax. No wealth tax, but a good income tax (say 95% on everything above 1 million, and 50% on anything above 500K). No taxes on your mansion, but you still need to pay the maid, the gardener, the upkeep … which requires real money, so taxable income. And when you sell the place, that is a big tax-generating transaction.
    That will also require to close a few loopholes in the current tax laws, but one sees the image: enough taxation to make wealth acquisition & maintenance difficult.
    But as far as I am aware, only Europeans are stupid enough to make funny laws that shoot themselves in the feet.
    I have a dream and all that.

    1. Henry Moon Pie

      This level of taxation would the most helpful, constitutional thing we can do for Overshoot. It’s the wild overconsumption by the world’s richest 10% that is the biggest chunk of carbon emissions.

      That’s really the only possible response in the time frame allowed. Electrifying everything in even a decade is a pipe dream. There’s nowhere near the necessary mining and manufacturing capacity even if all the needed minerals can be got within the shrinking friendly territory. Carbon capture is a small scale joke. Thankfully, all the frightening talk about solar geoengineering is a fantasy within the time allowed. They don’t even have more than an idea for a plane design–nothing now available will work–and it will take a large fleet because the entire planet must be sprayed. (See how crazy that sh-t sounds?_

      Reducing luxury and conspicuous consumption is the biggest, lowest hanging fruit out there. Broader economic adaptation will be required because we’re an economy built to cater to that kind of consumption. Protect the vulnerable. Let the billionaires, who’ve built this YOYO world, figure things out for themselves.

    2. LifelongLib

      FWIW I’ve read that the truly wealthy (i.e. people who can afford better lawyers than the IRS has) have all sorts of tricks for avoiding taxation e.g. borrowing money for routine expenses so no income tax, and hiding estate assets in family trusts so no inheritance tax either. I assume this applies mainly in the U.S. and I welcome correction on any of it.

  5. upstater

    Property taxes based on market value works reasonably well on single family or duplexes, outside of Prop 13 kind of places. Where it falls apart is by design, eg “investor” type properties, mansions apartments with double digit units, condos, etc. Stiff transaction taxes on properties, all second+ homes, or luxury items like large yachts, jets, cars over $100K, jewelry, bullion*, etc above a threshold value could also work.

    Seizures would be best under a different regime.

    * India has the highest personal ownership of gold and has VAT. Many in the EU also have VAT on metals

    1. Mildred Montana

      A year ago, Canada introduced a tax on the purchase of luxury goods:

      “The Luxury Tax, originally proposed in the 2021 budget, received Royal Assent on June 23, 2022. The tax will apply to new cars and aircraft with a retail sales price over $100,000 and to vessels over $250,000. It will be calculated at the lesser of 20% of the value above a set threshold ($100,000 for cars and personal aircraft, and $250,000 for vessels) and 10% of the full value of the item subjected to tax.”


  6. Clint Olsen Wright

    Are taxes used to fund government, control the money supply or reduce inequality in countries with their own fiat currency? MMT dismisses the first assumption and supports the second. Inequality is a result of neoliberalism maintained by the major ruling parties in the Anglosphere and beyond.
    TUC, Howard and Richard can run their numbers exercise to a perfect result, but the likelihood of them resulting in any reforming policy is remote to non-existent.

  7. The Rev Kev

    I regret to say that although there are many possible solutions, that there is zero political will to do any of them. The people that benefit most from the present tax laws are also the ones that finance the politicians so nothing will change – until there is no other choice. And that will not be a good time that.

    1. pdxjoan

      Agreed. Incumbent politicians are all corrupted by the system, even if they landed in their elected office with the best of intentions and a true desire to represent their constituents. As a result, I decided a few years ago that I would never, ever cast my vote for an incumbent. Politicians will never pass term limits, but I have the power to try to limit their term. It’s called voting. It doesn’t matter what they run on, because party affiliation means next to nothing in the “uniparty era”, except on the latest polarizing cultural issue.

  8. Rip Van Winkle

    In the middle of the H.P. Lovecraft movie Re-Animator right about now. The ending is hilarious, in a sick way. That’s how I see it currently playing out in the U.S., everywhere one looks.

    1. Bugs

      Ah yes the chef d’oeuvre of the late and lamented master of horror, Stuart Gordon, starring my favorite Star Trek alumnus Jeffrey Combs. The end is spectacular. And kind of politically incorrect. Now try “From Beyond”. It’s even more tripped out!

  9. Ignacio

    An article that was linked by Henry Moon Pie a couple of days ago on the inequal carbón print by the richest decile of the population made me think that a great mistake is to have flat indirect tax rates (VAT etc). That, for instance make It unfair to rise indirect taxes on fuels to fight climate change. Would It be easier to have a ladder of indirect taxes relative to income? Say, 51% for top 10% earners, 21% for middle income and 1% for lowest decile incomes. With AI and all that Big data available, It wouldn’t be that difficult IMO.

    1. Cristobal

      We need to be clear. VAT, and other forms of taxes on consumption, are regresssive. People with lower incomes spend all their money each month, pay VAT on all their income. Those who have higher incomes and are able to save, pay less VAT. We need to go after income. Focus on rentiers. All these other proposals are just a smoke screen to avoid what must be done.

      1. spud

        yep, vat tax is a back door tariff on the victims of free trade.

        tariffs are a tax on the rich, use excise taxes, tariffs, duties and capital controls. then you can have the heavy boot of a civil society on the throats of the oligarchs, pare down the wealthy oligarchs till they are manageable.

      2. Felix_47

        While I do think we need much higher taxes for a number of reasons I think one area that many do not see with a VAT is that in the environment I work in there are a lot of broken families and people living on the edge. Some really need help and some don’t. Almost universally I see that women are trying to raise a lot of kids with no child support from the men. The men are living reasonably well working for cash so the DA cannot find and take their money. They do not use bank accounts to protect their money from the DA. It is incredibly common. And many, sadly, are in prison or simply vanish to another state and build new families with new women so they cannot pay and the children’s future is grim. So to catch those deadbeat dads working for cash a VAT would be great. When they get that new bass boat, the Cadillac Escalade or BMW or the Rolex or the 200 dollar Nikes the government gets a good cut. I would like to see the entire national VAT revenue go to paying reasonable child support to women in the social groups that have over a 70% out of wedlock birth rate and whose children generally have a poor long term prognosis economically and educationally. Long term that would really improve US society far more than the government and union run schools. And a VAT should not replace raising current taxes. If the revenue is used properly it does not have to be regressive. Simply allocate the collections to the people that would be unfairly burdened with it…..like minority mothers of children without child support.

        1. Deb

          Soooo…white mothers without child support are NOT unfairly burdened? We’re all rich enough to raise our kids alone without any help from their fathers, because of our RACE? I beg to disagree. Race shouldn’t have anything to do with it. This is strictly a financial thing.

    2. Henry Moon Pie

      Somebody like Jason Hickel should look into that idea, Ignacio. A progressive VAT tax. And it would take some serious computing power to apply it at point of sale, but maybe it could be calculated later and applied against income?

      I know I keep saying this, but folks, this is the only way to more toward any 2030 targets.

      What I keep remembering is this is the weather we’re getting from the carbon that entered the atmosphere by 10 years ago. We’ve been putting it in at record rates since. Hard rain gonna fall.

      1. Bugs

        Income isn’t important. Wealth is. And you’ll spend more in court arguing over the amount than you’ll ever collect in taxes. In his last novel, The Pale King, David Foster Wallace spends some time discussing a quixotic attempt by the state of Illinois to put in place a progressive sales tax, with the complexity and confusion you might imagine at points of sale in the 1980s.I never looked it up to see if it was actually something that happened. It would probably work on luxury goods but you would need to use sanctions or something similar to clawback tax avoidance outside the jurisdiction.

        1. Yves Smith Post author

          A novel is not evidence and Illinois never had a progressive sales tax. Please don’t make me waste time checking things you could have checked yourself. But I agree a progressive sales tax is a crazy idea. Income is easier to tax because you don’t have to argue about valuation.

    1. Michael

      Biden spends money on the cold war and charging stations but won’t raise taxes to pay for it.

      As Cristobal says, smoke screen to avoid what can’t be done.

  10. Bunter

    Commenters’ alternate strategies for more equitable taxation are fine. However, the author’s salient point is the efficiency, or “cost incurred to collect a dollar of tax”.

    The purpose of taxation may vary, as observed by a prior commenter. Thus, if the purpose is revenue raising, and a particular tax costs government $2 for every $1 it collects then it’s a non-starter.

    This is a similar concept to the costs incurred with “means testing” of benefits.

    The author’s second point about difficulties with valuation is also well taken. His proposal for pension taxation neatly sidesteps this issue.

    However, won’t this leave the obscenely wealthy, musk, bezos, etc…, untouched as most of their assets are held in stock?

    1. Yves Smith Post author

      Yes, sadly, unless perhaps the authorities impose transaction taxes on sales of interests in private businesses. Those occur at a measurable price. You’d have to include sales of various rights that could suck the value out of a company while leaving the formal ownership intact.

      I also must confess to forgetting a key idea of classical economists, often recommended by Michael Hudson: high land taxes.

      1. Kouros

        Took the words of my mouth here.

        Adam Tooze has a series on China just now where he discusses the musings of the rich against the authoritarian Xi. I think an alliance between Tyranny and demos is always better for the majority than an alliance between tyranny and oligarchy – which is the model proposed by the west and spearheaded by the US.

      2. Bunter

        I agree that a “financial asset transaction tax” would reduce the valuation uncertainty – the transaction price is beyond dispute. However, again, I don’t see how this would impact those who use their massive holdings (musk, bezos, etc) as collateral for a loan. There is no change of ownership, per-se. Perhaps this is the “sales of various rights that could suck the value out of a company while leaving the formal ownership intact” to which you refer?

    2. Ignacio

      I don’t know how is It done in the US but in the EU VAT is collected and declared by the companies that do the sales so this is not burden for the state. A “progressive VAT” might be somehow more complex but wouldn’t add a significant cost to the state.

  11. JonnyJames

    Sorry to be uber-skeptical but::The likelihood of Congress Crooks passing any sort of legislation to ameliorate the sickening levels of inequality is almost nil. It would be nice to have a national discussion about wealth tax, land tax, financial transaction tax (Tobin), unearned income tax, progressive income tax etc. but I don’t see the MassMediaOligopoly or politricksters facilitating that.

    Sadly, folks like Warren and Sanders talk a good game sometimes, but they are merely sheepdogs for the DNC. At the end of the day, they withdraw and tell everyone to vote for the D sociopath war criminal, because the R is supposedly worse.

    As socioeconomic inequality becomes more and more perverse in the US, I am afraid that levels of violence will increase. We have millions of heavily armed civilians who are ignorant and misinformed – a very dangerous combination. Many of these people have stockpiled supplies and ammunition. They are not really a threat to the ruling class/oligarchy because they don’t know who their enemies are.

    However, when large segments of an armed population are driven to despair and have little to lose, the potential for violence increases. They often lash out against fellow citizens, innocent people and their perceived enemies.

    1. Grayce

      True. And a demagogue stands up and says, “They’re coming for you. And I’m just standing in their way.” And without knowing anything better, the people follow such a person until it is too late. Frying pan into fire.

  12. Alice X

    My solution is to forbid absentee ownership. If you live in it, you can own it, but only up to a certain size where you care for it yourself, or with a small number of assistants. If you work in it, you can own it, but only with 20 assistants. And there goes Wall Street. Sob, sob. But as Trotsky is said to have asked of British Labor ca. 1926: You don’t think they are just going to give it to you, do you?

  13. scott s.

    I’ve read Warren’s arguments that a wealth tax is an income tax under Amendment XVI and find them unpersuasive. It should be considered a capitation or other direct tax that is apportioned to the states. As was done with the direct taxes in the 1800s you divide the country into assessment districts to make the assessments.

  14. dirke

    Most of the wealthy have the real wealth held by corporation or trusts that they control. An example the Gates Estate in King county is own by Cascadia Corp. Which is mostly owned by Bill Gates. His foundation contains most of the Microsoft assets (mostly stock) that Gates transferred to it. Corporation, trusts and others are taxed on net versus gross income (like us common folks). Large corporation do not use tax accountants to figure out their taxes. The have tax lawyers to read the actual tax law and they tell the accountants how and what to file. When I was running my consulting company in the state of Washington, I paid a B&0 tax that was 1.5% of my gross. I had no problems with it. I would have gladly paid a 10-15% to Feds just to avoid a the tax games. If a simple B&0 system was implemented for everyone we’d see the tax burden and income inequality start to level out. Corporation play the money shuffle and most (in percentage) pay little or no taxes. I have a acquaintance, that his tax filing was 300+ pages. He took to a bookbinder and had it bound with a nice cover. He also included another volume with all the references to the tax, tax law and tax legal cases that applied.

  15. tiebie66

    If the purpose is to increase revenue, why fret so much about taxing the rich? The thresholds, over time, would simply be lowered until they hit you… I’d say much revenue could be had by not wasting so much money, especially on wars and armaments. Why do we allow ‘them’ to get us to bark up the wrong tree?
    If the objective is to regulate the money supply or fight inflation, introduce a small fixed transfer tax that comes due every time an amount changes from one account to another, no exceptions. As the rich and corporations are more likely to transfer larges sums from one account to another, they will proportionally be more affected. In fact, they will be affected proportional to their economic ‘activity’. Netting is not allowed and ownership transfers without a corresponding money tansfer will have no legal standing.

  16. TomDority

    The following needs to be read in classic sense – Wealth = outcome of applied labor
    Money does not equal wealth. Asset price inflation = outcome of speculation
    FIRE sector is overhead not addition to GDP and on it goes – Micheal Hudson’s J is for Junk economics (think that is title, need to round it up) goes into the Orwellian changes in definitions

    In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers.
    If a man earns his income by producing wealth nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, unemployment, and increased cost of living.
    If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth.
    If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth.
    Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.

    Written around 1925

    Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery.
    It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices.
    But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other.
    Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both.
    Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.

    1. some guy

      The coal-mine owners who ” gave” employment to coal miners also gave them abundant killings and maimings in mine explosions, cave-ins, rock-falls, etc. The owners who “gave” employment to coal miners also gave them abundant black lung disease.

      Coal mine owners never “gave” a mining job to anyone out of charity. They only did it in the knowledge that they would make more money selling the coal to society at large than the money they had to pay to the miners they “gave” employment to.

      If the coal mine “owner” were abolished and the mine were owned collectively by its miners, they could “give” themselves their own jobs without the need for a “charitable” mine-owning job “giver”.

      This paragraph offered to us reads like hasbara for the owning class.

    2. Grayce

      One more thing about the statement, “without employing labor or producing wealth they secure a large part of the wealth others produce.” Let us talk about Chief Executive Officers. They cannot labor enough for their salaries. They presently take a large part of their annual wealth-building-income from the corporate wealth {profit] others produce. Activist stockholders aka corporate raiders can now apply enough pressure to ensure that the golden handcuffs produce policy that takes and takes from the wage earner.
      Chief Executive Officers, Chief Financial Officers and Chief Financial Officers triple that rake-off behavior. Are they stockholders? No and yes. Once stock options are the reward for finagling the bottom line annually, they become shareholders, whose finagling currently reaches backward into chiseling off pieces of the delayed comp of retirees.
      American royalty chats at board meetings.
      If this seems cynical, it is time to fix it.

  17. Stephen

    The other problem with taxing wealth is that it is a “stock” rather than a “flow”. Taxing wealth can kill the goose that creates the golden eggs, so to speak. Widows being forced to sell their houses to pay tax bills creates bad headlines. Wealth is not always liquid and that also creates the valuation problems that sew referred to if there is not a ready market for many assets. Reality would be that the truly rich would manage to avoid the tax anyway.

    Much better to tax the income and capital gains that create wealth in the first place. These are a “flow” and taxing them usually does not kill incentives so much. Even better if we could rediscover Victorian logic about taxing the so called unearned increment or economic rent. The UK tax system even treats such capital gains favourably compared to income from employment when it comes to high earners. Entrepreneurs Relief is another exemption that sounds good on paper but is subject to all sorts of abuse.

  18. FUBAR111111

    Alternate title: “How to cause capital and entrepreneurs to flee, faster”

    Because there are alternatives out there, if you are motivated enough, and nothing causes motivation to rise like the threat of the Government taking all your money.

    Like me, not a particularily rich guy, many of my neighbors have far more wealth than I do, I’m just what used to be called “upper-middle class”, which today is just “works, but has just enough to pay ever-rising bills, with litle left over, if anything”.

    I’m already planning to bail for greener low-tax pastures, not sure where yet, but I am going, going, gone. Will sell existing businesses and property in the West, lay off employees, sell everything I can, and move to a place where I will start over.

    I’m sure most of you will be upset by this statement, you are welcome to stay here, and pay your ever-growing share of the tax burden, it’s your right, after all. Be generous, pay 110% tax, it will make you feel more virtuous, I’m sure.

    I fully recognize what I am saying is not applicable to BIllionaires who pay little, but as discussed above, how do you draw the line between “fair” and “unfair” taxation, exactly? Who ever said life was fair anyway? Besides Utopia, when was life ever fair? There have always been Oligarchs, and I don’t see them going extinct yet.

    People who can, will flee, those left behind in The Garden will be screwed. As ever was. When will Bankers pay their “fair share”? Probably on the 1st of NeverComes, of course.

    Am I cycnical? Damn straight.

    When I see the WEF giving up their money for the sake of helping elevate society….I’ll stop holding my breath now.

    1. tegnost

      Close your biz, and if it was a good biz, someone else will do it.
      This whole “I’m going to take my toys and go home.” is bs., as is the “I’m not the rich guy, bob down the street is the rich guy.” .gov has been shoveling money into your asset values and now you’re having the predictable tantrum at the possibility, very slight possibility, that you might have to give up some of your unearned lucre.
      Don’t let the screen door hit ya where the good lord split ya.

      1. some guy


        As long as we live under the Free Trade Occupation Regime, Mr. FUBAR will be able to re-set up his own business in whatever Mercantilist export aggression platform he re-sets his business up in and use his production to undercut any American production which might try to replace what he will shut down.

        Until Free Trade is abolished, people like Mr. FUBAR will have the last laugh and won’t even mind expressions of ill will like ” don’t let the screen door hit ya” etc.

    2. some guy

      If we had militant belligerent Protectionism instead of the Free Trade we have now, we could ban imports from whatever slavery-haven greener pasture you move to in hopes of dumping your underpaid underpriced production onto the American market from.

      I note with interest that you have never even considered selling your assets to your targeted-for-layoffs employees. If the business is such a good business, I would think a loan or other method could be set up based on the expected future earnings of the business and assets to enable the employees themselves to be able to pay whatever the price is that you would be selling your assets for.

    3. Tedder

      I am very happy to hear that you, FUBAR, are giving up your privilege and joining the working class. Welcome!

  19. QuarterBack

    Beefing up inheritance tax helps with the risks of children and grandchildren coming out of the womb with enough financial power to wreak unstoppable havoc upon industry and society without having any of the knowledge or experience that comes from being “self-made”. I have less trouble with self-made billionaires retaining assets to realize their visions and potential contributions, than than I do with dynasties of adult children playing out Lord Of The Flies with mountains of family cash. Self-made billionaires should have the right to make their children comfortable, but not to unleash future dynastic power.

  20. Cure E Us

    Leona Helmsley – Queen of Mean – said, “We don’t pay taxes; only the little people pay taxes”, a quote which was identified with her for the rest of her life.

    A wealth tax won’t be enforced in the USA – if a wealth tax is enacted, it will be nominal, and deliberately designed to facilitate circumvention. Wealth and power are paramount to people like Leona and the like – their wealth was/is expropriated from the poor, ignorant, and disadvantaged (or conveyed through their dynastic estates with little to no income tax.) The American public must justifiably confiscate their expropriations; however, it gets more dastardly and insidious.

    The United States, by offering tax incentives and secrecy to attract money from overseas, has been turning itself into a tax haven. Currents of financial capital flow around the world in response to minute changes in tax and secrecy incentives. This is ‘off-shore’ business, and it has become central to the U.S. government’s global strategies for financing its stupendous debt. The U.S. government – and many other governments (e.g., Paris, Geneva, Moscow, London, Cyprus…) – have allowed tax havens to multiply because the elites who use them are the world’s most powerful lobbyists. Offshore is how the world of power now operates!

    A wealth tax? A wealth tax, if anything, facilitates the perpetuation of a sick system. Congress would love to delude the American public with the fallacious prospect of a wealth tax – this grants additional time for theatrics, obstruction and diversion, from the failed-state – that is the USA. As an alternative, why not have a tax on corruption?

  21. Tedder

    I have heard Marxian economist Michael Hudson several times proposing a land-rent tax, a patent fee tax, a gains tax, etc to simply tax away the wealth of the superrich and oligarchs. He proposed this to the Russian Duma sometime in the 2000s, but his proposal was beaten down by the very power of the wealthy.
    He is also much in favor of a hefty inheritance tax.

  22. danf51

    The top 10% of income earners already pay the vast majority of taxes. We don’t need higher taxes, we need smaller governments.

    I am in favor of one thing along the tax pillaging line: tax 100% all compensation in all forms paid to corporate employees over 10 million per year. This would be aimed at CEO’s – corporate managers. People who found and build their company’s would be exempt.

    If a guy like Tim Cook, thinks he’s talented enough, and would not be fairly compensated with 10 million/year running Apple, his option would be to quit and form his own company and make it a success.

    1. tegnost

      The top 10% of income earners take most of the money and own most of the stock market so it’s not inconsistent that they pay more taxes. If this unequal distribution bothers you then you should be happy to pay the bottom 90% (wait, the “bottom” is 90% which is not accurately described as a bottom, except and until you realize that the top 10 have taken everything, creating this lopsided bs) more so that they can pay more taxes. If you look at ocare as a tax, that also whacks the lower orders while enriching the poor widdle taxpaying 10%er’s)
      More importantly, all of these threats to move somewhere else ignore that somewhere else doesn’t really want you either. And how much tax do the giant corps pay? That would be basically nothing.
      And over 10 million a year? How bout we close the carried interest loophole?

  23. Phichibe

    I would like to believe a wealth tax would be effective but I also have great respect for Yves’ judgment on these matters. Towards her skepticism, I know that the advent of off-balance sheet entities (1980s? 1990s?) has demonstrated that the GAAP is completely worthless when it comes to corporations. The shock of Enron wasn’t what was illegal but what was legal. Any prosecutor less determined than Andrew Weissman would have punted.

    I have zero confidence that there was any reform that the Big 4 and the management consultants haven’t long since gamed. Back in the early 2000s I knew a JD/CPA who worked for KPMG in Silicon Valley. When I met him I asked how frequently he flew to the US Virgin Islands. He smiled and said twice a month. Last I checked he’d taken a job in corporate finance at Ebay/Paypal.


  24. john

    You don’t have to get private equity disclosure if you have the IRS file a lien for a percentage of the holding every year until a transaction happens. This is not hard.

    1. Yves Smith Post author

      I see you like assuming can openers.

      The IRS can’t assume a value in a vacuum, among other issues. And private equity has persuaded governments all over the world of the necessity of its privacy regime. What about “enshrined in law” don’t you understand?

      1. john

        Wow. Vicious. No valuation required, only a percentage lien. Nothing is forever and PE will do transactions. At that time, when partners must report transactions, IRS will claim its percentage. This is really not hard.

  25. Jorge

    What about a progressive income tax?

    We have developed massive inequality in the US among salaried individuals partly because the people at the top can pay themselves more and keep it, which pulls up salaries all the way down. This is justified by “oh well we need to pay people more so they will want to be executives”, which is nonsense. In the 50s-60s regime of progressive taxation, they would reward executives with company perks as status symbols. This is really what the executives want: status symbols. You don’t have to pay them twice as much, just dangle some status symbols in front of them and they’re happy. They don’t care about money, they care about their rank in the dog pack.

  26. Polly Cleveland

    We already have a wealth tax. It’s called the property tax. It’s intrinsically the most progressive tax we have, and would be more so with better assessment practices and fewer loopholes.

  27. Boshko

    Supporting the argument of the challenges of implementing (let alone passing) and wealth tax, I’m surprised I didn’t see mention anywhere of the fact that the ultra wealthy in the US, individuals and corporations, simply evade and avoid taxes to a remarkable degree.

    Matt Desmond cites many number in his latest book, On Poverty in America, (an excellent read, btw), but he emphasizes that many if not most of the fiscal policies and long-term investments that would materially close economic inequality gaps (primarily around education, housing, and health care) could easily be paid for if corporations and the wealthy actually paid the taxes they owed. Unlike us suckers who labor for their income and get taxed automatically, those rentiers who gamble other people’s capital for income get taxed on the honor system with little follow-up or recourse by the IRS. It’s way easier to go after a middle-class couple, siphoning savings on the side, than after a billionaire with an army of lawyers and accountants that will inundate that IRS’s untrained and inexperienced ranks.

    And of course, our lawmakers are all wealthy. Why would they every legislate against their own interests unless the threat of popular revolt were real?

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