I was glad to see a proposal to fight inequality through wealth taxes. However, I was dismayed by several inaccuracies, which serve to undercut the proposal as framed.
While I agree that we should fight “the sources of inequality present today,” it’s not true that those are related to technical improvements. Rather, as explained in Rognlie’s “Piketty and diminishing returns to capital,” the increase in inequality comes entirely from asset appreciation in housing, with advanced technology making up only a small portion of overall capital. Technological capital has historically been a deflationary force, providing more and more spending power to those with limited capital.
While the WEF may claim that automation will cause unemployment, this is contrary to the long history of automation, which has historically increased movement into wage-labor. No explanation is given for why this long-run trend, which has been consistent for hundreds of years, is about to change.
One adverse consequence of taxing equity is that it advantages fast-growing companies like startups, which have only existed for a short time, at a cost to businesses that grow slower, in more prosaic parts of the economy. This would push more capital towards "those who own the technology companies building these advances”—the opposite of what this proposal claims to seek.
The claim is made that this proposal can be made immune to deshoring of companies. This is hard to believe. More likely, it seems that certain categories of companies—especially ones growing at less than 1.5% annually—would find themselves avoiding direct engagement in the US market entirely, with goods available only through gray-market importers. This again punishes the prosaic companies that make up the majority of the economy and which have little profit-taking power, and advantages those with excessive sway.
Finally, the critiques on taxing land are also disingenuous. Taxes on property constitute the largest source of income for municipalities and do so fairly uncontroversially. The idea that raising these is politically impossible is false, as shown by the cap on the SALT deduction and the cuts to the Mortgage Interest Deduction in 2017. Property liens are also uncontroversial, and would remain uncontroversial if they could be paid in equity stakes rather than dollar terms.
Discouraging investment in american equities in favor of investment in land—as our tax code already does in too many ways—has been a major cause of inequality for decades. This proposal seeks to exacerbate that in order to fight a phantasmical belief that technology is responsible for inequality. Unfortunately, it won’t even achieve that, as the difference in rates of growth between advanced technology and more prosaic parts of industry means that increase the relative attractiveness of tech equities.
In contrast, I urge readers to consider further consideration of land value taxation—a straightforward approach which is nondistortionary and corrects for the causes of inequality in our economy. Finally, it is the most immune of all approaches to flight—the tax base cannot be taken out of the country because, quite literally, it is the country.
I was glad to see a proposal to fight inequality through wealth taxes. However, I was dismayed by several inaccuracies, which serve to undercut the proposal as framed.
While I agree that we should fight “the sources of inequality present today,” it’s not true that those are related to technical improvements. Rather, as explained in Rognlie’s “Piketty and diminishing returns to capital,” the increase in inequality comes entirely from asset appreciation in housing, with advanced technology making up only a small portion of overall capital. Technological capital has historically been a deflationary force, providing more and more spending power to those with limited capital.
While the WEF may claim that automation will cause unemployment, this is contrary to the long history of automation, which has historically increased movement into wage-labor. No explanation is given for why this long-run trend, which has been consistent for hundreds of years, is about to change.
One adverse consequence of taxing equity is that it advantages fast-growing companies like startups, which have only existed for a short time, at a cost to businesses that grow slower, in more prosaic parts of the economy. This would push more capital towards "those who own the technology companies building these advances”—the opposite of what this proposal claims to seek.
The claim is made that this proposal can be made immune to deshoring of companies. This is hard to believe. More likely, it seems that certain categories of companies—especially ones growing at less than 1.5% annually—would find themselves avoiding direct engagement in the US market entirely, with goods available only through gray-market importers. This again punishes the prosaic companies that make up the majority of the economy and which have little profit-taking power, and advantages those with excessive sway.
Finally, the critiques on taxing land are also disingenuous. Taxes on property constitute the largest source of income for municipalities and do so fairly uncontroversially. The idea that raising these is politically impossible is false, as shown by the cap on the SALT deduction and the cuts to the Mortgage Interest Deduction in 2017. Property liens are also uncontroversial, and would remain uncontroversial if they could be paid in equity stakes rather than dollar terms.
Discouraging investment in american equities in favor of investment in land—as our tax code already does in too many ways—has been a major cause of inequality for decades. This proposal seeks to exacerbate that in order to fight a phantasmical belief that technology is responsible for inequality. Unfortunately, it won’t even achieve that, as the difference in rates of growth between advanced technology and more prosaic parts of industry means that increase the relative attractiveness of tech equities.
In contrast, I urge readers to consider further consideration of land value taxation—a straightforward approach which is nondistortionary and corrects for the causes of inequality in our economy. Finally, it is the most immune of all approaches to flight—the tax base cannot be taken out of the country because, quite literally, it is the country.