Let's Punish the Plutocrats!

Smash capitalism! Support a wealth tax!

How the comrades define wealth…

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Not long after October 7, I happened upon an X (formerly Twitter) post from that insufferable leftie leprechaun, former Secretary of Labor Robert B. Reich. He was bemoaning the possibility that the Supreme Court might take up a case that would give those fascists in robes, the Court’s conservative majority, an excuse to declare a wealth tax unconstitutional.

Though I seldom post anything on X these days, I took the trouble to do so in this instance. Because really, the wealth tax is a surpassingly stupid idea. I pointed out as much. And naturally, I got a come-back from one of the comrades:

A wealth tax is only “stupid” if you’re still in high school and don’t understand what you’re talking about. The point of it is to redistribute ill-gotten gains and prevent the hoarding of money by people who were able to take advantage of the rest of us by bribing government officials.

How’s that for sophisticated policy analysis?

But “hoarding of money”—how quaint! This troll seems to think that wealth consists of gold doubloons and pieces of eight, squirreled away by wicked rich people in safe deposit boxes, hidden treasure chests, and mattresses. It’s obvious that she hasn’t given a second’s thought to a good question: What exactly is wealth? Because before you tax it, you need to define it.

So let’s try this definition: Wealth is the net worth of all you own. And according to the proponents of a wealth tax, some portion of that net worth may constitute “ill-gotten gains”; that is, you did something underhanded or illegal to acquire it. So therefore…

But the attentive reader will have foreseen the difficulties implicit in such an analysis. While there may be isolated cases where ill-gotten gains can be identified and dealt with through criminal or civil judicial proceedings, for tax purposes that could never work. A wealth tax would have to set an arbitrary ceiling on virtuous wealth, intimating that anything above that ceiling constitutes ill-gotten gains. Thus (to pluck some numbers from the air), a net worth of $999,999.99 would be virtuous, while a net worth of $1,000,000.00 would be sinful—as a matter of tax law.

It may be objected that I’m setting up a straw man or, shall we say, a straw IRS agent. And it’s true enough that most progressives wouldn’t put the case for a wealth tax as crudely my interlocuter did. Instead, there would be the usual blather about the necessity of making the “the rich pay their fair share.” But that’s just another appeal to the phony morality that undergirds most progressive policymaking. For the definition of fair share is bound to be as arbitrary as the definition of ill-gotten gains. Whether the comrades are prepared to admit it or not, their call for a wealth tax is based on ideology and primitive emotions: hatred, spite, envy, greed, the desire to “smash capitalism.” Progressivism has big, expensive plans for America and the world. Why shouldn’t the evil rich pay for them? Why shouldn’t these despicable plutocrats be made to disgorge their ill-gotten gains?

How would a wealth tax work, though? The dismal sciences of administration and logistics teach that it wouldn’t work very well at all. As the Tax Foundation noted in 2019, “In 1990 ,12 member countries of the Organisation for Economic Co-Operation and Development imposed a wealth tax; today, only four do.” The eight countries that gave up on the wealth tax found that on the bottom line, it introduced more complications and caused more trouble than it was worth.

One problem is that a wealthy person’s net worth is not an easy value to calculate. Many of the assets it includes, such as real estate, fluctuate in value as economic conditions change. So a wealth tax targeting real estate and similar assets would rarely get it right: Either it would over-tax assets that have lost value, or under-tax assets that have gained value. An effective tax should be predictable, based on well-understood rules. The administrative complexities of a wealth tax would make it just the opposite: arbitrary and erratic.

Another problem is that a wealth tax would constitute an ongoing tax on unrealized capital gains—essentially a tax on capital, which would be radically counterproductive. Taxing capital incentivizes investors to cash in now by selling off the stock they hold, while disincentivizing them to invest in stocks going forward—the creation, essentially, of a permanent bear market. Mr. & Ms. Not-So-Wealthy America would not appreciate the effect that would have on their retirement accounts! And it gets worse. Capital is not hoarded cash; it’s money that’s been put to work. A tax on capital is therefore a tax on investment, innovation, and employment.

Finally, when you get down to the bottom line, it turns out that a wealth tax simply won’t generate significant revenue relative to the uber-ambitious spending plans championed by progressives. The version proposed by Senator Elizabeth Warren when she was running for president in 2020 would bring in $3.75 trillion (according to her) or $2.2 trillion (according to the Tax Foundation) over a ten-year period. But compared to the estimated $30 trillion ten-year price tag of all the goodies she proposed to shower on Americans—Medicare for All, the Green New Deal, student loan cancellation, free this, that, and the other—her wealth tax would deliver chump change. That’s what’s known as progressive math.

But revenue is really beside the point. If you listen to people like Warren, like Senator Bernie Sanders, like Robert B. Reich, like the troll who ventured to school me on the wonders and marvels of a wealth tax, you realize that the real point of it is to punish people who have had the audacity to be financially successful. How dare they produce goods and offer services at Y cost and sell them at a price of Y + 1? That’s unfettered, predatory capitalism—and it must be stamped out! The atrocities of Hamas might be excused or even justified, but the profits of Amazon are an abomination. The wealth tax is an expression of that attitude.

However, if my economically challenged troll is right and “people who were able to take advantage of the rest of us by bribing government officials” are running the show, a few more bribes should suffice to ensure that a wealth tax is never enacted. So bribe away, you predatory plutocrats! That would be a great investment in fiscal and economic sanity.