Monday, April 14, 2014
We begin to hear proposals about taxing wealth, like that presented by Thomas Piketty in “Capital in the Twenty First Century”
Taxing wealth might reduce the fever of inequality, but it does not attack its causes. In fact, forcing the sale of assets, which is where wealth is stored, in order to increase the consumption of the less well off, might direction the funds away from those who have earned their wealth naturally, to those who earn it thanks to market imperfections, or to outright crony capitalism. An in such a way it could undermine even more the meritocratic values on which democratic societies are based, something that Piketty himself would seem to abhor.
In other words, if in Russia, would you tax wealth if that benefited the oligarchs?
I believe it would be better to concentrate on what is causing unjust artificial inequality and in this respect I could mention the following possibilities.
Like to eliminate the concept of risk weighted capital requirements for banks which channels bank credit away from “the risky”, in much a proxy for the poor, to “the infallible”, in much a proxy for the wealthy.
Like to increase the tax on all those profits which have originated under the protection of intellectual property rights. There is no reason for these to be taxed at the same rate as profits obtained from competing naked in the markets.
Finally, let´s give it a thought to what would have happened to all that unequally accumulated wealth, had not TARP and Quantitative Easing come to its rescue.
Just the fact that, except for religious considerations, when in the grave, we’re all equal, and the Gini coefficient is zero, should not mean we should hurry to get there... I think.