Taxing Wealth 101

Students: All those wanting to impose a tax on the wealthy, so as to rightly collect revenues to redistribute to those most in need or, wrongly, to redistribute among those they favor as being those who can favor them the most, this is the set of questions that shall not be heard much less answered:

What asset (1) and to whom, buyer (1) shall the wealthy sell in order to raise the money to pay the wealth tax?

What asset (2) and to whom, buyer (2), shall buyer (1) sell in order to buy asset (1)?

What asset (3) and to whom, buyer (3), shall buyer (2) sell in order to buy asset (2)?

What asset (4) and to whom, buyer (4), shall buyer (3) sell in order to buy asset (3)?

What asset (5) and to whom, buyer (5), shall buyer (4) sell in order to buy asset (4)?

What asset (6) and to whom, buyer (6), shall buyer (5) sell in order to buy asset (5)?

What asset (7) and to whom, buyer (7), shall buyer (6) sell in order to buy asset (6)?

What asset (8) and to whom, buyer (8), shall buyer (7) sell in order to buy asset (7)?

What asset (9) and to whom, buyer (9), shall buyer (8) sell in order to buy asset (8)?

.... and so on in the never-ending circle of economic life.

Homework: Should we exclude the possibility that a “fair”-tax on the wealthy ends up being an un-fair tax on the poor?

See you tomorrow!

PS. Explanation: When, as a redistribution professor :-), I had in the past heard those questions and tried to answer these, I was confronted with:

Professor: Having so many having to sell assets, could this not depress asset values, and thereby the economy, and therefore actually in the long-run perhaps even disfavor those who could be temporary favored with a share of the wealth tax, net after our redistribution “costs”?

Professor, does it not seem like that the intermediaries in all the buying/selling of assets, will benefit even more than us redistributors and the redistribution receivers? 

Professor: Should we not prioritize asset (wealth) creation over wealth (asset) redistribution? Would that not generate even more tax revenues for us to redistribute? I remember having heard legend holds that when 1974’s Carnation Revolution’s chief strategist, Otelo Saraiva de Carvalho, told Sweden’s Social-Democrat Olof Palme: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”.

This also works for Inheritance Tax 101

Students: All those wanting to impose an inheritance tax, so as to rightly collect revenues to be redistributed among those they favor as being those who can favor them the most, this is the set of questions that shall not be heard much less answered:

What asset (1) and to whom, buyer (1) shall those inheriting assets sell in order to raise the money to pay the inheritance tax?

What asset (2) and to whom, buyer (2), shall buyer (1) sell in order to buy asset (1)?

And so on…

PS. The origin of this post can be traced to:

Legend holds that when Otelo Saravia de Carvalho, of the Carnation Revolution, told Olof Palme, “In Portugal we want to get rid of the rich.”, Palme replied, “How curious, we in Sweden only aspire to end the poor.”

https://perkurowski.blogspot.com/2018/10/redistributing-wealth-is-not-as.html

https://perkurowski.blogspot.com/2019/10/wouldnt-you-agree-daddy.html

https://perkurowski.blogspot.com/2022/03/forcing-oligarchs-to-keep-their-yachts.html

Wouldn’t you agree daddy?

When I grow up, I want to be a candidate in as many elections as possible, in order to use social media creatively, including threats, and solicit donations from millions at a zero-marginal cost. 

It seems such a great business, wouldn’t you agree daddy? 

When I grow up, I’m thinking of entering the polarization business. Being as extreme as possible and using social media at a zero marginal to solicit donations from those I can convince I’m their best chance. 

It seems such a great business, wouldn’t you agree daddy? 

When I grow up, I’m thinking of becoming a redistribution profiteer. Offering to tax the wealthy the most, could create great opportunities for me, whether with the wealthy or with the poor, or perhaps with both

It seems such a great business, wouldn’t you agree daddy?

When I grow up, I’m thinking of becoming a great vote fisher. I mean one of those anglers who, as a fishing bait, offers to make other, by force, pay for their generous promises.

It seems such a great business, wouldn’t you agree daddy?

Daddy, when I grow up, I’m thinking of becoming a bank regulator or supervisor. It seems such a safe job.

Have you seen what has happened to those jobs since the global financial crisis? It sure looks as the more you fail the more jobs there are.

Absolutely son, these are so much better businesses than plastics.

https://youtu.be/eMtLdE5Zq-8 

PS. I just remembered... becoming a price regulator is a great option too.

PS. Daddy, when I grow up, I feel I should be a public voiceful admirer of any great “wealthy and powerful transformational leader”. Is that not a great business?

PS. Daddy, when I grow up, should I not aspire to become an artificial intelligence regulator. That sure sounds like the cherry on top of the icing on a cake.

Communicating in a polarized world.

I have some ideas about what could compete with Facebook/Twitter

Chris Hughes, a co-founder of Facebook, a co-chairman of the Economic Security Project and a senior adviser at the Roosevelt Institute opines in the New York Times:

“No one knows exactly what Facebook’s competitors would offer to differentiate themselves.”

I have some ideas (most apply to Twitter too):

1. That it guarantees that I am always messaging or receiving messages from parties that I can clearly and absolutely accurately identify, with ease.

2. That I am targeted in an at least a 95% perfect way, so that my already way too scarce attention span is not being further wasted away by irrelevant/useless advertising/information.

3. That it shares with the participants 50-50 all advertising revenues generated by exploiting their data. Either to each one his respective production quota, or by means of helping to fund a universal basic income.

4. That it does it utmost to keep out all those redistribution or polarization profiteers whom, with their messages of hate or envy, can destroy our societies.

5. That it swears never ever to form any type of joint venture, with any type of Big Brother.

PS. Should we at least, as a minimum-minimorum, not require all social media with over a million followers, to openly publish the algorithms they use to maximize their ad revenues?

https://perkurowski.blogspot.com/2017/11/those-bothering-us-and-wasting-our.html

Redistribution profiteers have a vested interest in hindering people from reaching the pot they promise will be there waiting for them, at the end of their Marxists rainbow.

"From each according to his ability, to each according to his needs"

In the Marxist view, such an arrangement will be made possible by the abundance of goods and services that a developed communist system will produce; the idea is that, with the full development of socialism and unfettered productive forces, there will be enough to satisfy everyone's needs

I do not agree.  First and foremost because I believe that free markets (capitalism) has by far the greatest capacity to extract the most from the citizens’ abilities. 

But also because, while traveling on such Marxist route, some few would have to redistribute any production of goods and services that is insufficient to satisfy the demand. And those taking the decisions fall too much in love with the political and financial profits such redistribution franchise can produce. As a consequence, the redistribution profiteers will never want to let loose of their power and their interference will never allow the production of abundance.

That said, as a citizen, I can nonetheless see the need for some redistribution of income and wealth to occur, not only in order to keep our society at peace but also out of simple plain need of social justice. For that I firmly believe the redistribution should primarily be done, not top down, but bottom up. 

An unconditional universal basic income would do so and it would also be the best way of keeping the distortion of the productive forces of a free market at minimum. 

That societal dividend would have to absolutely meet two criteria:

Be large enough to help you out of bed but never large enough to allow you stay in bed.

Be 100% fiscally sustainable, nothing of having our grandchildren pay for our income today. 

It should be easy to understand why the redistribution profiteers abhor the UBI… and one of their arguments against are precisely: that it will inspire laziness and keep people in bed; and proposing that it should be so big so as to guarantee its fiscal unsustainability, so that they will have to be kept in their role as redistributors.

There are many funding sources for an UBI. In an oil exporting country obviously those oil revenues should be a prime source, as already done in Alaska.

Though in Spanish, below is a short YouTube in which three important members of the Chavez/Maduro Bolivarian Revolution, confess their need of keeping the poor poor: 

Tareck El Aissami, former Vice President and current Minister of Industries and National Production: “The poorer people are, the more loyal to the revolutionary project they are, and the more love for Chávez they have"

Héctor Rodríguez, a former Minister of Education and currently the Governor of Miranda: "It is not that we are going to lift people out of poverty into the middle class so that they later aspire to be scrawny (a derogatory term used for the opposition)"

Jorge Giordani, four times Minister of Planning, “Our political strength is given to us by the poor, they are the one who votes for us and that’s why our discourse of defending the poor. The poor will have to remain poor, we need them so.”

Redistributing wealth is not as straightforward as redistribution profiteers want us to think.

I posted a thread with 8 tweets 

Louis XII could be the filthy rich who gave up main-street purchase power to commission Leonardo da Vinci to paint Salvator Mundi. 500 years later another filthy rich freezes $450 million of his own purchase capacity, hanging that painting on a wall. Bad or great? 

Why are just the "filthy rich", like Louis XII and the buyer of Leonardo da Vinci’s Salvator Mundi cursed? Why not Leonardo da Vinci, or the current vendor of Salvator Mundi? Could they‘ve not just as well used money they got from filthy rich for something “more worthwhile”?

Does it all boil down to that Louis XII should not have commissioned Leonardo da Vinci’s Salvator Mundi and instead have bought food for the poor? I guess that would then depend on what the food suppliers did with that money, grow more food or drink more gin. Life isn’t easy

We can just pray that something of that main-street-purchasing-power comes into the hands of the few risk-taking entrepreneurs who, with luck, help catapult our world forward. Sadly, with risk weighted capital requirements for banks, regulators have made that less possible.

Yes, life isn’t easy. So let us all beware of all those redistribution profiteers out to make money or gain political power and who tell us “Let us just redistribute the wealth of the filthy rich, and you will all live in Nirvana. Venezuela, Nirvana? My …!!!

If Louis XX commissioned Leonardo da Vinci to paint Salvator Mundi, would it not make a beautiful novel to trace how that money flowed, perhaps to a Bill Gates, generating wealth so that someone could freeze $450 million on a wall, and keep the human development ball rolling? 

 

These ramblings about how the “filthy rich” convert their main-street-purchasing-power into assets and services, some that would never have existed without them started when seeing a totally useless shield in the Louvre in Paris.

Just in case, this is not a point blank defense of the “filthy rich”. It refers strictly to how their purchase power morphs into assets and services. Many “filthy rich” do become so in unjust and corrupt ways, quite often highly detrimental to development.

PS. A tweet: "A tax on wealth? Ok! But please, what assets should the wealthy sell to whom, in order to raise the money to pay it? And what would the buyers otherwise have done with the money they also must raise? And so on, and on, in the circle of the economy’s life."

PS. A tweet: "A conundrum. How to structure a tax on wealth without reducing the wealth that is taxed?"

PS. This of course does not mean that I am not in favor of reducing inequality. For that I strongly believe in the need for an unconditional universal basic income, a Societal Dividend

PS. When it comes to wealth, yachts are often depicted… but rarely do we see any interest in what those yacht-builders did with the money they received.

PS. Let’s hope taxpayers will not be surprised finding out they now have to pick up huge bills for maintaining some Russian oligarchs confiscated super yachts.

PS. Legend holds that when 1974’s Carnation Revolution’s, chief strategist Otelo Saraiva de Carvalho told Sweden’s Olof Palme in Lisbon: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”