The politics of a wealth tax

That is the topic of my latest Bloomberg column, here is the end sequence:

Besides which — a fact that is getting too little notice — the U.S. already has what is in essence a wealth tax: Tax rates on capital gains are not indexed for inflation. With this nominal-based tax system in effect, it is harder to accumulate wealth over time, and the nominal-based tax erodes the real value of the asset base.

Whether or not you think this capital-gains policy is a good idea (I do not), it is striking how few Americans understand that it serves as a wealth tax. It is not marketed or proclaimed as such. And I don’t expect Republicans or Democrats to counter Warren by saying, “Don’t worry, we already have a wealth tax.” Isn’t this a sign that voters simply are not yearning for a wealth tax?

The other major form of wealth taxation in the U.S. is of course the property tax, which is paid by large numbers of Americans and used to finance local services, rather than being primarily directed against the wealthy. It is seen as a way of making local government accountable to those who vote and pay for it, not as an engine of wealth redistribution. If anything, by maintaining the quality of school districts in wealthy communities, its net distributive effects are anti-egalitarian. That system seems to be a permanent part of the American political landscape.

Finally, think about politics in the broadest possible terms. What Americans really want is for their lives, their jobs, and society in general to get better — an admittedly ill-defined but nonetheless instantly familiar concept. Americans also want their leaders to deliver such outcomes with the considerable resources already at their disposal. Is that so unreasonable?

Anyone promoting a wealth tax is in essence saying that there aren’t many ways of improving society within current resource constraints. That is a brand of pessimism which Americans voters have not often rewarded.

File under: the Twitter reactions are self-refuting.  But if you would like the opposing point of view, here is Eric Levitz.


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