09 April, 2021

The Only Dumber Idea than Corporate Taxes are Wealth Taxes

Well, carbon taxes are up there too, but these are the top two.

History Tells Us That Wealth Taxes Don't Work, by Veronique de Rugy | Creators Syndicate

In a study done for the Center for Freedom and Prosperity, Rice University economists John Diamond and George Zodrow examined the expected impact of Warren's previously proposed wealth tax (a 2% annual tax on wealth over $50 million, rising to 6% for wealth over $1 billion). They found long-run GDP loss of 2.7%, thanks in large part to a 3.7 % decline in the capital stock. Economists Douglas Holtz-Eakin and Gordon Gray of the American Action Forum also found that Warren's wealth tax would cost workers 60 cents of earnings for every dollar of revenue raised, or approximately $1.2 trillion in lost earnings over the first 10 years.

Well, that’s pretty predictable. When you take money away from investors, they don’t invest. When they don’t invest, companies can’t afford to hire or pay more. When companies can’t afford to hire or pay more, employees lose money.

When all of these things happen, you destroy the economy.

But that’s a goal of Democrats anyway.

If you're skeptical of economic predictions, consider that these scenarios have already played out in the real world. A detailed analysis by the Tax Foundation shows that while many Organisation for Economic Co-operation and Development countries have tried a wealth tax, only five of those countries still have one today.

Wealth taxes weren't widely abandoned because these governments suddenly embraced free-market principles. Instead, implementing the tax put reality on a collision course with the same theoretical myths now being spread in the United States. These taxes don't rake in the revenue or solve the supposed problem of inequality. For starters, wealth taxes aren't paid by rich people who reduce their consumption as a consequence. They reduce their investments, which reduces capital formation, which slows productivity and wage growth. In other words, wealth taxes may be originally paid by wealthy folks, but the economic burden falls heavily on workers.

I think I just said that. There’s one other problem too. Will Veronique de Rugy get it too? I bet she will. She’s damn smart.

Previous wealth taxes also triggered capital flight to other countries, which explains the relatively small amount of revenue actually collected. Declining capital stocks then slowed economic growth and depressed overall tax revenues. The Tax Foundation notes, "Among those five OECD countries collecting revenues from net wealth taxes, revenues made up just 1.2 percent of total revenues on average in 2019." And high administrative costs due to a more complex tax made even the little bit of revenue raised unappealing. That's why so many countries gave up.

Yep, there it is.

You either flunk basic math by supporting such a thing, or you are deliberately trying to destroy the economy. There are no other possibilities.

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