New Republic: What Would the World Look Like with Piketty’s Global Tax on Wealth?


I like this article because it starts off by saying that Piketty’s ideas, while interesting (why else devote an article to them), are essentially impossible. Taxation based on net worth not only requires significant information gathering, but also encourages tax evasion in a much more significant way than an income tax would.

As I’ve said before, though, a wealth tax is interesting because it disincentivizes static property. If you aren’t earning a return on investment from something you own, you’d sell it instead of incurring the tax- this becomes especially true if a hypothetical wealth tax displaces capital gains taxes to some degree. What this means is that large pools of assets become more of a liability.

One interesting side effect of this is that if the tax is high enough to encourage property churn, real estate will become cheaper, but only to those who don’t have enough net worth to be affected by the tax. This effect alone could be hugely democratizing. Now if we imagine the tax being higher, and there being a negative tax for certain forms of productive debt (mortgages, student loans), and suddenly inequality becomes less of an issue.

I will also say the notion of this tax being zero under say a million euros (or dollars) of assets is a good one. You want to discourage vast static holdings, but no one should be penalized for owning a house or having a retirement fund. Tax-advantaged funds like 401(k)s could even be exempt until you become old enough to withdraw, or until you do withdraw.

Even Piketty calls the idea “utopian”, but it’s still fun to talk about.


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