Bruce Ackerman and Anne Alstott argue that we should impose a tax on net assets of the wealthiest Americans (boldface mine):
We propose a 2% annual wealth tax on households owning more than $7.2 million in net assets. Such a tax would target the 0.5% of Americans at the top of the pyramid, and would yield at least $70 billion a year. This calculation is based on Federal Reserve data that we have updated to take into account the recession’s impact on housing and stock prices to 2009. Because we have used very conservative assumptions, the revenue yield could well be higher…
There is more at stake than fairness. Our proposal would address a deeper issue. There comes a point at which extreme wealth concentration threatens the very existence of democracy, and we are reaching that point.
This is one of the tragic lessons of Latin American history, where democracy has repeatedly bumped up against tight economic oligarchies that feel threatened by majority rule. Though reliable statistics on wealth equality aren’t available, we do know that income inequality in the U.S. today far exceeds that in Europe, and it is getting into the Latin American range. Because wealth is generally more concentrated than income, we are clearly in the danger zone.
Remarkably enough, the CIA has investigated the matter, and its website contains some sobering estimates. It reports that income is already more concentrated in the U.S. than in Venezuela, though we still have a way to go to reach the dizzying heights of Brazil and Chile.
Economic power corrupts as much as any other kind of power. And someone should remind our betters that the tax rate at the end of a pitchfork or gun barrel is typically around 100%.
They also shoot down the constitutional argument:
In the United States, anti-tax zealots will try to use the Constitution to cut off debate about a wealth tax before it begins. Article 1, Section 8 grants Congress plenary power to impose any and all “taxes, duties, imposts and excises,” but it contains a special limitation on “capitation and other direct taxes.” Under this little-known proviso, such taxes may be imposed only if they are apportioned among the states according to their population. This provision was part of a compromise with the slave-holding South, and its intention was to prevent the North from imposing a “head tax” on slaves because this could not be apportioned equally among the population of all the states.
Given its origins, this provision has consistently been construed very narrowly by the Supreme Court, which has found only head taxes and real estate levies to be within its scope. There has been only one exception. In 1895, the court used the clause to declare the income tax unconstitutional, but this judgment was reversed by the 16th Amendment. Given this history, it is extremely unlikely that the justices will cite the founders’ original compromise with slavery to bar a tax that would serve the cause of economic equality and democratic legitimacy. The Roberts court may be conservative, but it is not quite as reactionary as all that.
Actually, I wouldn’t put anything past the Roberts court, but one can hope. Here’s the problem a wealth tax would address:
For those keeping score at home, the odds are that you’re somewhere on the right side of the graph. And for those
Standing on the Overpass of History lobbing cinderblocks into oncoming traffic worried about the fortunes (so to speak) of the ‘job creators’, this assumes that they’re using their wealth for capital formation and not consumption. But are they? Well (boldface mine):
Classical, neo-classical, and neo-liberal economics all share a common mistaken psychological premise, one that is simple but deep, and in itself explains why they don’t understand the aims of Progressive Taxation.
Label it how you like, the academic discipline that emerged from England in the 18th and 19th century implicitly, hell I’ll make it stronger, explicitly assumed that the goal of capitalism is accumulation, i.e. getting more and more numbers on the right side of the ledger sheet. Which assumption seems blindingly obvious, which is why it is simple and goes so deep. In this model taxation on gains from capital serve to displace investment on the equally simple assumption that if you tax something people do less of it. Again perhaps blazingly obvious.
But it doesn’t hold up well against the historical record either narrowly considered in relation to 18th and 19th century England or more broadly across cultures and across history. Instead in most of those cultures and most definitely in Georgian and then Victorian England the evidence is strong that capitalists saw investment as the means to different ends, those of consumption and display that in turn would lead to societal status. You only have to look at the great Country Houses that were built during this period, with no expenses spared inside or out whether that be on landscape architects or silversmiths. And even a passing familiarity with say English literature of the time shows this on full display, the manufacturing classes rushing to build those country houses and buy their daughters way into society as soon as they could afford it, the facts on the ground clearly show that the driving goal of most investors was to finance consumption and display in the form of dress and habitations. Let us put it this way Scrooge was not then or now considered the hero, and throughout history the miser has been a despised and mocked figure.
So let’s not fool ourselves into thinking this would hurt job creation. As one rich dude put it:
Pity the poor job creators.