A Wealth Tax

You can click either graph to see it in a readable size, or click the link below it to see the graph in the Ngram Viewer:

A long stretch with almost no discussion of the wealth tax:

Graph #1: "wealth tax" (blue)

And when there was discussion of the wealth tax, there wasn't very much:

Graph #2: "wealth tax" (blue), "income tax" (red)

In Domesday: A Search for the Roots of England, Michael Wood quoted from the Anglo-Saxon Chronicle on the idea for the Domesday book and on William the Conqueror's motivation for gathering the information:

Then he sent his men all over England, into every shire, and had them find out how many hundred hides there were in the shire, or what land or cattle the king himself had in the country, or what dues he ought to have each year from the shire.

William wanted to know what dues he ought to have each year -- what revenue he could expect to receive. In the 11th century, the King's business was to determine the wealth of the nation in order to predict his revenue from a tax on that wealth. It would be six centuries before anybody thought about taxing income.


Jerry's thoughts on a wealth tax:

I think of it more in terms of paying for the services that you use. e.g.: federal and state taxes go to pay for the military, police, fire department, highways, etc. Do the military and the police and the fire department only protect the assets that you bought with this year's income? No, they protect all of your assets. Every year, they protect all of your assets. That protection is fairly expensive, every year. We should pay for it in proportion to how much we have in terms of assets -- not income.

Similarly...everybody who gets their food from the grocery store benefits from the highway system. But the guy who owns a car benefits more. And the guy who owns a supermarket or a trucking company benefits even more. A wealth tax more accurately allocates this cost than an income tax does.

And even things like welfare or unemployment -- they have the effect of keeping society stable, preventing revolution, preserving the status quo. High net worth taxpayers benefit way more from that than the people receiving the welfare do...

At ProMarket: The Decline of American Journalism Is an Antitrust Problem by Sally Hubbard. Good article. Great opening:

As a former antitrust enforcer, I believe that the starving of journalism and the disinformation crisis are in good part monopoly problems. I’ve been writing about antitrust and tech platforms since the summer of 2016, when I noticed that the tech giants—Google, Amazon, Facebook, and Apple—were doing the same types of things Microsoft had been sued for nearly 20 years earlier. They were leveraging their market power to make fair competition impossible.

These tech giants are gatekeepers that also compete against companies that must get through their gates to reach users. News publishers must get through Facebook and Google’s gates due to the two platforms’ concentrated control over the flow of information. But Facebook and Google compete against news publishers for user attention, data and ad dollars. They are controlling the game and playing it too.

Publishers never had a fair shot...

Toward the end of the article, Hubbard summarizes, and suggests first steps toward a solution:

Weak antitrust enforcement set the stage for these platforms to extract the fruits of publishers’ labor, much as monopolies are extracting wealth across most sectors of our economy. Monopolies are putting the American Dream at risk, as people—including journalists—are not rewarded for their efforts.

Beginning immediately, antitrust enforcers should:

• Prevent Facebook and Google from acquiring competitive threats and companies that fortify their monopoly power
• Unwind anticompetitive deals and divest subsidiaries to open up competition
• Sue to stop exclusionary practices

Antitrust enforcement alone won’t solve all of the problems listed above, but we won’t be able to solve anything unless we weaken monopolies’ power. It is a necessary but not sufficient condition.

Necessary but not sufficient, Sally says. I'd like to suggest something else: The existing corporate income tax favors bigness. The corporate income tax is a tax on profit, on the income you take out rather than reinvesting in the company. The income you sink back into the company is all (or nearly all) deductible: you don't pay tax on it.

This arrangement drives business spending. The spending reduces the corporate income tax and encourages economic growth. But it also favors bigness, because the more you can afford to spend, the more of your income avoids the tax.

We need antitrust enforcement. One of the main reasons we need antitrust is that the corporate income tax favors bigness. And one of the main reasons antitrust is less effective than it should be is that the corporate income tax works against it.


At USA Today, from April of last year: Analysis: Trump is right. Amazon is a master of tax avoidance by Jeremy Bowman of The Motley Fool:

Throughout its history, Amazon has consistently reported minimal profits, meaning it has paid very little in taxes since taxes are assessed based on profits... Between 2008 and September 2017, for example, Walmart (NYSE: WMT) paid $64 billion in income tax, compared to just $1.4 billion for Amazon, even though Amazon has been the more valuable company for several years now.

Amazon uses the tax code as a tax avoidance strategy. And now that Amazon has shown American business how to take advantage of the tax code, we have really no option but to change the tax code.

In The Atlantic of 1 August 2018, in Jeff Bezos’s $150 Billion Fortune Is a Policy Failure  Annie Lowrey writes:

Amazon is a marvel that has changed everything from how we read, to how we shop, to how we structure our neighborhoods, to how our postal system works. But his fortune is also a policy failure, an indictment of a tax and transfer system and a business and regulatory environment designed to supercharging the earnings of and encouraging wealth accumulation among the few. Bezos did not just make his $150 billion. In some ways, we gave it to him...

Lowrey has it exactly right: We gave it to him. It's time to re-write the tax code.

But what to write? That is the question. Here's my answer: Broaden the tax base to include all of business income, and reduce the tax rate so the government's tax revenue is unaffected by the change. We could instead increase that revenue or reduce it, as you prefer. But the change that I see as necessary is the broadening of the tax base to include all business income. This will eliminate the tax advantage for bigness.


The main argument against this proposal would likely be that it turns the income tax into a wealth tax. From the businessman's point of view, he spends money to make a profit. But first he gets his money back, and then the profit is the extra money he makes on top of that.

The key concept here is that he gets his own money back. The businessman doesn't count that money as income. He considers it to be part of his wealth. By taxing it, in his view, the income tax becomes a wealth tax.

To the extent that the businessman's view is correct, it is a micro-economic perspective. When government makes economic policy, it must be from a macro-economic perspective. And from this broader perspective, the businessman's money stops being his money the moment he spends it. If he gets that money back later -- or more accurately, if he gets that much money back later -- it is two transactions later, or more. Probably more.

From the macro perspective, it isn't his money until he has it in hand. And when he receives that money, he receives it as income. For tax purposes, it is "gross income", but income nonetheless. And an income tax should tax it.

If Amazon and Walmart pay the same tax rate, and Amazon's gross income is bigger than Walmart's, then Amazon should pay more income tax than Walmart. It's that simple.

And the wealth tax? From a macroeconomic perspective: Yes, we need a wealth tax too.