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If this claim is true, it's highly non-obvious. For one, it seems you would need to conclude that inflation should also be zero (or negative!?) lest certain pro

by leot 13y ago

If this claim is true, it's highly non-obvious. For one, it seems you would need to conclude that inflation should also be zero (or negative!?) lest certain productive investments go unmade. Sure, it may discourage some very low-yield productive investments. This is the cost of encouraging some more productive ones. At present, we live in a world where there's lots of wealth that's poorly (too conservatively) allocated. So such a trade-off seems entirely reasonable.

yummyfajitas 13y ago
A wealth tax discourages all investment and savings. There is no trade-off here. The rate of return (and hence the incentive to save) is lowered on all investments. Your analogy to inflation is nonsensical. Inflating away the value of cash does not reduce the incentive to invest in shares of GOOG or a pizza shop. Regardless of the inflation rate, the pizza shop will still produce the same # of pizzas one year from now.
- leot 13y ago
  This may be true of a wealth tax in the absence of a VAT. If you have any good sources on this, I'd be very curious to see them (though I'll look them up myself, too). Regardless, too much consumption (and too little saving) has never been a problem for the group that would be subject to a wealth tax. By exempting the first $100k - $300k (or so) of wealth, most people would experience no such disincentive. In any case, the larger point isn't whether or not it discourages investment. The real question is whether this kind of policy would be better or worse than what we've currently got. Capital gains taxes also discourage investment. Income taxes discourage work. Those impose real costs too. The claim I'm making is that any discouragement of investment or savings (among the already by-definition-wealthy) imposes far less of an economic cost than the current discouragements of by capital gains and income taxes.

by leot 13y ago

yummyfajitas 13y ago

A wealth tax discourages all investment and savings. There is no trade-off here. The rate of return (and hence the incentive to save) is lowered on all investments. Your analogy to inflation is nonsensical. Inflating away the value of cash does not reduce the incentive to invest in shares of GOOG or a pizza shop. Regardless of the inflation rate, the pizza shop will still produce the same # of pizzas one year from now.

leot 13y ago
This may be true of a wealth tax in the absence of a VAT. If you have any good sources on this, I'd be very curious to see them (though I'll look them up myself, too). Regardless, too much consumption (and too little saving) has never been a problem for the group that would be subject to a wealth tax. By exempting the first $100k - $300k (or so) of wealth, most people would experience no such disincentive. In any case, the larger point isn't whether or not it discourages investment. The real question is whether this kind of policy would be better or worse than what we've currently got. Capital gains taxes also discourage investment. Income taxes discourage work. Those impose real costs too. The claim I'm making is that any discouragement of investment or savings (among the already by-definition-wealthy) imposes far less of an economic cost than the current discouragements of by capital gains and income taxes.