Eat The Rich

I rarely do this, but I got mad at an editorial, and now I'm writing about it on my blog!

The Washington Post Editorial Board recently wrote an editorial arguing that an increase in the capital gains tax rate would eliminate the need for a wealth tax. It's one of the dumbest things I've read, and it's a huge bummer to see it published in my favorite newspaper.

 

It's flat-out wrong, misleading, or missing the point from top to bottom. Hitting a few highlights here:

* They say that if the wealth tax is implemented, when the price of Tesla stock goes down, Elon would get a "tax cut". He would actually get zero dollars from the government when his wealth went down. Instead, he would pay a smaller tax the following year. If Tesla went bankrupt and Musk's net wealth was zero dollars, then he would owe zero tax. I'm not even sure what they're trying to say here.

* They lament that people with high wealth but low income (e.g. wealthy heirs) would have to sell stock in order to pay the tax. That isn't a bug, it's the whole feature! First of all, if you're doing anything at all with your wealth, you'll easily be able to afford the tax. (Your 100 million shares of $10 stock are worth $1 billion. They go up 4%. You owe 3%. You sell shares to pay $30 million in tax. You're now worth $1.01 billion.)

* Secondly, the whole point of this is to shake up the entrenched wealth of the top .0001%. We shouldn't be bending over backwards to ensure that billionaires can live comfortably in perpetuity.

* They worry about a downward spiral in markets. But markets are overwhelmingly owned by the wealthiest people. Stock is like any other asset: when it comes down in price, it's more affordable. If the stock market crashed in half today, people who automatically contribute to 401k's would be able to buy twice as many stocks as before the crash. Let's say it again for the millionth time: Wall Street is not the real economy, and we should not allow stock prices to dictate our economic policy. Markets should reflect reality, not drive it.

* They then pivot and say that the rich also have other assets that aren't easy to price, like fine art (maybe) and real estate (absolutely false). This is a specific point that Warren repeatedly addressed during her campaign, and I find it impossible to believe that the Washington Post Editorial Board isn't aware of it. As Piketty and others have shown, the vast majority of the wealth of the wealthy is held in financial securities. Fine art and the like is an infinitesimal fraction of that amount. Saying that it's hopeless to tax 98% of the wealth because it's hard to estimate the value of the remaining 2% is asinine. That would be like saying that because some people are paid in DogeCoin and that's hard to price we should stop withholding FICA payments on payrolls in US dollars. So, let's start collecting that 98% today, and tackle the remaining odds and ends (art, patents, copyrights, etc.) when we get to it.

* Piketty wrote at length in Capital And Ideology about why the European wealth taxes of the 1990s were a disappointment, and the very simple technical fixes to address them. (Use more progressive rates, re-appraise annually, don't let the uber-wealthy hide their wealth in secret tax havens.) I guess the Washington Post Editorial Board hasn't read this book. They really really should before they spout out about the wealth tax. Why the hell argue against something you don't understand?

* Reforming property taxes (real estate tax) is the dumbest possible way to try and reduce the wealth gap. The wealth of the middle class is mostly held in real estate, while the wealth of the top 1% is overwhelmingly held in financial assets. You could increase Jeff Bezos's property tax rate by 5000% and it wouldn't make any noticeable impact on his wealth.

* And yes, we should also increase the capital gains rates as the editorial says. The two are not mutually exclusive, which is why folks like Piketty and Warren argue for both!

* And refreshing the estate taxes would also be a great move to make. But again, not mutually exclusive! And estate taxes would not be needed as badly in a world with wealth taxes. It's a choice between a big bite at the moment of death, and smaller levies over a series of years.

* The editorial says in its final paragraph "If the inheritance tax were more substantial people could still aspire to bestow a legacy on their children, but without unduly perpetuating unearned privilege." That contradicts what they are arguing for. Without a wealth tax, and with an inheritance tax less than 100%, parents could bestow legacies on their children that last their entire lives, that will grow over their entire lives, and that they will pass down to subsequent generations, in perpetuity, without anyone needing to ever do any work. I'd call that "unduly perpetuating unearned privilege". Again, the whole point of a wealth tax is to stop exactly that. You can still get wealthy, and you can still inherit wealth, but you have to do something with it, or do something on your own, or else your vast fortune will over the years become merely a respectable fortune.

They say that Part 3 of this editorial is coming soon. I hope it isn't the hot garbage that Part 2 was.