Capital and Taxes

The New York Times has reported today on a ProPublica study that shows that the wealthiest US individuals regularly pay little or no income tax. The NYT mentions that this has revived an interest in a wealth tax.
A few years ago, there was much excitement over the publication of Thomas Picketty’s Capital in the Twenty-First Century. Now there is a Netflix documentary which I haven’t seen yet but I did read the Picketty’s book. In record time I think, a full two and half-month for all its nearly 700 pages and I understood some of it. As a matter of fact, Picketty was careful to explain each of his formulas in plain English (translated from the French). Here is the most important one: r > g that is, the r or rate of return on capital will always be greater than g, the rate of growth of the economy which is the source of income for us 99 percenters. Some economists have criticized the book on various points (one accusing him of “mathiness” like “truthiness” using a lot of math to overwhelm the reader into thinking he must be right, it’s math after all). I take it from Nobel prizewinner Paul Krugman, that the book is one of the most important texts of our age. And of course the right-wing suggests the book is just more liberal socialism. Picketty’s book was given to me by my wonderful friend Tom, a dyspeptic but benign old Marxist professor. I think Tom was a little disappointed that Picketty’s Capital wasn’t a modern version of Das Kapital.
Of all the controversy about the book, no one has criticized his major point. Capital relies on labor to increase its value and will always increase faster than labor’s earning power causing increasing income inequality. Picketty spends a lot of time showing the negative effects of inequality including not only poverty and ill health but social upheaval and even violence. Picketty also documents generational wealth, vast fortunes passed along down the ages growing to enormous proportions. Mostly untaxed.
The solution is a wealth tax. In the US we do have one form of wealth tax, the tax on real estate, usually the only form of wealth for most Americans. Some European countries have a wealth tax on assets like holdings in a stock market.
When a significant wealth tax was implemented in France a few years ago, many of the enormously rich elites simply fled. That’s why Picketty proposes that there be an international and therefore inescapable wealth tax that is the same rate universally. Fat chance.
At any rate at least the idea is being discussed. Elizabeth Warren had proposed a wealth tax as one of her many plans, but the Biden folks have dismissed it.
I do wish people would remember when they shell out for the their real estate tax payment, that a retiring Jeff Bezos will be looking down on us all from above the skies in his space ship and just rolling in his enormous billions and paying no tax at all. Capital in the Twenty-First Century, Thomas Picketty, Harvard University Press. 2014.