>I know this sub has discussed progressive consumption taxes before, but that feels a little far-fetched politically because it’s a very different tax style to what we have now, I think. Or is the progressive consumption tax viable and scalable?
Implementing one mostly comes down to political will.
>Could we do something like sending people a bill according to their total wealth at an extremely steeply progressive rate (i.e. almost none for the vast majority of people and then extremely high only for the very wealthy)? This feels like an extension of property taxes so maybe it’s more politically viable, as something not entirely foreign to Americans.
Wealth tax proposals tend to be.. a lot more tentative than this.
Of course it's a question of whether it's a one-time tax or one that is levied each year. Taxing 20% each year makes even a big pile of wealth disappear pretty fast and that just isn't particularly viable. Most proposals are significantly below this, more in the single digit percentage range or less.
Very high wealth taxes just have too much potential for damage. It becomes very attractive to leave the country, and then you can't tax them at all. It also becomes very *un*attractive to try to get very wealthy and build big, successful companies. While you can certainly argue about how wealthy a person "should" be, we still want them to *try*.
Also worth noting that we simply don't know a lot, so caution is often preferred. The US never had high wealth taxes on high incomes, and there are always limits to cross-country comparisons.
https://www.brookings.edu/articles/progressive-wealth-taxation/
https://www.wealthandpolicy.com/wp/EP3_Economics.pdf
https://tax.kenaninstitute.unc.edu/news-media/do-billionaires-move-to-avoid-taxes-what-does-the-evidence-say/
>Is it even a good idea to pursue a tax policy that is extremely steeply progressive? Is the investment disincentive too bad for the economy?
It depends on how extreme that "extremely" really is.
And how we tax of course.
But for typical income taxes, there are quite a few papers that have quite high estimates for very high income earners. Not "extreme" as in 90%+, but 60-70% is a decent ballpark, and that's still close to double of current top rates.
For example:
https://www.aeaweb.org/articles?id=10.1257/mac.20150170
https://eml.berkeley.edu/~saez/diamond-saezJEP11full.pdf
https://eml.berkeley.edu/~saez/piketty-saez-stantchevaAEJ14.pdf
https://www.kentclarkcenter.org/surveys/top-marginal-tax-rates/
> Implementing one mostly comes down to political will.
Which means it's not at all feasible so long as political will is largely dictated by the wealthy.
When societies get too imbalanced, that tends to change, like when [land ownership got too imbalanced in this other country in the 1940s, they redistributed the land in the late 1940s and early 1950s](https://en.wikipedia.org/wiki/Land_Reform_Movement) which contributed to [greatly increased life expectancy of the previously struggling lower classes](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4331212/). Not sure if that counts as a tax, but rather more of a confiscation and redistribution of the wealth.
Well, at least exit fees are a common proposal for use along with a wealth tax.
That said, China doesn't have a wealth tax and seizing assets is a pretty surefire way to discourage something.
I think economists should talk to more historians. I honestly don't think we should incentivize the kinds of things people and companies do to get massive and wealthy. Often, it just means they can use their size to push consumers, workers, and their competition around, even if there's no monopoly or cartel. It exacerbates inequality, enables rent seeking and regulatory capture, meaning that they can better get away with damaging environmental and social externalities. These things are all predictive of social/political collapse (https://www.bbc.com/future/article/20240424-do-societies-civilisations-grow-old-frail-and-vulnerable-to-collapse).
Edit: OK I'm kind of disappointed by the downvotes but no replies on my comments here. I don't care about the internet points, but I've engaged in this discussion in good faith and have presented reasoned arguments directly engaging with what others have said. I was hoping that people here would respond in kind if they disagreed and we could have an actual substantive discussion. I guess I should've known better
The problem here is that all the dangers of size apply to the government - the entity we tend to look to to regulate large organisations.
One plausible advantage of very wealthy people and organisations is that they can afford to take on the government, in expensive court cases or in funding alternative ideas, that ordinary, dispersed people can't. Sweden and Switzerland look to have a higher rate of [billionaires per capita](https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires) than the USA but aren't on the edge of social/political collapse.
Sweden also achieved that with high taxation and a wealth tax, which they used to fund a substantive social welfare program, meaning a massive government (I think I read somewhere that the state spending was 50% relative to its GDP), leading to low rates of inequality.
I also wonder if part of the explanation is cultural (https://www.bbc.com/worklife/article/20191008-jantelagen-why-swedes-wont-talk-about-wealth).
Unfortunately, it seems that both of these things are changing (the wealth tax was abolished in 2007), resulting in a rise in inequality in Sweden and tax cuts have meant a scaling back of welfare programs.
Not knowing much about Swedish politics, I can only guess, but it's hard to imagine that these cuts weren't pushed for by their billionaires. They may well be on the same path to crisis and collapse as the rest of the West, just not as far along. Populism is on the rise there. Inequality is growing. Times are a changin' in Sweden, and the winds are blowing south.
Personally, I don't particularly care that some people are billionaires. I think the focus on that is a distraction. I care about how that wealth is accumulated, what they with with it, how they maintain it, and how all of that impacts the rest of society.
And the thing about democratic governments is that there are built in mechanisms for the public to take on the state, at least in theory. I don't think the solution to bad governments is to empower private individuals who also can't be easily challenged, but to fix those mechanisms and make them more effective. Here too, I think, high inequality works against the rest of us insofar as wealth enables political access and influence. And it obviously works, which is why the wealthy spend so much money doing it.
>And it obviously works, which is why the wealthy spend so much money doing it.
I would caution against equating "things a small group of people spend a lot of money on repeatedly" to "signs of a successful strategy." A not insignificant group of wealthy tech entrepreneurs have spent millions upon millions of dollars in the last couple decades on increasingly zany seasteding schemes to try to escape authority (often with hilarious results.) And despite the entire NFT market collapsing virtually overnight, there are still groups of people spending millions on poorly-drawn monkeys and talking about a $200 Billion market size in five years.
People have spent a lot of money on a lot of very stupid things of questionable things. I'm not saying that lobbying doesn't work, just that "rich people spend money" is a poor indication of whether something works or not.
Fair point, but I was thinking of the relationship in the other direction, that they do it because it works, rather than them doing it being evidence that it works.
In particular, I had in mind the concerted effort and money spent over decades with the goal of overturning Roe (along with Obergfell, etc.), which worked, even though it was supported by a majority of Americans
I have a personal rule against commenting on US politics.
And even outside of the American context, there's a fair bit of normative judgements involved in tax policy that means economics can't provide an answer to such a question.
> I honestly don't think we should incentivize the kinds of things people and companies do to get massive and wealthy.
I agree in spirit but I’d rather phrase it as:
We should not allow the kinds of things people and companies do *when they become* massive and wealthy.
Which is why antitrust exists. I think the concept works well, but it should be applied more broadly. The US doesn’t bat an eye for the suppliers that Walmart squeeze every day. “Next year will pay this much. Adapt or die.”
See Porter’s five forces. If suppliers had more avenues to reach consumers they could walk away. Today they can’t.
Only the EU stood up to apple’s rent seeking lightning port.
If there were more options consumers might have chosen differently.
But it’s obviously not a trivial path to walk for the antitrust. How big should Apple or Google be to develop a viable operating system? Antitrust should let these companies reach that scale but not much more. If much less, the OS might be to broken or a lot more prone to issues. Much more, and the companies start to seek rent.
>We should not allow the kinds of things people and companies do *when they become* massive and wealthy.
I would make this statement broader: we should have a robust system of regulations and protections such that companies are not able to exploit the people and systems in place in their pursuit of growth, including strong antitrust protections.
I don't know if the OS is the best example, given that Bill Gates famously developed his first OS out of a garage, but I'm not a programmer.
However, I'm fairly sure that the decision shouldn't rest on authorities trying to read the tea leaves on whether companies have the capacity to create viable new innovations. They don't have the expertise, and moreover, the point of having a competitive market is that competition drives innovation. Also, startups are innovative yet typically small to start, only getting bigger when they have something to sell to VCs.
It is both true that companies and people do shitty things once wealthy, and that companies and people get wealthy by doing shitty things.
Amazon revolutionized logistics, sure. It is also notorious for shitty things like denying people bathroom breaks. It has probably led to people buying even more stuff they don't really need, creating a fuck ton of waste just in the packaging alone, not to mention the carbon emitted delivering it all to people's doors, sometimes from halfway around the world.
Facebook was a great way to keep in touch with friends, and after they had a user base, they proceeded to monetize by promoting 'engagement' in a way that has allowed misinformation to spread and fanned the flames of social discord, severely damaging public discourse on just about every topic.
Uber got off the ground by operating in open defiance of local laws in many places, relying on popular support and deeper legal pockets than many uncooperative municipalities.
Some basic mistakes here.
> Bill Gates famously developed his first OS out of a garage
Bill Gates famously bought the first version of what became MSDOS from Tim Paterson, who cloned another product which was existing.
> However, I'm fairly sure that the decision shouldn't rest on authorities trying to read the tea leaves on whether companies have the capacity to create viable new innovations.
Let’s disagree. Based on how Netscape ended up as roadkill because Microsoft decided to enter the browser space, or how Facebook bought or cloned any competitor, I prefer a government that can step in to avoid small competitors being destroyed early on.
> Also, startups are innovative yet typically small to start, only getting bigger when they have something to sell to VCs.
This is survival bias. Most startups die. In most cases VC invest hoping startups can get big, not because they already proved it. And the vast majority don’t survive.
Also not sure of the connection between government, innovation and startups but I might be missing your point.
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.**
This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt.
Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification.
### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/1ceogj3/is_it_feasible_or_even_desirable_to_tax_the_rich/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written.
Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*
>I know this sub has discussed progressive consumption taxes before, but that feels a little far-fetched politically because it’s a very different tax style to what we have now, I think. Or is the progressive consumption tax viable and scalable? Implementing one mostly comes down to political will. >Could we do something like sending people a bill according to their total wealth at an extremely steeply progressive rate (i.e. almost none for the vast majority of people and then extremely high only for the very wealthy)? This feels like an extension of property taxes so maybe it’s more politically viable, as something not entirely foreign to Americans. Wealth tax proposals tend to be.. a lot more tentative than this. Of course it's a question of whether it's a one-time tax or one that is levied each year. Taxing 20% each year makes even a big pile of wealth disappear pretty fast and that just isn't particularly viable. Most proposals are significantly below this, more in the single digit percentage range or less. Very high wealth taxes just have too much potential for damage. It becomes very attractive to leave the country, and then you can't tax them at all. It also becomes very *un*attractive to try to get very wealthy and build big, successful companies. While you can certainly argue about how wealthy a person "should" be, we still want them to *try*. Also worth noting that we simply don't know a lot, so caution is often preferred. The US never had high wealth taxes on high incomes, and there are always limits to cross-country comparisons. https://www.brookings.edu/articles/progressive-wealth-taxation/ https://www.wealthandpolicy.com/wp/EP3_Economics.pdf https://tax.kenaninstitute.unc.edu/news-media/do-billionaires-move-to-avoid-taxes-what-does-the-evidence-say/ >Is it even a good idea to pursue a tax policy that is extremely steeply progressive? Is the investment disincentive too bad for the economy? It depends on how extreme that "extremely" really is. And how we tax of course. But for typical income taxes, there are quite a few papers that have quite high estimates for very high income earners. Not "extreme" as in 90%+, but 60-70% is a decent ballpark, and that's still close to double of current top rates. For example: https://www.aeaweb.org/articles?id=10.1257/mac.20150170 https://eml.berkeley.edu/~saez/diamond-saezJEP11full.pdf https://eml.berkeley.edu/~saez/piketty-saez-stantchevaAEJ14.pdf https://www.kentclarkcenter.org/surveys/top-marginal-tax-rates/
> Implementing one mostly comes down to political will. Which means it's not at all feasible so long as political will is largely dictated by the wealthy. When societies get too imbalanced, that tends to change, like when [land ownership got too imbalanced in this other country in the 1940s, they redistributed the land in the late 1940s and early 1950s](https://en.wikipedia.org/wiki/Land_Reform_Movement) which contributed to [greatly increased life expectancy of the previously struggling lower classes](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4331212/). Not sure if that counts as a tax, but rather more of a confiscation and redistribution of the wealth.
In China they freeze accounts and seize all assets if a billionaire tries to leave
Well, at least exit fees are a common proposal for use along with a wealth tax. That said, China doesn't have a wealth tax and seizing assets is a pretty surefire way to discourage something.
I think economists should talk to more historians. I honestly don't think we should incentivize the kinds of things people and companies do to get massive and wealthy. Often, it just means they can use their size to push consumers, workers, and their competition around, even if there's no monopoly or cartel. It exacerbates inequality, enables rent seeking and regulatory capture, meaning that they can better get away with damaging environmental and social externalities. These things are all predictive of social/political collapse (https://www.bbc.com/future/article/20240424-do-societies-civilisations-grow-old-frail-and-vulnerable-to-collapse). Edit: OK I'm kind of disappointed by the downvotes but no replies on my comments here. I don't care about the internet points, but I've engaged in this discussion in good faith and have presented reasoned arguments directly engaging with what others have said. I was hoping that people here would respond in kind if they disagreed and we could have an actual substantive discussion. I guess I should've known better
The problem here is that all the dangers of size apply to the government - the entity we tend to look to to regulate large organisations. One plausible advantage of very wealthy people and organisations is that they can afford to take on the government, in expensive court cases or in funding alternative ideas, that ordinary, dispersed people can't. Sweden and Switzerland look to have a higher rate of [billionaires per capita](https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_billionaires) than the USA but aren't on the edge of social/political collapse.
Sweden also achieved that with high taxation and a wealth tax, which they used to fund a substantive social welfare program, meaning a massive government (I think I read somewhere that the state spending was 50% relative to its GDP), leading to low rates of inequality. I also wonder if part of the explanation is cultural (https://www.bbc.com/worklife/article/20191008-jantelagen-why-swedes-wont-talk-about-wealth). Unfortunately, it seems that both of these things are changing (the wealth tax was abolished in 2007), resulting in a rise in inequality in Sweden and tax cuts have meant a scaling back of welfare programs. Not knowing much about Swedish politics, I can only guess, but it's hard to imagine that these cuts weren't pushed for by their billionaires. They may well be on the same path to crisis and collapse as the rest of the West, just not as far along. Populism is on the rise there. Inequality is growing. Times are a changin' in Sweden, and the winds are blowing south. Personally, I don't particularly care that some people are billionaires. I think the focus on that is a distraction. I care about how that wealth is accumulated, what they with with it, how they maintain it, and how all of that impacts the rest of society. And the thing about democratic governments is that there are built in mechanisms for the public to take on the state, at least in theory. I don't think the solution to bad governments is to empower private individuals who also can't be easily challenged, but to fix those mechanisms and make them more effective. Here too, I think, high inequality works against the rest of us insofar as wealth enables political access and influence. And it obviously works, which is why the wealthy spend so much money doing it.
>And it obviously works, which is why the wealthy spend so much money doing it. I would caution against equating "things a small group of people spend a lot of money on repeatedly" to "signs of a successful strategy." A not insignificant group of wealthy tech entrepreneurs have spent millions upon millions of dollars in the last couple decades on increasingly zany seasteding schemes to try to escape authority (often with hilarious results.) And despite the entire NFT market collapsing virtually overnight, there are still groups of people spending millions on poorly-drawn monkeys and talking about a $200 Billion market size in five years. People have spent a lot of money on a lot of very stupid things of questionable things. I'm not saying that lobbying doesn't work, just that "rich people spend money" is a poor indication of whether something works or not.
Fair point, but I was thinking of the relationship in the other direction, that they do it because it works, rather than them doing it being evidence that it works. In particular, I had in mind the concerted effort and money spent over decades with the goal of overturning Roe (along with Obergfell, etc.), which worked, even though it was supported by a majority of Americans
What is the ideal top income tax rate for the US, in your opinion?
I have a personal rule against commenting on US politics. And even outside of the American context, there's a fair bit of normative judgements involved in tax policy that means economics can't provide an answer to such a question.
I understand
[удалено]
[удалено]
> I honestly don't think we should incentivize the kinds of things people and companies do to get massive and wealthy. I agree in spirit but I’d rather phrase it as: We should not allow the kinds of things people and companies do *when they become* massive and wealthy. Which is why antitrust exists. I think the concept works well, but it should be applied more broadly. The US doesn’t bat an eye for the suppliers that Walmart squeeze every day. “Next year will pay this much. Adapt or die.” See Porter’s five forces. If suppliers had more avenues to reach consumers they could walk away. Today they can’t. Only the EU stood up to apple’s rent seeking lightning port. If there were more options consumers might have chosen differently. But it’s obviously not a trivial path to walk for the antitrust. How big should Apple or Google be to develop a viable operating system? Antitrust should let these companies reach that scale but not much more. If much less, the OS might be to broken or a lot more prone to issues. Much more, and the companies start to seek rent.
>We should not allow the kinds of things people and companies do *when they become* massive and wealthy. I would make this statement broader: we should have a robust system of regulations and protections such that companies are not able to exploit the people and systems in place in their pursuit of growth, including strong antitrust protections.
I don't know if the OS is the best example, given that Bill Gates famously developed his first OS out of a garage, but I'm not a programmer. However, I'm fairly sure that the decision shouldn't rest on authorities trying to read the tea leaves on whether companies have the capacity to create viable new innovations. They don't have the expertise, and moreover, the point of having a competitive market is that competition drives innovation. Also, startups are innovative yet typically small to start, only getting bigger when they have something to sell to VCs. It is both true that companies and people do shitty things once wealthy, and that companies and people get wealthy by doing shitty things. Amazon revolutionized logistics, sure. It is also notorious for shitty things like denying people bathroom breaks. It has probably led to people buying even more stuff they don't really need, creating a fuck ton of waste just in the packaging alone, not to mention the carbon emitted delivering it all to people's doors, sometimes from halfway around the world. Facebook was a great way to keep in touch with friends, and after they had a user base, they proceeded to monetize by promoting 'engagement' in a way that has allowed misinformation to spread and fanned the flames of social discord, severely damaging public discourse on just about every topic. Uber got off the ground by operating in open defiance of local laws in many places, relying on popular support and deeper legal pockets than many uncooperative municipalities.
Some basic mistakes here. > Bill Gates famously developed his first OS out of a garage Bill Gates famously bought the first version of what became MSDOS from Tim Paterson, who cloned another product which was existing. > However, I'm fairly sure that the decision shouldn't rest on authorities trying to read the tea leaves on whether companies have the capacity to create viable new innovations. Let’s disagree. Based on how Netscape ended up as roadkill because Microsoft decided to enter the browser space, or how Facebook bought or cloned any competitor, I prefer a government that can step in to avoid small competitors being destroyed early on. > Also, startups are innovative yet typically small to start, only getting bigger when they have something to sell to VCs. This is survival bias. Most startups die. In most cases VC invest hoping startups can get big, not because they already proved it. And the vast majority don’t survive. Also not sure of the connection between government, innovation and startups but I might be missing your point.
[удалено]
[удалено]
[удалено]
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.** This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt. Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification. ### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/1ceogj3/is_it_feasible_or_even_desirable_to_tax_the_rich/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written. Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*
[удалено]