Wealth Tax

                                                       Wealth Tax

While it tickles all the deep inferior elements in the human heart, a wealth tax has many problems. While it makes for great "soak the rich" soundbites, in reality, it's ineffective at reducing inequality. What wealth taxes do best is to disrupt the accumulation of capital. Since most wealth is invested and provides capital for innovators and producers to draw upon — and for workers to work with — all Americans would suffer from a wealth tax.

In a recent paper published by the Center for Freedom and Prosperity, economists John Diamond and George Zodrow of Rice University's Baker Institute added to the extensive evidence on wealth-taxation's negative effects.

The authors simulated the Warren wealth tax's economic effects and how that impacts the lifetime earnings of different income groups. They estimate that long-run GDP would be 2.7% lower than it would be without a wealth tax. They also found declines in lifetime wealth from the upper to lower-middle classes.

The simulation assumes that wealth tax revenues would be used for redistribution in similar proportions to current spending. The authors thus found small increases in lifetime per-household wealth for bottom income earners, ranging from $100 to $500.

These very small "benefits" come at very high costs. Initial losses in average household income would amount to about $2,500.

The problem is that there is no reason to believe that the motive for politicians' behavior has anything to do what is best for the nation. Rather it is entirely what will benefit the politician through the exploitation of the naiveté of the poor voter. And a politician dressed in righteousness is an awesome sight.

(most from deRugy)