Okay, once more.
It is possible to tax the rich.
It is even easy, IF the major powers (or just the US) decide to do it.
This is for three reasons:
1) None of the tax havens are powerful countries. All of them can easily be coerced.
2) Money is actually earned in specific countries. You can actually tax it before you let it leave, and once it leaves, you don’t have to let it back in.
3) There aren’t a lot of places rich people want to live.
Rich people don’t want to live in a backwater. They want, and indeed, need to live in a “world city”: New York, London, Paris, Berlin, Tokyo, San Francisco, etc. Sure, there are second- and even third-tier world cities like Hong Kong, Vancouver, and various lovely, smaller European cities, but basically, rich people want, and can only really run their businesses from, a few places.
Yes, the telecom revolution matters, and so do private jets (which should basically be illegal), but at the end of the day you need to meet people in person, and you want to live in a place where other big people are, and where all the lovely amenities are, which isn’t a police state utopia (a.k.a., Dubai, which is lovely, unless anything goes wrong, in which case you are in hell, and, no, there is no resort to law).
World elites need to live in world cities. They make their money in the big powers, often in more than one, and they need to be able to spend their money where they live and where their businesses are.
Where is Tim Cook going to go? Where is Jeff Bezos going to go? If someone has a ton of money in tax havens, but can’t get any of it into Europe, the US, and so on, that money is virtually useless to them (yeah, they can still live well, but they’re out of the game).
Regional elites, it should go without saying, are easy to tax. If you’re a big wheel in a country with almost no business outside that country, except perhaps some exporting, you have no choice. You pay or you stop doing business (and this doesn’t mean the business goes away, if the government is smart).
Clamp down on the tax havens, tax money where it is earned, before it leaves the country, and don’t let grey or black money into the country.
This doesn’t work for small countries, except with respect to their own elites, but it is something that the US Treasury and the IRS could do tomorrow if they chose. If the EU and some other countries got together, they could do it because their market is large enough.
Taxing the rich doesn’t happen because it is particularly hard to do technically, but because our governments are owned and run by rich people who do not to be taxed, and will avoid being taxed by evading their country’s taxes. The system is set up the way it is because the rich don’t want to be taxed, as Stirling Newberry has noted.
In other words, this is a political problem. It’s not that rich people inherently can’t be taxed (reading about how rich inheritors felt about being taxed during the 1930s through the 1960s in Europe and the US will disabuse you of that notion). Rich people aren’t taxed because, politically, the desire isn’t there.
Even things like bitcoin and blockchains have not effected governments’ ability to tax the rich. Bitcoin is simply a ledger which records every transaction. Blockchain is an inherently authoritarian surveillance technology, something many of its idealistic or opportunistic boosters refuse to understand or admit. Neither protects rich people’s money. I’ve worked in a financial institution, and when regulators are actually serious (they often aren’t), financial companies get really serious about obeying the law.
We can tax the rich any time a powerful enough government, or governments, choose to do so.
Not doing so is a policy choice, driven by elites’ ownership of the political class, and by politicians’ own membership in the elite class (or their desire to join the wealthy class).
It isn’t more complicated than that.
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Bill H
It’s not that you can’t do it, it a question of whether or not it’s worth the effort and consequences.
What happens to the stock market when stock holders sell off stocks to pay the tax? How do you evaluate the net worth of the holdings of the rich? What does it cost to perform the audits and collect the taxes?
Why have so many nations imposed wealth taxes and later rescinded them? Why do so few nations which imposed wealth taxes still have them, and how successfully do they enforce them?
Would a constitutional challenge to a wealth tax be successful?
Is the amount of money, about 20% of the current national deficit, worth having to run the gamut of answering all these questions? That many pitfalls in pursuit os a relative pittance?
Herman
If anything elites are more geographically concentrated now than in the past. The days of local elites running regions of small towns and rural districts are ending. Most of these backwater areas are being abandoned by the elite, as seen by their increasing decay. Statistics on substance abuse, suicide, unemployment, family breakdown and other problems all tend to be worse in peripheral regions. Unsurprisingly, these areas are also where much of the populist backlash is coming from.
The reason why there is political opposition to higher taxes stems in part from the nature of the modern left. In most advanced countries the mainstream left is an upstairs/downstairs coalition of affluent professionals and poorer workers who are likely to be ethnic minorities. This coalition is increasingly located in the major cities while the base of right-wing populism is in the peripheral regions which tend to be more ethnically homogenous.
Problems arise when politics is based on an hourglass coalition within a very unequal context. Big cities are often very economically unequal. This explains why so many center-left parties have embraced multicultural neoliberalism as their ideology. It is a way to get the economic policies they want while keeping their identity-based electoral coalitions alive. However, there are signs that some people on the left are starting to see this arrangement for what it is, as favoring economic elites.
Ten Bears
It’s all just ones and zeros on a computer somewhere – on “The Cloud”.
What happens when the power goes out?
nihil obstet
I suspect it would take several of the great powers to do this. The New Yorkers would take off for London or Paris, or their elites would move to New York or another of the great cities.
As a first step, we might aim at enforcing current laws. There’s so much banking fraud and laundering of illegal money that we could get the elites’ attention.
I’m very fond of Dean Baker’s idea of making corporations give the government non-voting stock, so that the public enjoys any increase in value or profits. The government can be gamed only if all stockholders are gamed, and that’s called theft.
This is all to work our way towards virtually confiscatory top marginal tax rates and inheritance taxes, which we need for a decent society.
450.org
So long as money owns the political process and governance, no, you can’t tax the wealthy elite. In fact, quite the opposite, it will be more and more tax cuts for the wealthy elite and rampant catastrophic deregulation until there is no regulation. Caveat Emptor is fashionable once again. The market and the black market have merged and become one. The black market, like the Corleones, has gone legit.
Donald Trump is in the Oval Office because of money. Every POTUS was POTUS because of money. This is why Donald Trump’s head, I would say brains but there’s no evidence he has one, is still intact which means the wealthy elite are willing to tolerate his odiousness so long as he doesn’t take their wealth or threaten to take their stolen wealth. It’s impossible for it to be otherwise considering the current system. The horse left the barn long ago as far as this system is concerned.
In a different system, yes, you could tax the wealthy elite and it would be easy as you say and for all the reasons you state. But getting from where we are now, Point A, to there, Point B, is where the discussion resides. Getting from Point A to Point B cannot happen in this current system. That necessarily means revolution. The wealthy elite have gone all in and the emperor is stark naked in his birthday suit. It’s time to scalp him and burn his throne and castle to the ground.
Ian Welsh
Nah, the New Yorkers almost all aren’t going anywhere. The US treasury can sanction them anywhere. The IRS can follow them anywhere. And too much of their biz is in the US.
Remember, US taxes are extra-territorial.
Mallam
No need for them to sell off stocks to pay such a wealth tax. Just hand over some ownership of stock to the government to fund a sovereign wealth fund, and redistribute dividends to people in form of checks.
Probably the biggest impediment to taxing the rich in the United States is that the IRS has been hollowed out and doesn’t have enough staff and highly trained experts to go after the rich. To go after them the IRS would need to be beefed up and staffed by many more people. Then you have to build institutional knowledge which takes time. Theoretically you’re right it can be done, but this is what the war on certain institutions and the IRS has been about. This is also arguably the best argument in favor of a Elizabeth Warren presidency: she has amassed her own network of experts outside of Clinton/Obama orbit, and she will unleash the bureaucracy against the rich bastards.
bruce wilder
once again, neoclassical economics — a primary source of neoliberal ideology — gets in the way of thinking this problem thru. by insisting on framing everything as markets,markets,markets and largely ignoring or oversimplifying the concept of economic rent, while ignoring the importance of hierarchy in organizing the economy. at bottom, the economic concept of “ownership” is sadly neglected and the result is a fluidity for that notion in law and accounting that makes possible the epidemic of fraud in company (corporate charter) registration and the shell game of transfer pricing, that are at the center of schemes of international corporate tax avoidance.
i think ian makes a very good point about the critical need for capital controls, as a lever for collecting taxes. neoliberals love “freedom”: free trade, free movement of people (labor) and free movement of capital. the last undermines everything else, the bargaining power of labor, the power of states to collect taxes, and so on.
whether collecting taxes from multinational corporations that derive big incomes from their positions of political power in the world economy is “technically hard” is the kind of neoliberal objection that inevitably will be raised.
i would follow lambert strether on the thesis that neoliberalism is the ideology of the professional classes, and the professional classes would be fine with collecting taxes on their super-wealthy patrons, as long as the arms race of collecting and avoidance employed lots of them. if it is made “technically difficult” it is because it serves the interest of a powerful political class of lawyers, economists, accountants, and bureaucrats that it be so.
the primary political problem, though, is that economic rents are both a product of political power and a source of political power. an ideally healthy and efficient state will heavily tax economic rents; while an unhealthy state can almost be defined as captured by rent-seeking interests (using “rent-seeking” as a pejorative originated with neoliberals, which is an interesting tale of politics, as they used it to upend the post-WWII order, which depended in part on parceling out small economic rents to diverse entities, in exchange for the current order of gigantic business networks and conglomerates)
Eric Anderson
There’s an even easier way, Ian.
The one thing all obscenely wealthy people have in common is the ability to pay an army of lawyers to do their bidding. Lawyers (unlike journalists — a point upon which I have railed on here) submit themselves to sanctions should they breach their ethical oaths. Those ethics are a product of state bar policy enforced by individual state supreme courts’ legal decrees. Campaigns, like divestment, could be waged upon these bar associations to ethically prohibit the lawyers from conducting such transactions for their ethically challenged pay masters.
ps … This comment may be the first step toward my newest 501c3.
“Lawyers Opposing the Obscenely Prosperous Hiding Of Lucre Elsewhere”
LOOPHOLE
Obviously, I’m open to suggestions on the name.
Stirling S Newberry
It is only a question of when the masses start believing in climate change. Right now the wind has started to break on the democratic side of the aisle, the question is: do we want cars for the middle class or jet rent by the wealthy?
Eric Anderson
bruce:
“i would follow lambert strether on the thesis that neoliberalism is … “
https://www.nakedcapitalism.com/2014/03/neo-liberalism-expressed-simple-rules.html
I thought it was:
Rule #1: Because markets.
Rule #2: Go die!
One of his all time best.
Stirling S Newberry
Yeah, and he believes in the state going bankrupt with MMT and 1200 pages of unworkable equations. Simple lesson: do not take advice from a person who wants to start blowing his foot off os the hip.
Ché Pasa
When taxation is considered punishment it’s harder to tax someone who is or claims to be “successful.”
Taxation, of course, is not (necessarily) punishment at all, but is part of the price one pays to live in a decent society. Like elites in the past, today’s rich don’t think they should have to pay for a decent society for anyone but themselves, and if they can get away with it, they don’t think they should have to pay even for their own society. Let the Little People pay. That’s their motto.
Even getting the rich to consider paying their fair share is problematic if they don’t consider any amount to be ‘fair’ when they think all taxes are punishment and confiscatory.
In our current system, the only answer is to do as once was done: legislate and impose high taxes on the rich and enforce it. Let them whine and complain and threaten to run away. As was the case in past eras, most will pay. They’ve got too much at stake not to.
On the other hand, most of our legislative bodies are made up of rich people who believe taxes are punishment and confiscatory and should only be imposed on the Little People. Courts are bound to agree.
Stalemate.
Jeff Wegerson
“As an economic online discussion grows longer, the probability of a comparison involving MMT approaches 1″
Eric Anderson
Sterling:
Who? Bruce or Lambert? I’m going to assume you’re talking about Bruce, who sounds like he’s firmly with Stiglitz in the Georgist camp. Pretty much where Liz Warren is as well.
Jeff Wegerson
Sterling. If you can dance around the topic and force someone else to invoke it you actually are awarded bonus points.
So you say things like “governments aren’t funded by taxes but by deficit appropriations”. Or you say “sovereign money printing governments are never bankrupted by debts in their own currency.”
nihil obstet
We can’t leave most of culture alone and expect to change one of its results. Messages to hammer over and over:
Greed is bad.
Greedy people are bad.
Greedy people hurt you and your children.
By avoiding taxes, rich greedy people hurt your children’s schools, your roads and airports, veterans, law enforcement, your old age economic comfort, [add whatever your listener values].
And so on.
It’s a losing battle to distinguish the deserving rich from the undeserving rich. First, make evil the a priori assumption of wealth.
Willy
The more I get out there, the more I sense that the rich are propping up causes of any kind, which try to propagandize to ‘lesser’ individuals that they alone are responsible for their own fate. On the surface this makes reasonable horse sense, as all good ruses do. But when the realities of concentrated power are thrown in this only makes very limited horse sense.
Fertile ground of every kind is being taken by the rich while the rest of us are being told to be “personally responsible” for managing the wasteland that’s left.
bruce wilder
@ Eric
Lambert tried to publish Sterling back in the day, and Sterling did not always appreciate being lightly edited, as much as his writing needed it.
On economics, Lambert defers to Yves Smith, which seems to be pretty much a condition of his business relationship with her, and Yves Smith (Susan Webber) has committed herself and her enterprise to MMT even or especially in its most indefensible late-night infomercial forms. Sterling is perfectly correct, imho, in rejecting these MMT doctrines as prescriptive of explosive policy failure.
For what little it is worth, I would not use the rhetoric of “state bankruptcy” as Sterling does to attack Lambert’s MMT economics. MMT does have a critique of the rhetoric of neoliberal austerity and deficit hysteria, which I think mostly hits a ripe and deserving target. Conventional mainstream economics may be even less defensible than MMT in regard to its doctrines of money, banking and public finance. Mainstream economics relies on the rhetoric of “seriousness” which is reinforced by hand-waving in the direction of the risk of runaway inflation or state bankruptcy or other melodramatic scenarios. I do not like to do anything to confirm the mainstream — intellectually bankrupt imho — is their redoubt of “seriousness”.
Stiglitz is the Past Grand Master of mainstream Neoclassical Economics. Stiglitz, in his no doubt sincere endorsement of Henry George’s ideas about the importance of taxing away economic rents, is engaged in his larger project, which is demonstrating how one can justify left-of-center or progressive views and desiderata with wholly conventional and even Orthodox (sic) neoclassical reasoning.
I am adamantly opposed to Stiglitz’s larger project. I think neoclassical economics is, in Goebbels’ sense, a Big Lie. Neoliberalism draws its durable strength from what Stiglitz is doing — in many ways Stiglitz is as much a father of neoliberalism as Milton Friedman. Neoliberalism is not a single doctrine touted from a single-point-of-view, but rather a dialectic carried on between two poles and Stiglitz et alia anchor the left pole. By keeping the “debate” inside the iron rhetorical cage of neoclassical economics, neoliberalism maintains the pretense that “There is No Alternative”.
When Stiglitz argues the rightness of Henry George’s views he isn’t really intending to promote neo-Georgist thinking. He’s just legitimizing neoclassical economics; he’s saying, look, you do not have to leave the neoclassical framework to make “sound” progressive arguments and by extension, that “sound” arguments in economics are best kept within the supposedly well-vetted neoclassical framework. As long as the political discourse is trapped in the rhetoric of neoclassical market economics, politics is trapped inside neoliberal ideology. That mainstream economics and therefore neoliberalism has a “left” pole of Stiglitz, Krugman, Akerlof, Quiggin, Thoma et alia — probably a numerical majority of academic economists identify as “progressive” — does not redeem it.
I was trained in neoclassical economics and I think there are many salvageable bits and pieces among the wreakage and ruins. I am not much on the fatuousness, as I see it, of many who dismiss economics for supposedly assuming rationality when people are plainly irrational, nor do I think the empty vessel of Monty Python anti-capitalism is likely to be anything but destructive of leftish policy ambition. (In this spirit, I remain highly skeptical of MMT’s more provocative rhetoric. The claim of some MMT’ers that the state should not borrow at all strikes me as idiotic know-nothingism; “modern money” is institutionally founded on a central bank administering a marketable national debt — if you do not “get” that, you do not understand anything about how money works.)
To return to Stiglitz and Henry George for a moment, I do not think neoclassical economics is compatible with the thinking of George, who, like Marx, was working from and against the ideas of classical economics, where economic rent loomed large at the center of everything. Neoclassical economics was founded in the so-called Marginal Revolution to bury the subversive and revolutionary implications of Classical Economics and in George’s own day, very particularly to refute George! In the 1960’s, neoliberalism drew great strength from reburying economic rent with the use of “rent-seeking” as a rhetorical pejorative by the Public Choice / Virginia School branch of Chicago Schools economics.
Steve Ruis
Hear, hear … and gee, all it takes is political will. would that someone get elected who showed such spine (Bernie, Elizabeth, maybe … the rest of them … not … a … chance).
Hugh
MMT is different from neoclassical economics in that it has a different take on money, but, as far as I can see, it remains solidly neoliberal in its outlook. In this, we need to distinguish between MMT theorists and their cheerleaders. The theorists say the rich CAN’T be taxed (it’s too hard) and corporations shouldn’t be taxed (they earned their profits, amirite?). They believe in markets, markets, markets, just like their neoclassical colleagues. They view labor as a commodity. When they talk about a Jobs Guarantee, they are looking at it as a temporary public place to park a “labor stock” for the private sector during economic recessions. Its cheerleaders go, who cares about the rich? We can pay for Social Security, Medicare-for-All, a good job for everyone, free education, and the Green New Deal. Rah!
I find MMT theorists deceitful and the cheerleaders kind of empty-headed.
In fact, we can have many of the things that the cheerleaders want but getting them has to be based on the real and human resources at our society’s disposal. Money is just a way of moving these resources around.
Print money and spend it to get these things but understand you have to extinguish most of the wealth the rich currently control and limit excess future wealth accumulations. Otherwise, you have a huge competing source of money (the rich) which can and will direct resources away from what you want. Even the money initially spent for the things you want will eventually end up in the hands of the rich, unless limited and taxed away, and this will simply increase the leverage of the rich against what you want.
This brings me back to the subject of Ian’s post. You can tax the rich. But you must organize politically to do it. Taxing the rich is a dynamic process where you keep closing the doors to their hiding their wealth and income and where you raise their costs (confiscation and jail time) for doing so. We also need to make clear what the upper limits of wealth we want and can tolerate are.
bruce wilder
@Hugh
excellent
John
In a time where money is speech and corporations are people,economics is political to its core. The rich need to be taxed to curtail political power and the delusion that money knows best. Money is a prostitute that will always sell itself for more money. Shareholder value has the same sluttish tendency. Markets are always dishonest and corrupt. The larger the market, the greater the lie. Greed is the human vice that drives it all. I could go on, but we all know the details of the story if we were honest with ourselves. Nature always reverts to a mean and the laws of energy and thermodynamics rule. When money is grasped too tightly, sometimes heads have to roll to spread things out.