> That's a good thing. Taxing wealth more, and income less, helps equalize wealth disparities over time.
It also slows economic growth over time, because most of the tax money is redistributed by the government, not invested, while the wealthy generally invest their wealth.
This is wrong. The redistributed tax money doesn't magically disappear. Almost 100% goes back into the economy because the people receiving it actually need the money for various things.
It is much more likely that the wealthy will use the same money instead to buy another yacht or private jet, which while also providing some jobs is ultimately a net waste for society.
Not that yachts should be banned, but economic policy should never encourage such spending.
The US introduced a "luxury tax" on yachts in 1991. It was a disaster and basically killed the domestic boat industry (many jobs lost) because wealthy buyers just went offshore. A general wealth tax may be fine, but targeting particular industries like yachts is a terrible idea.
Which is why a wealth tax is a better approach than "penalty" taxes on yachts or jets.
Would the high end suppliers of luxury items see a reduction in the very small numbers of people able to buy their top end products? Yes. Is that a bad thing? Probably no in the scheme of the entire economy or even the luxury industry affected.
People downgrading from their $100m yacht to a modest $95m yacht isn't going to destroy the yacht industry.
Are you going to bemoan the job loss of pyramid builders if/when some rich schmuck decides to spend half his net worth on building a pyramid too? (A yacht is a modern pyramid)
Jobs are not magic resource humans can't do without.
Jobs are a temporary, unpleasant condition of having to do shit you'd rather not do, because some idiot schmucks decided wage slavery is a natural progression from outright slavery and serfdom.
Why do I or anyone need to do unpleasant work unless it fulfills irrefutably necessary needs of my community, such as agriculture, medicine, construction of shelter, raising children etc.
Building yachts, pyramids and I'd argue the majority of the 'work' being done in cities world-wide is not fulfilling communal necessities and should therefore be abandoned.
This is not some pipe dream, it is an inevitable conclusion - humans don't like living in a system where their natural desires are constantly suppressed or left unfulfilled. There'll come a 'prophet' of sorts that will explain the human condition plainly and simply, explain where humans have gone wrong for thousands of years and propose viable alternatives enabled by science and technology that will seem obvious in hindsight. It will involve humans getting to be their animal selves and live simpler, happier lives, enabled by advanced science and technology that serve human needs, not individual needs of idiot schmucks with an inferiority complex.
There are a lot of caveats to this observation. The tax was levied during a recession, at a time when yacht sales had already declined sharply (from 16,000 in 1987 to 9,100 in 1990 for $100k+ boats).
Not really disagreeing, but you seem to be implying that the non-wealthly would use money on needs as opposed to wants and also that the money would not be used for societal waste. I think part of that's true to an extent - eg how many ovens or microwaves can one billionaire need. There are plenty of normal people who waste money on things that do not improve society, such as TVs, expensive vacations, fancy new cars, and so on instead of using that money for education, healthcare, etc or using that time for productive activities like volunteering, growing a vegetable garden, etc.
I was mostly responding to the part about money not entering the economy again, I was then lazy and introduced another topic into the discussion without comparing both sides.
> Not that yachts should be banned, but economic policy should never encourage such spending.
Yachts and private jets are obvious symbols of unequal wealth, but they are also objects that require huge amounts of ongoing spending that goes into the pockets of middle class workers.
Making sure a yacht or jet is ready to go when and where it is wanted requires a few full-time jobs. As strange as it may sound, I don't think economic policy should discourage such spending. Perhaps just be neutral on it?
It doesn't magically disappear in the same way that an incandescent lamp is 100% efficient if your goal is to heat your house as well as light it. The distinction isn't really meaningful unless you're trying to sell incandescent bulbs.
Most people would consider money directed at things that don't benefit the citizens (graft, boondoggles, arguably a bunch of things on the defense budget) more than the money would have had it stayed in the hands of whoever had it in the first place. Obviously graft and pork trickles down but does it really trickle down more than a chunk of money in a bank account but does it really trickle down more than if it had been spent on a yacht? Is hand-waving away efficiency (relative to whatever goal you're spending toward) losses as some sort of under-handed welfare really something we want to accept?
This is a strawman argument, but the logic actually does hold: If the original premise is true, "taxing the poor to give to the rich" would accelerate economic growth.
The problem is of diminishing returns - it would have a disproportionate negative effect on the poor and a minimal impact on accelerating growth, so it would be considered one of the most inefficient ways to achieve the latter.
> most of the tax money is redistributed by the government, not invested, while the wealthy generally invest their wealth
If the money redistributed by government is given to poorer people, what do they do with it? Are you suggesting they save it somewhere it cannot be invested in the economy?
All of the tax money is redistributed by the government. What else can it do with it? If it pays off debt, it is redistributing it, if it invests in infrastructure, it is redistributing it, if it sends cash to the population, they'll spend it and it has been redistributed.
Poor people spend money faster than wealthy people. Taxing wealth (up to some unknown limit) and redistributing it increases the income velocity of money--speeding economic growth.
But if the government redistributes the wealth to its citizens, wouldn't that boost consumer demand and thereby boost economic growth on the demand side?
Consumption is an important part of the process, without which production has no purpose, but you don't become wealthier just by increasing your spending. Consumer demand is an accelerant, not a fuel source. Boosting it gives you short-term growth at the expense of a long-term decline as you consume the capital that makes efficient production possible in the first place.
Capital depreciates at varying rates. I assume by "consume the capital" the parent means allow the total amount of capital in the economy decreases over time because the savings/consumption ratio is not high enough to compensate for the depreciation that occurs.
Yes, exactly. "Capital consumption" is a standard term in economics[1]. A common (if somewhat outmoded) example would be farmers eating their seed corn rather than saving it to plant the next year. In practice it usually looks more like what you described: Productive durable goods like machines or buildings simply wear out and aren't properly maintained or replaced. The total amount of capital investment thus decreases over time.
Capital consumption just refers to capital depreciation. Reduced capital investment, and more specifically reduced efficient in capital investment doesn't necessarily follow from increased consumer demand. Just stating that it does isn't an argument.
> Reduced capital investment, and more specifically reduced efficient in capital investment doesn't necessarily follow from increased consumer demand.
Of course not. However, the original question was about the government redistributing resources from capital ("the wealthy") to consumers, which would have the direct effect of shifting the balance from capital investment to consumption.
The vast majority of consumer spending will go directly to companies who can invest the extra profit in whatever they want (and going down the chain, their suppliers can invest their extra profit).
The percentage of savings to consumption can go down without the absolute value going down.
It's redistributed to people who spend it, fueling consumption. Switzerland has a higher GDP per capita than the US. The country has a wealth tax, but no tax on capital gains though.
