Wealth Taxes? Don’t Hold Your Breath

By James Kwak

Tyler Cowen thinks that we are entering an age of debates over wealth taxes. If only.

It’s true, as Cowen notes, that national debt everywhere is a relatively small fraction of national wealth and that, therefore, “fiscal problems are best regarded as problems of dysfunctional governance.” One of our central arguments in White House Burning was that the United States obviously, easily has the ability to pay down the national debt, and how it will do so is basically a distributional issue.

Even if wealth taxes make sense, that doesn’t mean they will happen. Cowen claims that “Like the bank robber Willie Sutton, revenue-hungry governments go ‘where the money is.'” But all that is cleverly phrased is not true. Consider this chart from White House Burning:

Screen shot 2013-07-24 at 1.30.09 PM

Since the beginning of the current round of perceived deficit problems in the late 1970s, tax revenues have shifted away from income taxes (especially the corporate income tax) and toward payroll taxes—at a time when real wages have been falling. This trend was accentuated by the 1997 (Clinton-Gingrich) and 2003 (Bush) tax cuts, which reduced capital gains taxes first to 20 percent and then to 15 percent. As capital gains have made up a larger and larger share of income, we have been taxing them less and less, with only a partial correction this year. Our one significant wealth tax—the estate tax—was slashed by Bush; even after the latest tax compromise, the exemption is set at $5 million and indexed for inflation, as compared to $1 million (unindexed) only twelve years ago.

The reasons are obvious. As much as conservatives like to portray the federal government as some kind of Leviathan out to maximize its own size at the expense of the people, the reality is that for decades people who want to cut taxes have either held the reins of power or been able to veto policies they oppose. Since they are backed by the wealthy, of course they have set about reducing taxes on wealth at every opportunity. How is that going to change—when conservatives have more than a 2-to-1 advantage in outside spending (7-to-1 for groups that don’t disclose their donors)?


21 thoughts on “Wealth Taxes? Don’t Hold Your Breath

  1. No, inheritance taxes are mostly absorbed by administrative costs (I mean ponzis). No, instead of talking up the unsustainable healthcare issues and how working your way into the middle class is the solution. He should be talking more about a financial emanciaption treaty with the 99%, rather than sending rich foriegners to take the place of the once American, middle class.

  2. ‘ As capital gains have made up a larger and larger share of income, we have been taxing them less and less….’

    Alternatively; as we’ve taxed capital gains at lower rates, they’ve become a larger share of income. Elementary econ, that.

    Also, we’ve obviously moved to ‘social insurance’ taxes because ‘social insurance’ payments have increased.

  3. If consevatives have such a HUGE ADVANTAGE in funding groups why were they outspent in last election??? “Decades they have held power” ??? are you kidding me. Please look into who has been in charge of both houses the last 4 decades? Majority have ben tax and spend Democrats…Do you actually beleive what you write??

  4. It’s called “playing the refs”: boo-hoo me, pity me, be nicer and gentler with me, because I have such miserable luck… and maybe I’ll get something more out of this.Younger adults can be forgiven if they think conservatives’ entire strategy is self-pity, resentment, and victimization since they use it so often.

    Last week it was white people are the real oppressed minority. Here in the comments, someone is complaining about Republicans not having enough funding even though: http://elections.nytimes.com/2012/campaign-finance/independent-expenditures/totals

    The best thing to do is just call it out and point to the facts. Thanks for this post!

  5. Yea Alex I know that list is right on and accurate…The DNC didnt spend a dime leading up to election..Yep NY Times is always right in your mind.

  6. The kind term of wealthy does a disservice to understanding the horrors we – the 99% face. The wealthy are predatorclass. They are predators, psychopaths (see the post above). This den of vipers and thieves do not hold the capacity for empathy, or guilt, or any sense of rightorwrong or the socalled ruleoflaw! These monsters are delirious with greed, power and otherworldly wealth and these beasts will never relinquish thier illgotten gains (gleaned through institutional, endemic, systemic, and wanton criminality) peacefully. The people must end this nefarious abuse and hold the predatorclass culpable and responsible for grevious crimes, abuses , psychopathic behavior.

    As to any hope of a wealth tax (regardless of the math any smidgen of ethics) – surely you jest!!! There’s is only one way to right these horrific wrongs – and there will be blood!

    Burn it all down! Reset!!! It’s the only option for notwhite, notsuperrichpeople!!!

  7. Normally I’m opposed to government monitoring people’s conversations to find evidence of dangerous characters, but this blog’s comments section might be justifiably watched.

  8. @Paddy, don’t worry, we are watching you :-)

    How much to *tax* the rich should be in proportion to how many tax dollars they embezzled (SS fund) on their way to becoming a member of the 500 club collectively worth 3 TRILLION, no?

  9. No doubt the fascists who own and control our socalled government are watching all of us brother! All the more reason to burn it all down! Reset!! There is no other option!

  10. And here I lift verbatim (with apologies to Jane Mayer and The New Yorker for not asking their permission) a large section of Jane Mayer’s article on the Koch Brothers, which explains very well who is pulling on puppet strings nearby the mouth movements and writings of Tyler Cowen:

    ” In the mid-eighties, the Kochs provided millions of dollars to George Mason University, in Arlington, Virginia, to set up another think tank. Now known as the Mercatus Center, it promotes itself as “the world’s premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems.” Financial records show that the Koch family foundations have contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization. “It’s ground zero for deregulation policy in Washington,” Rob Stein, the Democratic strategist, said. It is an unusual arrangement. “George Mason is a public university, and receives public funds,” Stein noted. “Virginia is hosting an institution that the Kochs practically control.”

    The founder of the Mercatus Center is Richard Fink, formerly an economist. Fink heads Koch Industries’ lobbying operation in Washington. In addition, he is the president of the Charles G. Koch Charitable Foundation, the president of the Claude R. Lambe Charitable Foundation, a director of the Fred C. and Mary R. Koch Foundation, and a director and co-founder, with David Koch, of the Americans for Prosperity Foundation.

    Fink, with his many titles, has become the central nervous system of the Kochtopus. He appears to have supplanted Ed Crane, the head of the Cato Institute, as the brothers’ main political lieutenant. Though David remains on the board at Cato, Charles Koch has fallen out with Crane. Associates suggested to me that Crane had been insufficiently respectful of Charles’s management philosophy, which he distilled into a book called “The Science of Success,” and trademarked under the name Market-Based Management, or M.B.M. In the book, Charles recommends instilling a company’s corporate culture with the competitiveness of the marketplace. Koch describes M.B.M. as a “holistic system” containing “five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives.” A top Cato Institute official told me that Charles “thinks he’s a genius. He’s the emperor, and he’s convinced he’s wearing clothes.” Fink, by contrast, has been far more embracing of Charles’s ideas. (Fink, like the Kochs, declined to be interviewed.)

    At a 1995 conference for philanthropists, Fink adopted the language of economics when speaking about the Mercatus Center’s purpose. He said that grant-makers should use think tanks and political-action groups to convert intellectual raw materials into policy “products.”

    The Wall Street Journal has called the Mercatus Center “the most important think tank you’ve never heard of,” and noted that fourteen of the twenty-three regulations that President George W. Bush placed on a “hit list” had been suggested first by Mercatus scholars. Fink told the paper that the Kochs have “other means of fighting [their] battles,” and that the Mercatus Center does not actively promote the company’s private interests. But Thomas McGarity, a law professor at the University of Texas, who specializes in environmental issues, told me that “Koch has been constantly in trouble with the E.P.A., and Mercatus has constantly hammered on the agency.” An environmental lawyer who has clashed with the Mercatus Center called it “a means of laundering economic aims.” The lawyer explained the strategy: “You take corporate money and give it to a neutral-sounding think tank,” which “hires people with pedigrees and academic degrees who put out credible-seeming studies. But they all coincide perfectly with the economic interests of their funders.”

    In 1997, for instance, the E.P.A. moved to reduce surface ozone, a form of pollution caused, in part, by emissions from oil refineries. Susan Dudley, an economist who became a top official at the Mercatus Center, criticized the proposed rule. The E.P.A., she argued, had not taken into account that smog-free skies would result in more cases of skin cancer. She projected that if pollution were controlled it would cause up to eleven thousand additional cases of skin cancer each year.

    In 1999, the District of Columbia Circuit Court took up Dudley’s smog argument. Evaluating the E.P.A. rule, the court found that the E.P.A. had “explicitly disregarded” the “possible health benefits of ozone.” In another part of the opinion, the court ruled, 2-1, that the E.P.A. had overstepped its authority in calibrating standards for ozone emissions. As the Constitutional Accountability Center, a think tank, revealed, the judges in the majority had previously attended legal junkets, on a Montana ranch, that were arranged by the Foundation for Research on Economics and the Environment—a group funded by Koch family foundations. The judges have claimed that the ruling was unaffected by their attendance.

    “Ideas don’t happen on their own,” Matt Kibbe, the president of FreedomWorks, a Tea Party advocacy group, told me. “Throughout history, ideas need patrons.” The Koch brothers, after helping to create Cato and Mercatus, concluded that think tanks alone were not enough to effect change. They needed a mechanism to deliver those ideas to the street, and to attract the public’s support. In 1984, David Koch and Richard Fink created yet another organization, and Kibbe joined them. The group, Citizens for a Sound Economy, seemed like a grassroots movement, but according to the Center for Public Integrity it was sponsored principally by the Kochs, who provided $7.9 million between 1986 and 1993. Its mission, Kibbe said, “was to take these heavy ideas and translate them for mass America. . . . We read the same literature Obama did about nonviolent revolutions—Saul Alinsky, Gandhi, Martin Luther King. We studied the idea of the Boston Tea Party as an example of nonviolent social change. We learned we needed boots on the ground to sell ideas, not candidates.” Within a few years, the group had mobilized fifty paid field workers, in twenty-six states, to rally voters behind the Kochs’ agenda. David and Charles, according to one participant, were “very controlling, very top down. You can’t build an organization with them. They run it.” “

  11. Why do Koch’s mind control tactics not work on controlling their own blood lust for money?

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  13. dude…Governments everywhere in the USA are suffering from massive cash shortages. this cannot be fixed by raising taxes. this is not a question of some “lobbying group” but simple math. the Fed is NOT printing money but debt…to pay that debt down massive amounts of cash must be created. to say “only investment oriented rich people do this” is the understatement of all time. sure you can have a national sales tax (good luck having that pass Constitutional muster…let alone pass either the House or the Senate) but obviously this will reduce growth as well. in short you ‘re going to have to solve this by allowing those who generate revenues to pay for things do just that.

  14. yes, the idea of taxing the Rich who write the laws their “chosen” Congressmen enact, well, better luck looking for gold in a silver mine. lol. why even waste webspace on such a ludicrous idea. them that own the Congress aren’t about to tax themselves one penny more. and the story about George Mason University is incredibly detailed and true. i even got an email from them about the NASA Climate inquirey. then i found out who was behind the “poll.” as if the Koch Bros are going to care about Climate Change unless they can make money off of it.

    welcome to the Banana Republic/Empire of the Elites once known as the American Democratic Republic. We aim to show other Banana Republic what that term really means. lol

  15. all of you pseudo intellects who twitter all day and expect some hard working guy to fund your bull shit should try something novel ?! get off your ass and get a job !!!

  16. Tweet, tweeter, tweet.
    There ya have it, I just contributed to my monthly twitter account.

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