Here’s a practical policy idea that might serve the aims of the ‘Occupy’ movement: try to transition from income taxes to wealth taxes. Instead of limiting how much money people can make in a year – try to limit how enormous a fortune they can actually amass.
If you taxed people a percentage of their total wealth each year, it would massively raise the tax burdens for the richest individuals, without having a large effect on those who are just doing the basics of saving for retirement. Such a policy would punish the ‘idle rich’ who inherit some sort of windfall, and who live on it for the rest of their lives. Arguably, it would do less than income taxes to diminish the efforts of people whose efforts genuinely produce a lot of value. True entrepreneurs and innovators could pay a small wealth tax and keep coming out ahead; only those who are just sitting on a pile of money would see their assets shrinking substantially.
Steve Jobs may have produced spinoff benefits for the people who work at his company and use his products; Smaug the dragon did not, sitting alone on his massive pile of gold. (Though he also stole the gold, which may be a bigger strike against him than simply having it. He didn’t earn it though voluntary transactions that were to the benefit of both parties.)
Imagine you set a wealth tax of 0.1% per year. Someone who has saved $1,000,000 for retirement would pay $1,000 per year in tax on the wealth. Carlos Slim, who is currently the richest person in the world, would pay about $74 million per year in wealth tax – $1 million in tax for every $1 billion in the bank. You could also make the tax progressive: set the rate for the first $1,000,000 at 0.1% and set the rate for much higher levels of wealth at higher percentage values. Maybe Mr. Slim should pay 10% per year on that gigantic fortune. That would be $7.4 billion for the Mexican treasury, taken from a pile that is already far too large to be spent by a single person, except perhaps in the most lavish ways imaginable.
I am not sure if the policy is a good idea, but it is the sort of thing a movement could actually push, as opposed to just expressing a general ill-focused agenda in favour of redistribution of wealth. Taxing wealth might even be economically efficient, if it kept people from maintaining vast unproductive piles of wealth. It is quite likely to be efficient from a utilitarian standpoint. People who rely on government spending – in the form of food stamps, unemployment benefits, and the like – value those dollars far more than Mr. Slim does. For Mr. Slim, they might mean the difference between being able to buy 15% of some big company and being able to buy 16%. For the people dependent on government benefits, it might mean the difference between feeding their children well or badly.
One exception to the policy: people who perform a sufficiently great public service should earn a basic state pension for life, not subject to any taxes. To double down on Tolkien analogies – if you carry the One Ring to Mount Doom, you get to retire afterward without worrying about taxes.
I am curious to know what readers think about the idea.