Mastodawn

Are there any coherent arguments against taxing very high incomes and wealth, to reduce social inequality ?

I don't think so. Three of the main arguments are:
1. Income and wealth belong to individuals - tax is theft;
2. Individuals make better investment decisions than governments or other social bodies; and
3. Unless people keep all or most of the income and wealth they have gained there will be no incentive to work, so everybody gets poorer.

The first argument breaks down because all income and wealth is social in origin - most profit arises from business 'externalities' - unpaid labour in the home, state education, free use of resources, use of public roads and other infrastructure... None of the world's major industries would be profitable if they paid for their use of these free resources.

The second argument breaks down because private investment only goes after financial returns or hobby-horses (like space rockets) not wider priorities with no quick investment returns (like education, home insulation, rewilding) - and a lot goes on socially useless investment in assets like housing just to extract rents - a disutility for almost everyone.

The third argument is disproved by history. In the 'Trente Glorieuses' - the 30 years or so after the war - marginal tax rates on both income and property were 70-90%, even in the US - but these were exceptionally hard-working years, with high economic growth, improving living standards, better education, more caring societies, etc, etc... When taxes were reduced from the 1980s on, social progress began to reverse.

#TaxTheRich #tax #taxes #TrenteGlorieuses

GeofCox Mar 2, 2025

Interesting development - US isolated... https://www.theguardian.com/commentisfree/2025/mar/02/the-guardian-view-on-a-tax-war-the-world-must-unite-against-american-obstruction

The Guardian view on a tax war: the world must unite against American obstruction

Editorial: Donald Trump’s threats to global tax reform have backfired, leaving the US isolated as nations push ahead with a new UN tax convention

The Guardian

Markus Hofer Mar 2, 2025

@GeofCox That's the only good way to deal with all of this. Use it as a catalyst for positive change. Fix tax loopholes, make companies pay their fair share. The system is broken and has been for such a long time.

René Mar 2, 2025

@GeofCox We should also drop #us treasury bonds and not buying new ones; a coin that takes over the #dollar as second currency; introduce export tariffs on critical goods exported to the us like #asml ; create new alliances with #eu #asia #africa #southamerica and the middle-east #canada australia Japan and south korea.

IDUCtioN Mar 2, 2025

@GeofCox my favourite (and least favourite) example that negates the second argument is what Norway did with the surplus revenues of its petroleum contrasted with what the UK did with its surplus revenues.

Colin Rowat Mar 2, 2025

@GeofCox the standard introduction to tax policy used to be Myles' _Public Economics_ (CUP, 1995). Myles was also involved with the IFS' Mirrlees Review of the UK tax system. Summaries of that would also be good introductions.

I don't know the literature (although Mirrlees was my supervisor) but think that the third argument is key: higher marginal tax rates reduce incentives to produce/declare.

Colin Rowat Mar 2, 2025

@GeofCox Young Mirrlees wanted to argue for a strongly progressive tax system, but was forced by his own studies to back down towards more neutral systems.

This does not argue against 'taxing the rich' at all: it merely argues that increasing marginal tax rates does decrease the incentive to produce in that high tax jurisdiction.

There will be periods of high taxes and high growth because a lot of other factors determine growth rates.

Joseph Lord Mar 2, 2025

@GeofCox The other argument I’ve heard is that they will then leave the country & you will then lose the benefit of having them (tax revenue and sparkling entrepreneurial skills). I don’t fully buy the story especially for the wealth taxes.

I’m open to the idea that there might be a level that becomes counter productive but I think it is substantially higher than current rates. More importantly limiting avoidance mechanisms so that the wealthy do actually pay at least as high rates as others.

cryptogopher Mar 2, 2025

@GeofCox The most important argument against is the one that is most often overlooked:
0. It is technically impossible to effectively tax the richest people, since they are best equipped to avoid taxes anyway, whether in the form of changing tax jurisdictions, bribing legislators, or bribing audit offices - it doesn't matter. As a result, the new tax will become a burden on everyone except the people for whom it was intended. If someone has built wealth, they know better than we how taxes work.

Artemis Mar 2, 2025

@cryptogopher @GeofCox The ultra rich are the *easiest* people to tax if you do it right. All their wealth is in unmovable assets: shares in corporations, houses, land. Just tax these at the source: Tax corporate profits, tax stock buy backs, tax options, tax buying/selling shares, tax rents, tax lands...

GeofCox Mar 2, 2025

@artemissian @cryptogopher

I'm with @artemissianon this on 2 counts:
1. It can't be that hard because lots of countries do tax wealth in various ways; and
2. The argument that it's hard is not a logical reason for not doing something - rather the reverse, as Kennedy famously said.

Vck Mar 2, 2025

@GeofCox
While I don't disagree with taxing the rich more, looking at only taxing without controlling spending is a recipe for disaster. Soon enough you may find them asking you for more taxes as well. Remember, it is easy to spend other peoples money, politicians are quite good at it.
It is already happening in America, across fed govt, state governments, local towns ...etc.
Government has to keep a level playing field for all its citizens so they can work, compete ...etc.

GeofCox Mar 2, 2025

Tax does control spending - in the most useful way possible - it curtails the ability of the wealthy to over-consume, and therefore curtails lots of really damaging things - pollution, inflation, waste, etc...

Vck Mar 2, 2025

@GeofCox
There is a limit on rich persons consumption, they can't eat food meant for 10 people. Things like private jets is one area where they consume/pollute at a disproportionate level. I am sure they are few examples like that
Issue with too much wealth is their ability to control govt policy and put regular population at a huge disadvantage. Musk is doing that now, Republican politicians don't have the courage to go against him because he can pump a lot of money against them

Taxes require state, state depends on violence, coercion, exclusion, enclosure, and inequality.

As long as there is a system in place that produces such unequal distribution of wealth/power, that system is the source of our problems, not the level of taxes being levied. If rich exist, it's already too late to solve the problem with taxes. Sure, taxes can be a temporary amelioration, but the ruling elite will always knock us two steps back for every step forward, as long as state exists.

These days I marvel that the true nature of state is still not crystal-clear to everyone. The mask is rapidly disintegrating before our eyes.

theearthisapringle Mar 2, 2025

@GeofCox I’ve heard people say that if you taxed the richest too much, they would move their money out of the country and that would hurt the economy

GeofCox Mar 2, 2025

@theearthisapringle

This is double-myth. First, because there is little evidence that many people do emigrate for tax reasons (though there are a great many unevidenced alarmist media stories about it); and second because it makes little difference whether the government reduces their spending through tax or they reduce it by emigrating - and their capital is mobile anyway. See my post on this here: https://climatejustice.social/@GeofCox/113883616849187853

GeofCox (@[email protected])

@[email protected] Yes - I recently followed up the source of one of these media stories about the 'exodus' of UK millionaires - it was New World Wealth - which seems to be a one-man-band using a co-working space in Johannesburg, South Africa, with a 'GoDaddy' website - and if you click on its 'Britain's Wealth Exodus' report link it just takes you to a press release from last October from a 'wealth migration' consultancy (trying to encourage migration for obvious business reasons). Nothing about the story has any journalistic credibility at all, as far as I can see. And that's, of course, leaving aside the really big unsupported assumptions in such views - the two biggest being: 1. That tax from the wealthy 'pays for' public services (it doesn't - it just mitigates inflationary pressure, which is also accomplished by the wealthy leaving the country), and 2. That the wealthy living in the UK means they invest productively in the UK (but by and large, in fact they don't - indeed their UK 'investments' are likely to be in unproductive assets like property and shares, etc, already in circulation, so tending generally to make most UK residents poorer).

Climate Justice Social

Harry Mar 2, 2025

@GeofCox I am by no means an expert, but I think that a counterpoint to item 3 is that if people keep all or most of the wealth they gain, it simply causes them to hoard wealth, seek power and control, and exploit public resources indefinitely.

Artemis Mar 2, 2025

@GeofCox the main reasons to tax is to prevent inflation caused by government spending.

By taxing the people who have the money which the government spend, — which are the assets holders because rents, profits, interest all flows to them — you remove the excess money from circulation and prevent inflation.

Artemis Mar 2, 2025

@GeofCox Argument 1 is non-sense, either you have targeted taxation or inflation for everyone.

2. Investments only make money by living long enough to slowly see your wealth grow eg: Like a sovereign wealth fund OR you are already rich enouh to be able to stay in the game long enough for you to get lucky

3. Do not tax anyone making less than a fair income: 150% of living income for 2 adults and 2 kids. Mainly tax corporations and assets. Tax movement of capital.

Ted Spence Mar 2, 2025

@GeofCox When people are permitted to keep more of what they earn, bad incentives occur. Unethical people see a reason to mistreat others, write unfair contracts, and even break the law, because they see they will get a chance to keep their ill-gotten gains. If people know that misbehavior and theft won't result in them keeping enough of their earnings, they may opt to follow laws and ethics instead.

Mike Taylor 🦕Mar 2, 2025

@GeofCox The only coherent argument I have heard is that raising tax levels *may* reduce the total tax take, depending on the circumstances. See https://en.wikipedia.org/wiki/Laffer_curve

But I think the US and UK are both *well* below the optimum point.

Laffer curve - Wikipedia

GeofCox Mar 2, 2025

The Laffer curve is pure fiction - literally - it was just made up without any evidence.

Mike Taylor 🦕Mar 2, 2025

@GeofCox Well, sure. But it captures a real thing: there does come a point _somewhere_ when increasing the tax rate reduces the take: after all, when income tax goes to 100%, no-one has any incentive to do paying work. The whole question is _where_ on the x-asis the maximum falls.

GeofCox Mar 2, 2025

That's not true, because we're talking about marginal rates - on the first part(s) of income people pay the same rates as others with those levels of income.

The evidence is that at very high marginal rates (and they have been at 90%+) what happens is 'predistribution' - businesses simply stop paying excessively high salaries, and apply the money instead to other employees and other investments - one of the reasons that growth rates were generally higher when taxes were progressively higher.

Mike Taylor 🦕Mar 3, 2025

@GeofCox Yes, which is brilliant. But it doesn't change that fact that at SOME point, people are going to just stop working. I'm all for redistribution, and would actively like to be taxed more myself (so long as others in my income bracket are also taxed more, obviously!), but there's no point in pretending that tax revenue is a well that can never run dry so long as we keep cranking the percentage up.

GeofCox Mar 3, 2025

Ah - Where are you Mike ? In most countries that have their own currency tax 'revenue' is not a well - it doesn't 'pay for' public services - indeed, all the money we pay in tax is simply cancelled - destroyed. The real functions of tax are precisely to remove money from circulation (too much of which can lead to inflation) and to assist government policies (eg. making society more equal, or disincentivising smoking).

Mike Taylor 🦕Mar 3, 2025

@GeofCox I'm in the UK.

Mans R Mar 3, 2025

@mike @GeofCox A good chunk of income for the wealthiest is from capital gains type sources that don't require any work, though. If they could be incentivised to do something rather than just leech off others, that might be a good thing.

Mike Taylor 🦕Mar 3, 2025

@mansr @GeofCox I broadly agree. It's always seemed silly to me that the passive income of capital gains is taxed LESS than active income from working.

Mans R Mar 3, 2025

@mike @GeofCox It's silly, but the reason is obvious: those who have lots of it are the ones making the rules.

Mike Taylor 🦕Mar 3, 2025

@mansr @GeofCox It certainly seems that way

Mans R Mar 3, 2025

@mike @GeofCox Oh, and it's not quite that simple. When the marginal tax hits 100%, you don't lose all incentive to work, you merely lose incentive to raise your prices.

Joshua Barretto Mar 2, 2025

@GeofCox The other argument usually rolled out is the Laffer Effect / Laffer Curve, although it's been shown to be largely empirically false.

Kyle Taylor Mar 2, 2025

Taxing the rich is actually really hard. The rich are adept at hiding their money. They also know how to offshore to avoid taxes. And if your corporate taxes are too aggressive, the rich will leave entirely -- this is a problem that Europe and the UK are dealing with.

[1] https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en

The Draghi report on EU competitiveness

Read Mario Draghi's report on the future of European competitiveness, which lays out clear recommendations on how Europe can boost its economic growth.

European Commission

MattVortex Mar 3, 2025

The only other arguments I have seen are practical ones, not arguments against taxing the rich per se but about how to implement such a tax:

* The rich will take their money and leave the country
* Other rich people outside the country won't bring their capital into the country for investment
* The rich hide their wealth so it's hard to know how much they have
* Legal questions around constitutionality

MatthewToadAgain Mar 3, 2025

@GeofCox The main argument that the UK government gives is "the rich people will leave if they have to pay even the same tax rate as the rest of us". That's precisely why the moderately rich (the people who aren't entirely based in tax havens) pay Capital Gains Tax rather than Income Tax, at a much lower rate.

The argument is bullshit of course. Firstly because every other country in the G7 has an exit tax. Secondly because a lot of their assets cannot easily be moved (e.g. mansions). Thirdly because historically it hasn't happened.

Of course this is really a variant of your third reason. It's just the one that is most commonly given by politicians lately to justify the rich paying less tax as a proportion of their real income than everyone else.

MatthewToadAgain Mar 3, 2025

@GeofCox Plus, there's a bonus point here:

The reason productivity nosedived since the 1970s/1980s is precisely that tax moved away from the rich and corporations (indistinguishable from sufficiently rich people) onto the general population around that time.

When there's no incentive to invest in training and machinery, businesses don't. They return dividends and employ people on shitty wages (having destroyed the unions) instead.

Basically Reaganonmics / Thatcherism did exactly the opposite of what they promised.

(I'm not 100% certain about the mechanism here but it certainly looks plausible given the trends)

Andrea Bianchi Mar 3, 2025

@GeofCox I think part of the problem is that a lot of the really rich people do not have any "income" that is taxable through the current tax code.

Sean D Mar 3, 2025

@GeofCox The main argument that I've heard is that rich people are more likely to move money offshore, so the revenue from their income may reduce. I've no idea if that is true or only applies in certain countries.

GeofCox Mar 3, 2025

@seanddotmedotuk

See my previous reply to this point: https://climatejustice.social/@GeofCox/114094896762696590

GeofCox (@[email protected])

@[email protected] This is double-myth. First, because there is little evidence that many people do emigrate for tax reasons (though there are a great many unevidenced alarmist media stories about it); and second because it makes little difference whether the government reduces their spending through tax or they reduce it by emigrating - and their capital is mobile anyway. See my post on this here: https://climatejustice.social/@GeofCox/113883616849187853

Climate Justice Social