[author: Rick Jones]
Have you been thinking about the wealth tax winds blowing across Europe?[1] You should. While weather here in the US certainly moves west to east, really bad statist-inspired policies seem to move east to west. After all, Europe gave us the absolute monarch, utopian socialism, Marxism, nihilism, anarchism, theocracy, fascism and whatever the Russians are doing these days. (Please don’t be offended if you embrace some other weird political philosophy that embraces human sacrifice or conventional capitalism as I left you off the list as just too outre.)
Now it’s the time of the wealth tax. In one shape or form, the notion that the rich should fork over a share of their net worth so that our government can continue to shovel out the goodies expected by the electorate while avoiding bankruptcy is spreading. A wealth tax has been adopted many times (and thereafter often abandoned) across Europe and Latin America. Now it’s raising its impractical and egalitarian head in both France and England. That’s rather close to home. While these wealth taxes have rarely worked, they often persist long after it’s clear that they’re not raising the revenue their proponents anticipated because, let’s face it, they feel good to significant elements of the electorate. In all cases, these regimes have been riddled with exemptions and fiddly rules with a wide variety of floors for determining where wealth actually starts. In no case has it brought in the tsunami of revenue its proponents trumpeted. Capital flight and beavering lawyers and accountants ensue.
I get the appeal. If you assume the moral rectitude of the narrative which is gaining a lot of traction on both sides of the pond about equality, egalitarianism and the moral bankruptcy of capitalism, it makes a weird sort of sense. Once you have convinced the folks that it is both unacceptable for other people to do better than they, and that it’s perfectly fine to whinge about it whilst fervidly maintaining you are not a resentful, bile-filled, envy-marinated person, its support is rather assured.
As more and more of our political class notice that we’re running out of other people’s money and are getting desperate to meet the obligations they undertook in exchange for votes, a wealth tax is the obvious next step. Let’s pick the pockets of those rich folks who probably deserve their pockets to be picked anyway.
To be a little bit serious for a moment, while inequality may be a predicate for entrepreneurship and risk taking, inequality is indeed a societal problem. It’s an unresolved tension in our polity and while the denizens of the right are increasingly and appropriately worried about the impact of inequality, the thoughtful elements of the left have a sneaky suspicion that ensuring the people can actually get paid for risk-taking, entrepreneurship and hard work might be important for our economy. That’s a tough situation for which there is no obvious and broadly supported answer in circulation across the western democracies at this time (although a wealth tax might have the inside track).
While many observers, including most mainline economists, have observed that if the golden goose is squeezed too hard and one gets the balance wrong between egalitarianism and entrepreneurship, you end up like… France, without the really good food. Nonetheless, mortgaging the future to satisfy the present is a time honored political strategy and that brings us back to taxing the wealthy. Gobs of money now; pay for its negative externalities later.
There have been a number of efforts about this across Europe. If you’re a fan and want to look for validation, the actual data is not terribly comforting. But demonstrating considerable resilience, much of the chattering class in France has been applauding a proposal for 2% tax on wealth on those above $100 million in assets. (A prior version of this had the tax kick in just over €1,000,000, but that didn’t last very long as the governing elite decided it was too close to their pocketbooks to be tolerated.) The English, or at least the doyens of the current Labor Government, are also intrigued by a wealth tax as a possible way out of their current financial disaster (or at least as a way to show that they’re doing something, regardless of whether it works).
Will this come to America? I’m starting to think it will. Will it come under the current administration? Unlikely, although Mr. Trump has a deep streak of populism which could be repurposed to support some type of an equality-generating tax. Stranger things have happened in this administration…weekly, in fact. Under a more progressive administration (and we’re bound to have one, right?), it’s almost certainly to be on the table.
So, let’s be honest here and recognize that something like this is coming. If so, we ought to at least see if we can get something that works, that generates the trumpeted revenues out of it.
I’ve got an idea: Let’s give the rich, the aristos, something in exchange for their wealth tax! Let’s sell it! Let’s make them like it!
We know that if we do nothing those who will pay, or are supposed to pay, won’t like it much. That group broadly doesn’t buy Obama’s moment of socialistic honesty from a few years back about how one didn’t build it. If confronted by a wealth tax, the aristos will work hard to fiddle the system, find exemptions and frankly hide assets or obscure valuation (not that hard when assets are not regularly traded). They will fight to repeal the wealth tax and when all else fails, they will flee.
There is at least one instance where this type of deal really worked well, think Medieval Europe.
When the Europeans embraced a feudal form of monarchial government (not that many of the folks were actually consulted), the monarch was supported by loads of aristocrats; those sundry dukes, barons, marquis and the like. These folks had a great life, but they actually had to do something extraordinary to get their goodies…like fight a lot. They had to go to war every time the king got pissed off. Sure sometimes all they were doing is whacking defenseless peasants with their nice shiny swords, but once in a while, something like Agincourt happened. Whoops! They had to serve the Crown and essentially do whatever the damn Crown said (periodic rebellions aside). They periodically had to belly up to the bar for an extraordinary expense required by the king. They had to show up at court and genuflect and the like. All these obligations of those medieval aristocrats were the equivalent of paying this new wealth tax.
For being aristos and doing all that stuff the Crown required, the aristos got a lot of good stuff. They couldn’t be taken to court, they could steal the peasants’ food, they might, in some circles, deflower brides in their village before their wedding night (Droit du seigneur, sounds a lot better than what it was, plain old fashioned rape). They got to attend the king, wear fancy clothes, eat really good food and live in impressive (albeit drafty and not terribly comfortable) castles.
We truly don’t want Mr. Musk running around doing the Monty Python bit, but think of the wealth tax as the equivalent of homage, fealty and military service in days gone by. For that, we need to give them something. Make them feel better. Keep them from running away and keep them from fussing. Keep them from hiding their assets.
We’ll offer the right to pay this tax as a “Special Honor.” Hey, it might be outrageously expensive, but if the perks are great, we will make the sale. We’ll give them something shiny they could show off (like the American Express Black Card). We’ll give them priority seating at inaugurations, private member only bars at Madison Square Garden, seating with the Kelces, reserve parking, guaranteed reservations at fancy restaurants, nights in the Lincoln bedroom, get-out-of-jail card for parking fines. We’ll give them silly little robes to wear at official events. Lots of ermine (and for progressives, faux ermine), sashes, medals, etc., etc.
Let’s not forget that we probably need to give them names or titles that announce their status and make bragging about it easier. Duke, earl, baron, marquis, viscount, have all been taken, but I guess we could repurpose them. Let’s put our best marketing minds to it, we’ll come up with something. Bonaparte was happy with First Citizen…for a while.
We could even have them sit in their own little egalitarian capitalistic House of Lords. Clearly, we don’t want them to actually legislate, albeit they couldn’t be a whole lot worse than the gang of doofuses we have now, but they could sit around, debate to no purpose, propose bills and get a chance to eat in fancy dining rooms with decent food and really good wine. They could even ride that cute little train that attaches the Capital to the House and Senate office buildings.
They’ll eat it up!
One might say we don’t do that in America, we’re all just citizens. Give me a break. We already know about what our aristocracy looks like; this is just formalizing the thing. And let’s recognize our government already does give away goodies. Think about the new golden pass for folks who want green cards. Think about how the wealthy (or at least the rich supporting the current administration) get put on blue ribbon panels, get invited to the White House to pontificate and share their largely uneducated views about public policy in front of the cameras, get called Honorables. We do this already. This just formalizes and monetizes the benefits of being an American aristo.
If we’re going to give out these goodies and create this new status, I suspect we might be uncomfortable just giving it to the wildly rich. Perhaps we could take a card from the English House of Lords, which not only is full of the hereditary aristocrats, but friends of the administration, impecunious bishops, judges and other folks of distinction. We’ll give them the status too. It’ll be a way for the government to reward and validate the utility and importance of judges, scientists, doctors, philosophers, political hacks, actors and rock and roll stars…but of course, only the rich would have to pay for this badge.
Come on, this is the clear solution, It’s the American way, pay for value. It would probably mean the wealth tax actually works as the truly wealthy will stop hiding their assets, stop fleeing the jurisdiction and actively compete to show their entitlement to pay up. For the first time a wealth tax could actually meet its proponents’ expectations.
Sure, we’d have to get over our egalitarian instincts that got rid of the aristos when we got rid of George III, but who are we fooling? We all know who our current class of aristos actually are, billionaires, government officials, right-Honorables left and right, our Hollywood/television elites, our political hacks and sundry pontificating talking heads. All we’re doing is regularizing the system and getting paid for doing so.
Think out-of-the-box. The wealth tax is coming. It’s not really worked well anywhere else because they don’t have the entrepreneurial zest of Americans to actually validate the right to pay up. Do you have a better idea?
[1] A note up front to my loyal readers, if you’re actually looking for actionable advice, you might put this commentary at the bottom of the pile.
