Marx said, "Start by taxing inheritances."
I'm posting this comment by my friend, the Demosophist, which he wrote in response to my post "I'm a greedy capitalist pig" because it illustrates so clearly the disagreements he and I have had about economics.
Pat: OK, just for the sake of clarity I support a flat tax (combined with a demogrant). The specific size of each is negotiable, and I'm not bound to any specific formula. That depends. As for the estate tax, my thinking is that as long as the legacy is bequeathed in "chunks" that are distributed in a way that makes each of the beneficiaries as economically independent as possible the tax can be completely eliminated. And you might as well eliminate corporate income tax too, the tradeoff being that we'd have both a ceiling and a floor to individual income. That last part would rankle the libertarians a bit, but the justification isn't that greed is bad, it's that too much individually hoarded wealth removes too much buying power from circulation. The ceiling would therefore depend not on some number picked out of the air, but on how much people can manage to spend on themselves and their assigns. If you can't possibly spend the income that's produced, you can't keep it. Personally, if I can't spend it I don't much care about keeping it. Again remember, there's no corporate income tax. Zero. Would that work for your business?
It'd be strange, but it would work. The result would be a very different economy than the one we have now though. And there'd be the additional benefit that inflation would no longer occur. It would become a distant memory, like the millions of flies that buzzed all over the world's cities before the invention of the automobile.
Scott, I read your essay "Toward a New Liberalism" and now this comment and I'm not sure that I should have been so self-denigrating in stating that I don't always understand you because you are more intellectual than me. I actually think that your intellect may be preventing you from understanding how simple and practical capitalism is. I know I am more of a libertarian than you and that you are far more of a statist than I am but I'm beginning to wonder if an academic can even understand how free enterprise makes the world go round.
You wrote: Personally, if I can't spend it I don't much care about keeping it. Again remember, there's no corporate income tax. Zero. Would that work for your business?
No, it would not work for my business. The whole point of capitalism is to make more money than you can spend so than you can re-invest it in growing the business or investing in a new business. Capitalism is all about accumulating more money than you need. If there were no-one accumulating wealth then there would be no capital to invest.
I tried restraining myself from saying things like, "You're thinking like a Marxist" but I do wonder if you would even be thinking of such things as, "If you can't possibly spend the income that's produced, you can't keep it," if you were a business man and not an academic.
As for the estate tax - Marx's ten point plan for practically instituting communism had as it's first item: place high taxes on inheritances and then move towards finally confiscating all inheritances. Marx knew that control over individually accumulated wealth was the basis of freedom and the antithesis of communism and went for the weak spot - grab that wealth when it's owner was dead.
It is the impractical and hubristic thinking of social engineers and academics that makes dyed in the wool capitalist pigs like me see red. Socialism must seem attractive to people who have not accumulated any wealth through their own hard work, initiative, creativity and entrepreneurship.
Have you read anything about the Fair Tax? Now, that is capitalist/libertarian economics. Your economics is socialist/statist.
UPDATE
To be fair, Scott posted this addendum later:
I'm having some second thoughts about the "ceiling" for income. When that concept was originally devised by Kelso his justification was that returns to capital follow exponential growth patterns and that according to Say's Law that produces "morbid capital" that stays out of circulation. That would be like a kind of tumor on the economy, to use a health-related metaphor.
However, I'm not sure that returns to capital are really exponential (first order growth) rather than sigmoidal (second order growth). Second order functions look like exponential growth during the first half of the pattern because they haven't reached diminishing returns produced by limits. With the other changes to the economic system, especially diffusion of capital ownership, the limits on sigmoidal growth simply may not produce the kind of morbid returns that Kelso was worried about. During his time they didn't know about self-limiting functions and sigmoids were not a big part of the literature. The ceiling is inherent in a sigmoid function.
Anyway, even if there was an imposed ceiling it would be way above what most of us will ever earn even if we become millionaires. Think about the most extravagant lifestyle you know, and add 10% just to be safe. (You and I are probably both thinking about the same dufus.)
I'll respond to this when I'm sober - I just had wine with dinner, a nice fat juicy steak, home-made freedom fries from scratch and salad with a glass of Australian merlot.
Pat: OK, just for the sake of clarity I support a flat tax (combined with a demogrant). The specific size of each is negotiable, and I'm not bound to any specific formula. That depends. As for the estate tax, my thinking is that as long as the legacy is bequeathed in "chunks" that are distributed in a way that makes each of the beneficiaries as economically independent as possible the tax can be completely eliminated. And you might as well eliminate corporate income tax too, the tradeoff being that we'd have both a ceiling and a floor to individual income. That last part would rankle the libertarians a bit, but the justification isn't that greed is bad, it's that too much individually hoarded wealth removes too much buying power from circulation. The ceiling would therefore depend not on some number picked out of the air, but on how much people can manage to spend on themselves and their assigns. If you can't possibly spend the income that's produced, you can't keep it. Personally, if I can't spend it I don't much care about keeping it. Again remember, there's no corporate income tax. Zero. Would that work for your business?
It'd be strange, but it would work. The result would be a very different economy than the one we have now though. And there'd be the additional benefit that inflation would no longer occur. It would become a distant memory, like the millions of flies that buzzed all over the world's cities before the invention of the automobile.
Scott, I read your essay "Toward a New Liberalism" and now this comment and I'm not sure that I should have been so self-denigrating in stating that I don't always understand you because you are more intellectual than me. I actually think that your intellect may be preventing you from understanding how simple and practical capitalism is. I know I am more of a libertarian than you and that you are far more of a statist than I am but I'm beginning to wonder if an academic can even understand how free enterprise makes the world go round.
You wrote: Personally, if I can't spend it I don't much care about keeping it. Again remember, there's no corporate income tax. Zero. Would that work for your business?
No, it would not work for my business. The whole point of capitalism is to make more money than you can spend so than you can re-invest it in growing the business or investing in a new business. Capitalism is all about accumulating more money than you need. If there were no-one accumulating wealth then there would be no capital to invest.
I tried restraining myself from saying things like, "You're thinking like a Marxist" but I do wonder if you would even be thinking of such things as, "If you can't possibly spend the income that's produced, you can't keep it," if you were a business man and not an academic.
As for the estate tax - Marx's ten point plan for practically instituting communism had as it's first item: place high taxes on inheritances and then move towards finally confiscating all inheritances. Marx knew that control over individually accumulated wealth was the basis of freedom and the antithesis of communism and went for the weak spot - grab that wealth when it's owner was dead.
It is the impractical and hubristic thinking of social engineers and academics that makes dyed in the wool capitalist pigs like me see red. Socialism must seem attractive to people who have not accumulated any wealth through their own hard work, initiative, creativity and entrepreneurship.
Have you read anything about the Fair Tax? Now, that is capitalist/libertarian economics. Your economics is socialist/statist.
UPDATE
To be fair, Scott posted this addendum later:
I'm having some second thoughts about the "ceiling" for income. When that concept was originally devised by Kelso his justification was that returns to capital follow exponential growth patterns and that according to Say's Law that produces "morbid capital" that stays out of circulation. That would be like a kind of tumor on the economy, to use a health-related metaphor.
However, I'm not sure that returns to capital are really exponential (first order growth) rather than sigmoidal (second order growth). Second order functions look like exponential growth during the first half of the pattern because they haven't reached diminishing returns produced by limits. With the other changes to the economic system, especially diffusion of capital ownership, the limits on sigmoidal growth simply may not produce the kind of morbid returns that Kelso was worried about. During his time they didn't know about self-limiting functions and sigmoids were not a big part of the literature. The ceiling is inherent in a sigmoid function.
Anyway, even if there was an imposed ceiling it would be way above what most of us will ever earn even if we become millionaires. Think about the most extravagant lifestyle you know, and add 10% just to be safe. (You and I are probably both thinking about the same dufus.)
I'll respond to this when I'm sober - I just had wine with dinner, a nice fat juicy steak, home-made freedom fries from scratch and salad with a glass of Australian merlot.
posted by Joubert at 4:33 PM
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