Thomas Piketty's like "whateva!"
I want to like French economist and best-selling author, Thomas Piketty. Anyone who
backhands Hollande et al by refusing the legion d'honneur on the grounds that governments wouldn't know honor if it bit them on the ass, has to be awesome.
Alas, Piketty is not so awesome. While the statement that a state has no right to decide what is, or is not, honorable is philosophically interesting and implies a mind capable of extra-ordinary thought, the idea of progressive taxation, which is what Piketty espouses, implies utter stupidity.
The idea that we should 'tax the rich' is as old as the hills. All forms of taxation are sold to shortsighted publics this way, and it has always backfired. For a very simple reason: it costs more to pay taxes than to dodge them when you are rich. Even in the worst case scenario, the cost of lawyers to tie the whole thing up in court is less than the cost of the taxes themselves. If you have $20 Billion, you can pay lobbyists, pay lawyers, fund a TV based anti-tax campaign for less than the cost of actually paying your taxes. Hell, if you only have $100 Million it's still worth your while.
Thomas Piketty's idea of taxing people in the U.K. 50% of their earnings over 1 million pounds is idiotic. All this does is create a barrier between the middle and upper classes and ensures that the wealthiest people will stay wealthy, indefinitely.
First off, it's just not fair. You might think it's not fair that they are so rich and you so poor, but this isn't going to work. The rich got that way for a reason, and come hell or high water they will stay that way. It is a matter of survival for them. Poverty is, they say, the mother of all crime. Well, so is threatening poverty. Someone who has been accustomed to have billions will see the loss of even half his wealth as being cast into utter poverty, and he will fight to prevent it. He will fight dirty. He will win. The material advantage of the wealthy means that direct confrontation with them is both pointless and counter productive. Most people who represent this idea of over taxing the rich wouldn't like it so much if they suddenly won the lottery.
Secondly, the problem is not that the rich aren't taxed enough, it's that they aren't taxed at all. Coming up with new and complicated tax regimes is like trying to design an elaborate key to a door without a lock. It's a keypad, dummy! The most important thing to do with taxation is make it worth their while to pay up.
The correct solution is a flat tax that everyone has to pay, no exceptions, no loopholes. It shouldn't matter if you make $10 or $10 Billion. At the end of the year, you pay x%. The more complicated a tax regime is, the easier it will be to dodge it, because it is next to impossible to find a person who completely understands the system, and even less likely that a judge or jury would. So all a very wealthy person needs to do is pay a good lawyer to take it to court and defer payment forever.
The truth is, progressive taxation actually benefits the rich. Complex tax regimes benefit the rich. Because they are able to spread out their income all over the world, they are able to invest it in art, and stamps, and properties and pay lawyers and lobbyists to exploit or create complex loopholes in tax laws. What progressive taxation does, what all complex tax regimes do, is act as a barrier to prevent crossing from one class to another. Progressive taxation at the $1 million, or even $10 million mark ensures that the upper crust will never have to worry about newcomers and competition.
So to sum up: it's not about making the rich pay more taxes, it's about making them pay taxes. Period. Full stop. This has been a problem for thousands of years. The rich get richer, the poor get poorer, and people like Piketty come along with their slick sounding solutions that just make the situation worse. We don't need more complex taxes, we need simpler ones. Reasonable ones that everyone can pay, and no one will feel like they are being extorted. Rich people are people too, and there is no reason to punish wealth.
Reader Comments
A flat tax might sound superficially appealing - fair, easy to administer, etc. - but it's actually highly regressive. Reason: 10% of a poor person's wages is a lot more to them, in terms of survival, quality of life, etc., than 10% of a rich person's wages. Progressive taxation recognizes the inherent diminishing returns of additional income, in that taking a larger share from those who have considerably more will hurt them considerably less than taking a smaller share from someone who has less to start with.
I'm also utterly baffled as to why the author seems to think that the rich would not do everything in their power to dodge a flat tax? He's quite correct that the rich will fight tooth and nail to avoid paying tax at any rate. As Ragnar just noted, in the U.S. they've successfully bid themselves down from 80% to 12% ... and last I checked, they continue to whine that taxes are too high. So sure, they'll fight. And we should just give in? I hope the author doesn't raise children, he must spoil them rotten if so.
@deej:
Shut up and get back to work.
signed,
your rich fat uncle
Because the US started as that and ended up less(it's not flat, but progressive with the wealthiest ideally paying up to 20.1%) only goes to show you that progressive income tax is pointless, as the US has one of the largest(although concealed) income gaps with plenty of millionaire/billionaire citizens and plenty below the poverty line.
There are plenty of ideas that sound good on paper, that sound good in the telling, but in the practical application of them, they have the contrary effect.
You other point, in your title: simple solutions, simple minds.
Well that's a very interesting and clever thing to say, but how about this: Occam's Razor. The simplest solution is usually the correct one. We are all very used to clever pseudo-reasoning and complex and impossible to implement solutions.
Now, what about being poor? Your argumentation here is completely fallacious. Wealth does not have diminishing returns, and it certainly won't seem that way to a very wealthy person who seeks wealth and power for wealth and power's sake. The idea that the Poor will suffer more is idiotic in the extreme. There is no legitimate reason to tax people at or below the poverty line, and even then, a flat tax of 13%(like in Russia) is not going to break them as much as you claim. If a person makes $20,000 dollars a year he will pay $2,600 in taxes(considering a non-deductive system which I advocate). However he still makes $17,400 so I don't see the huge problem here. When you have a flat tax, you don't say: so and so makes 20k less 13%, you say so and so makes $17.4k That's their income, that's their wealth. A poor person still has to pay rent, still has to buy food and so on. Wealth, income, are not pristine numbers, people have to pay rent on life, and the government needs steady and uninterrupted income in order to do business.
If you want to ameliorate their suffering or financial situation that's a welfare/socialism problem, and can also be worked out and solved. You make what you make. When you have a job in a country, if we agree that taxes are a good, then everyone pays them, in fact it's better if the taxes are immediately taken out of the salary on a monthly basis as it is done in Russia for instance.
There are many ways to look at taxes, but let's call them citizenship subscriptions. Though admittedly compulsory. In that sense, if you pay more, you should get more. But progressive income tax has you pay more and get the same. Like with internet, imagine having to pay more for internet(substantially more) just because you can, but not getting any different service. Of course, in the realm of net neutrality this is a big issue. They want people to pay more to get more, at least that is reasonable. But here, there is no reason to pay taxes.
This leads also into the problems of capital flight, which you want to avoid. If anything, you want capital return, and you want to stimulate capital flight from your competitors. You want their rich people to give up their citizenship and come to your camp, because government is business. It should be run like a business.
So psychegram and deej, both of you are a perfect example of the Duning-Kruger effect. I don't expect either of you to understand this topic at all, and completely expect you to come back and split hairs till the cows come home.
It reminds me of a story from Lucian about Demonax I think, where he got into an argument with some wannabes who wouldn't concede he had won, so he beat them over the head with a stick and said: "That's for not knowing your betters!"
So, let me just grab my stick and say: This is for not knowing your betters!
In the entire "Capital in the Twenty First Century" Piketty does not one mention Fractional Reserve Banking and associated monetary expansion via credit monetization. This alone indicates that he is not a genuine example of a dissenting voice but a new voice of the ruling power. He talks as if all the means of payment in circulation were created by central banks, while in fact 97% of the M3 monetary aggregate that includes most bank account balances that can be offset between banks and thus serve as consideration for cheques and EFTs (our primary modes of payment) do not even get a mention. These ~97% are created by the commercial banks ; not by the central banks, and constitute the backbone of their profits, which are in turn skillfully divested to faceless bondholders as so called "costs of funding" and thus evade taxation. In Australia the level of such expropriation is about $100 billion per annum, calculated as the official expansion in M3 less taxes paid on banking profits.
I think more than anything, we need legislation and economic incentives that makes for the creation of really big needles and maximum security surrounding those big needles. This would be so that the rich can get all their camels through, and safely, as much as it would please them and provide for their blessed entertainment.
This also would be an excellent way to circumvent the teachings of Jesus and to prove, once and for all, via technology and massive central government, that he was no more than a village idiot, spewing nonsense at best, and a dangerous rabble rouser at worst, who deserved what he got.
If we can get rid of spurious 'folk' teachings, science and technology, in conjunction with the magnificent ego-driven force of greed, will facilitate and complete the Final Solution.
signed,
Totalitarian Man
which 'civilization' swears by the flat tax: [Link]
In the words of Epictetus:
If you think that things naturally enslaved are free or that things not your own are your own, you will be thwarted, miserable, and upset, and will blame both gods and men. But if you think that only what is yours is yours, and that what is not your own is, just as it is, not your own, then no one will ever coerce you, no one will hinder you, you will blame no one, you will not accuse anyone, you will not do a single thing unwillingly, you will have no enemies, and no one will harm you, because you will not be harmed at all.
Taxation is nonsense. Solving one problem by creating more is stupid. The entire system we live in is irrational, and tinkering with levels of wrongness will not lead to a better world.
@zek:
Epictetus is alive and well and living in James Hetfield's guitar.
God, on the other hand, is a bit more elusive.
ned