June 25, 2019

June 25, 2019

Why Willie Sutton Is a Sounder Guide to Taxing Wealth Than Chuck Lane. Today, the Economic Policy Institute and the Institute for Policy Studies are holding a conference entitled “Taxing the (Very) Rich,” featuring such luminaries as New York Times columnist Paul Krugman, author Barbara Ehrenreich, Senator Chris Van Hollen, Congresswomen Pramila Jayapal and Jan Schakowsky, and a veritable minyan of economists. Moreover, a number of certifiable gazillionaires, including George Soros and Abigail Disney, just released a letter calling for a wealth tax, a cause that their fellow gazillionaire Eli Broad also embraces in a Times op-ed today. In his article, Broad argues, persuasively, that all the charitable giving that he and his peers have undertaken, and all the progressive economic policies that his state (California) and city (Los Angeles) have enacted, still fall woefully short of remedying our stratospheric levels of economic inequality. Taxing the nation’s great fortunes, he concludes, is required if we are ever to seriously seek to rebuild our middle class.

In an endeavor to halt this rush to social decency and economic viability, a host of right-wing and centrist commentators have punditized that wealth taxes don’t work. In today’s Washington Post, columnist Chuck Lane argues that the Nordic countries tried wealth taxes and then abandoned them (well, actually, Norway didn’t; it still has one), and that expanding social programs requires major tax increases on the middle class. He advances this argument the better to pooh-pooh Senator Elizabeth Warren’s proposal to levy such a wealth tax.

What Lane’s argument misses is that the level of income and wealth inequality in the United States is many times higher than those in the nations of the Nordic north. Comparing the Gini coefficients (in which zero equals perfect equality of income and 1 equals all of a nation’s income going to just one person) of the Scandinavian nations to that of the U.S., the coefficients of the four Scandinavian nations range from 0.25 to 0.28, while that of the U.S. is 0.39. The Nordics are not nations where median incomes (particularly when their generous social benefits are factored in) have stagnated since the 1970s, as is lamentably the case here. Nor is ours a nation where the great mass of taxpayers are accustomed to getting their full money’s worth in social benefits, as most Nordic taxpayers are. Polling shows that taxing wealth is a popular, and hence, potentially enactable, idea, should an anti-plutocratic government emerge following the 2020 election. A lot more popular and enactable than raising taxes on the middle class.

In short, neither the economic nor the political preconditions for levying a tax on great wealth in the United States are comparable to those in Scandinavia. A look at our nation’s comparative levels of inequality and the political perceptions shaped by those levels suggests that Broad and his cohort are right. We should tax wealth here for many reasons, most particularly that which Willie Sutton advanced in explaining why he robbed banks. “That’s where the money is,” he said. Indeed.