Wealth Tax Is A Bad Idea But There Is An Alternative!

If you hate billionaires, you’d probably hate the title of this post. But I hope you read the whole post. Because Wealth Tax is a highly misunderstood idea in America and with the rise of corporate power, it has even become an emotional issue with the voters. “These corporations avoid taxes, so let’s punish their owners” is a popular sentiment on the left. The problem with that logic is that the underlying assumption is that corporations are working against the people. And that’s not true. Corporations are working for themselves and it just so happens that their incentives are aligned in a manner that does not benefit the people. And systemic problems need systemic solutions and the Wealth Tax, by its very nature, is an outside-the-system solution that is doomed to fail.

Taxation is more than just about the government collecting revenues. In fact, what taxation really is about is creating an economic system that incentivizes certain behaviors and disincentivizes others. Think Carbon Tax which incentivizes the use of clean technology and disincentivizes the use of fossil fuels. And that is where the Wealth Tax fails miserably. Remember, I am talking incentives, not outcomes. Because we know what the projected outcomes look like — increased social spending with greater revenue for the government. But when it comes to incentives, what exactly does a Wealth Tax incentivize? What change of behavior are we likely to see from the wealthy? Will they become more likely to stop accumulating wealth? No. What exactly does a Wealth…