The following video has gone viral although it has been around for a while. I'm wondering if this means anything.
I have been disturbed by growing inequality of both wealth and income for a long time. Not really so much because of fairness issues (although those are certainly valid) but because our economy can't function well with all the income accruing to an investing - not consuming - class. In short, I think it puts us on a path to lower demand for everything.
But as the video clearly demonstrates, the disparities are not only wider than we imagine, they are wider than we can imagine.
The other big issue for me is the lack of ways to address this short of a revolution - the traditional end to mass extreme inequality. Some of the ideas being floated are things farmers should keep an eye on, I think.
Taxing wealth in addition to income is one way to make sure that the rich contribute more to government coffers. That would essentially be a tax on household assets like property, stocks, bonds, unincorporated businesses, trusts, art and yachts.The idea is to aim at the wealthiest part of the population, perhaps the top 1 percent, a group that has seen the most significant and consistent accumulation of wealth over the last few decades.“A wealth tax is an attempt to fill the holes in income tax,” said Douglas A. Shackelford, a tax expert at the University of North Carolina. “The primary hole is unrealized capital gains. That’s behind the big buildup of dynastic wealth.”COUNTRIES like Canada have a tax on asset appreciation, based on the value of the assets at the time of the owner’s death. The United States does not, and the tax code contains a huge loophole through which to pass wealth to one’s heirs.Here is how that can work in practice:A billionaire can borrow against his stocks, art and real estate, and spend that borrowed money without paying tax. All he has to do is pay interest on the loan. When he dies, his heirs can sell the assets to pay off the debt. Under an existing rule known as the “step-up in basis,” no matter how much the assets have appreciated in value, no one will owe income tax on that gain. And the rest of his fortune goes to his heirs without anyone ever paying income taxes on the appreciation in the assets.Partly to close loopholes like this, Ronald I. McKinnon, an economist at Stanford, advocates a wealth tax in addition to income tax. He outlined his proposal in a recent op-ed article in The Wall Street Journal titled “The Conservative Case for a Wealth Tax.”Professor McKinnon’s plan would require households to list all domestic and foreign assets annually. There would be a $3 million wealth exemption, which, in his estimation, would exclude more than 95 percent of the population. The remainder would be subject to a flat tax of about 3 percent of household wealth. [More]
The step-up in basis is the big win, IMHO, in the estate tax compromise reached at the beginning of this year. It also is enormously expensive - about $60B per year. This is a target large enough to attract budget hawks and with a small enough constituency to be vulnerable.
In short, I don't think this battle will ever be over as long as wealth continues to pile up in a very, very few hands.