Amazing how no one ever reads reports, isn’t it?

But, as Oxfam point out in a new report today, almost 50% of all wealth is now owned by the top 1%, and much of that by the tope 0.1% of wealth holders in the world. We live in a time of obscene inequality which has delivered no proven benefit at all to the world at large.
As I point out here, actually Oxfam is complaining that wealth inequality is still less than it was in 2000 and 2001.
It’s right there on page 2 of their own report. Funny how no one else has mentioned this, isn’t it?
The Republicans are, of course, lined up to oppose him saying that taxing the wealthy would reduce the rate of economic growth contrary to all evidence when US growth is now entirely dependent on US state intervention.
But this is just standard optimal taxation theory. Taxing the returns to capital has higher deadweight effects than taxing labour incomes or consumption. What the money’s spent on doesn’t change this one whit.

20 thoughts on “Amazing how no one ever reads reports, isn’t it?”

  1. do you really think optimal taxation theory does a good job of describing that happens to investment when you tax the wealth of the very rich?

  2. right. And if you put the question I put to you, to him, how do you think he’d answer?

    as you well know, Nobels are handed out for coming up with ideas that had great influence, not creating models that can straightforwardly be mapped onto policy in the real world.

  3. Well, you could go read the Mirrlees Review. Where he advocates a progressive consumption tax. Meaning that, yes, there should be no wealth tax even on the very wealthy.

  4. IIRC, the purpose of taxation is to pay for things governments do. Its purpose is explicitly not to apply the least bucking to markets. Indeed a lot of taxes are designed to buck markets.

    So you’re going to get some quite reasonable demand that those who benefit a lot from, oh, things like the rule of law, functional defence, and lots of regulations destroying their upstart competitors, should be paying for that. Rather than all that be paid for by the less well off because deadweight costs.

  5. you are right, it doesn’t call for a wealth tax as such – most of the arguments there are about feasibility, not distortions of investment decisions of very rich, or the impact on growth. Here is discussion:

    http://www.ifs.org.uk/uploads/mirrleesreview/dimensions/ch8.pdf

    And the report *does* call for taxing the returns to capital, which is what you claim above is what we shouldn’t be doing on basis of optimal taxation theory. It recommends that savings income and capital gains (above risk free rate) “should be taxed in full, with losses relieved in full … at the same rate schedule as earned income”

    it also recommends inheritance tax is replaced by a more progressive and comprehensive lifetime wealth transfer tax

    not quite the picture you paint,

    also still not really addressing the question I asked, which is about how very simple models concerning labour supply and investment decisions (wasn’t Mirrlees theory based on ‘ability to earn’ – I can’t remember) translate into real world, when you are asking how the super rich would do things differently – in a way that affects economic growth – if taxed more.

  6. As I recall it it’s not “risk free” rate (ie, Gilts) but “normal” rates. Meaning that most capital incomes would be untaxed, only “super profit” would be taxed.

  7. BIG,

    > So you’re going to get some quite reasonable demand that those who benefit a lot from, oh, things like the rule of law, functional defence, and lots of regulations destroying their upstart competitors, should be paying for that. Rather than all that be paid for by the less well off because deadweight costs.

    Fair enough, except, of course, that deadweight costs are a payment made by the less well off.

  8. http://www.ucl.ac.uk/~uctp39a/MirrleesReview_FS_2011.pdf

    “These goals can be achieved by an approach that taxes only ‘excess’ returns, and which exempts from taxation the component of income and capital gains earned on savings that corresponds to a risk-free or ‘normal’ rate of return – for example, that paid on medium-term government bonds.”

    also I kind of feel that I made some substantial points only to receive a reply nitpicking on one word I used

  9. “These goals can be achieved by an approach that taxes only ‘excess’ returns, and which exempts from taxation the component of… capital gains… that corresponds to a risk-free or ‘normal’ rate of return.”

    Bring back Indexation Allowance! 🙂

    Here’s a thought: calculate capital gains with indexation allowance, deduct the annual exemption and any holdover/rollover reliefs, and stick the rest in as income taxable at marginal rate (as in the good old days when CGT made sense).

    Entrepreneurs then get to index up at a higher rate than the RPI most people get – so the longer they invest in their business, the better the cumulative effect will be for them. Short-term speculation is effectively taxed as income.

    That’d ditch a few distortions 🙂

  10. “We live in a time of obscene inequality which has delivered no proven benefit at all to the world at large.”

    Man invents iPhone. People like iPhone. Man sells millions of iPhones. Man becomes .1 Percenter. Millions are happy.

    People become wealthy by pleasing people. A LOT OF PEOPLE. The “no proven benefit” is ignorant propaganda.

  11. Much of tax policy is based on the horrid that it’s OK to incite hatred of people if a) you’re jealous of how much they have, or b) find something they do icky.

  12. How many pensioners are in the 1%? How many people who have decent equity in their house, a couple of ISAs and a bit in a savings account at the bank are in the 1%?
    Probably some….

  13. I see Polly has misinterpreted 1% of the world population owning the same amount of wealth as the other 99% of the population as the 1% owning 99% of the wealth.

    Is she thick or just a horrible lying shit?

  14. Pellinor has it. Taxing earnings and capital accumulation at different rates distorts incentives.

    Luis, I.will now take Tim’s advice.and.read that report. And then I’ll probably disagree with you, Tim and.Mirlees.

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