But the point is that those models are all political. There is literally nothing in the economy that does not have a power relationship built into it – the tax system being a perfect example of that. It is power alone that results in income from wealth being taxed less than income from work; nothing else can explain that.
According to the profession’s most popular theoretical models, optimal tax rates on capital
should be equal to zero in the long run–including from the viewpoint of those individuals or
dynasties who own no capital at all. Taken literally, the policy implication of those theoretical
results would be to eliminate all inheritance taxes, property taxes, corporate profits taxes,
and individual taxes on capital income and recoup the resulting tax revenue loss with higher
labor income or consumption or lump-sum taxes. Strikingly, even individuals with no capital
or inheritance would benefit from such a change.
Sure, you can disagree, as Piketty and Saez do. They buttressing their disagreement by changing the social weighting given to such things as inequality.
But do note what it’s not about – power. The standard economic models are about economic efficiency. You can indeed start to claim that efficiency ain’t all and as a bald statement it’s true. The question actually becomes when should we prioritise efficiency and when some other thing we’re interested in?
To claim that the non-equality of capital and labour income taxation is because of power is to be ignorant of the basics of the subject under discussion.
But then, you know, Snippa and economics.