discuss: wealth tax

On the Keynes thread, Arthur initiated a wealth tax discussion and provided some wikipedia links:

On the need for a positive program I would suggest a separate topic on “wealth tax”. Wikipedia has some good starting points which link to useful statistics:







Unlike the usual Keynesian stuff, reformist proposals for wealth taxes have the benefit of actually providing a plausible solution to budgetary crises and sharply raising the property question since revolutionaries can propose steep progression from the insignificant rates currently contemplated to actual expropriation.

Major arguments against are:

1. High cost of administration (but this cost is necessary to facilitate future expropriation by having detailed records of ownership etc).

2. Capital flight, which leads directly to other “antiquated” demands from the Communist Manifesto like confiscation of the property of emigrants and rebels.

24 Responses to “discuss: wealth tax”

  1. 1 Arthur

    I suggest this represents a concrete political demand that could “take off” within the “99%” and “occupywallst” movements.

    There are already appeals from “enlightened gentry” for their income tax to be as much as their employees. (Serious campaigns in Germany and France and Obama has taken up proposal from Warren Buffet in USA).

    A few countries still have small wealth taxes (around 1%) but most have abandoned them as impractical due to capital flight.

    I think there is potential for an international movement to address the issue of capital flight and to use proposals for a wealth tax to really focus attention on “we are 99%, they are 1%”.

    A lot of detailed policy work would be needed on exactly where and how to draw the line, but a basic principle agreeable to both reformists and revolutionaries could be for a tax with a threshold that excludes 99% of the population with a sharply progressive rate affecting the most wealthy people in the 1% far more than those only just at the threshold.

    A lot of groundwork has already been done by the financialization of most wealth and anti-money laundering measures affecting tax havens. Fiscal crisis will require some sort of wealth tax. Proposing that it be a confiscatory tax (reaching 100% above a certain cap) would sharply raise the “property question”. Fits nicely with the communist manifesto:

    We have seen above, that the first step in the revolution by the working class is to raise the proletariat to the position of ruling class to win the battle of democracy.

    The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.

    Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.

    These measures will, of course, be different in different countries.

    Nevertheless, in most advanced countries, the following will be pretty generally applicable.

    1. Abolition of property in land and application of all rents of land to public purposes.
    2. A heavy progressive or graduated income tax.
    3. Abolition of all rights of inheritance.
    4. Confiscation of the property of all emigrants and rebels.
    5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
    6. Centralisation of the means of communication and transport in the hands of the State.
    7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
    8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
    9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
    10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c.

    When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character. Political power, properly so called, is merely the organised power of one class for oppressing another. If the proletariat during its contest with the bourgeoisie is compelled, by the force of circumstances, to organise itself as a class, if, by means of a revolution, it makes itself the ruling class, and, as such, sweeps away by force the old conditions of production, then it will, along with these conditions, have swept away the conditions for the existence of class antagonisms and of classes generally, and will thereby have abolished its own supremacy as a class.

    In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all.

    Point 4 is a necessary corollary to points 1 to 3 since the natural reaction of the rich is emigrate and rebel. Worth spelling out some detail of measures freezing and confiscating assets of people engaging in “capital flight” (and “capital fight”!). Point 2 just said “taxes” in the original German version. “Income taxes” was in the authorised English translation, but a wealth tax fits better with “use its political supremacy to wrest, by degree, all capital from the bourgeoisie”.

    Still missing of course is the concept of establishing a workers state by forming councils etc as opposed to trying to simply take over the existing machinery. But that also flows naturally from both the “administrative difficulties” and the likely terrorist resistance to any serious proposals for actual expropriation.

  2. 2 Arthur

    Some closely related issues.

    1. Proceeds of wealth tax could be paid into (multiple) wealth funds each owned by the nation. Income of wealth funds goes into national budget which allocates it between accumulation back via the wealth funds (with directions on priorities including investment in developing countries and shifts between labor and capital intensive depending on employment and between debt and equity depending on cycle), universal accumulation (R&D) and ordinary budget expenditures including public consumption and transfers.

    2. Enforcement could be “privatized”. All tax records published and undervalued wealth can be compulsorily acquired at its declared value. (Also points toward abolition of commercial secrecy).

    3. From the manifesto point 10 should be extended to tertiary level and oblige developed countries to subsidize free education in developing countries.

    4. Manifesto points 1, 4, 5 and 6 should be applied at a world level. Resource rents go to world government responsible for assisting development of poorest countries and for universal R&D rather than to national governments of peoples that happen to have rich resources. Previously “nationalized” means of transport, communication and exchange (“credit”) that were “privatized” because they are now essentially multinational would now be socialized at that multinational level. Disputes as to who gets to confiscate capital flight resolved by proceeds of confiscation going to world level.

    5. I don’t understand “industrial armies, especially for agriculture” in manifesto point 8. Am inclined to reject it as fully “antiquated”. Can anyone provide a link explaining the historical meaning and background?

  3. 3 Bill Kerr

    Recent events in Spain illustrate the difficulty of political opposition to a wealth tax in countries undergoing economic crisis.

    Spain’s parliament has restored a deficit-reducing wealth tax in its final session before dissolving to make way for an election that opposition conservatives are favoured to win.

    Most opposition parties criticised the tax bill as a desperate electoral manoeuvre by the beleaguered ruling Socialists, who argue it is only fair to hit the rich harder in times of crisis, highlighted by Spain’s 21 per cent jobless rate.

    Still, there were only two votes against the new tax for no party wanted to be seen as coddling the wealthy in an election year.

    The yes votes totalled 176 – most from the Socialists – while 166 MPs abstained.

    More detail here:

    The new wealth tax will be in effect just for 2011 and 2012, and will only tax people’s net worth above 700,000 euros ($A945,000). That’s about seven times the earlier threshold. The government says only about 160,000 people will be affected…

    The average yearly salary in Spain is about 20,000 euros.

  4. 4 Bill Kerr

    The extent of economic inequality is astonishing and underestimated by nearly everyone. PBS NewsHour’s Land of the Free, Home of the Poor with Paul Solman is brilliant and a must watch.

    Over 90% of people interviewed underestimated the extent of wealth disparity picking the Swedish wealth profile as the one they thought represented America. Difference b/w Democrat and Republican voters were insignificant.

    Top 20% possess 84% of the wealth
    Second 20% possess 11% of the wealth
    Third 20% possess 4% of the wealth
    Fourth 20% possess 0.2% of the wealth
    Fifth 20% possess 0.1% of the wealth

    In the last 10 years most of the change has been a dramatic increase in the wealth proportion of the top 0.1%

    Warren Buffet:

    Yes, there has been a class war in the United States and my class, the super rich, have won”

    Towards the end Richard Freeman points out that the extent of inequality in the USA matches that of China, still a mainly peasant society, and African countries.

    Another reference which makes some similar points and also emphasises that across the political spectrum Americans desire a more equal society than the one they currently live in.
    Building a Better America—One Wealth Quintile at a Time

    First, respondents dramatically underestimated the current level of wealth inequality. Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: All demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

  5. 5 Arthur

    This ACTU sponsored study from Empirica on Australian attitudes to wealth inequality seems to be inspired by the US unions and show similar results:


    Unions would seriously push a moderate wealth tax and it would be electorally popular anywhere (eg 64% supporting proposals for bigger taxes on rich in USA).

    BTW the statistics seem to be based on household surveys. I would guess that seriously underestimates the real concentration at the very top as they just wouldn’t be surveyed.

    One task should be to compile a collection of links to useful research data on wealth distribution, then analyse it.

  6. 6 Dalec

    I would suggest that in any discussion on wealth inequality in the US that the elephant in the room is well represented here:


  7. 7 jim sharp

    I AM NOT MOVING – & the imperial state ain’t either unless the people move ..
    Short Film – Occupy Wall Street

  8. 8 Bill Kerr

    John Paulson, the hedge fund titan who made billions in the financial crisis by betting against the subprime mortgage market, has defended Wall Street:

    “The top 1 percent of New Yorkers pay over 40 percent of all income taxes, providing huge benefits to everyone in our city and state,” …
    In Private, Wall St. Bankers Dismiss Protesters as Unsophisticated

    Are his figures accurate? How high should the wealth tax on the top 1% go?

  9. 9 tomb

    Again this is not the issue for occupy wall st. They are their because they have no say and no money. They don’t want handouts from the top 1 percent, they want the money honey.

    OccupyLA general assembly appears to be run by peacenicks who are wary of any more radical elements. they have taken to chanting over those they feel may be a threat. Chanting in some quarters has become a tool of control even in open meetings. Assume there is a gradual increase in those wanting to take a more positive and pro active position.

  10. 10 tomb

    sorry about that can never get the captcha code to work so lost first part of that response will try again but don’t have the time to go into the detail again.

    The top 1 percent pay 38 percent of income tax. (lost link with captcha) However this is irrelevant as they have around 25% of the wealth although this figure as with income is hard to determine because of havens like bermuda and also art gold etc.

    They are paying 40 percent of total income tax so this is not 40 percent of their wealth or income.

    the benfits of their contribution to welfare is also hard to determine. Developers etc benefit from government spending also holders of treasury securities etc. Perhaps they get it all back. sorry no time to do detail of original lost

  11. 11 Bill Kerr

    Go to the just formed Occupy Melbourne Economics Discussion Group for fresh perspectives

  12. 12 Bill Kerr

    steve provided a valuable link on another thread. I think it should belong here though so I’m repeating it on this thread:
    CHARTS: Here’s What The Wall Street Protesters Are So Angry About…
    or, http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1#ixzz1bUgcYj24

    Thanks for this link steve (do you receive Alan Kohler’s weekly report?). I agree with you that these graphs should be studied closely. The graphs towards the bottom require more analysis. eg. are the Banks insolvent? The Bank graphs seem to suggest that they are NOT so for me there is a need for more analysis here.

  13. 13 Bill Kerr

    Occupy movement will go on as long as the people are feeling aggrieved by MIKE STEKETEE (The Australian, October 22, 2011)

    This article provides some recent statistics about Australian wealth distribution demonstrating how wealth disparities are far greater than income disparities:

    Australian Bureau of Statistics figures released last week show that the top 20 per cent of households earned on average 11 times more income than those in the bottom 20 per cent in 2009-10 — $3943 a week compared to $360. The 11-times multiple is an increase from 8.5 in 2003-04.

    After taking into account taxes and benefits and adjusting for family size, the gap still widens, but by much less, from a multiple of 4.8 to 5.4. Moreover, some of those on low incomes are relatively wealthy, notably retired people owning their own homes.

    But the distribution of wealth as distinct from income is a whole different story. The ABS figures show that the top 20 per cent of households had 70 times as much net wealth as those in the bottom 20 per cent in 2009-10, on average $2.2 million compared to $31,829. One reason is that wealth typically builds up over a lifetime. But that does not explain why the gap is widening dramatically: for the bottom 20 per cent, net household worth rose by 10 per cent in the six years to 2009-10, compared to 36 per cent for those in the top 20 per cent. In dollars, the increase at the bottom was $2966, compared to $586,240 at the top. The ageing of the population is one factor, but it cannot account for such a large difference.

    The most spectacular growth in wealth was at the tip of the top:

    2.9 per cent of households had a net worth of $3m or more, almost double the proportion of six years earlier. Those with $7m or more comprised 0.6 per cent of households — close to a tripling over six years — and almost half of those were worth more than $10m.

    Here is the link to the ABS report on which the above is based: 6554.0 – Household Wealth and Wealth Distribution, Australia, 2009-10

  14. 14 Bill Kerr

    Some wealthy billionaires have already pledged to give away at least half of their wealth (Bill Gates setting the benchmark at 75%).

    This creates a bit of a dilemma for the wealth tax on the top 1% demand. On the one hand it shows that billionaires have no need for their excess wealth so if a handful decide to give it away then the rest ought to be made to follow their lead.

    On the other hand it shows that a very significant fraction of their wealth (up to 75%) can be given away without altering the operational mechanics of capitalism in the slightest. But then if the wealth tax is framed at a higher level than this, or at a level that makes Bill Gates concerned about his future, then it becomes hard to distinguish from a demand to overthrow the capitalist class immediately. But the purpose of a reform demand rather than revolution demand is that it is more realistic in terms of mobilising a broader range of people in an immediate united front. I can’t really see how a wealth tax demand which really bites when spelt out in detail will sound any different from a demand for revolution.

    As well as all that it becomes harder to nail down the capitalist as “capital personified”.
    Bill Gates first life: screw all competitors
    Bill Gates second life: give away 75% of ill gotten gains from first life to help the wretched of the earth provided they buy MS and don’t use open source

    Nothing is simple.

    Lists billionaires who have promised to give at least half of their wealth to charities.

    June 2010:

    Investor Warren Buffett and Microsoft (MSFT.O) founder Bill Gates announced on Wednesday that they are asking hundreds of billionaire Americans to give away at least 50 percent of their wealth to charity…

    Gates was ranked the second richest man in the world by Forbes magazine this year with $53 billion, while Buffett came in at No. 3 with $47 billion. Forbes said the United States is home to 403 billionaires, the most in the world.

    Bill and Melinda Gates have so far given more than $28 billion to their foundation. Since the foundation began in 1994 it has given away more than $22 billion for health improvements in poor countries and to improve access for Americans to opportunities they need to succeed in school and life.

  15. 15 Arthur

    Wealth tax on top 1% spelled out as 0% for bottom 99% rising to 100% cap on wealth exceeding 99.9% would be opposed as communist by dominant forces in ruling class but would only be an initial step in the expropriation of capital by degrees.

    Would still leave both wage labour and state capitalism and a significant bourgeoisie as well as allowing super rich to retire in comfort.

    Presumably trusts worthy purposes like those setup by Gates and Buffet would be dealt with later, but there is no reason why they should retain 25% or be in charge of administering the income derived from the 75% they have put in worthy trusts. (The fact that they were reasonable and smart enough to do that may well result in them having some useful role to play in a new society, perhaps in the projects they have donated towards, unlike the vast majority of the super rich who have not responded to their pleas and who would just be retired).

    In practice the proposal would mainly be an agitational response to demands for “austerity” as a result of current taxes leaving government budgets unable to afford dole etc as unemployment grows. Very likely to result only in “moderate” wealth taxes applied to middle class as well as top 1%. Positioning the movement to side with the middle against the top in pushing for further expropriation seems like a good idea to me.

    The fact that some of the super rich are willing to give so much away tends to confirm that capitalism has long since ceased to make much sense even for the main beneficiaries. Hopefully some of them will actually swing over to the revolution when that does develop.

  16. 16 Arthur

    eg ABS figures show top 1% of households had more than $5M each in 2009-2010, top 0.3% more than $10M so proposed cap would still be well over $10M and top 1% of population would still be in a different social class from the large majority after tax.

    The 99% would still include some smaller capitalists and rentiers in addition to the top 1% still remaining rentiers with substantially more than $10M per household.

    Large slice of Australian wealth owned elsewhere.

  17. 17 Bill Kerr

    This shows wealth distribution in the sought after pyramid or rather triangular form:

  18. 18 Arthur

    Thanks. http://omeconomicdiscussion.wordpress.com/I assume that will also appear at omeconomicdiscussion

    Based on those global figures I would suggest a good cap would be at $50 million affecting only 85,000 people who would each be reduced to the same wealth as the poorest among them.

    Median household wealth in Australia is about $426,000 so I would not want to propose an “excess wealth tax” starting at $1 million here. Start with 0 excess wealth tax for 99% (households with less than $5 million) rising to 100% cap on excess over $50 million?

    Visually, I prefer an upside down pyramid eg:


  19. 19 Bill Kerr

    CHARLES HUGH SMITH’s 3 demands:

    There are only three things–and only these three–that will cripple Wall Street’s democracy-killing concentration of wealth and power:

    1. Transfer the 99%’s money out of Wall Street and the Too Big To Fail Banks

    2. Remove campaign contributions from our democracy in a way that the corporate legalist lackeys in the Supreme Court cannot overturn, i.e. entirely publicly financed elections

    3. Abolish Wall Street’s dealer, pusher and protector, the Federal Reserve.

  20. 20 tomb

    Think there is one certain way to finish it. Transparency!!!! Full transparency, but could start with all government. In the US a large percentage of the stimulus package went to companies (mainly financials that had been bailed) without any tender just given to them and was spent on bonuses and buying their own shares as well as repaying the government.

    The Us spends more on welfare than we do and has little to show for it. An example is rates. They vary from 1% to 2% (ventura county in LA) or even higher. This means that a house in Box Hill (middle class Australian suburb) would cost about 15,000 a year. Along with this is that most of these cities are bankrupt and provide no more services than an Australian council. People are now starting to ask questions as they the cost of maintaining a house is just as much a killer as paying a mortgage. Corruption is a major issue.

    People want answers but no confidence in current system to give them. They need to take responsibility themselves and without transparency they can’t.

  21. 21 Bill Kerr

    Larry Ellison, the world’s fifth wealthiest person, wants to give away 95% of his wealth according to this report on the world’s 7 wealthiest people

    Ellison reportedly earned $960 million in executive compensation over the last five fiscal years, but has since dropped that amount to $1. He is also taking a page from the Gates/Buffett playbook and will donate 95 percent of his wealth to charity, according to Forbes.

  22. 22 Bill Kerr

    read meritocracy

    Many people prefer a meritocracy to their conception of socialism (formal equality, insufficient opportunity for the more able to shine) or the reality of capitalism (growing disparity of wealth coupled with economic crisis denies too many of the chance to progress). One aspect of both the OWS movement which celebrates difference as a principle (your right to be different transcends everything) and the wealth tax (wealth redistribution to either relieve enormous wealth disparities or taken further to expropriate the wealthy) is that they sidestep the meritocracy question. wrt to the wealth tax it may lack a visceral appeal to many of the 99%, those who do believe that hard work, frugality etc. ought to be rewarded somehow, those who have worked hard to build something within the world as they have found it. Needs discussion IMO.

  23. 23 tomb

    I think 99% of the 99% have worked hard, some (the middle class) have been able to garnish some possessions and assumed wealth. A wealth tax is not going to affect them because they are not wealthy. They do have the threat of unemployment and losing their “wealth” and a wealth tax is the best way at the minute to avoid this or at least diminish the pain. At the minute they pay high taxes however under a wealth tax they would pay less or none at all so can’t see how they would be opposed.

  24. 24 tomb

    sorry read the wrong article.
    The meritocracy article seems to me to be saying that meritocracy is only viable if it is a (or perceived)level playing field. The occupy movement I think is saying it is not a level playing field and the support for that movement is because most people agree. some of the examples in the article point to people giving up on meritocracy when under threat and most feel under threat at the minute.

  1. 1 Wealth tax and the move to social ownership « Occupy Melbourne Economic Discussion Group

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