Wealth Tax on "rich" people

[Michael]

A German Think tank (apparently over 100 years old) is proposing a wealth tax on rich people . Rich people would be those with assets worth $250,000. Pretty much 'rich' here means anyone middle class who worked a lifetime and bought a home. Each German Citizen would be forced to pay a 10% once-off tax of a minimum of $25,000. Yeah, once off, I bet.

Interesting isn't it? How quick we reach for the gun. How the middle class always bares the pain for the mistakes of the cheating politicians. It might be interesting to know that Germans have been paying for 15 years on their $1.5 Trillion to pay for reunification. That meant ZERO wage increase in a decade and a half. And now they're expected to bail out Greeks who retire at 55. Spanish who like their siestas. And soon, Italians. Well, actually, they can't .... even Germany has it's limit.

How much longer before a politician has the bright idea in the USA to tax every American a minimum of $25,000 that owns a home? Which won't be many if the Banks have their way - they'll own it all! If we get enough poor people, I'm sure they could demagogue the issue. Or maybe the media masters will turn on the proletariat? Every plebeian must pay back to society what they took!

A lifetime of welfare madam?
That'll be one child to the State! We all have to pull together! Do your part For The Society! Give a Child Today!



Oh, I forgot, we sell 30 year bonds Anyhow, I hope everyone is holding onto their seats tight. I'm thinking the rides just left the station and over the next 5 years is going to be a rollercoaster.

[Kittamaru]

Heh, a wise man once said - when you make peaceful change impossible, you make violent revolution inevitable...

[Billy T]

... Rich people would be those with assets worth $250,000. Pretty much 'rich' here means anyone middle class who worked a lifetime and bought a home. ...

It is very hard to quantify total assets owned by someone in US. How would you do that? In Brazil it is relatively easy, except for crooks hiding assets. Every annual tax return must list you assets. If they increase more than is reasonably possible by your income, you will be investigated. Banks, employer, brokers etc, much like in the US, report what they paid you; but when selling something you own to some one else you can get cash and many do now that the Brazilain Real has little inflation to erode the value.

I sold a cattle ranch in Brazil I had owned for 10 years and the buyer had undeclared cash, so he asked if officially we could record the price as less than he actually paid. (He could not explain where all that money came from.) I agreed as then my capital gain was less. Unless his buyer, when he sells wants to do the same, he will have a larger than true capital gain to pay. I.e. he will pay the capital gain I should have. In the end the government always will get what it should, but with delay. Unlike him, I could put the payment in the bank and earn high interest rates on it and if ask where it came from say "From my US funds not earlier brought into Brazil." In fact I do bring dollars into Brazil every time I return from a US visit as long term the dollar will be trash and the Real, strong.

I don´t know all the details but this is quite common in many countries. My ex wife, a Norwegian, sold a house there she inherited and got more than half the payment "under the table" as they say there. So even where you must annually declare your total assets, the declared amount may be false (by the undeclared cash you hold). In the US, I think IRS accurately knowing ones total assets is essentially impossible.

The progressive income tax and inheritance taxes do some of what you want with a "wealth tax" as your will tells government what you have accumulated. Currently the first 5 million is not taxed when passed by inheritance but that should revert to 1 million soon. So I give my kids $13,000 each, each year, as up to that amount has no gift tax. I´m getting old so soon will do the same for my four grandchildren too as they will be able to use it well soon too.

[quadraphonics]

How much longer before a politician has the bright idea in the USA to tax every American a minimum of $25,000 that owns a home?

You say that as if property taxes aren't already commonplace in the USA.

[quadraphonics]

It is very hard to quantify total assets owned by someone in US. How would you do that?

Same way as anywhere else: reporting requirements, along with tax incentives (you can write off depreciation on assets). Why would it be any harder in the USA than anywhere else?

In the US, I think IRS accurately knowing ones total assets is essentially impossible.

That's silly. You are aware that the USA has a capital gains tax, yes? And that such requires accounting for all capital assets, so that gains can be calculated and taxed?

Assets are definitely accounted by the IRS in the USA. Your implication that they are not, and that there's some vast space of unknown assets that can never be accounted for, is inane.

[RedStar]

I don't like the concept of the income tax or wealth tax because it divides class by income rather than capital ownership. We need a "capital tax", where owners of property, including real, capital, financial, and virtual, are taxed for their ownership. It can be an annual 75% of value tax. If they do not pay, their capital is confiscated and they are arrested.

Now that is a real tax.

[Billy T]

I don't like the concept of the income tax or wealth tax because it divides class by income rather than capital ownership. We need a "capital tax", where owners of property, including real, capital, financial, and virtual, are taxed for their ownership. It can be an annual 75% of value tax. If they do not pay, their capital is confiscated and they are arrested.

Now that is a real tax.

No -it is a sure way to make capital flee the country and a quick depression, probably with no hope of recovery until that silliness is reversed.

[RedStar]

No -it is a sure way to make capital flee the country and a quick depression, probably with no hope of recovery until that silliness is reversed.

If they try to flee, we seize their wealth and arrest them for being enemies of the people.

No joke. I'm tired of the wealthy taking the economy hostage.

[Michael]

If they try to flee, we seize their wealth and arrest them for being enemies of the people.

No joke. I'm tired of the wealthy taking the economy hostage.

What gives YOU the right to someone else's anything? Why do you feel entitled to take what someone else owns?

If I grow an apple tree, water it, care for it and then have a bushel of apples - are YOU entitled to MY apples? Yes or no? If I pick apples for a farmer. Are YOU entitled to a percentage of MY labor? How about my kidney? Do you get to take that too?

And, when you formulate your answer, please do not use a phase that includes anything along the lines of "For the 'good' of society" or "For the good of the State" or "For the Glory of God" or for Christ's sake not the "You use the roads!". I want to you to explain why YOU think you have a right to someone else's property. Let's not bring the State or society into this.

Explain your moral position.


Secondly, you don't have to use the same money as the so-called wealthy person. If you and your friends decided to use your own money, then the wealthy person's money wouldn't mean shit to you. Just as Zimbabwian dollars probably mean crap to you. Because, you don't use them. But, to people in Zimbabwe, yeah, they mean something.

[RedStar]

What gives YOU the right to someone else's anything? Why do you feel entitled to take what someone else owns?

Private ownership is a feudal, idealistic concept that has no justification in reality. The working class generates all wealth, yet owns a pitifully small amount of it. That is problematic.

Explain your moral position.

I don't have a moral position. I have a material position. Your bourgeois morality means nothing to me. There is only class struggle, and I care about the working class.

Capitalism in reality does not work according to principles or market fundamentalism. It works with brutality, political repression, fraud, and deception. Why do you think so few wealthy people actually support laissez-faire capitalism? Because that's idealism. It's not reality. It's not a reality conducive to protecting class interests, which is what people do.

[Billy T]

To RedStar: I´m glad you are posting. - IMHO often stating things that need to be stated, but few dare to; however, I disagree that the wealthy are "protecting class interest." Their actions may collectively have that effect, but they are protecting their individual property rights. They try as best as they can to increase their wealth and don´t care much who loses wealth in the process, but as poor have little, they mainly try to get wealth from those who have it. - I.e. there is more intra-class war by and between individuals than between classes.

[RedStar]

To RedStar: I´m glad you are posting. - IMHO often stating things that need to be stated, but few dare to; however, I disagree that the wealthy are "protecting class interest." Their actions may collectively have that effect, but they are protecting their individual property rights. They try as best as they can to increase their wealth and don´t care much who loses wealth in the process, but as poor have little, they mainly try to get wealth from those who have it. - I.e. there is more intra-class war by and between individuals than between classes.

There is intra-class competition, but this arises as a product of the capitalist mode of production. Why do workers compete in the work place, when they typically have similar interests (having a decent wage and being able to live)? The reason is because labor is surplus to capital, and workers must compete in order to earn a living - they turn on each other.

As a class, the bourgeoisie (capital owners) have less reason to compete, because while profits and property may vary, they ultimately always have a surplus army of labor available. Consolidation is preferable to competition from the perspective of the ownership class.

It is important to view society not as a collection of disjointed, unconnected individuals and events, but as a dynamic system, and especially as a class struggle. Capital owners protect their capital because it is their leverage. The ultra-wealthy ultimately arrive in their position through the appropriation of surplus value of workers.

What one man could ever single-handedly be productive enough to produce $50 billion in wealth? Nobody. But because they own the property and capital, they accumulate the wealth generated by labor. In feudal societies, land was privilege, and "ownership" of the land entitled the landowner to a portion or to the complete products of the land, even though he did not actually labor on the land. Capitalism is simply an updated form of feudalism, where profit from ownership, and not labor (which is productive), can and does exist. In fact, without the appropriation of surplus value by the capitalist, fabulously wealthy people could not exist.

[Billy T]

RedStar your post 12 is the traditional Marx etc. view and I will not dispute much of it, but most really great wealth today is not gained by stealing (the surplus) part of the production of the workers.

For example Bill Gates was college drop out, working with his brain in his garage and eventually giving jobs to thousands of workers with good pay. Sores (guy who "broke the bank of England") got his billions, not from the workers, but from the financial system as whole. - Most great wealth is financially achieved in the modern era; although Marx was right about it (which is the story you still tell as true) in his era. For recent example of mixed wealth achivement, Zuckerberg created (or partially stole from other creators) the Facebook idea. Then when it was big, made the IPO, not stealing from Marx´s "exploited workers" but from those with capital to buy his now much lower value stock. Etc. ("Stealing" as the IPO was promoted with data he knew was false.)

[RedStar]

I'm not sure what you're saying.

Hiring a person is only done when the employee gives more to the employer than he is paid. Otherwise, there would be no point to hiring employees. This difference is the surplus value. All great wealth is achieved by the "growth" of the company, in that the owner can profit from the surplus value generated by each worker and he may have thousands and thousands of workers.

The owner owns the capital; the laborer only has his own labor.

[Billy T]

I'm not sure what you're saying.

Hiring a person is only done when the employee gives more to the employer than he is paid. Otherwise, there would be no point to hiring employees. This difference is the surplus value. All great wealth is achieved by the "growth" of the company, in that the owner can profit from the surplus value generated by each worker and he may have thousands and thousands of workers. The owner owns the capital; the laborer only has his own labor.

That all seems nearly true to me, except the word "surplus" normally implies something not needed.

The capital applied on average for each job existing in the US is huge. I forget the value but something like $80,000 or more dollars is a reasonable guess. It is a great multiplier of the worker´s productivity. It is the ONLY reason why American worker can enjoy a vastly better living standard than the workers in say Indonesia, who are equally intelligent, and working 60+ hours per week, often in unhealthy or even dangerous conditions, with very little, if any, saving possible for their old age. (In Asian cultures, the children are expected to {and do} support their parents when they are old - that is the main reason why female infanticide is common - Sons can earn more than daughters can.)

If capital were not allow a reasonable return, then without it the American worker would earn like the Indonesian does. (I.e. no more than 5% of what he does when capital multiplies his efforts.) Then, also, no one would save for the purpose of building capital. Possibly no one would be saving (enjoying less now) even for their old age, if they have at least one child especially if it is a male. That is the universal pattern that develops in ALL societies that do not use capital to multiply the productivity of each worker. - Why would the US be an exception? - There is no point to saving if gives no benefit. Without accumulation of capital, there is no multiplication of the worker´s efforts.

Furthermore as you observe (and many, especially Malthus, did even some centuries ago) the workers are always in surplus to capital* and competing against each other for their needs. I.e. without capital, the workers will always live at the margins of human life with many dying as production of more workers is a simple natural process and one of the few pleasures of the very poor.

Thus, what you call the worker´s stolen "surplus" is not a surplus (unneeded) at all. A surplus beyond what the worker needs and consumes is essential for the worker´s well being. It is better called the "rent due the capital" which elevates the worker from an other wise subsistence existence.

I suspect you are too well indoctrinated to admit this obvious / self evident truth, but try at least to present a counter argument. I. e. that all wealth is produced by the worker and taking any from him is stealing.

Do you understand what I am saying now?

* The capital Malthus considered in the pre-industral age, was fertile land.

PS, If you wish, we can later discuss what is "a reasonable return" / a "rent" for the capital deployed. I have several posts, including mathematical proofs, showing that these accumulating capital gains MUST be partially redistributed to the masses, if society is to be stable and have efficient production. - I.e. it cannot have all the wealth in the hands of one (or very few). That is desirable to some for moral reasons, but for me, it is an economic necessity to avoid excessive concentration of wealth as then mass production efficiency is impossible. - Society is then stable only with a few craftsmen producing for the elite. - Return to the society of middle ages.

[RedStar]

That all seems nearly true to me, except the word "surplus" normally implies something not needed.

No, surplus in this case implies labor that benefits capital without compensation.

The capital applied on average for each job existing in the US is huge. I forget the value but something like $80,000 or more dollars is a reasonable guess. It is a great multiplier of the worker´s productivity. It is the ONLY reason why American worker can enjoy a vastly better living standard than the workers in say Indonesia, who are equally intelligent, and working 60+ hours per week, often in unhealthy or even dangerous conditions, with very little, if any, saving possible for their old age. (In Asian cultures, the children are expected to {and do} support their parents when they are old - that is the main reason why female infanticide is common - Sons can earn more than daughters can.)

Laborers in America enjoy a higher standard of living because of the exploitation of laborers in Indonesia by American capital.

If capital were not allow a reasonable return, then without it the American worker would earn like the Indonesian does. (I.e. no more than 5% of what he does when capital multiplies his efforts.) Then, also, no one would save for the purpose of building capital.

The problem is that capital itself produces no value. Only labor produces value. Labor comes before capital. You are right that nobody could save to build capital, but why should they? In socialism, capital is owned by the community. There is no need for individual ownership of capital. Furthermore, individual ownership of capital enables the owner to profit without labor.

Without accumulation of capital, there is no multiplication of the worker´s efforts.

The "multiplication" is in the surplus value generated by the laborers of capital. The owner of capital benefits disproportionally.

Furthermore as you observe (and many, especially Malthus, did even some centuries ago) the workers are always in surplus to capital* and competing against each other for their needs. I.e. without capital, the workers will always live at the margins of human life with many dying as production of more workers is a simple natural process and one of the few pleasures of the very poor.

Labor comes before capital. Labor generates and operates capital.

Thus, what you call the worker´s stolen "surplus" is not a surplus (unneeded) at all. A surplus beyond what the worker needs and consumes is essential for the worker´s well being. It is better called the "rent due the capital" which elevates the worker from an other wise subsistence existence.

Why should there be private ownership of capital, though? This gives the owner leverage over others, and a disproportionate ability to profit. This creates an antagonism between labor and capital.

that all wealth is produced by the worker and taking any from him is stealing.

This is precisely my argument. All wealth is indeed produced by labor.

[Billy T]

No, surplus in this case implies labor that benefits capital without compensation {to the worker}.

His compensation is the higher wages he is paid. (Say 15 times more than an Indonesian worker working harder and longer in dangerous conditions with little capital multiplying his efforts.) The deployed capital allows the US worker to produce, for example, 20 times more wealth ~per hour than he could without it. (And be paid 15 times more, if the owner of the capital is getting 5% of the production´s value than the harder working Indonesian worker gets.)

Laborers in America enjoy a higher standard of living because of the exploitation of laborers in Indonesia by American capital.

Only your uninformed mind set allows you to call it “exploitation.” The Indonesia worker, of his own free will, left the rice paddy to come and work in factory whose capital made it possible for him to be more productive and enjoy a better life than the had. If you came there with a gun, told him he was being exploited so you were taking him back to his rice paddy, What do you think his reaction would be?

The problem is that capital itself produces no value. Only labor produces value. …

That is quite silly, based only on your uninformed POV. Obviously false when the factory is fully automated yet very productive. Salaries in China have been recently rising at double digit real (inflation corrected) rates. So world´s largest, by far, maker of consumer electronics, Foxconn, is increasing its profits (and product reliability) by installing 100,000 production line robots and reducing its labor costs. I.e. this capital investment will give greater wealth with much less labor. If labor were the only source of wealth, the only generator of wealth, – how is this possible? – It is not. Your uninformed POV is false.

In almost all modern factories, the capital invested is responsible for more than 90% of the wealth created. Yes the workers in a Ford factory could produce perhaps 100 Ford cars per year without any capital (but simple hand tools)* but with capital they can produce a million cars. Even if they could produce 1000 cars in a year without capital, the factory´s capital (that lets them make 1,000,000) is responsible for 99.9% of the wealth created! There are a few, very expensive, mainly Italian cars made buy hand - with only modest capital compared to the Ford factory, but the production rate is much less than 100o per year and they still require capital in form of large high pressure metal bending presses, large expensive milling machines to make the block top flat, large expensive boring machines to drill the piston cylinders, etc.

What will you say when all the iPods, digital cameras, cell phones etc. are made ONLY by capital intensive machines? Again, your uninformed POV that only labor makes wealth is false, demonstrated by current reality, as silly nonsense. It was probably true, back in the middle ages.

.... In socialism, capital is owned by the community. There is no need for individual ownership of capital. … The owner of capital benefits disproportionally.

On a small scale of production the workers can own the factory. For example, several lumber companies in US´s NW were created by Scandinavian immigrants and prospered for a few decades with only the workers owning the saw mill etc. As the original workers grew old, they decided to sell out, and retire. Once a company has more workers than can be personal friends, one to the other, these cooperatives always fail – Human nature makes each worker think some workers in the other division, which he does not even know, are getting too much of the profits that should be his.

At least with “disproportionally” you tacitly recognize that capital has an essential need to collect part of the wealth produced. Never does it get to collect (get compensated for) the more than 90% of the wealth it is typically responsible for being produced in a modern factory.

Why should there be private ownership of capital, though?

For the same reason you think (I assume) the car you bought, should be your car and I can not drive it away when ever I like. I.e. instead of spending all your income on immediate pleasures you denied your self some pleasures and saved up to buy it. All capital is like that – saving that were not spent on immediate pleasure but saved up. In part because when invested to increase worker productivity wealth is increased and even though the workers will get most of the increased wealth (as salaries), you will get a much smaller part as rent for the capital that increased their production of wealth more than 10 fold. I.e. the ROE, return on equity, seldom exceeds 10%.

This is precisely my argument. All wealth is indeed produced by labor.

Yes you do keep dogmatically asserting that, but never offer any evidence for it to be true since the end of the middle ages. In contrast, I above, have clearly demonstrated it is a false, uninformed POV – most clearly by examples like the Foxconn example, or the more than 1000 fold increase of wealth produced per worker by the capital invested in the Ford factory with the same small contribution of the Ford workers to the wealth production or the fully automated factory producing wealth with no workers.

*Probably not even 100 cars per year is possible without a large capital investment. I doubt they could produce even one car without a great deal of capital. - How would you precisely bore the cylinder block to be an exact circle with constant ID with an error less than 0.001 inch by hand? I think a very large, expensive, capital intensive, drill press is absolutely essential.

[quadraphonics]

The labor theory of value is bullshit. It was discredited a long time ago, and RedStar's inability to grasp this is a root cause of the insane conclusions he reaches.

A simple counter-example that concretely demonstrates the invalidity of the labor theory of value is that it predicts that profit margins should be higher in labor-intensive industries than in capital-intensive ones (because you're using that much more labor per unit output, and so have that much "excess labor" to "steal"). In fact, exactly the opposite is true.

Hiring a person is only done when the employee gives more to the employer than he is paid. Otherwise, there would be no point to hiring employees. This difference is the surplus value. All great wealth is achieved by the "growth" of the company, in that the owner can profit from the surplus value generated by each worker and he may have thousands and thousands of workers.

That analysis is almost half-right, but relies on a stilted perspective to get to a screwy conclusion. It's true that, on the one hand, an employer would not offer a job unless he could produce more income from hiring the person than he will pay him. But that's only half the story - a potential employee has no reason to accept a job if he can make as much, or more, on his own. What we have, then, is not some exploitative, one-sided relationship, but a consensual transaction wherein each side ends up better off than they'd be on their own. I.e., the worker gets paid more for his time and effort than he could on his own, and the employer makes more profit than he would have without the other.

It is not the case that the added profits that the employer ends up with were "extracted" from the employee, any more than it is the case that the added income the employee makes were "extracted" from the employer. The laborer doesn't "give more" to the employer than he is paid - rather, he gives something which the employer can then combine with his other resources to generate new value. By combining their resources and abilities, the two parties were able to generate something new and valuable, which they then divided among themselves according to their initial agreement.

[quadraphonics]

No, surplus in this case implies labor that benefits capital without compensation.

Then your "surplus" does not exist, in the first place.

Laborers in America enjoy a higher standard of living because of the exploitation of laborers in Indonesia by American capital.

That's backwards.

The problem is that capital itself produces no value. Only labor produces value. Labor comes before capital.

Those assertions are all demonstrably false, and have been understood to be such by serious economists for a long time.

Suppose I save up enough capital to buy a factory that produces car stereos, and which is staffed entirely by robots. It's just me, my pile of money, and my means of production. Are you asserting that the resultant car stereos have "no value?" If they do have value, where is the labor?

[RedStar]

A simple counter-example that concretely demonstrates the invalidity of the labor theory of value is that it predicts that profit margins should be higher in labor-intensive industries than in capital-intensive ones (because you're using that much more labor per unit output, and so have that much "excess labor" to "steal"). In fact, exactly the opposite is true.

No, you misunderstand my assertion. I am not saying that all labor produces value, but that labor produces all value. There is a difference. Value cannot be generated without some form of labor.

But that's only half the story - a potential employee has no reason to accept a job if he can make as much, or more, on his own. What we have, then, is not some exploitative, one-sided relationship, but a consensual transaction wherein each side ends up better off than they'd be on their own. I.e., the worker gets paid more for his time and effort than he could on his own, and the employer makes more profit than he would have without the other.

That's not the real world. You have to look at material conditions; it is incredibly difficult, if not impossible in some cases, for property-less persons to accumulate capital and to earn a living without depending on the capital of others. But this dependence is not mutually beneficial, not ultimately, any more than feudalism was mutually beneficial for all parties.

You could make the case that the peasants need land and therefore "need" the landlord, but this is false. The landlord's ownership of the land is, in the first place, illegitimate and gives him a position of leverage.

It is not the case that the added profits that the employer ends up with were "extracted" from the employee, any more than it is the case that the added income the employee makes were "extracted" from the employer. The laborer doesn't "give more" to the employer than he is paid - rather, he gives something which the employer can then combine with his other resources to generate new value.

You are forgetting the fundamental problem: why should the capital owner own the capital? Capital without labor is idle, and owners of capital that do not labor are parasites. They use their ownership to benefit without labor.

That's backwards.

No