Here is a point about taxation that is both
(1) Unambiguously true
(2) Less than 1% of the public understands
Imagine an economy of output valued at 20 trillion dollars.
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Each one of these T’s represents actual stuff, real output. Not “money”, not paper. The output is measured in money, but the output is real stuff.
Every trillion of output can be divided into 1000 billion of output.
Billions
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Each and every one of those B’s represents 1000 million of real output in the economy.
Millions
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And each and every one of those millions is a thousand thousands, again of real output in the economy.
Thousands
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And I could, of course, divide each one of those thousands into a thousand individual units, each one representing one dollar worth of output.
One particular difference of these thousands is that I’ve highlighted the first hundred of them (representing 100,000 dollars worth of annual output) in bold. A very wealthy person can easily afford 100k of consumption every year. This is arbitrary, because a sufficiently wealthy person can easily afford much more than a mere 100,000 worth of consumption annually.
This is just to make a point about scale.
Someone like Jeff Bezos has a highly varying networth, but we can stick it at 200 billion for convenience. The vast majority of this is paper. It is paper that represents ownership of corporate infrastructure: warehouses, proprietary code, offices, trucks, other buildings. He does not consume 200 billion worth of resources every year.
Let’s suppose, just for the sake of this example, that a very wealthy person consumes a mere 100k of the annual production of the nation, while possessing a networth of 200 billion. Let us further assume that 199 billion of wealth is “seized”, and this (still very) wealthy person is left with only 1 billion. And after the seizure, this person continues to easily afford 100k of consumption annually.
The question we can ask then is: Who was actually taxed?
The wealthy man lost 199 billion of paper, but continued to claim 100k of the annual output for his own consumption.
From the perspective of the consumption of real resources in the economy, he was not taxed at all. Not by one dollar. If the government used that 199 billion of paper in order to claim some of the resources of our economy with it, the actual resources that were allocated came from entirely different people. None of the resources came from what the rich man would have otherwise consumed, because he did not change his consumption.
Ownership of stock is ownership of a company, and so represents indirect ownership of capital equipment: the aforementioned warehouses and trucks and computer code and all that.
Seizing stock above some arbitrary number is very likely to be stupid, from the simple matter of incentive alignment in society. But it’s even worse than that.
Paper wealth is, ultimately, just paper. The only way you can specifically re-allocate the conspicuous consumption of the rich is by taxing that consumption directly. Getting in a huff about paper is not about the real resources in society.
It’s about status anxiety.
Such-and-such a person has racked up a “score” of 10 digits or more, and that makes people uncomfortable. That’s all that this is about. If the discussion were about the allocation of real resources, then we’d be talking about real resources rather than how many digits are listed on pieces of paper. It’s not the paper that ultimately matters. It’s the resources, and their allocation, that we actually care about. If those resources are already being allocated toward production, then seizing them doesn’t make sense.
You don’t eat the seed corn. You save it in order to plant it for the next season.