WHAT PEOPLE ARE SAYING

Capitalism needs a wealth tax

The idea of a wealth tax is not new, but it gained mainstream popularity with the publication in 2013 of the French economist Thomas Piketty’s “Capital in the Twenty-First Century,” the book that launched a thousand think pieces. Mr. Piketty, who has expressed support for both Ms. Warren’s and Mr. Sanders’s campaigns, argued that a capitalist economy inevitably produces wealth inequality that is self-perpetuating and, if left unchecked, “potentially terrifying.” He wrote:

When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

To avert what he calls “patrimonial capitalism,” where rich people get ever richer only by virtue of being rich in the first place, Mr. Piketty prescribed a global wealth tax, progressing from 1 percent on assets of one million euros to 5 to 10 percent on assets above a billion euros (as well as an “optimal” top marginal income tax in developed countries around 80 percent).

“Short of that, many may turn against globalization,” he wrote with prescience in The Financial Times in 2014. “If, one day, they found a common voice, it would speak the disremembered mantras of nationalism and economic isolation.”

A wealth tax may not work

Even those sympathetic to the spirit of a wealth tax acknowledge that there are considerable pragmatic obstacles to its implementation. Even if there were sufficient political will to pass it, it could face a constitutional challenge. Megan McArdle , a libertarian Washington Post columnist, writes:

The big problem is Article 1, Section 9 of the Constitution, which forbids “direct taxes” on people or property unless they’re “apportioned” — doled out among the states by population. Instituting an income tax required a constitutional amendment to override that clause, and Warren’s plan might well require another.

Both Mr. Sanders and Ms. Warren have cited numerous legal experts who say a wealth tax would be constitutional. But with the Supreme Court’s composition being what it is, the question is far from settled.

There’s also the matter of enforcement. As Paul Krugman notes, the wealthy are quite good at avoiding taxes and evading them illegally. And because many assets owned by the ultra-wealthy — like artwork and diamonds — aren’t always traded on the market, Ms. McArdle writes, taxing them would mean “creating a lot of administrative capacity to track and price the assets, with the wealthy and their lawyers fighting every step of the way.”

“If these difficulties prove insurmountable,” writes Noah Smith, a left-leaning economist, in Bloomberg, “Warren and other egalitarian tax crusaders might consider an alternative — an inheritance tax, which would close many of the loopholes that now riddle the U.S. estate tax.” He adds:

Taxing all income from inheritances — including trusts, foundations, gifts, estates, and any other kind of family transfers — at a very high rate would yield a result similar to a small annual wealth tax, only its constitutionality would be less in doubt. And it would focus the tax on the rich people whose fortunes Americans are most likely to think of as being undeserved.

A wealth tax is a bad idea

Skeptics of the idea of a wealth tax argue that it has a bumpy track record. While 12 European countries had a wealth tax in 1990, Greg Rosalsky writes in NPR, only three (Norway, Spain and Switzerland) still do. He writes:

According to reports by the OECD and others, there were some clear themes with the policy: it was expensive to administer, it was hard on people with lots of assets but little cash, it distorted saving and investment decisions, it pushed the rich and their money out of the taxing countries — and, perhaps worst of all, it didn’t raise much revenue.

An economist and leading inequality scholar who has advised Ms. Warren, Gabriel Zucman of the University of California, Berkeley, says that her wealth tax is designed with those failures in mind, since it applies only to the ultra-wealthy, taxes citizens wherever they live and imposes a 40 percent “exit tax” on Americans worth more than $50 million who renounce their citizenship.

Still others oppose the idea on principle, for the very reasons many support it. Michael R. Strain, director of economic policy studies at the American Enterprise Institute, writes in Bloomberg:

Warren’s wealth tax would be an abuse of government power. It is the tax-code equivalent of looting mansions. What is wrong with the way these 75,000 families made their money? Paying taxes is not a punishment, and the tax code should not be used to penalize any group of citizens. Not even the very rich.

A wealth tax is only a start

A wealth tax could close the country’s wealth gap from the top, and the universal social programs it helps fund could go some way to closing the wealth gap at the bottom. But more targeted redistributive measures, like reparations, may be needed to completely close the gap between blacks and whites, argues William Darity Jr., a professor of public policy at Duke University. He told The Times:

That’s an objective that is not achieved by any of the existing policies on the table now. Ultimately, you need a person-based program if you’re really concerned about the racial wealth gap. And it not only has to be person-based, but it has to be race-specific.

Some on the left have also criticized the idea of a wealth tax as utopian in its belief that those at capitalism’s helm would steer the system in a direction it by nature does not want to go. To fix the problem at the root, writes Benjamin Kunkel in The London Review of Books, imagine a market socialist revolution through which the shares of all corporations are transferred into public hands. With ownership of the means of production more evenly distributed, inequality wouldn’t deepen automatically as Mr. Piketty says it does under capitalism. Mr. Kunkel writes:

The notion of such a revolution — first in one country, then gatheringly international but not yet universal — is fanciful right now. But is it more so than a global capital tax requiring the coordination of virtually all nations? … Socialist revolution frankly seems more likely. … Capitalism can dispense with democracy more easily than with profits.

THE TAKEAWAY

In “Capital,” Mr. Piketty himself wrote that his idea of a progressive global wealth tax was indeed “utopian.” Yet he also said that the United States, producing as it does a quarter of global G.D.P., wouldn’t need to “ask permission” from other countries to pioneer the policy.