Two recently published books in Europe are calling for doing away with the rich. The authors are left wing thinkers, Ingrid Robeyns the Ethics professor at Utrecht University and Luke Hildyard the director of a left-wing British think-tank in London. For both of them, the rich are almost evil, they produce a lot of carbon emissions by their private jets, they aggravate the housing shortage by owning multiple homes. Some of them buy political influence by their wealth and so on.
Mr.Robeyns suggests in his book that the state should not allow anyone to accumulate a wealth of more than $10 million (or 10 million pounds or 10 million euros) as a rough figure. And in the countries where the governments pay for health care pensions, this threshold should be much lower, perhaps close to $ 1 million. In his new book, named “Enough”, Hildyard suggests something similar: No one should earn more than the current threshold for entering the top 1 percent of taxpayers. This threshold, in Britain in 2021-22 was 180,000 pounds and in the United States, in 2021, it was $ 330,000.
Both authors rightly mention that the marginal utility of let’s say $1000 is much higher in poor families compared to the rich. For a poor family, $1000 is enough to purchase food for maybe several months, but the rich would spend that much on a single dinner, wine not included!
The arguments can be alluring for some people, however, they are flaws in them just like the communist idea in the first place.
The rich would do anything they can to hide their true wealth and income. They bribe the government bureaucrats, collide with them to bypass the laws. They would migrate to countries who are more friendly toward capitalism. But even if all the countries around the globe enforce such laws, the result would be more devastating. No surgeon or engineer or entrepreneur would spend time on what is eventually confiscated or taxed by the governments. They would rather chill out in their homes. This 100 percent marginal tax rate, which is not mentioned directly in both books, but it is akin to their policy recommendations, means that many current factories and many companies which are going to be founded in coming years, will be owned and confiscated by the governments. These government-owned industries are both inefficient and prone to corruption.
Like many others on the left, they gloss over the fact that in recent decades hundreds of millions of people have come out of poverty. But they emphasize the glowing inequality within nations. Yet, recently, Maxim Pinkovskiy and his colleagues provide some data which indicates growing inequality in recent decades is not as much as generally assumed. According to the Pinkovskiy paper, between 1990 t0 2019, global inequality between countries decreased dramatically and internal inequality within the countries had barely budged. In another study of 27 rich countries in 2017, Jakob Lundberg of the university of Sweden has shown that five countries (Austria, Belgium, Denmark, Finland and Sweden) are already on the wrong side of the Laffer curve!This means that the government’s tax income can improve by lowering the tax rates.
Source: Economist
