Is a wealth tax a good or bad idea? Why?
Bad idea. This would encourage the rich to move more and more of their assets offshore and make the United States a bad place to invest. If the rich hide their assets, they won't be creating jobs. This would lead to less tax revenue, as there would be less production in the United States. Already we see firms moving their headquarters to places such as the Cayman Islands or using a "Double Irish with a Dutch Sandwich" because the US corporate tax system is too complicated. This tax would encourage HNW individuals to move their assets offshore, where they would either not benefit the United States or the revenue generated would not be taxable. The result is that US corporations have trillions of dollars in cash in offshore accounts that will do nothing to benefit American workers. They cannot repatriate this money without facing US tax penalties, so it will not create jobs in the United States. If the US government were to cut a deal with them to tax it at a much lower rate, maybe some jobs would be created. Some see a tax on wealth as a solution to wealth inequality. In this thinking, if we take some money from Peter and give it to his poorer cousin Paul, both will be more equal. We need to divide the pie better, in this thinking. I disagree. I think we need to bake a bigger pie. We need to encourage Paul to step up his game so that he can join Peter in the ranks of the wealthy. Most people are financially illiterate and don't understand personal finance and accumulating wealth. It isn't a closely guarded secret, but something few put into practice. We should instead offer classes on how to accumulate wealth, how to start a business, and encourage more hiring. There are tons and tons of regulations that affect hiring; if we cut some of this red tape that would encourage more people to hire and create jobs. Tyler Cowen has some good ideas: "A more sensible and practicable policy agenda for reducing inequality would include calls for establishing more sovereign wealth funds, which Piketty discusses but does not embrace; for limiting the tax deductions that noncharitable nonprofits can claim; for deregulating urban development and loosening zoning laws, which would encourage more housing construction and make it easier and cheaper to live in cities such as San Francisco and, yes, Paris; for offering more opportunity grants for young people; and for improving education. Creating more value in an economy would do more than wealth redistribution to combat the harmful effects of inequality"