With California’s idiotic attempt to drive even more of its revenue base out of the state, I thought it would be worth a look at wealth tax research. You can replicate what I did by a Google or Bing search or using an AI engine, although I don’t really trust AI results that much at this point. What you will find is some mixed results on the extent to which wealth taxes cause out-migration. But a lot of the research is done in regard to national wealth taxes, where it may be harder for people to move. In the US people are free to move among all the states. Some countries, like Norway, do allow some local adjustments, so there is some research that might be relevant outside the US. Wealth taxes also are of dubious constitutionality, certainly federally, but also in most states. Regardless of the research, the early California experience, before the tax is even enacted, pretty much shows you what will happen–wealthy people subjected to the tax will leave and tax their income, wealth and businesses elsewhere.
Most of the research notes this effect. Sweden had a wealth tax and dumped it because it of course actually led to reduced revenues. Swedish officials look at Norway, which is struggling to rationalize its wealth tax, and say it is unfortunate that the country didn’t learn from the US experience. And of course when you start reading various articles you have to consider characteristics of the authors, you can imagine the cherrypicking and data and statistical manipulation that goes on. Here is what I consider to be a good summary of the likely outcome.
Since most wealth taxes have failed, proponents tend to use the moronic “fairness” argument to justify them, and claim that they lead to greater equality. I doubt that is true, but I am also not sure how it is good thing to create equality by making everyone poorer. That is almost always the result of distributionist (i.e. socialist) policies. New Yorkers are beginning to get a good look at this axiom. And there is nothing “fair” about a wealth tax. Fairness implies some objectively derived natural rule. For example, making people pay an amount of taxes that reflects the benefits they get from government. But most government revenue goes to help poorer people, who pay no income tax, much less a wealth tax.
I am all for progressive taxation, those who have higher incomes should pay more. At least in the US, the wealthy benefit from absurd deductions, like the private foundation scam and renewable energy credits. An income tax should be completely flat, with only a deduction for dependents; no other credits, deductions or exclusions of any type. And labor income and invested income should be taxed equally. This would result in far lower tax rates, which as I said, can be progressive, so that higher-income people pay more. A wealth tax, however, is nothing but a punishment of success. It has no redeeming features other than to punish those who worked hard and did well. I would be very much in favor of an estate tax that is very high above a certain level; it would be a much better way to raise revenue, and that isn’t money attributable to the effort of the inheriting generation.
