by Dr. Mike Munger
Duke Professor of Political Science, former LPNC Governor Candidate, and current LPNC Candidate

Read the full article on the American Institute for Economic Research

We seem to be moving towards a wealth tax. At least, there is a growing consensus on one side of the political spectrum that a wealth tax is "needed" — politician-speak for "bad idea that I want to do anyway."

Interestingly, the need for a wealth tax is not primarily the need for revenue, a way to reduce the exploding deficit. That would at least have some tenuous connection to reality, though it would still be a bad idea. The argument for a wealth tax is fairness; as far back as 2008, candidate Barack Obama famously said the quiet part out loud, and strongly advocated for increased taxes on capital gains, even if it explicitly meant that tax revenues declined.

I have written before about some of the reasons that wealth taxes are a problem. The notion of "social justice," and the unique position of the state as controller of coercion, are somehow supposed to justify theft of accumulated savings, even after the owner of the wealth paid his or her taxes on the income. The logic is eternal: "You have something left over? Give us some! And next year, too, until you have nothing."

The difference between an income tax, or consumption/transactions tax, and a wealth tax, is important. The first two are taxes on what economists call flows, activities that are defined over a time period. Income, or consumption spending, is a movement of value, and taxing those movements (flows) is a way of collecting revenue from the working of the system.

Wealth is different, because wealth is the accumulation of income I already paid taxes on...

Article continues on the AIER website.

Mike Munger is a Professor of Political Science, and Director of the PPE Certificate Program, at Duke University. Munger's most recent book, The Sharing Economy, was published in 2021 by the Institute for Economic Affairs.