The Stupidity Of California’s “Wealth Taxes”

I just watched a video of a political candidate in California claiming that she was for a wealth tax, basically because they have wealth and “Californians need that money for their healthcare.”

Lord have mercy. Bless her little pea-pickin’ heart.

There is so much economically stupid and anti-American in that statement it is hard to unpack all of it, but the stupid stands alone.

The first sign of economic illiteracy would be to ask a politician, activist, or your neighbor if they think billionaires should be subject to a wealth tax because somehow their existence harms them.

If they say “yes”, don’t even take the time to ask them to put down their bong or crack pipe, just quietly step back and then run as fast as you can in the opposite direction.

First of all, the “billionaires” don’t have that money sitting around doing nothing. Most of that wealth is locked up in company stock, the value of which fluctuates almost daily – it can be worth billions or it can be worth nothing, but it doesn’t exist as tangible cash until it is sold or becomes worthless.

That’s just as true for those of us who own a house, property or have a little retirement stash. I can’t go to Home Depot and buy a hammer with my home equity or promise them part of my 401-K because the value exists only on paper, and will stay that way until there is some kind of transaction that makes it real and spendable.

Next, it doesn’t matter how much any person in America has, it ain’t yours to take no matter how “noble” you consider your reasons. That impulse leads to evil things, and that is why envy and covetousness made it into the top 10 sins. The only people who support this idea are basically financial alcoholics, and just one little drink often leads to the plot for The Hangover IV.

And if you think these alkies will settle for billionaires…well, their limits will depend on just how thirsty they are at any given time. 

These folks are not principled, they are addicted – and the politicians are just scheming to get you high with someone else’s stash.

The old X-Files poster is applicable here: Trust No One.

Now, I will give over on a few points. I don’t think a billionaire should be able to borrow against their portfolio and use it for substitute income, thereby avoiding income tax – but the way to address that is to do away with income taxes and institute a consumption tax, not to take wealth away from billionaires. 

The second point is that a person’s wealth should not be used to buy political power and access. I can’t bee against Soros and Neville Roy Singman and be for Elon doing the same thing. If the wealth was obtained illegally or is being used to accumulate political power, I can understand the opposition – but still, people should be free to fund whatever cause the choose, but the disclosure should be complete and transparent. 

My last point is that wealth inequality by itself is not necessarily evidence of an economic problem. What matters much more is why the inequality exists, whether people can move through the economic hierarchy, and whether accumulated wealth can be converted into coercive political power.

Elon’s wealth has not stopped a single entrant into the EV or space travel industries, for example, nor has it impoverished a single person, quite the opposite.

There is no economically defensible number at which one can say, “Once the top 1 percent owns X percent of the wealth, society has crossed the danger line.” The Gini coefficient and top-1-percent wealth shares only measure distribution. They don’t tell you whether the distribution is just, unjust, productive, or destructive.

The proper object of economic policy shouldn’t be equality of wealth. It should be broad prosperity, competitive markets, economic mobility and equality before the law. Extreme inequality deserves attention when it tells us one of those mechanisms has stopped functioning but the mere fact that one person possesses vastly more wealth than another doesn’t establish that anything has gone wrong.

Economic inequality is primarily a symptom or measurement, not a diagnosis of a problem.