[FoRK] Bar Stool Economics

Dave Kammeyer kammeyer at kammeyer.org
Tue Sep 28 05:39:07 PDT 2010


On Mon, Sep 27, 2010 at 11:10 PM, Jeff Bone <jbone at place.org> wrote:
> Don't make me laugh; these folks get the good stuff, and believe me, they pay WELL for it.  Defense of their assets?  In a world where wealth is increasingly mobile, I don't buy it;  this made sense when wealth was measured in contiguous acres, but no more.  However, you could take the jaded view that in fact it serves merely to destabilize and therefore create opportunity.

There are lots of other points to argue, but defense of assets is a
huge factor.  Assets roughly include land, physical property,
intellectual property, and various types of contracts (stocks, bonds,
and derivatives can be viewed as sets of interlocking contracts plus
portions of the above).  Now you may not have most of your wealth tied
up in land, and so perhaps the fact that you can call the police if
someone starts squatting in your house isn't important to you.  Most
of your wealth is probably tied up in various contracts, which the
government will enforce for you, with guns if necessary.  Without the
government to perform this service, your assets have no value.  Sure,
you could try to enforce the contracts yourself, or hire private
enforcers, but then the contract is only as good as your private
enforcers.  In fact, you could just have your private army enforce
anything, without the hassle of obtaining a signature.  If there are
multiple private enforcers without a central arbiter, eventually they
will have different ideas about who owns something and have a civil
war.

It is impossible for anyone to become wealthy without a court system
and police force that at least have the potential to act on his
behalf, because all of his wealth would simply be taken by others
without consequence.  It might seem logical then to have a straight
wealth tax.  This is somewhat difficult though, because many assets
are difficult to value or impractical to divide.  Forcing the owner to
come up with cash to pay a wealth tax on an illiquid asset would cause
some undesirable consequences.  Since those with lower incomes tend to
have negative to minimal assets, it stands to reason that they should
pay a very low tax rate.  Those with high incomes tend to have assets
disproportionately high relative to their incomes, and so it is
logical that they would pay a higher income tax rate.

You suggest that the rich should simply pick up and move their assets
overseas, but most people in the U.S. have their assets in contracts
that ultimately are enforced by pointing a gun at someone in the U.S.
You really can't depend on the long arm of the Cayman Islands to
protect what's yours.  If too many super-wealthy people move out of
the U.S., the U.S. will simply institute an asset tax on them on any
property in the U.S. that they want defended.

Oh, and I might add, this is all over a lousy 4.6% increase in the top
marginal rate.  The top rate was 50% for a good part of the Reagan
administration, and much much higher in previous decades.



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