Multi-millionaires have always been a problem in any society, but it's getting worse.
Governments around the world had to create vast quantities of money to pay for the covid crisis, but the consequence is massively increased inequality and inequality matters. Partly that is because of its psychological impact. Feeling left behind is deeply damaging. Social cohesion is harmed. As worrying are the economic dimensions.
Increasing wealth leads to overvalued housing, rising stock markets, and (perversely) increasing debt as those left behind try to achieve basic things, like owning a home to live in. These stresses also create instability in society. When they spill over into most people's cost of living by, for example, fuelling rent increases, hardship results. The increasing wealth inequality of the UK is in that case a cause of concern for everyone.
In this video I explore these issues and explain why we need to tax multi-millionaires more. It is the first in a series that will be published over the next few weeks, with one scheduled for every day this week.
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It seems to me that one of the great advantages of an MMT perspective is that it takes the focus away from taxing in order to “raise money to pay for things” and allows one to focus on the question of whether a particular form of taxation has socially beneficial effects. The question of whether more could be raised or whether it could be raised more efficiently elsewhere then becomes largely irrelevant.
If a good case can be made for taxing multi-millionaires more, and I believe there can, then they should be taxed more.
Are you going to say anything in this series about rent seeking? Most people, when they think of rents, think in terms of renting a house or a flat or a car or, maybe, a tool they might only use for a short period like a steam wallpaper stripper. However it goes much further than that. If you think you own a copy of Microsoft Word, you are mistaken. If you read the license you will see that it says the software remains the property of the Microsoft Corporation. Similarly the books on your Kindle or the software on your IPhone, if you have one, are only leased to
you. It seems to me that most of the wealth of many multi-millionaires was acquired through rents of one kind or another.
I will cover rents….
Hi Richard,
My impression of millionaires and billionaires is that they usually minimise liquid assets in their possession and invest their wealth in illiquid assets so the tax point is usually on the sale of these illiquid assets. This is why folks like Elon Musk paid zero federal taxes since 2018. It seems to me that increasing income taxes to combat inflation would be futile. How should governments go about tackling inflation without hurting normal folks?
Thanks,
Zhan
Elon Musk is not normal
His portfolio is not normal either
And most inflation is in asset prices with consequence spillover via economic rents
So tackling wealth is actually fundamental given how signif98icant rents are
You are thinking too narrowly
Hi Richard,
Apologies if I come across as a sceptic. I simply just want to get the economics right. I was thinking if we tax wealth (which I have no qualms on doing so), then we are increasing the supply of money if billionaires like Elon Musk had to liquidate his stocks to pay for wealth taxes. When the supply of money goes up, I believe the implication is that inflation will rise and this will hurt the majority of us who live from hand to mouth. Could you please clarify what’s wrong with this logic since you said that I was thinking too narrowly? What is then the correct way to think about the relationship between wealth taxes and inflation? I would like to clarify that I have mere A levels economics knowledge (which I also didn’t manage to do very well in it) so kindly dumb it down for my sake.
Thanks,
Zhan
How will increasing tax increase the money supply?
Tax reduces the money supply
That is their purpose – and it is done to control inflation
Taxing wealth forces the sale of assets. An excess of sellers forces the price down. That is the aim.
I cannot see how it increase the money supply. Can you explain how you think it does?
[…] This is the second in a series of videos, the first of which is here. […]
Thanks, your answer helps to clarify my misconception. I was mistaken about the concept of money supply and equated it with money collected by the government instead of the money circulating in the economy.
[…] video in this post is the third in a series on how to tax multimillionaires. The first and second are […]