Thursday, July 03, 2014

Picking Piketty Apart (5) Solution

Part 4 of Capital by Thomas Piketty is called Regulating Capital. That title sums it up. Piketty sees government regulation as the solution to all the problems he has identified.

Piketty has no confidence in progressive income tax to solve inequality. When income taxes are raised too high, wealthy people set about evading them. He notes that top tax rates have declined in the last few decades, because a lower rate captures more tax.

The solution proposed by Piketty is an annual progressive annual tax on global wealth. He suggests that this tax would be 0 percent on wealth less than a million. The tax might rise to 5 to 10 percent per year on fortunes greater than a billion euro.

Piketty acknowledges that a global wealth tax might not produce a lot of revenue, but that is not it purpose. The objective is to eliminate large holdings of wealth. This claims that this would reduce inequality.

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