Latest / Words & Numbers / Episode 444: The Wealth Tax Trap

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Episode 444: The Wealth Tax Trap · Words & Numbers

0:00
Hi, I'm James and I'm Anthony. And this is Words and Numbers.
0:08
This week, Anthony and I are going to talk about the wealth
0:11
tax. Along the way, we're going to
0:13
get into why your dog is so damn fat.
0:15
No, I'm serious. We're going to do this.
0:17
We're going to talk about genetically engineering
0:20
mosquitoes, which sounds like science fiction but would
0:24
probably be a great idea, and U.S. debt donations.
0:28
If you really want, you can donate to the federal
0:31
government. All this and more on Words and
0:33
Numbers coming right up. Words and Numbers is a civil
0:36
original podcast. You can find out more at
0:39
civil.com. That's civl.com.
0:42
What is new and exciting in your world this week?
0:46
Well, once again, I'm going to palm it off on one of our
0:48
listeners, actually a friend of ours.
0:50
You suck so hard. Brendan Eck who posted something
0:55
on the words and numbers backstage face group Facebook
0:59
group which you should all join. Brendan says.
1:03
Well actually I don't have the quote, but the the article he
1:05
posted was an announcement from the Treasury Department that
1:09
they are now accepting Venmo. To.
1:13
If you want to contribute to help to pay down the debt.
1:16
Yep, this is going to work exactly as well as how you can
1:20
send more income tax in every year if you feel like it.
1:23
Well, yeah, I mean, what left me, It left me wondering, you
1:27
know, I contribute every April 15, and yet the debt gets worse
1:31
year after year. What do you think will happen if
1:34
people start sending in trillions of dollars to pay down
1:37
the debt? Well, see, that's the
1:38
interesting thing. Dollars are the technical term
1:41
is fungible, which means that that they're all the same.
1:46
How should I say this? Well, I'll give you the example.
1:48
You can send money into this and you can think in your mind,
1:52
well, this money's earmarked to pay down the debt, which indeed,
1:57
I swell. I, I'm going to take it for
1:59
forgiven that it is. That's what they claim.
2:02
So I send in let's say 100 bucks and that goes to pay down the
2:06
debt. And so now I can rest easy.
2:08
The debt is $100 less than it was.
2:11
But here's where the fungibility part comes in.
2:14
With the debt $100 less, the politicians now are free and
2:18
clear to spend $100 more than they would have otherwise.
2:22
Well, careful now, because I think we've decided over time
2:27
that for every $100 that comes in, 123 gets spent.
2:32
Yeah, on average, if you look back historically, look at look
2:36
at what happens to tax revenues over time as they go up and then
2:40
the following year, what happens to spending.
2:44
And on average, for every every time an extra dollar comes in
2:47
the next year, Congress ends up spending an extra buck 23.
2:51
Isn't that something? So yeah, go ahead, Venmo, the
2:55
United States government, some money.
2:57
Yeah, well, the new, the new piece is that you can Venmo the
3:01
government to help pay down the debt, but this thing has existed
3:04
for a while. There's a form in the IRS.
3:08
They're pretty smart. You know, they've got a number
3:10
for every form, the 10:40 and the 1099 and what have you.
3:14
They did not assign a number to this particular form.
3:19
And as near as I could tell, it's the only form like it that
3:22
doesn't have a number attached to it, which is kind of nice
3:25
because it makes it feel more, you know, cozy and warm.
3:28
But the form is called gifts to reduce the public debt.
3:33
That's the name of it. Now tell us, and all those rich
3:37
people who say we should tax rich people like me, how much
3:42
are those people all as a group, collectively?
3:45
Well, what the hell? Along with all other Americans
3:48
sending in with that form every year.
3:52
Yes, very good. And here's where the numbers
3:55
come in. How much do Americans actually
3:57
contribute voluntarily to pay down the debt?
4:00
This year, 2025, Treasury expects to collect $1.5 million.
4:06
Million with an M. Million with an M Oh my God, I'm
4:10
I'm I'm going to get to that in a moment.
4:13
In 2024, it collected 2.7 million with an M.
4:18
Oh my God. 1,000,000 in 2023 and in 2022, that's at the height of
4:25
inflation. Of course everybody's pissed off
4:26
about that. It collected $180,000.
4:32
And I mean just, I know you're a math whiz and I know you like
4:36
doing calculations. How long can the federal
4:39
government run on $180,000? Let me help you out here.
4:44
This figure, Oh yes, this figure averages 2.5 million a year.
4:50
So on average, Americans are donating $2.5 million a year to
4:53
pay down the deficit. And someone's going to look at
4:55
that and say, well, yes, it maybe it's a little amount, but
4:58
it's every single year. And that adds up because every
5:01
little bit helps. No, no, no honey, it doesn't.
5:04
$2.5 million a year relative to the federal debt is like
5:09
donating 2 cents to pennies to pay down a $350,000 mortgage.
5:15
Well, every little bit helps. So this thing collects virtually
5:19
nothing. I mean, the government spends
5:21
this much money in a matter of seconds.
5:23
Oh, in fact, yes, because I didn't write it down in my
5:26
notes, but I did the calculation.
5:27
If you write a check, by the time you're done writing the
5:32
check, interest on the debt has already wiped out your 2.5
5:37
million. Yeah, that's great.
5:39
That's just great. And I, I just want to point out,
5:42
as I always do when this comes up, that every single time you
5:47
hear some rich person on TV saying we should tax the
5:51
billionaires or the rich people like me.
5:55
Well, if you're so committed to that, send in some money.
6:00
Right. But yes.
6:01
But what? But what they really mean is we
6:03
should tax all of you. That's what they really mean
6:08
because they never, ever put their money where their mouth
6:11
is. Anybody.
6:13
Anybody, rich, middle class, poor who claims that they'd be
6:18
willing to pay more taxes? Help yourself.
6:20
The name of the form is Gifts to Reduce the Public Debt.
6:24
Go crazy and it's not going to happen anymore next year than it
6:27
did this year. I have something that's actually
6:30
quite uplifting. You know how?
6:33
You kind of. Shut up.
6:36
You know how I kind of like like even when I'm, I'm not
6:40
scientifically trained at all, right?
6:43
But I'm, I'm fascinated by the world of science and, and an
6:47
article crossed my gaze couple of days ago driving a protective
6:52
allele of the mosquito Fr EP1 gene to combat malaria.
6:59
Now let me just unpack that for you for a brief second.
7:04
Some people have figured out how to genetically alter mosquitoes
7:11
so they can't carry malaria. Really.
7:14
And, and where do you hear this? That alteration continues
7:20
through the rest of their bloodline for all time.
7:23
Wow, wow. We may see the end of malaria
7:28
very soon. And just to be clear, malaria
7:31
has killed more human beings than war.
7:34
Indeed, malaria has killed more human beings than every other
7:39
thing. Yeah, that's that's why the
7:41
mosquito was listed as the most dangerous animal to humans by
7:45
far. More humans are killed by
7:47
malaria. Mosquito's a serial killer of
7:50
epic proportion. But it it may be the case and I
7:54
don't. I don't want to get too far
7:55
ahead of myself here, You never know, but wow.
8:00
Yeah. How about that?
8:02
It's going to be almost impossible to segue to the
8:04
foolishness of the weak from what might be the best, newest
8:07
ever for human beings. It is, it is good news, but it
8:11
suddenly worries me in the back of my head that we're going to
8:15
get to the point and we're pretty close to it now where we
8:18
can just reach in and tweak genes on whatever Organism we
8:22
want to get whatever effect we want.
8:25
And, and it sounds hauntingly familiar to me.
8:31
Hauntingly. Familiar aunt.
8:33
Of politicians reaching in and tweaking pieces of the economy.
8:38
And it almost always has where the economy is concerned,
8:41
devastating effects because the politicians can't see the 2nd,
8:46
3rd, 4th degree outcomes that that result from this.
8:53
And so I wonder, OK, so we do this.
8:56
What happens now? Malaria doesn't trans, isn't
8:59
transmitted as much as it was before.
9:01
What's the consequence of that? Don't.
9:03
Maybe there's a good one, I don't know.
9:05
No. And nobody knows.
9:07
And that's the point. We don't know.
9:09
You have to be very, very humble when you think about things like
9:12
this. So, yeah.
9:14
And look, you, you would ask me a couple of years back, if I
9:17
could eliminate one thing from the world, what would it be?
9:20
And I was on top of that with mosquitoes within one second.
9:24
Yeah. And then I said, but who the
9:26
hell knows what unintended consequence would emerge if we
9:29
got rid of all the mosquitoes? It doesn't seem like there'd be
9:32
anything because there's nothing that feeds solely on mosquitoes,
9:38
Right. And every which way you push it,
9:40
there doesn't seem to be a bad outcome.
9:42
But that's the nature of unintended consequences.
9:45
They don't seem to be there until they are.
9:47
Right. The the way to find out what
9:50
depends on the mosquito is get rid of them.
9:52
And all of a sudden, Oh my God, yeah.
9:54
That's right. And and look, you you went to
9:57
economics, shock of shocks, but I would have gone to eugenics,
10:03
right? Because pretty soon we're going
10:05
to be able to eliminate all the human characteristics we don't
10:08
care for. And should we different, right?
10:12
Yeah. Should we?
10:13
I mean, look, it's one thing when you say we can eliminate
10:16
Down syndrome, and it's another thing when you say, oh, would
10:20
you like green eyes for your baby, right?
10:24
And, and somewhere in between those two things, there's going
10:26
to be a line. And that line is going to be
10:28
very dangerous. Yeah, well, I, it's funny you
10:32
you mentioned that because I'm thinking about what is the term
10:36
psychopaths, that psychopaths, you know, we think of them as
10:39
being, you know, the murderers, which they are, but they're also
10:43
the top notch. CE, OS or CEO, etcetera, they're
10:46
quite good at, sorry. There goes your good news.
10:51
Yeah, that's all right. That's typically how good news
10:54
works anyway. So I'm, I'm not terribly
10:55
concerned for the foolishness of the we can't, I can't help
11:00
myself but go to I, I keep an eye on this website called Study
11:04
Fines. But today the headline that
11:06
caught my eye is that more than half of the dogs in the United
11:10
States are overweight. Really.
11:14
Yeah, that doesn't surprise me. Even beasts who run around
11:19
unencumbered by the thought of any damn thing other than oh
11:23
boy, I like to do this even even they are overweight.
11:28
And not not only over, but half of them.
11:31
They're Now come to find out there are some breeds who are
11:33
more susceptible than others. But I I think we can all contend
11:37
that this is an owner problem because if a dog is overweight,
11:41
that means a human being is giving it too much food.
11:44
Well, the human being is probably overweight by the
11:47
numbers. And that is absolutely correct
11:50
too. You're going to see remarkable
11:53
correlation here. Remarkable causation.
11:57
Hey, I don't know. Yeah, of course it's going to be
11:59
causal. Of course it is.
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to support our show and for access to member exclusive
12:16
content. And on on that happy note, Ant,
12:21
we're going to talk about numbers and boring stuff now, as
12:24
I recall. Well, I wanted, I want to talk
12:27
about wealth. And what brought this up is
12:30
again a discussion on words and numbers backstage where
12:33
apparently it's now, it comes up every few years.
12:36
But there's now discussion about replacing the income tax with a
12:41
wealth tax or maybe adding the wealth tax on.
12:44
And of course people get, particularly politicians will
12:47
get all bent out of shape about the number of millionaires and
12:49
billionaires and we should tax the wealth.
12:51
And I, I wanted to talk about it, James, from 2 perspectives.
12:56
And maybe the place to start is from the, from your perspective,
12:59
the philosophical perspective. What is what is the nature of
13:02
wealth? What's the philosophical
13:03
implications? Not the economic, but the
13:05
philosophical implications of taxing wealth.
13:09
Well, there are philosophical implications.
13:11
Wealth more simply. We'll get to taxing it in a bit,
13:15
but if, if you go back and, and really read the ancients, the
13:20
the concern, it wasn't about equality and inequality exactly
13:24
that those terms were largely unknown to those those guys.
13:28
But if you read your Aristotle carefully, what you're going to
13:30
see is a concern with oligarchy, right?
13:35
That that some human beings are going to become much wealthier
13:41
than others and much more influential than others and
13:45
they're going to look around and find each other and they're
13:48
going to come together and say we can do a better job of ruling
13:52
this place for us then whoever's ruling it now.
13:56
And then you've got a problem. So do I have a problem with
14:01
wealth or absolutely not. Do most philosophers and
14:05
professional philosophers? Yes, but that's because they're
14:08
liberal leaning American ish academics and, you know, western
14:12
academics who are going to have a problem with anything like
14:16
that. But you know, the serious
14:18
thinkers, over time, marks notwithstanding, don't really
14:21
have a problem with wealth per SE.
14:24
They have a problem with starvation, right?
14:28
People who are forced to do without when others have so
14:30
much. So there's a a delta there
14:33
between two groups of people that you can probably hang your
14:37
hat on for a philosophical argument that would have some
14:40
teeth. But the real philosophical
14:42
argument, the one that never gets answered, is Aristotle's.
14:47
Yeah, and it's funny you say that because that's the one
14:51
argument that I found moving. There is question of of
14:55
oligarchy, but but people phrase it as this is a, this is clearly
15:02
a a problem market failure because the market free markets
15:05
will produce billionaires and that that will lead to oligarchy
15:09
to which I respond, that's not a market failure, it's a
15:11
government failure. That's it.
15:12
That's absolutely estimate. Elon Musk got rich from
15:15
government contracts. Well, that's one way to to to
15:19
look at. I wasn't going there.
15:20
Let's suppose you've got a billionaire who became a
15:23
billionaire through entirely market forces, no government
15:27
intervention at all. And you say, well, he can, he
15:30
can now turn around and buy all effectively buy off politicians
15:33
to get favored status and all this sort of thing.
15:36
To which I respond, OK, yeah, but the problem isn't the
15:38
market. The problem is the politicians
15:40
are for sale. It's a government problem that
15:42
your government is not treating everybody as if they are
15:45
politically equal. Well, or there's a a certain
15:49
market in government that you might like, might not like to
15:51
have. Right, Yeah, there's a market in
15:54
government which is a government failure.
15:57
There's a defective market, kind of like we talked about last
16:00
week, right? The, the government, the, the
16:02
market in human hearts would be a market we wouldn't want, you
16:06
know, a, a market in members of the House of Representatives not
16:10
too. I'm not too keen on that either.
16:12
Yeah, well, exactly. But you know, to all these
16:14
politicians who say we've got to do something about the
16:17
billionaires because they can buy power, I say just don't pick
16:21
up the phone when they call. Stop taking their money.
16:25
Yeah, odd. Oddly, the the phone calls work
16:27
in the other direction more often than not.
16:29
Yeah, I imagine so. But you mentioned something that
16:32
I think people get hung up on is mixing up inequality.
16:38
We're not talking about inequality, we're talking about
16:40
wealth. But you touched on it mixing up
16:42
inequality and poverty. These are two very different
16:46
things, and poverty absolutely is something we should be
16:49
thinking about and concerned about.
16:51
Inequality is a different animal and I'm much less concerned
16:55
about it. There's a great thought
16:56
experiment on this. I, I for the life me can't
16:59
remember whose it was. So you know, somebody will send
17:01
me hate mail later. But imagine aliens come down and
17:06
they they walk up to you and they say, you know, where we
17:08
live, our standard of living is 1000 times higher than here.
17:15
Want to come with us? And you say, yeah.
17:18
And they say, well, one stipulation, you're going to
17:21
live half as well as we do, so you only live 500 times better
17:26
than you do now. Is that fair?
17:29
Is that fair? Yeah, absolutely.
17:32
Take that in the heartbeat. Take that deal in a nanosecond,
17:35
but go ask a bunch of 20 year olds and it becomes unfair
17:39
somehow. Right.
17:42
Yeah, yeah. And.
17:43
Right, these are just sticky things and they they the same
17:45
arguments come and go and come and go.
17:47
We never really solve them. And I think there are two
17:50
problems here. One is 1 I just write off is
17:53
greed that look, if you're clearly better off and and
17:57
you're upset because somebody else is even more better off
18:01
than you are, that's just greed. Call it what you want, but
18:03
that's what it boils down to. The other thing I think that I
18:07
run across, Yeah. I think it's envy.
18:11
Are you sure? Sure.
18:12
Thank you. Thank you.
18:13
Yes. Envy is a better thing.
18:15
Envy. The other thing I run across is
18:19
this, this this sense that people seem to can't, they can't
18:23
get over they they believe that wealth is fixed.
18:28
And so if this guy has more wealth, somehow I necessarily
18:32
have less. And I don't know how they can
18:33
possibly believe this if they have homes to live in.
18:39
Right. If this were the case, if wealth
18:41
were fixed right now, we should all be about we.
18:46
Our wealth should be about 10% of what our great grandparents
18:50
wealth was because there's 10 times the number of us.
18:53
No, no, no, Aunt, If wealth is fixed, we should have fewer
18:57
stones than our parents did, because we'd all be living in
19:03
caves, right? And there'd only be so many
19:05
stones to go around. Right.
19:07
Sure, sure. We we wouldn't have homes at all
19:11
if wealth were fixed in any way. So look around.
19:17
The modern American city, for example, is utter proof that
19:21
wealth is not fixed. The proof is right in front of
19:24
you every time you walk out your door.
19:27
Indeed, the proof is right in front of you when you sleep on a
19:29
bed at night. These are not the natural
19:32
condition of human beings. Yeah.
19:35
And I think I, I think what people don't get is from an
19:42
economic perspective, wealth is not dollars.
19:46
It's the reorganization of material in such a way that the
19:52
material is now more valuable than it was before.
19:54
So you talk about rocks. Rocks are, you know, they have
19:56
some value. They're sitting there.
19:58
But if I form them into a, into a house and I carve them and
20:02
they're beautiful, now all of a sudden they're worth a lot more.
20:05
I've rearranged the material to make it more valuable.
20:08
That's the creation of wealth. Yeah, and that's that's exactly
20:12
how it works all the time. Somebody looks around, sees
20:16
something that that others haven't yet seen, moves on it,
20:21
builds with it, and either succeeds or fails.
20:25
Right, right. Because you don't always
20:27
succeed, right? You could do all this all, all
20:29
day long and fail after a lifetime of trying or any number
20:33
of people that we could, we could talk about who meet that
20:37
that description. But for every single thing you
20:42
see that makes your life better, somebody, somebody stepped out
20:45
on a limb and said, I'm I'm going to make this thing and
20:49
people are going to love it. Yeah, somebody stepped out on a
20:54
limb. And here's another place where
20:56
people go off the rail. They look at the billionaires.
21:00
I'll pick on the billionaires, you know, Musk and and Sam
21:03
Walton and Bill Gates and so forth.
21:05
And they say, look at all the money they have.
21:08
There's something not right about this.
21:10
To which we we reply, but they took on tremendous risk to get
21:14
to where they are, to which someone will say, well, maybe
21:17
they did, but look at all the billions they have.
21:19
And, and my response is you're seeing the world through a
21:24
biased lens. You're only seeing the risk
21:27
takers for whom the risk paid off.
21:30
You aren't seeing the numerous risk takers who lost their
21:33
shirts. But let's put this a very
21:36
strange way. I'm going to go out later and
21:40
and buy a lottery ticket. Now, lotteries are are math or
21:44
it's a tax against people who are bad at math.
21:46
But I'm bad at math and I like to dream a little bit.
21:49
Now let's just say I win $250 million.
21:55
Nobody. Nobody will tell me I don't
21:58
deserve that. Why not?
22:00
Lots of people tell you. No, no they won't.
22:03
They won't. They I, they, they say you
22:04
bought the ticket, you hit the number.
22:06
Good for you. There's something about working
22:10
for it and achieving it over time in a way that doesn't
22:14
involve such an obvious bit of luck.
22:17
I see. That makes it so much more
22:20
difficult. And I think our I think envy is
22:22
back into the picture again because I think a bunch of
22:25
people want what hard workers get, but don't do hard.
22:29
Work without doing the work. Right.
22:32
And they imagine it. I guess it's easy to convince
22:35
yourself. Well, I could have done that
22:36
work. Yeah.
22:38
Except you didn't. Yeah.
22:40
And, and I think that really plays, I think, you know, the
22:44
human psychology is a problem and it's one that we're never
22:47
going to overcome. All of all of the evidence in
22:51
the world won't matter as long as people have feelings.
22:55
Yeah, yeah. And as long as we're on the
22:58
topic, let's go back to someone like a like a Bill Gates or or
23:04
Steve Jobs who have the billions of dollars.
23:07
And when we talk about wealth, and again I'm thinking about
23:10
wealth inequality, we only look at half the picture.
23:13
We look at the dollars that these guys have, we're
23:16
completely, completely ignoring the fact that they got those
23:21
dollars because we liked their products more than we like the
23:24
dollars. We, we gave them our dollars to
23:27
get the iPhones, For example, some somehow when we talk about
23:32
wealth, we never count the iPhones.
23:34
We only count the dollars. So of course your your argument
23:37
is necessarily going to be biased toward against the the
23:40
billionaire. And when we talk about taxation,
23:43
taxing income, although I'm on record as hating it, it's
23:48
probably the most effective fairway to tax a group of
23:53
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25:03
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25:08
Tell me why. Because you can zero in with
25:13
rates on who can't afford it at all.
25:18
You could say, OK, you get a 0% rate and you could do that by
25:21
giving them an exemption or just there's a million different ways
25:24
to play around with the numbers. And then you could look at the
25:28
the vast middle class and say, look, most of this is going to
25:31
fall on your shoulders because there are more of you than there
25:34
are of anybody else. And then you could look at the
25:37
rich people and say, well, you're probably going to have to
25:40
pay a little bit more. And that's just how life is.
25:45
And they generally accept that. And it's, it's, it's easy
25:48
because income is a number. It's a number that you get every
25:53
year. And if you're not going to play
25:56
around with forms and deductions, it's an easy number
25:59
to understand. And I think we should just have
26:02
flat tax and be done with it. We could all fill out our, our
26:05
income tax on the back of a postage stamp, right?
26:08
It'd be that easy. There are other ways to tax
26:11
people, but when you get the things like taxing wealth, I'm
26:16
not convinced you can do it. Really.
26:19
I think. I think politicians will turn it
26:23
into a punishment against the most productive members of
26:28
society. They will take much more than
26:31
they should have taken from those people, thereby making it
26:34
impossible for those people to continue in business.
26:37
You usually use the family farm as an example here when we get
26:40
to this point in a conversation, and I'd like to hear you do it
26:43
again. Yeah, the the family farm, I
26:48
usually hold out as an example of of where you go so wrong with
26:52
a wealth tax and the and the story goes like this.
26:55
And this applies as to United States as we currently use the
26:59
wealth tax. One of the major groups that it
27:03
punishes are family farms, because the wealth tax is based
27:08
on the book value of your wealth.
27:12
I should say book value, the market values are well, so,
27:14
yeah, your assets. So if I'm a, if I'm a farmer and
27:18
my family all, you know, work the farm and I've got, you know,
27:21
whatever I have thousands of acres and machinery and all of
27:24
that. If you add up the market value
27:29
of my assets, I could well trigger the estate tax.
27:34
And if I die, I have to give half of it or whatever it is to,
27:38
to the federal government. There's all kinds of footnotes,
27:40
but you get the idea. That's a wealth tax.
27:42
They're taxing me on the wealth. But here's the thing.
27:45
Just because on paper the farm is worth X millions of dollars
27:50
doesn't mean I have X millions of dollars of cash.
27:52
In fact, a lot of the family farmers don't have any more
27:54
close to that. So the heirs, what do they have
27:58
to do when it comes time for them to pay this wealth tax?
28:01
They have to sell off pieces of the farm to raise the money to
28:05
pay the tax. If not the entirety of the farm.
28:09
Right, if not the entirety. And so over a couple of
28:11
generations, the farm is gone. And I would submit, aunt, that
28:16
that people have experience with something like this, but they
28:20
don't think of it in exactly these terms.
28:23
And I'm I'm thinking about what happens to the family home in a
28:26
divorce. Right.
28:29
Sure, right. A lot of times no one gets to
28:32
keep it. Right.
28:34
Yeah, You got to sell it to raise the money to settle
28:37
whatever it is. Yeah.
28:39
And, you know, because the math doesn't add up any other way.
28:43
That's a wealth tax. OK, so you oddly went down the
28:48
economic route. I want to hit a philosophical
28:51
problem I have with the wealth tax, which is that with a wealth
28:58
tax there is no place, there is no thing that is unequivocally
29:03
mine. The way this works now is I earn
29:06
some money and the government's going to tax some of that money,
29:09
but what's left? That's mine.
29:12
I can do with whatever I want. Now if there's a wealth tax, all
29:17
of a sudden that's no longer mine.
29:20
It's sitting there in my bank, or maybe I buy a house and
29:23
sitting there in the house or whatever it is.
29:24
And the government comes along each year and says, well, you've
29:26
got this much wealth, we're going to tax it.
29:28
And over time it gets whittled away.
29:31
Now I argue philosophically. At that point there is no such
29:37
thing as private property anymore.
29:39
Instead, I become like a serf. I can use the property until
29:44
such time as the government decides that it wants it back.
29:48
Well, and I hate to burst your very optimistic bubble there,
29:55
but we're already at the point where it's not ours, right?
29:59
I own a home. Or do I?
30:02
If I don't pay my property tax, they'll take it away from me.
30:06
Yeah. And so I'm glad you bring that
30:09
up because I think there's a difference between state and
30:14
local governments imposing property taxes, which they do in
30:18
a federal government imposing it.
30:21
Because although I, I grant you absolutely that if I'm in a
30:24
state or I'm in a locality that taxes wealth, I've got the same
30:27
problem of do I own this? Really.
30:30
But I have the ability to walk away.
30:32
I could say, forget it. I'm leaving Virginia.
30:34
I'm going to Arizona or Florida or somewhere where they don't
30:36
have a property tax. But when the federal government
30:39
imposes it, there's nowhere I can go.
30:42
There's nothing. There's no place that I can take
30:47
something that I've earned and move it off the table so that it
30:50
is unequivocally. Mine, yeah.
30:52
And and look, with an income tax, if you're doing really
30:57
well, you pay more. But if you have an off year, you
31:03
pay less on a on a wealth tax. Nobody cares how you're doing.
31:09
Right. Yeah.
31:10
You might be having the worst year of your life, but if you
31:13
had three good years running up into it now, you're going to be
31:16
taxed on your good fortune from three years back.
31:20
Right. And boy, that doesn't sit well
31:23
with me at all. Now the real problem here isn't
31:27
actually wealth. It's oligarchy.
31:31
Let's just let's be clear. How do you get around oligarchy?
31:37
That's the question we should be asking.
31:40
Why do you think none of our representatives in Congress use
31:46
the word oligarchy? Cause pretty simple,
31:49
straightforward answer. They are oligarchs.
31:53
Yeah. At least enough of them are that
31:56
they all know better than to walk down that line.
31:58
So, as usual, we have an obvious problem.
32:00
We could all see it. We can define it from every
32:02
direction. We knows what we know, what
32:04
works and what wouldn't. And yet not going to happen,
32:08
because the problem is woven right into the nature of all
32:12
things, not just economic things.
32:15
Ain't that a kick in the pants? Let me go back to numbers
32:19
because the way this is going to happen, if indeed it does
32:23
happen, a wealth, a federal wealth tax will, will come about
32:27
in the same way that the federal income tax came about.
32:30
Politicians will be on and on about it and they'll be assuring
32:34
us it's only going to be 1%, only going to apply to the
32:38
billionaires. And, and my warning to everybody
32:42
who says that is look back at the history of the income tax.
32:46
That is exactly what they said about the income tax and it took
32:49
not ten, it took seven years of the income tax for the poor to
32:54
be taxed on their income. That's right.
32:57
Matter of fact, it seems like that took a little longer than I
33:00
would have predicted, right? Yeah, yeah.
33:03
Exactly. And so this is this is where I
33:05
get very concerned because again, people look at the
33:08
billionaires and I've got the numbers here for how much wealth
33:11
the top, not the top 1%, but the top 110th of 1% own, they own
33:19
$22 trillion of wealth out of there's a total, the estimate,
33:24
of course, you can only estimate these things.
33:26
The estimate is currently in the US, Americans own $160 trillion
33:31
of wealth. So 22 trillion or a little under
33:34
15% is a top 110 to 1%. And so people are going to look
33:38
at that and say, hey, look what we can do if we tax that 22
33:41
trillion, my gosh, you can come not all the way, but 75% of the
33:46
way to paying off the debt with that.
33:48
That's a lot of money, that's. Correct, and and you could do it
33:52
exactly one time and never again.
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34:34
Well, you can only do it one time and never again because,
34:37
yeah, you'll never get any. You've just ruined the incentive
34:40
to become billionaires. But here, that's not where the
34:43
politicians are going to start salivating.
34:45
Where they're going to start salivating is not in the top
34:49
110th of 1%, but the top 10%. So now all of a sudden you're
34:55
talking about 100 times the number of people, right?
34:58
The top 10% own $58 trillion. They're well more than double
35:05
what, the top 110th per second the the same.
35:07
Inclination that gets them going after the middle class all the
35:10
time is going to have them going after that group.
35:13
Oh yeah? Well, I'm.
35:14
Getting there because after we have taxed the top 10% and
35:20
gotten their 58 trillion, politicians will then turn to
35:24
everyone between the 50% and the 90%.
35:28
So you're reaching straight down into the middle of the middle
35:31
class. That group, $48 trillion, that
35:37
group has, again, more than double what the top 110th of 1%
35:41
have. And I claim that all these
35:43
politicians that are promising we're only going to tax the
35:46
billionaires, they've got their eye on the middle class.
35:50
Individually, we don't have the wealth that the billionaires
35:53
have, but we far outnumber them. So in total, the wealth we have
35:58
outstrips what the billionaires have.
36:00
This is why. The middle class always gets hit
36:03
with the taxes because that's the only place to hit for the
36:07
taxes. You know, look, anybody who was
36:10
put in charge would do the same exact thing because it's
36:13
literally the only thing to do. There aren't enough rich people
36:16
and the poor, you can't get anything from them.
36:19
They're poor. But here's you're, you're
36:23
presenting kind of a, a straw man argument here.
36:26
Nobody's no politicians going to come and say we're just going to
36:29
confiscate all your wealth. What they're going to say is
36:32
we're going to confiscate a portion of your wealth.
36:35
They won't even use the word confiscate.
36:37
They'll use the word tax and the word fairness will be thrown
36:41
around. But over time, maybe over 7
36:45
years, sooner or later, middle class retirement accounts are
36:50
going to be on the table. Middle class retirement.
36:53
Accounts your mortgage is going to be on the table what do you
36:56
do if you've worked hard and you paid off your house and there it
37:00
is it's worth pick the number $300,000 and the government
37:03
comes along and says OK every Year 5% of that you owe us where
37:07
are you going to come up with that kind of money except by
37:09
selling the house selling selling the.
37:12
House That's right. And and that's a terrible,
37:16
terrible place to be if if we're even thinking about doing that,
37:21
everything is lost. Yeah.
37:23
And you know. I I take your point, James, that
37:26
about the straw man. Nobody's saying we're going to
37:28
confiscate all their wealth. Yeah, but I say they're not
37:32
saying it yet because look back again to the income tax.
37:37
Politicians promised US one percent, 2%.
37:41
Somebody said 5% of the time was being debated.
37:44
He was laughed but but none the less, those are the numbers are
37:47
talked about. And what happened?
37:48
It was maybe 30 years, 40 years and the top rate went to 92%.
37:55
Great. Yeah.
37:57
So. What could what?
37:59
Could motivate a man to do way more work than the thought of a
38:03
92% marginal tax rate. Yeah.
38:06
So in any event, I. I would, I would jump in here
38:10
with a So what and, and my So what here goes is look back to
38:18
the source of the problem. The reason we're having this
38:21
debate at all is because we have year after year of trillion
38:25
dollar deficits. We built up a 36 trillion, $37
38:29
trillion debt. And so we're looking for sources
38:33
of revenue. But I'm I'm claiming revenue
38:36
isn't the problem. If you track the government's
38:38
revenue over time it rises at like 6% a year.
38:42
The government is way better. Than the rest of us.
38:44
Do it. It does better than.
38:45
Most markets, yeah, the problem. Is government spending, if
38:50
you're not going to get that under control, it doesn't matter
38:53
how much wealth you confiscate, you're going to be right back
38:57
where you started. You're just going to have
38:59
everybody pour while you do it and and you're going to spend a
39:01
dollar. 23 of every dollar you steal from everybody, right?
39:05
Because some. Things never change, you know,
39:08
In a lot of ways, I. Think you've drawn the analogy
39:10
before, but I think it's an apropos in a lot of ways.
39:13
We're dealing with the same problem that one deals with
39:16
with, for example, alcohol addiction.
39:19
If you've got someone who's who's addicted to alcohol, the
39:22
answer is not give them more alcohol.
39:25
That might solve your problem in the very short run.
39:27
In the long run, you've got a much bigger problem.
39:29
The solution is you cut the dye off and that's exactly.
39:34
The problem? Here careful, because I think
39:36
that. Analogy is a good one, but more
39:40
for the most severe cases, and I think we're we are a severe
39:43
case, the answer is not to stop giving alcohol, not cold.
39:48
Turkey. Yeah.
39:49
Yeah, I think you're asking right.
39:51
Maybe we should. I don't know, cut spending a
39:54
touch and do do it again next year and the year after that and
39:57
the year after that until we're into some kind of rational
40:01
parity. With expenditures and tax and
40:04
tax income, yeah, I think you're right.
40:06
James and I think you could do this in a reasonable fashion,
40:10
but without doing this math we've done we.
40:13
Have What do we say? We said.
40:14
Cut cut the budget 10% and then 1515.
40:19
Percent for six years. Hold it not 15.
40:22
Percent every single year, but just once, Yeah, once.
40:24
And then hold it constant. Hold it constant for 6-7 years
40:27
and then you can, you can go back to increasing as long as
40:30
you don't increase faster than the GDP.
40:32
And I I think something like that would work.
40:36
Well, the problem is people then follow up with asking me, All
40:42
right, well, what would you cut? To which I respond, no, no, no.
40:45
That's a political question. What would you cut?
40:48
That's why we have Congress. That's why we have votes.
40:50
As an economist, I'm saying you need to cut.
40:53
Yeah, now. Let the politicians.
40:55
Figure out what they're going to do.
40:57
Yeah, good luck with that. Because they're not going to cut
41:00
a damn thing. No, but it means we have.
41:02
Lots more episodes that we can do in the future on exactly this
41:05
problem that that's really keep. Us going literally forever until
41:10
one or both of us is no more. And on that happy note, and I
41:15
take my leave a few this week and remind you above all others,
41:21
be nice to each other. You could do it.