The Sin Bin • Re: Who's Gonna Pay?
Sal Paradise wrote:
But the person bequeathing the inheritance has paid tax during the time they amassed the inheritance - surely that is unfair that the proceeds of potentially doing without conspicuous spending to invest in a property should be taxed once again?
The problem with your theory is that the whole economic system is routed in the value of property - if you have these type of assets you can borrow to invest to increase income and transactions. How many small businesses start with loans guaranteed by PG's on their house. Property businesses are just as legitimate an enterprise as a manufacturing business. These businesses are long term investors who often provide the facilities for your income and transaction generation. Most businesses couldn't afford to invest in the purchase of their property.
Every choice is a sacrifice. One could easily make arguments about the unfairness of taxes on income or transactions. Wealth taxes are not at all unusual in the US. And aren’t capitalist arguments usually based around hard nosed efficiency rather than woolly fairness?
As with income tax, I would suggest there’s a threshold and it could easily be set at a level that has no impact on those looking to secure modest five-figure loans to establish small businesses. It is also far from all about inheritance.
Legitimacy is a slippery term, but I would agree that many property businesses put capital to use in a way that benefits the economy, investing in building and renovation to provide capacity. And many rental businesses offer value by offering flexibility. However, profit based entirely or almost entirely on ownership without adding much or any value, while possibly efficient on the personal level, isn’t efficient for the broader economy.
To use a simple ye olde example, imagine a land owner is paid rent by a dozen small holders who farm the land. While they couldn’t afford to buy their plots, the land owner isn’t really offering any value - the existence of the land isn’t dependent on his ownership. Nonetheless, over time he becomes wealthy and neighbouring land becomes available. Ideally you’d want him to invest his capital in something innovative that may boost economic growth, so that should be incentivised. Just outbidding the neighbouring tenant farmers for land is inefficient and should be disincentivized.
If you want encourage work and productivity, there’s a case for low income tax. If you want encourage economic activity there’s a case for minimising taxes on it. The arguments for an absence of wealth taxes seem weaker to me.
Capitalist economic systems are malleable and adaptable. Our system may be rooted in the value of property, but it could be tweaked to be more rooted in the value of work and productivity, making it easier for anybody who works hard to generate the capital they need to start a business, rather than having to rely more on pre-existing wealth. That’s desirable, isn’t it?
Statistics: Posted by Mild Rover — Mon Apr 06, 2020 8:43 pm