Wealth and Taxes Part V -- it's all about politics

The Grumpy Economist ^ | January 10, 2020 | John Cochrane

[karpov]

So what is the question to which measuring wealth distributions and a wealth tax are the answer?

To briefly review, in Part I we met the fact that "wealth is measured as "capitalized income," Y/r. But only some kinds of income and with r choices that blew up measured wealth inequality. In Part II we learned that a big reason wealth inequality widened is that interest rates fell. If r falls, Y/r rises, but it's the same Y. In Part III we noted the distinction between consumption, income and wealth inequality. Wealth is beyond badly measured as a measure of lifestyle. The computations ignore taxes and transfers, wildly blowing up measured inequality and rendering it a "problem" that ipso facto cannot be solved. Why concern ourselves with pre-tax wealth inequality, especially given that most wealth is reinvested in businesses that produce things and employ people? In Part IV, we met the wealth tax. If the question is, how do we raise revenue for the government, either to spend or to transfer it, the wealth tax is a terrible idea, as it distorts the economy and leads to an evasion industry. A consumption tax is a much better idea.

So if wealth is not the answer to "how big is inequality," by any sensible measure, and if the wealth tax is not the answer to "what's the best way to raise money, or to redistribute income," if in fact wealth and wealth taxes are terrible answers to these questions, what is the question to which the wealth tax is the answer?

It's right there clear as day in Saez and Zucman's Jan 22 2019 New York Times Oped

Their [high marginal tax rates] root justification is not about collecting revenue...

[karpov]

Cochrane is a Senior Fellow of the Hoover Institution at Stanford and was formerly a professor at the University of Chicago Booth School of Business. This is the last of a series of his posts on wealth and taxes.

[sauropod]

Bkmk

[DIRTYSECRET]

I have no doubt Bernie’s people would take all my property if the voters gave them half a chance.

[Amendment10]

From related threads…

Patriots are reminded the following about President Thomas Jefferson. Although he had evidently promoted voluntary wealth redistribution in a State of the Union address, Jefferson had also made it clear that the states would first need to appropriately amend the Constitution to give Congress the specific new powers to make laws to experiment with wealth redistribution - something that the states have never done.

On a few articles of more general and necessary use, the suppression in due season will doubtless be right, but the great mass of the articles on which impost is paid is foreign luxuries, purchased by those only who are rich enough to afford themselves the use of them. Their patriotism would certainly prefer its continuance and application to the great purposes of the public education, roads, rivers, canals, and such other objects of public improvement as it may be thought proper to add to the constitutional enumeration of federal powers [emphasis added].”—Thomas Jefferson : Sixth Annual Message to Congress

So politicians who are trying to be elected or reelected to federal office by exploiting low-information voters, winning their votes with promises of already repeatedly failed socialist wealth redistribution fantasies, are doing so in the wrong government.

In other words, post-17th Amendment ratification socialist politicians are unconstitutionally expanding the already unconstitutional big federal government’s powers by chasing their fantasies, effectively selling low-information voters “the Brooklyn Bridge,” with constitutionally nonexistent federal government powers.

”From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states, or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted. The same proposition, otherwise stated, is that powers not granted are prohibited [emphasis added].” —United States v. Butler, 1936.

Misguided socialist politicians in the federal government actually need to get out of the constitutionally limited power federal government and find a state whose taxpayers are willing to experiment with their socioeconomic ideas using 10th Amendment (10A)-protected state powers as the early states had intended for those powers to be used.

"Congress is not empowered to tax for those purposes which are within the exclusive province of the States.” —Justice John Marshall, Gibbons v. Ogden, 1824.

Justice Brandeis had put it this way about the "laboratories of democracy," the unique powers of the sovereign states to serve the people, depending on what the legal majority citizen voters of a given state want.

"It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose [emphasis added], serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” —Justice Brandeis, Laboratories of democracy.

(Note that constitutional limits on states as laboratories of democracy is that states cannot establish privileged / protected classes or abridge constitutionally enumerated rights, and must maintain a constitutionally guaranteed republican form of government.)

So why are citizens now being oppressed under the boots of an unconstitutionally big, “limited power” federal government?

Regarding unconstitutional federal domestic spending prevalent today, using inappropriate words like “concept” and “implicit,” the excerpt below from Wickard v. Filburn (Wickard) shows what was left of the defense of 10A-protected state sovereignty by the last of state sovereignty-respecting majority justices in United States v. Butler, FDR’s state sovereignty-ignoring activist justices later blatantly ignoring the reasonable Butler interpretation of 10A when they scandalously decided Wickard in Congress’s favor imo.

• "10th Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

• ”From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states, or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted. The same proposition, otherwise stated, is that powers not granted are prohibited [emphasis added].” —United States v. Butler, 1936.

• "In discussion and decision, the point of reference, instead of being what was "necessary and proper" to the exercise by Congress of its granted power, was often some concept [???] of sovereignty thought to be implicit [??? emphases added] in the status of statehood." —Wickard v. Filburn, 1942.

Corrections, insights welcome.

Remember in November!

MAGA! Now KAGA! (Keep America Great Always!)

• "The “Holy Grail” of organized crime is to control government power to tax." —me

• "The power to tax involves the power to destroy,” —Chief Justice John Marshall, McCulloch v. Maryland, 1819.

• "The 16th Amendment effectively repealed the involuntary servitude aspect of the 13th Amendment imo, evidenced by unconstitutional federal taxes." —me

  • "Congress is not empowered to tax for those purposes which are within the exclusive province of the States." —Justice John Marshall, Gibbons v. Ogden, 1824.

  • "13th Amendment, Section 1:

    Neither slavery nor involuntary servitude [emphasis added], except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

  • "16th Amendment:

    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

• "The ill-conceived 17th Amendment not only effectively politically repealed the 3/4 state supermajority requirement of the Constitution’s Article V for ratification of proposed amendments to the Constitution, politically correct interpretations of the Constitution now prevailing under Democratic judicial tyranny, but also consider this. That amendment also effectively nullified Congress’s constitutional Article I, Section 8-limited powers along with the Supreme Court’s clarification of Congress’s limited power to appropriate taxes." —me

  "Congress is not empowered to tax for those purposes which are within the exclusive province of the States.” —Justice John Marshall, Gibbons v. Ogden, 1824.

• "The constitutionally undefined political parties are basically rival, corrupt voter unions, “union dues” paid by means of unconstitutional federal taxes. Belonging to a political party means that you are a subject, not a member.” —me

• "Patriots need to support PDJT in demanding that Congress moves "April 15" tax day to the day before election day." —me

• "The smart crooks long ago figured out that getting themselves elected to federal office to make unconstitutional tax laws to fill their pockets is a much easier way to make a living than robbing banks." —me

• "Federal career lawmakers probably laugh all the way to the bank to deposit bribes for putting loopholes for the rich and corporations in tax appropriations laws, Congress actually not having the express constitutional authority to make most appropriations laws where domestic policy is concerned. Such laws are based on stolen state powers and uniquely associated stolen state revenues." —me

[The Great RJ]

Assume that Bernie or Warren succeed in becoming POTUS and impose their confiscatory wealth tax on the billionaires. Two problems...first these taxes would not begin to fund even their Medicare for all. Second what happens in year two when the billionaires have been fleeced or even more likely have fled the country taking their money with them. Where do they get the money then? If in the great misfortune we elect either Bernie or Warren. I would expect in the time between the election and inaugural there would be the biggest sell off of wealth in history as those having wealth will liquidate while they can and flee the country. Gold and silver prices would skyrocket..again in preparation for becoming tax refugees