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Elizabeth Warren tweeted:
When someone makes it really big in America—like top-one-tenth-of-one-percent big—they can afford to pay it forward with a two-cent wealth tax so we can invest in opportunity for everyone else, too.
She’s advocating the introduction of a wealth tax. Such a tax is different from income tax in at least two ways:
Note that Warren is misleading readers by calling it “a two-cent wealth tax” (emphasis mine). She doesn’t literally mean $0.02. She means two cents on the dollar, or 2%. That’s a big difference—it means millions of dollars per taxed person instead of two cents. So Warren’s statement is extremely dishonest.
In a mere 198 characters, Warren communicates several things, some explicitly, some implicitly:
Actually, Warren asserts more than these points. None of them are new—all taxes are, in some form or another, based on many or all of them. But the wealth tax in particular rests on the assertion that each of these points may be used against the wealthy repeatedly, on the same wealth. Since there will always be differences in wealth in the population, such differences can be interpreted by thieves like Warren as “lacking opportunity” and, therefore, as justification to take ever more money from those who are better off, by some arbitrary standard determined by the parasite that is the state.
If 2% doesn’t sound like much, first be advised that 2% on, say, a billion dollars, is 20 million dollars, which is a lot of money. Second, as I said, it’s 2% every year.
Paul Graham has calculated and explained the dramatic effects of a wealth tax. At a tax rate of 2%, the government will have taken 65% (!) of the assets you earned in your twenties at a threshold of $50 million by the end of your career. But Warren doesn’t call it a 65-cent tax, does she?
The reason wealth taxes have such dramatic effects is that they’re applied over and over to the same money. Income tax happens every year, but only to that year’s income. Whereas if you live for 60 years after acquiring some asset, a wealth tax will tax that same asset 60 times. A wealth tax compounds.
Logan also shared a quote by Ron Paul with me that is relevant to the topic and beautifully captures the slippery slope a wealth tax would get us on:3
I argue the case that if 1 percent of the people need food stamps, you give up 100 percent of the principle. And then 1 percent becomes 2 percent, until now we have 30 percent. It’s not gonna be the perfect free society until you reject the whole idea that the government should be redistributing wealth.
In the case of the wealth tax, the slope is very short, since only 3% more—a 5% wealth tax—would have taxed 95% of your asset by the end of your career, according to Graham. And, as the old saying goes, freedoms are difficult to get back once lost. Due to its nature, a wealth tax would be a qualitatively new and decidedly more evil way for the parasite to extract lifeblood from its host.
In a democracy like the United States, the good thing is that the parasite can’t just go out and harm people without marketing it and convincing a majority that it’s not, in fact, a parasite, and that they couldn’t live without it. The immorality of taxation—theft—has to be masked with laws and bureaucracy and other superficial gestures to create a whiff of legitimacy.
And technically, in a democracy, such changes are more easily reversible than in other systems of government. But in the long run, the parasite is successful in misleading the masses. It keeps growing and latches on to ever more productive members of society, its fangs hooked ever deeper into their flesh. As it stands, the host seems to welcome this parasite with open arms.
If “from nothing” sounds weird, consider that wealth and opportunity are things that do not exist in nature by default but need to be created first. They cannot be created by rearranging existing things, only through creativity. ↩
Compare Rand’s remark: “The altruist-collectivist premise, […] is that men are “their brothers’ keepers” and that the misfortune of some is a mortgage on others.” 1964. The Virtue of Selfishness: A New Concept of Egoism. New York: Penguin Group. Apple Books. Chapter 10, ‘Collectivized Ethics’. ↩
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