A Global Tax on Capital

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GV4D4 week 10

requires international cooperation (but that could be done in stages, starting with regional)
thinks this is better than protectionism + capital controls
basic proposal: a progressive annual tax on global wealth (above a certain threshold, and including all types of assets)
if implemented, would require transparency about who owns how much wealth and where, which would facilitate more accurate discussions of fiscal policy
even if the level of tax is very low, it's worth carrying out just for the detailed reporting side effect
suggests an automated system (pre-populated forms) rather than asking for full declarations
first step: automated transmission of banking data to relevant authorities (which is already technically feasible)
- already occurs in some jurisdictions, and there's no real acceptable justification for the (tax shelters) that refuse to share
- example of this already occurring: FATCA in the US (not ambitious enough though, and doesn't include institutions that don't do business in the US)
he thinks there needs to be 3 types of progressive taxes (3 pillars): income + estate need to be supplemented by a tax on capital
reason: declared income doesn't necessarily match actual increases in capital accumulation (since most of it isn't needed for immediate spending and thus isn't paid out as dividends or whatever)
thus capital tax ensures they actually contribute to the tax system in a way proportional to their true wealth
need to find a balance between incentive logic (taxing capital stock to encourage productive investment) and insurance logic (taxing the flow to insure against unpredictable returns)
suggests linking tax rates to the observed rates of return in previous years
he sees this as a more palatable alternative to the Marxist approach (abolishing private ownership of the means of production)
on China, which has implemented capital controls (an approach he does not encourage) as well as a progressive tax schedule
on "petroleum rents" (oil resources in the Middle East) leading to distributional injustice due to the arbitrariness of national borders
on immigration to rich countries, which he correctly characterises as only a temporary, bandaid-like solution (in the long run, you need a strong social state with progressive taxes)
suggests that global inequality will be mitigated by his global wealth tax (since capital flight from the developing world is a huge problem)


        Piketty, T. (2014). A Global Tax on Capital. In Piketty, T. Capital in the Twenty-First Century. Belknap Press, pp. 515-539

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

A Global Tax on Capital

Capital in the Twenty-First Century by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century by Arthur Goldhammer, Thomas Piketty

A Global Tax on Capital

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty

Capital in the Twenty-First Century
by Arthur Goldhammer, Thomas Piketty