Administrative Woes of a Global Wealth Tax
June 4, 2014
French economist Thomas Piketty argues for a global wealth tax to combat inequality in his best-selling book, Capital in the Twenty-First Century. Such a tax would be a disaster, reducing inequality only by making everyone poor, explains Heritage Foundation Research Fellow Curtis Dubay.
A wealth tax would be an administrative nightmare.
- Unlike an income tax, a wealth tax would require the government to compile a list of all of the assets of every person in the United States, from cash to stocks to vehicles, appliances, furniture and jewelry.
- Accounting for every asset within the home would require a great deal of work, perhaps even a home inspection by government officials.
- Then, the federal government would have to assign values to each possession. That list of values would have to be updated often, as items change in value and people buy and sell things regularly.
For a government that has struggled to implement the Affordable Care Act, administering a wealth tax would be a daunting task. Even if the state were able to compile a list of assets, placing such information into the hands of the IRS would create major privacy concerns.
The federal government already has problems instituting programs of this nature. Just recently, the Treasury Department's inspector general reported that 25 percent of the payments from the Earned Income Tax Credit were wrongly issued, costing taxpayers $15 billion in 2013. Moreover, a new report indicates that Obamacare enrollees received inappropriate amounts of subsidies during just the first few months of the program. A wealth tax redistribution program would undoubtedly have similar problems.
Administrative issues aside, redistributing wealth via such a tax would destroy the economy, leaving all Americans worse off. A much better option to improve the economic fortunes of those at the bottom would be to lift them up through stronger economic growth.
Source: Curtis S. Dubay, "Thomas Piketty's Wealth Tax Would Be an Administrative Nightmare," Heritage Foundation, May 26, 2014.
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