Most wealth isn’t devoted to extravagant consumption

Monday, October 28th, 2019

Everyone, regardless of their income and wealth level, would take a hit from the Democrats’ proposed wealth tax:

That’s because, contrary to what American progressives believe, most wealth isn’t devoted to extravagant consumption. Instead, it’s invested in companies; it’s used to fund research and development that will create better goods and services for consumers; it serves as the capital that innovators and producers borrow from banks to grow their businesses. In other words, most wealth is used to fuel other wealth-producing activities that improve well-being.

So whether a wealth tax will create a real disincentive to accumulate capital or force rich taxpayers to send a larger share of their money to the IRS, less capital will be available for everyone in the economy to use for their own businesses and training. That means that many Americans beyond the super wealthy will get burned by the tax.

This negative consequence is a reason why so many countries that had wealth taxes in the 1990s have since abandoned them. The cost of implementing a wealth tax and annually assessing assets often costs more than the tax actually raises in revenue. In France, for instance, the administration cost was double the revenue raised. As such, it’s not surprising that the country dropped its wealth tax in 2018.


  1. Wilson says:

    Invested in companies that buy their own stock, build monopolies, and offshore jobs. Research, development, training, not so much. Extravagant consumption would be better than hoarding. Maybe if the government stopped devaluing wages by printing money people wouldn’t need to search for where the money goes because they’d still have enough of it

  2. Ezra says:

    H. L. Hunt was interviewed sometime in the 1960′s. At the time he as suspected of being the second richest man in the world. He said that if you make about $200K per year [1960's dollars] you live about as well as I do. That amount of $200K about one to two million today.

  3. Harry Jones says:

    However badly the wealthy may handle their money, I find it hard to imagine the government doing a better job.

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