These two articles, “The Assault on Wealth” and “Capital Gains Tax Hike: No Gains, No Fairness,” led my Hoover colleague Bill Whalen to interview me last Friday. The result is this 47-minute audio. Normally Bill will ask questions and I’ll answer. He did that, but this was more of a two-way conversation because Bill has his own thoughts on the issue. It was fun. By the way, Hoover has made my Assault on Wealth article into a mini-book.
Some highlights follow. (Times are approximate.)
1:50: Bill Whalen quotes F. Scott Fitzgerald on the rich.
4:00: Me on how I think the focus on inequality started. Sylvia Nasar and Bill Clinton were key players.
4:30: Bill quotes Abigail Disney.
6:30: Me on Mr. Miser, Mr. Generosity, and Bob Solow‘s growth model.
11:40: Wealth tax.
15:00: Back to F. Scott Fitzgerald.
15:30: Wealth tax.
17:30: My quite good guess about the number of millionaires in Congress.
18:40: How much wealth do you need to be wealthy?
20:00: My daughter’s question to me in 1999 after seeing her fellow students at Robert Louis Stevenson School in Pebble Beach and the cars they owned. (At the time, we had a 1990 Camry wagon and a 1992 Toyota Celica.) “Dad, are we poor?”
20:30: John D. Rockefeller’s life versus ours.
24:30: Biden’s proposal for a retroactive capital gains tax.
26:00: Why California Democrats should oppose Biden’s tax increase on capital gains.
27:15: The SALT limit and Bernie Sanders calling out his fellow Democrats.
29:30: Liz Warren.
30:30: What members of Congress know and don’t know.
31:08: In which I show how hip I am by connecting the conversation with one of my favorite Progressive Insurance ads.
32:20: The role of envy.
35:00: They earned it. William D. Nordhaus.
36:00: Wealth and race.
38:00: How one of my free-market proposals might both make it easier for people to buy houses and reduce the number of millionaires.
39:30: The flat tax and the VAT.
42:30: The effects of the SALT limit and the higher standard deduction. (I got a little muddled here, forgetting to point out that my analysis depended strongly not just on the SALT limit but also on the high standard deduction. Perhaps you can attribute that to the fact that I was up the night before from 11:30 p.m. to 4:00 a.m. with what looked like a medical emergency: everyone’s alright though.)
45:00: Assault vs. siege.
READER COMMENTS
Thomas Lee Hutcheson
Jun 22 2021 at 8:48pm
Many good observations.
Here are a few I’d add on the topics mentioned.
How did emphasis on “inequality” get started? Proximally, my guess is from folks looking at the changes in after-tax income shares.
I think it unfortunate that so much energy goes into opposition to capital gains instead of into opposing nominal, not averaged gains.
I’d still like to understand which distortion the removal of the SALT deduction reduces.
What Congressmen do not know? Lots, but my candite would be the Lerner Theorem: import restrictions are an export tax
A VAT does tax some consumption that a flat tax on “income” misses. And a VAT would be a good substitute for the capped tax on wages. But a VAT needs to be supplemented with progressive income (or even better progressive consumption) taxation for distributional reasons.
The “role of envy” is overrated as the supposed reason people support progressive taxation.
I’ve never seen any policy conclusions arise from comparing Rockefeller’s life to ours. Personally, if I could have some inkling of the good that a foundation would do, if only in the sciences, I’d risk the greater chance of premature death and deaths of loved ones to have his income in 1890.
SOME kind of increase in taxation is needed to narrow the full-employment deficit even if we don’t go full Keynesian to call for surpluses.
Too bad there is no transcript.
Vivian Darkbloom
Jun 23 2021 at 3:33am
“Normally Bill will ask questions and I’ll answer. He did that, but this was more of a two-way conversation because Bill has his own thoughts on the issue.”
I’ll be more frank and perhaps even un-diplomatic about that. While I had issues with some of the technical details of the discussion, my main issue with this podcast was that it was not really an interview. With due respect to Mr. Whalen, this came over as one choir member talking to another. An interview (if that is what we can call this example) is much more interesting and instructive if the interviewer restricts his role to asking relevant and difficult questions and indeed playing the devil’s advocate. The force of your arguments (at least for those who are still open to persuasion) is diminished, not enhanced, when the “interviewer” tries too hard and too often to support everything interviewee says.
As to technical details, for example, you can read here a good write-up by the CRS on the constitutional issues of retroactive tax legislation:
https://www.everycrsreport.com/reports/R42791.html
Short take: I doubt a retroactive date to January 1 would be unconstitutional even though there is a constitutional “due process” issue.
Also, as I tried to explain in an earlier comment here, I don’t think the Biden proposal should be explained as “eliminating the step-up in basis”. Rather, it more accurately proposes to tax at death unrealized gains of the decedent (over a certain amount). This results in a step-up in basis for the heirs! In contrast, Bush II’s proposal to eliminate the estate tax completely would have eliminated the “step-up” in basis for income tax purposes of the heirs.
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