Taxing the Wealthy Won’t Reduce Their Power

It’s happening. California looks likely to put a “one-time” tax of 5% on wealth above $1 billion on the ballot in November, and polls suggest it could pass — despite opposition from some economists (not so surprising) and Democratic politicians (more so). Meanwhile, calls to tax the rich are resounding across the country, from New York’s proposed “pied-a-tierre tax” to Washington State’s first-ever income tax, imposed only on millionaires.

As someone who has been arguing for more than a decade that these taxes are bad economics, I find all this disheartening. I missed the point. I thought the argument was about the optimal allocation of resources, but it is really about the redistribution of power. I concede that the concentration of power among the wealthy can be harmful. But using the tax code to fix it will create worse problems.