The Corner

Economy & Business

Wealth Taxes and Income Inequality, and Buffoonery

The Wall Street bull in New York, March 7, 2017. (Brendan McDermid/Reuters)

Eli Broad has written a column for the New York Times that manages to be wrong at almost every opportunity it has to be wrong — economically, politically, grammatically, etc. It’s really quite something.

Broad writes: “I’ve come to realize that no amount of philanthropic commitment will compensate for the deep inequities preventing most Americans — the factory workers and farmers, entrepreneurs and electricians, teachers, nurses and small-business owners — from the basic prosperity we call the American dream.” There’s a word missing from that sentence, also some thought: Do you know what factory workers, teachers, electricians, and farmers all have in common? Above-average incomes. Perhaps those suffering from the cruelty of inequality are those . . . entrepreneurs and business owners he cites, but I doubt it. If you go back and look at the big bite the Great Recession took out of median household incomes, the chart pretty strongly suggests the problem wasn’t being a farmer (median income $68,000 a year) but being unemployed.

Back to Broad: “But even in cities like my adopted hometown, Los Angeles, where many of these [progressive anti-inequality] policies have been enacted, they have not adequately addressed the crisis. Our country must do something bigger and more radical, starting with the most unfair area of federal policy: our tax code.” That’s a familiar formulation: Progressivism fails — solution: more of the same! Broad does not seem to be aware of the fact that that “unfair” federal tax code he complains about already is enormously progressive — by many measures the most progressive in the developed world.

And then on to the vague, hand-waving horsepucky and preening:

It’s time to start talking seriously about a wealth tax.

Some will say I’m calling for the populist masses to take out the pitchforks and take down the titans of Wall Street. Some will say it’s just too difficult to execute. Others will call it a flight of fancy.

Don’t get me wrong: I am not advocating an end to the capitalist system that’s yielded some of the greatest gains in prosperity and innovation in human history. I simply believe it’s time for those of us with great wealth to commit to reducing income inequality, starting with the demand to be taxed at a higher rate than everyone else.

“Some will say” is almost always a cowardly formulation employed by people who do not want to seriously address counter-arguments. Who says? Who says what, exactly? Mightn’t those who are interesting in “talking seriously” about a wealth tax address that? Shouldn’t they at least consider the cases of the countries that have enacted wealth taxes and abandoned them as destructive and unworkable? That’s what happened in Sweden, the beau idéal of American progressives. (Sweden, that right-wing hellhole, doesn’t even have an inheritance tax!) On the other hand, well-governed Switzerland does have some wealth taxes. Any thoughts about why one model was a failure and one wasn’t? No?

Oh, “some will say.”

Also, Broad is conflating income with wealth, and making a very large assumption that the incomes of the middle classes will be raised by appropriating the savings of the wealthy. He does not bother attempting to establish a mechanism by which that may be expected to happen. Climate change, maybe.

More: “This does not mean I support paying higher taxes without requiring government to be transparent, accountable and equitable about how it spends the revenue, particularly for health care, public education and other programs critical to social and economic mobility.”

Okay, I’ll wait.

And more: “The enormous challenges we face as a nation — the climate crisis” — which is going to be addressed through a wealth tax? — “the shrinking middle class” — the middle class is not shrinking — “skyrocketing housing” — in progressive-run cities that have created artificial housing shortages, largely under the pretext of addressing “inequality” — “and health care costs” — well — “and many more — are a stark call to action.”

(That isn’t really what “stark” means.)

And this: “Currently people who have stocks and other investments that appreciate in value — usually people of means — are taxed at lower rates and are allowed to defer taxes.” Well . . . they pay 20 percent capital-gains tax on income that’s already been taxed at the 21 percent corporate rate — and these investments may very well have been made out of income that’s already been taxed at the personal rate. And most stocks aren’t owned directly by individuals at all — about 80 percent of the market value of U.S. stocks are held by institutions, insurance companies and pension funds prominent among them. About 20 percent of the wealth of the middle class is held in pension funds. It is true that these pension-fund beneficiaries tend to be wealthier, but somehow I do not think that those California school administrators earning $200,000-and-up a year are the plutocrats we’re talking about here.

And more: “I’m not an economist but I have watched my wealth grow exponentially thanks to federal policies that have cut my tax rates while wages for regular people have stagnated and poverty rates have increased.”

Poverty rates are not increasing.

And more: “A wealth tax can start to address the economic inequality eroding the soul of our country’s strength.” Seriously — who is this guy’s ghostwriter? Strength doesn’t have a soul. That doesn’t even work as goofy figurative language.

Broad is the founder of KB Homes. Here’s his hometown newspaper: “As was the case with many builders, the early 2000s were quite profitable, fueled in part by easy-to-obtain subprime mortgages. Business declined quickly after the banking system nearly collapsed under the weight of bad loans and foreclosures. . . . KB Home’s longtime leader, Bruce Karatz, resigned amid an investigation into the company’s backdating of employee stock options. A federal jury later convicted Karatz of making false statements about the stock options.”

Oh, by all means, let’s tap this brain trust.

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