April 26, 2014
Missing Piketty’s Point

As an economic illiterate, the following had never occurred to me. But then I don’t remember ever seeing this obvious fact in the public prints before, so maybe I’m not alone. Maybe we’re all idiots.

[Thomas] Piketty’s big point about the United States is that we actually do engage in substantial wealth taxation in this country. We call it property taxes, and they’re primarily paid to state and local governments. Total receipts amount to about 3 percent of national income. The burden of the tax falls largely on middle-class families, for whom a home is likely to be far and away the most valuable asset that they own. Rich people, of course, own expensive houses (sometimes two or three of them) but also accumulate considerable wealth in the stock market and elsewhere where, unlike homeowners’ equity, it can evade taxation.

Piketty also observes that the current property tax system is curiously innocent of the significance of debt. A homeowner is taxed on the face-value of his house, whether he owns it outright or owes more to the bank than the house is worth.

“If you own a house worth $500,000 but you have a mortgage of $490,000 then your net wealth is $10,000,” he explains. “So in my system you would owe no tax.”

Right now, an upper-middle-class person with a pricey house and a mortgage is taxed identically to a colleague with a similar income who inherited a similar house from his parents. This, to Piketty, is nonsensical. He thinks economists who emphasize the importance of building a tax code that’s friendly to wealth accumulation are onto something, but that the emphasis on low rates for the rich is entirely misguided. The goal should be to make the haves pay more so that the rest of us can pay less.

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Posted by Jerome Doolittle at April 26, 2014 10:24 AM
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Good point. Never thought of it in these terms either.

Posted by: Sean O on April 26, 2014 6:45 PM

Concerning economists, and I know you already know about Professor Wolff and his vastly superior knowledge to 100 you and me's put together, but for other readers of this blog, his take on these kinds of things is always interesting and enlightening although he's far above my level of understanding quite often and I'm sure I often miss the point.

Therefore, I'll add a link to a recent post of his for readers of this blog who want to read more about economist orthodoxy, and more on economists and how the fail to recognize the need to step outside of ideologies if one is to understand the little part of the world that one inhabits. Therefore, might I suggest that this post of his might add a little bit more critcism of mainstream US economist thinking to what you just said.Considering that Krugman the supposed liberal economist is one of the worst but extremely useful to the moneyed, globalist pusing economists in the US today.

http://robertpaulwolff.blogspot.com/2014/04/wolff-contra-krugman-and-wren-lewis.html

As for me, I'm still struggling to overcome too many years of reading and half believing what i used to regularly read in FORBES magazine, although I still might pick up a copy every now and then to pick off some of the quotes on the last page. Quotations being one of the most useful tools for pushing certain ideologies to nonthinking people ever invented.

Posted by: BP on April 27, 2014 4:23 AM
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