A Wealth Tax reorganizes power in the economy, reducing clusters of wealth and mobilizing socialism

Emmanuel Saez and Gabriel Zucman’s plans for wealth taxation represent a welcome and, frankly, overdue shift in the attention the economics profession pays to issues of wealth inequality. Central to this shift, of course, has been their sometime co-author, Thomas Piketty, whose 2014 book Capital in the Twenty-First Century tracked the relentless redistribution of economic rewards over the last four decades from workers—those whose income derives mainly from wage labor—to capitalists, those whose income stems instead from the rents and profits that their wealth delivers to them. Zucman and Saez provide a powerful proposal for how we might begin to address this problem—what R. H. Tawney called “the problem of riches”—through ambitious political action. But in some instances we need to be more radical than they propose, and there is also much to be done outside the tax system itself. (Some of this Piketty himself outlines in his new book, Capital and Ideology.)

Start with our reasons for caring about wealth inequality. Zucman and Saez are right that wealth inequality matters not just to the degree that it determines income inequality. As they put it, “wealth is power.” Great wealth can be both cause and effect: a source of unacceptable forms of economic power as well as a consequence of such power. Wealth is not just a way of storing up opportunities for future private consumption, as in some rather innocent economists’ models. More often it is a means to shift political agendas in the direction of the wealthy by converting economic power into political power, or a way of buying educational and social advantages for family members at the expense of their fellow citizens.

In this way, extreme wealth inequality corrodes the possibility of genuine democratic politics and economic justice. And these effects create accelerating feedback loops—inequality cascades—that only reinforce the power of the wealthy to organize society in their own interests. The result is the unconscionable form of economic and political domination we see today, which undermines the standing and status of all citizens. In a flourishing economy, wealth flows and circulates between and across individuals and generations. In our comparatively diseased economies, by contrast, this recirculatory flow is blocked; instead wealth pools in particular locations, creating a distorting overconcentration of power, like a malignant growth that reroutes the body’s blood flow to maintain itself. Radical surgery is a reasonable course of action in dealing with such a serious condition.