Have you ever wondered why English castles are so dark and have few, if any, windows? Logic may lead to the conclusion the lack of openings was a defensive design against wandering marauders. Actually, that’s partially true, the lack of windows is defensive, but it’s against government marauders, not attacking horsemen.
In 1696, William III — of whom Elizabeth Warren may soon claim lineage instead of from Native Americans — enacted the “Window Tax.” He reasoned that the larger a person’s castle, the more windows it would have, and therefore the more one should pay in taxes.
It was an early, but not the first, net-worth tax.
Today, the torch and pitchfork crowd of Democratic Socialists want to do the same.
Elizabeth Warren led the pack a few months ago with a proposal to tax folks’ net worth.
She says she only wants to tax those she deems “rich” — and by “rich” she means anyone having more net worth than her. Her plan proposes a rate of 2% per year on rich folks’ assets, and the “super rich” would be hit with an additional 1% penalty on what they own for being successful.
By her advisors’ own calculations, if successfully implemented, the tax would not even raise 5% of projected Federal expenditures over the coming decade. And, those estimated expenditures don’t even include the costs of her free healthcare for all, free college for all, and free from student debt for all, which would more than double the cost of government. Also, completely ignored in her proposal are the administrative costs of assessing, billing, and collecting a tax on individuals’ net worth.
Not to be outdone, Bernie Sanders recently went farther back in English history to 1086, and released his plan to confiscate people’s assets.
With a scheme modeled after William the Conqueror’s "Doomsday Book," he’s called for a National Net Worth Registry. That’s right, he wants the government to collect and maintain a book of folks’ holdings so he can assess a net-worth tax varying from 1% up to 8% depending on how much a person owns.
His thousand year old “new” plan would purportedly raise about double what Warren’s plan projects. And, with his higher top-end rates, he claims it would cut the wealth of billionaires in half over 15 years. In a recent New York Times interview, Sanders said he, “…doesn’t think billionaires should exist.” Well then… OFF WITH THEIR HEADS!
Aside from the benefits of drinking mead and eating cabbage, there’s a reason even England doesn’t dwell in the past when it comes to net worth taxation. It doesn’t work. Historical anecdotes aside, modern attempts have failed and all but been abandoned by those countries foolish enough to give them a spin.
A 2018 Organization for Economic Co-operation and Development (OECD) study showed that of the twelve countries in 1990 that had net-worth taxes in 1990, today, only three remain. The main reasons for countries abandoning them were the inordinately high administrative costs, their failure to result in redistributive wealth equality, and the increased capital flight to avoid paying them.
The French economist Eric Pichet found that during the time the land of wine and mistresses had a net-worth tax, over $200 billion of capital left the country, while only raising about $3.5 billion per year in revenue. Additionally, his study found that the effect of the tax was to depress the French GDP by 0.2% — about the same amount raised by the tax.
A few years ago England again briefly toyed with the idea of a net-worth tax. However, a study from the London School of Economics showed that the costs of assessment and collection of the tax would exceed its revenue. It turns out that roaming armies of the Crown are expensive — and so is an army of IRS agents.
Aside from the operational costs and capital flight issues, there is a parchment worth of other reasons net-worth taxes are a bad idea.
They represent double taxation because an individual’s income is first taxed, and then what remains is taxed as part of that person’s net worth. There are also valuation issues. How much is your great grandmother’s wedding dress worth — its purchase price, its replacement cost, or its collector value?
With all of these issues, and a thousand years of failure, why are Sanders and Warren now pitching net worth taxes? It’s because their fantasyland visions resonate with their Democratic Socialist voter base. A recent Yale study found that 50% of the population would take a reduced paycheck as long as their neighbors didn’t earn more than them. The motivation is envy — just like I’m envious of Bernie’s three homes and Elizabeth’s $12 million net worth.
But Sanders and Warren should be mindful of the philosopher George Santayana’s famous quote, “those who cannot remember the past are condemned to repeat it."
Upon his death, William the Conqueror was so hated by even those close to him, that he was stuffed into a grave so small his body exploded. And, William III not only lost the support of his “party,” (the House of Orange), he was the only English king ever to rule from there again. History is interesting…
Kevin Cochrane teaches economics and business at Colorado Mesa University in Grand Junction and is a visiting professor of economics at the University of International Relations in Beijing, China. He is a regular contributor to several national publications including the Washington Times, Washington Examiner, and American Thinker. He previously was the economic correspondent for both CBS and NBC TV affiliates in Southern California. For 27 years he formerly was a senior banking executive with a major NYSE listed bank holding company and the CEO of a national multi-bank operating company. To read more of his reports — Click Here Now.
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