Only if you believe in democracy & opportunity too!
Musk is the world’s first trillionaire! It comes with good news, you’re now closer to the wealth of Jeff Bezos than Bezos is to the wealth of Musk!
Fun Fact: Elon Musk and his companies have received at least $38 billion in government subsidies.
But I want to pose an important question: Can you be a capitalist, and believe in taxing wealth? An unequivocal YES. And no, it won’t kill the incentive to thrive.
So here’s some notes on how capitalism and taxing inordinate wealth can exist in the same economy. All coming from a raving capitalist who believes in accumulating assets (to an extent) and where and why we should draw the line.
I’ll start with why:
I have worked with and dined with quite a few billionaires. And all of them have told me the following (though they wouldn’t say it publicly, and I don’t blame them): They all told me: accumulating billions rarely comes from pure genius. It usually comes from finding a glitch in the matrix. A loophole. A blind spot. A broken system. A gap between what the law intended and what the law allowed…
Tax arbitrage. Consumer-law grey zones. Cross-border loopholes. Political influence. Early access to public infrastructure, government contracts, data, spectrum, land, subsidies or monopoly positions. Luck played a massive role. Being in the right place before the law caught up, before regulators understood the trick, before the market and consumers realise what was being extracted.
The doors that opened for them were often doors that should never have been left open.
My take: Getting rich at the service of the many is fine, and ought to be encouraged. Getting richer at the expense of the many is why regulations need to exist.
A few things
Firstly: How much is a trillion? If you earned $10,000 a day it would take 273,972 years to earn that much, or 32,000 years if you earned a dollar a second ($86k per day). It’s a lot. More than anyone needs – unless control is your goal.
Secondly: Money creates power, and power leads to control. Control thwarts participation and ends in regulatory capture and monopoly positions. Capitalism (in a mixed market economy) is about freedom, and the opportunity to participate and start from anywhere. To create, invent, build and earn – yes, some parties have always had advantage – but we are now entering a quasi-feudalist techno-king era… We can all feel it won’t end well. We need to recalibrate the market. Even Adam Smith said the fundamental flaw of capitalism is concentration of wealth and the need for periodic resets. One is due.
Thirdly: Capitalism is the best system – it’s not even close – it’s lifted more people out of poverty and improved living standards more than any system in history – just look at China since 1980. But capitalism needs guardrails. (Their model is probably better with more controls – just ask Jack Ma). We are living under the umbrella of capitalistic benefits. Everything around us – all the technology, entertainment, food and modern conveniences are functions of innovation via entrepreneurs inside a capitalist free market. Ones government helped fund – we’re standing on taxpayer shoulders (the internet is Gov funded) – not just industrial and techno giants. The danger is the markets are becoming less free and ‘owned’ by the mega rich… whose desire for more money is really about more control.
Fourthly: We already tax wealth, just the wrong kind – earned wealth. We hurt the middle, let the top get away with not paying. We tax earned income far too high, and corporations and wealth far too low. The jury is in Mr Reagan: lower corp taxes don’t lead to jobs & growth, but inequality. The economy is a biological ecosystem – a rainforest, the more thriving species, the healthier it is – the easier it can recover from black swan events. The species (people) can find their niches. An invasive species (read here: billionaires and trillionaires) – poison the ecology.
Lastly: Some tax ideas worth discussing…
- Tax wealth and income separately.
- Start taxing wealth on assets outside of primary home.
- Tax unrealised gains above $100m. Make the wealthy sell assets if required. (We already do this with land tax – so we know it is possible).
- Income taxes on earnings should be lower – around 30% up until $200k plus.
- Corporate tax for corporations over $1 billion revenue – 5% of local revenue, or 49% of profit (whichever is greater for the Gov).
- Annual wealth tax – 1% on assets above $100m increasing 1% every $100m progressively, $100m-$200m at 2% and so on… to a max of 10% for assets above $1 billion – per annum. Yes – they may have to sell to pay. Too bad.
In Australia – it would only lose 4,630 votes – that’s the number of people with assets above $100m. We’d only be taxing the 0.01%. Their lives would be totally unchanged. In Australia alone, this would generate around $70 billion a year, which would represent approximately 8.3% of Australia’s total annual tax take of $839 billion, or about 20% of the $347.1 billion currently collected through personal income tax. Imagine how much healthcare, education and infrastructure that could provide! It could change a lot of lives for the better.
BTW – if you think these tax levels kill freedom and economic incentive, your mind has been captured by those much wealthier than you. FYI – this proposal would hurt me financially via my company setups – but the world I live in matters more than the money I’d need to hand back.
Keep thinking,
Steve.
PS – I posted this ideas in less detail on Linkedin but it only had 26 views – seems strange when my average post gets 5000-10000 views….. So I thought it was worth sharing here.