Archive for July 28th, 2014

Aletheia

Erik Falkenstein makes a lot of important points in this commentary on Thomas Piketty (via Isegoria). The whole post is highly recommended.

To pick up on just one of Falkenstein’s arguments here, he explains:

Most importantly for [Piketty’s] case is the fact that because marginal taxes, and inheritance taxes, were so high, the rich had a much different incentive to hide income and wealth. He shows marginal income and inheritance tax rates that are the exact inverse of the capital/income ratio of figures, which is part of his argument that raising tax rates would be a good thing: it lowers inequality. Those countries that lowered the marginal tax rates the most saw the biggest increases in higher incomes (p. 509). Perhaps instead of thinking capital went down, it was just reported less to avoid confiscatory taxes? Alan Reynolds notes that many changes to the tax code in the 1980s that explain the rise in reported wealth and income irrespective of the actual change in wealth an income in that decade, and one can imagine all those loopholes and inducements two generations ago when the top tax rates were above 90% (it seems people can no better imagine their grandparents sheltering income than having sex, another generational conceit).

The much-demonized ‘neoliberal’ tax regimes introduced in the 1980s disincentivized capital income concealment. (Falkenstein makes an extended defense of this point.) In consequence, apparent inequality rose rapidly, as such revenues came out of hiding (ἀλήθεια) into public awareness / public finances. The ‘phenomenon’ is an artifact of truth-engineering, as modestly conservative governments sought to coax capital into the open, within a comparatively non-confiscatory fiscal environment.

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July 28, 2014admin 18 Comments »
FILED UNDER :Democracy , Political economy
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