This, unfortunately, is correct. The birth rate means jack shit. People with the capital to do so will just buy multiple homes. Holiday homes, homes closer to work, rental properties etc. If the crash ever came it would be so bad it would make the Great Depression look like a picnic. This is why governments will go to ludicrous measures such as bailing out the banks during the financial crisis and then pumping the markets with money for an entire decade (!!!) afterwards. The problem is that the system might well collapse anyway. Here in the UK we seem to be right in the center of it and it’s not looking good. The health system is on the verge of collapse and almost every public profession is striking or in the process of voting to strike and there’s now talk of coordinated action between the unions for maximum pain because the government is flat out refusing to talk.
I’ve said it before but I will say it again: the government came out and said during Covid that we were essentially running a war time economy. And the war in Ukraine and the disruption it is causing means we’re essentially still in one. During WW2, tax on the wealthiest in society was around 90%. To be quite frank, that kind of tax rate for a few years on the super rich and the globo corps is the only thing that is going to turn the ship around. No-one expects that as a long term solution, no-one is saying that is how it should always be, but in times of real, actual crisis like this, the super wealthy have to step up and take responsibility to save the system they have profited from. Temporary, very high tax rates to get some normality back and then the cycle can start over again. The poor cannot shoulder the burden anymore because they’ve been shouldering it for the last decade. They have nothing left to give and there is nothing left to cut from public services.
The problem we have today is that the super rich now have very little ties to their own countries. They are hyper mobile with private jets, multiple passports, secret tax havens, and armies of lawyers and accountants to hide money and assets. They don’t have the same pride or sense of civic duty they once did in 1939-1945 where many of them took command positions in the war or oversaw industrial production. Nowadays, they are all snapping up mansions in New Zealand and other perceived safe havens in case shit goes sideways and governments decide to play hardball. Getting them to pay their fair share to keep the system running would be exceptionally difficult, perhaps even impossible.
So where does that leave us? With either a form of brutal neo-feudalism and potentially a peasant revolt or, perhaps most likely, a technology driven dystopia where enough of the populous is given just enough support to survive. Creative can kicking accounting from the civil service to quell the threat. To make it more tolerable, the populous will be plowed with endless distractions to sedate them into compliance. Bread and circuses, quite literally the standard playbook for millennia.
Eventually, once the surplus older generations have died off and the global birth rate has declined sufficiently everywhere, all of the world’s wealth will have been concentrated into a smaller set of hands and enough resources will be in circulation that life will be comfortable once again. A generation or two will go by with no direct experience of the hardships of the past and they will start living large again. Borrowing from tomorrow to pay for today. And thus the cycle continues…
Ultra-high tax rates during WWII, when governments used tax to raise the money they needed, may have made sense. Ultra-high tax rates in an unbacked fiat currency world are purely an attempt to punish the ultra-rich (which ends up punishing the upper-middle class as the ultra-rich can afford to either package their income or escape to a lower-tax jurisdiction). In an unbacked fiat currency world, income tax rates are used to heat & cool the economy, not really as a fundraising tool for government works.
So what is your suggestion then, to punish the poor some more? Is there not enough homeless on the streets of San Francisco for you? Are the slums of Bombay too small in scope?
As I said in the comment it would be very difficult or perhaps impossible to achieve and the dangers are high (you don’t want a USSR situation happening). You might even need coordinated effort across multiple governments and there is evidence that this is kind of happening with the move towards a global 15% tax rate on corporate business.
At the end of the day, steps need to be taken to tax capital at the same rate or higher than labour. Until that happens inequality will continue to grow. As the scales have been out of balance for so long I don’t think having capital gains and other taxes at parity with or a couple of percentage points above income tax is really going to cut it. A couple of short, sharp years at 90% and all of it invested into major, physical public infrastructure projects to create jobs and filter the money down. Whatever happens, if we continue allowing wealth to concentrate in fewer and fewer hands we are going to end up with a dangerous situation.
And the problem is that it is being framed as “punishment” in the first place rather than as an opportunity to be the actual hero and save your country and fellow citizens from being thrown to the dogs. Once upon a time men used to follow leaders into battle because they had faith in them as leaders. Would we do the same today? Probably not because they’re not acting like leaders, they’re acting like arseholes who would rather get in pissing contests over the length of their super yacht than invest in making their cities and countries a better place.
It's a very complex topic, which sadly I don't have time to delve deeply into at the moment. My intent with the previous comment was only to point out a fairly large flaw in the "tax the rich" argument as previously implemented, not to suggest that the actual ultra-wealthy shouldn't pay more than they are currently.
In theory there are steps that could be taken to fix the massively broken housing market in most of the Western world. Unfortunately the vested interests and massive financial house of cards built on top of property prices make these steps politically impossible. Therefore, what can't continue forever (unsustainable house prices) will not continue forever, but it will end messily & at some unpredictable future time.
Also, "A couple of short, sharp years at 90% and all of it invested into major, physical public infrastructure projects to create jobs and filter the money down."
I'll go out on a limb & guess you weren't in the UK in the 1970s...
I was born in & lived in the UK, but I was only 7 when the 1970s ended, so my viewpoints are of limited value. From what I could gather from my parents & teachers, income tax rates peaked at 90% (and apparently 98% for "unearned income"), which drove high earners who could escape to move overseas, and made the highly-paid but unable to move, unwilling to work many hours. There was obviously a lot more going on (high inflation, growing unemployment, industrial unrest / industrial decline etc), but the ruling political party at the time of these simultaneous debacles would not be elected again for 18 years, and the fallout from their 1970s policies is still being used to attack them 5 decades later.
The couple of short sharp years at 90%, even if it were politically possible, may not actually generate as much extra revenue as you'd think (leaving aside the fact that this isn't really how governments raise operating funds in an unbacked fiat currency world) - unless you force the ultra-wealthy and high-income earners both to stay in the country and to carry on working hard, while taking away most of what they perceive as the fruits of their labors - how do you think that would go?
BTW I suspect you and I have very different opinions and politics. I find it rare these days to be able to have a civil debate "across the divide", kudos for that.
> The couple of short sharp years at 90%, even if it were politically possible, may not actually generate as much extra revenue as you'd think (leaving aside the fact that this isn't really how governments raise operating funds in an unbacked fiat currency world) - unless you force the ultra-wealthy and high-income earners both to stay in the country and to carry on working hard, while taking away most of what they perceive as the fruits of their labors - how do you think that would go?
I do agree it's not likely to work. I think the war was unique in that it was an existential threat to the rich e.g if you assets are the properties and factories in a country that's being bombed then you have no choice but to do something about it unless you want to lose all your wealth. Now everything is so globalised, even war isn't the existential threat it was. I do think we need to raise taxes on earnings through capital/assets somehow though, at least to parity with income tax.
> BTW I suspect you and I have very different opinions and politics. I find it rare these days to be able to have a civil debate "across the divide", kudos for that.
I used to be left leaning when I was in my teens and early twenties but I've consider myself non-affiliated now. I think that both sides are right and that the approach that should be taken is the one that best suits the situation at hand. I actually think that what this country (UK) could do with at the moment is a cross party government with ministers from multiple parties in ministerial roles to get rid of this nasty divisive streak we've got going on atm and start leveraging the experience and knowledge of everybody for the greater good.
I imagine my original post comes across as quite left wing. I was trying to avoid that by stating that I only saw the high tax rate as a temporary measure but the entire post was quite emotionally laden as well which didn't help. I am quite angry because I think politicians have been leading very poorly over the last decade or so. I feel like they're not only failing to help people maximise their potential, but they're actively sabotaging it with their policies. There are so many lives being wasted as a result.
What do you mean by "escape to a lower-tax jurisdiction"? Isn't it ok that the ultra-rich should be forced to go live in 2nd/3rd world countries if they want to escape tax?
I’ve said it before but I will say it again: the government came out and said during Covid that we were essentially running a war time economy. And the war in Ukraine and the disruption it is causing means we’re essentially still in one. During WW2, tax on the wealthiest in society was around 90%. To be quite frank, that kind of tax rate for a few years on the super rich and the globo corps is the only thing that is going to turn the ship around. No-one expects that as a long term solution, no-one is saying that is how it should always be, but in times of real, actual crisis like this, the super wealthy have to step up and take responsibility to save the system they have profited from. Temporary, very high tax rates to get some normality back and then the cycle can start over again. The poor cannot shoulder the burden anymore because they’ve been shouldering it for the last decade. They have nothing left to give and there is nothing left to cut from public services.
The problem we have today is that the super rich now have very little ties to their own countries. They are hyper mobile with private jets, multiple passports, secret tax havens, and armies of lawyers and accountants to hide money and assets. They don’t have the same pride or sense of civic duty they once did in 1939-1945 where many of them took command positions in the war or oversaw industrial production. Nowadays, they are all snapping up mansions in New Zealand and other perceived safe havens in case shit goes sideways and governments decide to play hardball. Getting them to pay their fair share to keep the system running would be exceptionally difficult, perhaps even impossible.
So where does that leave us? With either a form of brutal neo-feudalism and potentially a peasant revolt or, perhaps most likely, a technology driven dystopia where enough of the populous is given just enough support to survive. Creative can kicking accounting from the civil service to quell the threat. To make it more tolerable, the populous will be plowed with endless distractions to sedate them into compliance. Bread and circuses, quite literally the standard playbook for millennia.
Eventually, once the surplus older generations have died off and the global birth rate has declined sufficiently everywhere, all of the world’s wealth will have been concentrated into a smaller set of hands and enough resources will be in circulation that life will be comfortable once again. A generation or two will go by with no direct experience of the hardships of the past and they will start living large again. Borrowing from tomorrow to pay for today. And thus the cycle continues…