People do say that. Usually the critique of (perfect) capitalism is that it (structurally and mathematically) skews towards increasing wealth for winners at the expense of the rest of the population and that this is inevitable.
Then the response of advocates against this situation is to either commit to more structures to prevent that outcome towards diluted (non-perfect) capitalism or other social forms (socialism, etc...)
> skews towards increasing wealth for winners at the expense of the rest of the population
The usual response against that is: what is wrong with being a winner? I did something right, let me have my well-deserved money.
The problem with someone getting well-deserved money is that the money starts working against everybody else, so essentially this money gives everybody else negative money.
Many times your money is not well deserved. Many times it’s due to luck, inheritance (see: luck), or dirty tactics.
Regardless, the problem is very rarely that you “earned” money. Almost everyone is fine with you getting wages or perhaps entrepreneurial income.
The problem is that wealth allows people to become more wealthy without really doing anything. Wealth compounds so that the rich get richer. And often the risk of financial loss is so low in a diversified portfolio that it’s basically a guaranteed win. See economic rent.
IMO what people want is neither an income tax, nor a wealth tax, but an income tax rated on wealth. Wealth does get created over time, but despite this, the wealthy also take a continually larger share of the total pie. Society should be the one to get the bulk of passive wealth accumulation gains. Not individuals who happened to be wealthy.
If you have a billion dollars, your income tax rate should be like 99%.
In a "normal" environment, it doesn't make sense to me that wealth begets more wealth passively without doing anything:
A) If your wealth is in cash in the bank, you are providing the bank with deposits. The bank can now make cheaper loans which helps others. But if these loans default, your bank fails and you get bailed-in. Assuming no government intervention comes to save you.
B) If your wealth is in stocks or corporate bonds, you're helping to finance companies that are making stuff / providing services that people might need. But markets can go down, companies fail, and as long as there's no bail-outs, you should be able to lose it all.
C) If your wealth is in government bonds, you're obviously financing the government. But if there's no buyer-of-last-resort (central bank) for your bonds, then one dodgy policy decision by the government, a large bout of deficit spending, or a failed bond auction will wreck the value of your bonds.
D) If your wealth is only in stuff, land etc. then your wealth shouldn't grow - in fact it should fall as these deteriorate in quality, and you're taking a big hit in the form of opportunity cost by not doing anything productive with the land/stuff. If you're having to maintain this 'stuff' then you're losing money, think cost of ownership, replacing capital etc.
E) If your wealth comes from rent, then you're taking a risk, and expect costly demands from tenants and to have to keep up with a competitive market. This I accept is something of a grey area because uncompetitive markets / monopolies can exist.
F) If you're wealth is in patents, copyrights fees, royalties etc... then there may be an argument here. This is up to the government to change, similar to E but without as much risk.
The trouble with the above A-E is the inherently inflationary system we have now where markets are never allowed to go down and deflation, bank failures, and default is prevented with stimulus. It props up stocks, bonds, means assets and stuff gets more expensive nominally without doing anything, it keeps banks afloat and means bail-ins of depositors are unlikely. Rich people who acquire assets are on to a guaranteed win like you say.
The solution is not to take away the incentive to produce more wealth by a punitive income tax, but to take away the asset inflation that makes asset holders rich by doing nothing, which also makes cash holders poorer and punished for being prudent with their meagre savings.
While it is problematic that bail outs happen to such a scale, the risk of things going south isn’t really a strong counter effect. You “can” lose. But you generally will not. Especially in the long run. And even if you do in particular, lose your investments, most wealth will beget more wealth. It’ll be a wealth transfer in dollars or real assets from you to a different wealthy party rather than society at large.
The economy improves and so assets do become more valuable, inevitably. We should be taxing that inevitable passive growth of society’s progress to benefit society.
To quote Keynes, ironically, "in the long run, we are all dead", and even wealth that gets passed on to children is frequently frittered away. There is no guarantee of unending passive growth if society at large does not make productive investments. Plenty of countries have learned that the hard way. I think this is a bias of modern westernized countries for the last century.
"The economy improves and so assets do become more valuable, inevitably."
More pricey, no guarantees about more valuable though. Some assets may be entirely Ponzi-like and have little value, but a high price.
And anyway, if the economy is improving, homeownership / rent would be more affordable, families would only need one parent to work, the number of hours worked to buy S&P500 would be more reasonable, things like healthcare and education would be getting relatively cheaper. But artificially cheap margin debt, speculation, and financial chicanery backstopped by the central bank have lead to a lack of productive investment. Unusually high immigration and population growth without a corresponding increase in productivity causes higher prices too. Everything is getting harder from the point of view of Mr & Ms NoAssets 20-somethings who earn a wage.
The fixation of the tax-happy is on making the rich poorer in a dollar-net-worth sense. But there is no focus on making the poor richer in a purchasing power sense (what you can buy).
This requires a gradual deflation, higher reserve requirements, saving and careful investment. All currently very unpopular with the asset-rich, banker class, and thoroughly captured mainstream economics profession, who want you drowning in debt buying ever more expensive stuff, and not deferring consumption to the future.
There is no guarantee of unending passive growth, but it nearly always happens. There is no guarantee of gradual wealth accumulation but it nearly always happens.
Then the response of advocates against this situation is to either commit to more structures to prevent that outcome towards diluted (non-perfect) capitalism or other social forms (socialism, etc...)