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16/10/2016

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ThereislessappetitefortaxingtherichthanyoumightthinkCapX

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Thereileappetitefortaxingthe
richthanoumightthink

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TaxingtheRichAHitorofFicalFairneintheUnitedtateandurope

Inthiworld,nothingcaneaidtoecertain,exceptdeathandtaxe

Thevatmajoritofwealthiuiltongoodworkthatimproveociet

Inthiworld,nothingcaneaidtoecertain,exceptdeathandtaxe.WhatU
foundingfatherenjaminFranklindidntauturelknewwathatdeathand

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ThereislessappetitefortaxingtherichthanyoumightthinkCapX

taxpolicaredeeplinterlinked.

ThatthetheifromKennethcheveandDavidtaavage,whohavetudiedthe
hitoroftaxationinuropeandtheUnitedtate,intheirnewookTaxingtheRich
AHitorofFicalFairneintheUnitedtateandEurope.Thefindthatwhatwe
thinkdrivehightaxeontherichinequalit,envandtheailittopajut
doenthowupinthedata.Itwantuniveraluffrage,orthepoliticofleftand
rightwinggovernment,thatdrovelargeincreaeinclaimontherichinthe20th
centuruttheneedforequalacrificeinatimeofwar.

Inthe19thcenturJohntuartMillwrotethattaxehouldeleviedtoenure
equalitofacrifice,uthetheneggedthequetionofwhethertaxehoulde
proportionalorprogreive.Thiianunreolvedmoraliuethatiatleathalfa
millenniumold.Theintroductionofthedecimacalata,aprogreivetaxonland
income,inFlorencein1500createdavigoroudeatethatFrancecoGuicciardini
tatemanandfriendofMachiavelliummariedinarieftext.Thereonecanfind
tatementthatmatchentimentwefindacrothepoliticalpectrumtoda,where
theidealprinciplerangefromonethatemphaietheailittopa,toone
extollingthevirtueofequaltreatment,irrepectiveofmean.

utthereianotherwaoflookingatequalitofacrificethathaentertained
recenttudieintaxhitor,notleatThomaPiketteminalworkoninequalit
andcapitalimin2014.FollowingPikett,cheveandtaavageconcludethatthe
effectoftwoall-conuminganddevatatingworldwarexplaintheverlarge
increaeintaxeontherichinthe20thcentur,eforethoetaxegraduallfell
ackinthefollowingdecade.The1918LaourPartmanifetocalledfora
ConcriptionofWealthfromtheoldermemeroftheritihpopulationwhomade
monefromthewarutwerenotenlitedtofightinthetrenche.qualitof
acrificeheremeanthort-termconficationfromthewealthintheformof
incomeandwealthtaxe,awellacapitalandexceprofitlevie,tofinancethe
cotofthewarandocialrecontructionintheearthatfollowed.

cheveandtaavagemajorinightithatthecountriethatmoiliedforwar
uchatheUK,UandFranceraiedtopincometaxeontherichmuchmore
thanthoethatdidnt.Whileratewereelow10%eforetheFirtWorldWarin
motindutrialcountrie,theroetoanaverage40%1919intheelligerent
indutrialtate,comparedtojut15%inthoethattaedoutofthewar.Inthe
UK,toptaxeonincomeroeto98%andonlargeetateto80%intheperiodafter
WW2.

Atheimpactofthewaruided,odidthedemandontherichetthedemand
forgovernmentcontinuedtogrow.Averagetoprateofincometaxfellfrom65%in
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ThereislessappetitefortaxingtherichthanyoumightthinkCapX

1945toelow40%in2010attheametimeatheizeofgovernmentdouledfrom
20%ofGDPto40%,fundedaroadertaxae.Whatiurpriingaoutthi
ookihowroutltheauthordicountotherwidelheldexplanationforthe
gradualreductionintaxpaidtherichet1%ince1980.Theinfluenceofpolitical
loing,lieraliedcapitalflowandthereakdownofthepotwarconenuare,
intheirview,inadequateanwer.Whathachangedithefocuofequalitof
acrifice,whichharerurnedtoadeateaoutfairne,aconceptunderwhichoth
equaltreatmentandailittopacancoexitandcompeteonnormativeterm.
Fairnecaneinvokedtodefendtaxethatarehighorlow;flatorprogreive.

ointhelightofthegloalfinancialcrii,therevelationwithinthePanama
Paper,andtheintenifingfocuontheo-called1%,whatarethelikel
conequencefortaxpolicintheUandurope?Notmuch,acheveand
taavage.Ina2014tudwithYouGov,2,000Utaxpaerwereakedwhatthe
elievedthemarginaltaxratehouldefordifferentincomelevel.Forthoe
earningover$375,000,themedianpreferredratewa30%,whichilethanthe
39.6%ratethatiactuallchargedonincomeaove$375,000.venwhen
repondentareinformedofthecaleofinequalitintheUwhichiignificantl
greaterthanmanpeopleimaginetheirpreferredrateoftaxfortopincomedoe
notchangevermuch.

Depitethechallengethrownupthefinancialcrii,thereinooverwhelming
impuletoringdowntherich.Thereitillanappreciationthatthevatmajorit
ofwealthiuiltongoodworkthatimproveociet,andthatenileprogreive
taxationgetthealancerightetweenailittopaandequalitforallunderthe
law.utthatappreciationinotguaranteedtolat.Ifthereareaurancefrom
thiworkthatwereunlikeltoeetheemergenceofapoliticofenvridingonthe
ackofconficatortaxe,thereiawarningthatreinforcetheurgencof
reformingcapitalim.Weneedtopromoteapopular,incluivecapitalimfrom
whicheveronecanenefit;andaocialcontractthatofferalevelplaingfield,
chanceforindividualfulfillment,ocialolidarit,andcompaionforthe
unfortunate.

Pulicentimentmachangefortheworeiftaxpaertarttoelievetheeconom
itematicallriggedinfavouroftherichinawathatifuelinginequalit.If
electoratefeeltoomuchoftheurdenoffundingthetatefallonlowandmiddle
incomeearner,epeciallintheformofindirecttaxe,therecouldwellegreater
upportforhigher,compenatorlevieonwealthandtopincome.Iftherei
anotherankingcriithatcallontatetoailoutfailedactor,therewoulde
callforretriution.Andifthegeneralperceptiongrowthattherichfinditeaier
notjuttominimietheirtaxillutalotogetpecialtreatmentthetatewhen

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ThereislessappetitefortaxingtherichthanyoumightthinkCapX

itcometouildingauccefulcareeroruine,orinfluencingpoliticaland
ociallife,thepulicmoodcouldeailour.

Thejoforcapitalititomakeurethatdoenthappen.

TaxingtheRichAHitorofFicalFairneintheUnitedtateandEurope.Kennethcheve
&Davidtaavage.PrincetonUniveritPre.RRP19.95

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