Thursday, October 15, 2015

Omniscience, Autonomy, and Control

Here's a blog post where economist Tim Smeeding's ideas on reducing income inequality are summarized.

What is the reason for taxing asset transfers and capital gains? If there was a social cost to the ownership, why wasn't the tax assessed at purchase? Either we did assess a tax and it wasn't of efficient size (so change the tax), or we didn't know the eventual valuation at purchase. But if we didn't know it, neither did the buyer, so it's not like he is gaining unfairly. It's a windfall, and windfalls are going to be unevenly distributed.

The main thing that these taxes would be trying to do is eliminate windfalls. It's the uneven ownership that's being targeted. Buy whatever you like, but if we later find out that you accidentally bought the "right" things, we're coming for "our share."

I could see an argument that would justify this: future generations would rather live in a world with equality, and we tried our best to create it, but when inequality starts to return, we're doing future generations a favor by not passing the problem on to them.

This could also motive his proposal to make all companies employee-owned (profit sharing). After all, firms are free to share profits right now if they want to, and if that was more efficient, more firms would do it. But if we require firms to do this, we must be saying the future wants no inequality and we're going to make sure they get what they want.

Who can make such definitive statements about the wants of the future? Who can even make definitive statements about his own wants right now? And even if the future doesn't want me to be comparatively richer than my peers, maybe I do. Why do the rights of actual living people have to take a back-seat to the hypothetical wants of possibly-never-to-be-born people?

No comments: