Taxing accumulated wealth taxes the capital that creates employment

The argument

A second argument concerns what large fortunes consist of. Opponents argue that a billionaire's wealth is overwhelmingly not money held in reserve but ownership of productive things: shares in operating companies, stakes in new ventures, property, plant and loans. Taxing the fortune therefore does not reduce a pile of unspent cash; it requires the sale or encumbrance of those holdings, and opponents argue that the buyer and the use the assets are put to afterwards are not improvements on what was there before. The mechanism opponents emphasise is the supply of patient capital. New firms are funded by people able to risk money they do not need and to wait years for a return, and opponents argue that this is a function very few can perform, since it requires both surplus and tolerance for loss. Reducing the stock of such capital reduces the number of ventures that get started, and because the firms that are never founded are invisible, opponents argue the cost is systematically underestimated in a way the revenue figure is not. Opponents add that the incidence of the tax is not where it appears. A levy on owners is paid, in the end, out of the returns the enterprise generates, which means out of wages, prices or investment. Opponents argue that it is therefore misleading to describe the choice as one between a billionaire and the public, since the billionaire is the point of collection rather than the ultimate bearer. On this account raising taxes on the very wealthy is a transfer from future employment and output to present spending, and should not be done.

Premises

Counter-arguments

Proponents reply that the premises prove the opposite of what is claimed. If the holdings are productive, then selling them transfers ownership to another holder and the productive assets continue to exist and employ; nothing is destroyed by a change of owner. They argue that patient capital is abundant and institutional rather than dependent on individual fortunes, and that the incidence argument, if accepted, would exempt every tax on capital whatsoever, since any levy can be traced to some eventual bearer. The question remains who can best afford the contribution.

Rejecting the premises

[Rejecting P1] Selling a productive holding transfers ownership rather than destroying the asset, so the enterprise and the employment it supports continue under a different owner. [Rejecting P2] Patient capital is supplied at scale by pension funds, endowments and institutional investors, so the supply does not depend on individual fortunes being left untaxed. [Rejecting P3] Every tax can be traced to some eventual bearer, so the incidence argument proves too much and would exempt taxation on capital altogether. [Rejecting C] The premises describe costs of the tax, which have to be weighed against the revenue and its uses rather than treated as decisive on their own.