Summary

Graham argues that politicians proposing wealth taxes don't understand the mathematical equivalence between wealth and income taxes. Using the risk-free rate of return (5%), he demonstrates that a 1% wealth tax is equivalent to a 20% income tax, meaning a 'mere 1%' wealth tax would give many US states the highest tax rates in the world.

Key Insight

Politicians proposing 'modest' wealth taxes don't grasp that each 1% of wealth tax is equivalent to 20% of income tax, making their proposals far more radical than they realize.

Spicy Quotes (click to share)

• 7

  It's clear from the way most politicians talk about the subject that they not only don't know the answer, but don't even realize there's such a question.

• 6

  Each 1% of wealth tax is equivalent to 20% of income tax.

• 6

  In the median case, US state politicians talking about adding a 'mere 1%' wealth tax are talking about causing the residents of their state to have the highest taxes in the world. That's not the sort of decision you make lightly.

• 5

  The answer's not hard to understand, once you realize the question exists.

Tone

analytical