Let’s tax the rich

right?

As a thanks to my paid subscribers they received this article yesterday. After a day, it opens up for everybody else.

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Someone left this under my last piece: “you could get back to hard money by making the rich bastards pay their fair share.”

He’s not wrong, exactly.

The fortunes at the top got built on your back, and the men who built them kept the change. The rules that let them keep it were written by the very people those rules are meant to fence in. And the money is right there. All visible, flaunting you.

So you rage against it, want to cut their tax breaks, make them pay on every dollar the way the till makes you, and you believe the gap closes on its own.

I’ll defend all of that. It’s not fair. The odds are stacked against us.

So let’s tax the rich.

Let’s run with it. All the way to the floor.

Let me tell you about a bar.

Ten regulars come together every Friday. Each time, the tab comes to a hundred and they split it the same way the country splits a tax bill.

The four with the lowest means pay nothing. The fifth throws in a dollar. The sixth three, seventh seven, the eighth twelve, the ninth eighteen. And the tenth, the one who drove the nice car, covers the last fifty-nine without a word.

And it works.

The beer is cold, the lights stay on, and everyone’s okay with it.

Then one evening, the owner feels generous and he says: “you chits are such good customers: I’ll give you twenty dollars off each round from now on”.

Now the ten of them have to work out how to divide this twenty dollars fairly. And they do it the only way that doesn’t end with the poorest being paid to drink: proportionally.

The fifth man ends up sipping for free. The ninth keeps four in his pocket. The man with the classy car keeps ten.

Everyone pays less. Every. one.

After calling it a night, the sixth man does the comparison. “I saved a dollar. He saved ten.” A nod at the fancy car.

So the nine of them, warm with lager and rightful fury, give the tenth a hiding and send him home.

Next Friday the nine sit down, order, and find that between the lot of them they can’t even cover half the bill.

The man they ran off wasn’t just a guest at the bar.

He was keeping it open.

It’s a cute little story, and people passed it around since the time before chain email. But it has a grain of truth in it.

So let’s stop story time and do the sum together. With real figures this time.

Take it.

Not tax, TAKE.

Every rich bastard in America, confiscated to the last cufflink.

Set aside, for a moment, the tiny detail that stripping every winner to the bone doesn’t exactly whisper to go build something in that country.

We’ll come back to that. Right now I just want to see how far the loot goes.

Start at the very top. Every billionaire in the country, all nine hundred-odd of them, Musk and Bezos and the entire leaderboard, sold for parts. Round it up to seven trillion dollars.

And set aside for a moment that when you start selling off those bits, they’ll crash in value immediately. [Imaginary numbers: marketcap]

The federal government spends about seven trillion every year. So you’ve bought one year. Just one. Come September you’re back where you started, only now there are no billionaires left and the bill is identical.

Okay, so clearly not enough rich bastards… Let’s widen the net.

The whole top 1% - which nets out to anyone worth north of eleven million, houses and businesses and portfolios scraped down to the floorboards. That’s fifty-two trillion. We can get rid of the entire national debt with some pocket change to spare.

That’s a win right there. Up until you remember the government will run another 1.8 trillion deficit before the confetti hits the floor, and you have permanently removed the one percent from the tax ledger.

- Mao tried that in China. Didn’t really work out in the decades after. -

Still short you say?

Ok ok… Let’s take the top 10%. Everyone over two million, which by now sweeps in a great many dentists and retired teachers with a paid-off house and a respectable pension. A hundred and thirteen trillion. That’s about 16 years of government running at current rates.

And since you’re asking. Let’s just go ALL the way… The whole frickin’ country. Every home, every farm, every 401k, every business, every dollar of net worth owned by every living - or voting - American, the full hundred and sixty-nine trillion of it.

Confiscate the United States down to the bare dirt.

Twenty-four years.

So there you have it... Strip the nation to the studs, auction the lot, and it funds the government as it currently spends for twenty-four years, after which there is NOTHING left to seize, No1 left to tax, no economy left standing, and a Treasury that’s still posting cheques into the void.

Because the spending never paused for a second.

They know this. The people saying loudly that everyone should pay their “fair share”, they can do division as well as anyone else.
They know there is no pile big enough.
They point at that rich man’s house because it polls, and it’s much easier than to address the real problem underneath.

When you look at the numbers I mentioned, you’ll see that the money that ACTUALLY funds the government, year after year, was never going to come from a few thousand billionaires at the top. It has to come from millions of people in the middle.

Which likely includes YOU.

Watch what happens when such a new rule is implemented. First they tax the rich. But then inflation and threshold creep make it hit the middle class (the AMT enters the chat)…

The top one percent earners start around 660,000 a year.
The top five percent at 336,000.
The top ten at 250,000.
And the top twenty at roughly 167,000.

A hundred and sixty-seven thousand. Per household. That’s a nurse married to an electrician. A cop and a schoolteacher who picks up summer work. By the time you’ve stretched “rich” far enough to find real money in it, you are standing in the driveway of a two-income family that doesn’t even remotely start to feel wealthy, calling them the bastards who need to pay their share.

No one says THAT part into the microphone. But the math is clear enough. There ain’t ever enough at the very top. There’s only enough once you start to quietly grow “the top” to include you.

But before you head into the comment section (yeah, don’t … I still have a LOT more to say about this topic): that anger you’re feeling at the unfairness? That quiet despair underneath all of it when you’re looking at a Musk and a Bezos adding zeros to their bank accounts like donning new clothes?

That is real. And THAT is actually what you should be focusing on. Not “the rich”.

Because a fat slice of that genuinely grotesque money was never earned by being better than anyone else.

It was earned by stacking the odds against anyone else.

You hire the lobbyist.
You fund the campaign.

And waddayaknow? That gleaming new regulation just so happen to require precisely the compliance department you already run, while the kid with the better idea drowns in filing fees before he ships a single unit.

When No1 is allowed to compete with you, the money piles up while you sleep. Skill becomes optional.

I dare you to call THAT a free market if you can with a straight face!!

But turn the coin over, let’s say everyone can compete with everyone all the time. That will take down walls it shouldn’t touch either. Some of that money has to be defended. For example a drug company sets a decade and a few billion on fire chasing something that probably will fail, and the morning it works, should a competitor be able to copy that molecule?

Kill the patent and you won’t get cheaper medicine, you will get NO medicine, because nobody sane torches a billion or so in order for the next guy to copy the result.

That protection is the only reason the risk gets taken.

So it’s a balancing act.

Enough shelter that people build the hard, terrifying, and yes: expensive stuff; but not so much that the ones who already built it weld the door shut and bill you rent until the heat death of the universe.

Right now that door is shut. What we have isn’t capitalism anymore. Real capitalism is upstarts knocking the incumbents off their perch. But the scales are unbalanced. The upstart never makes it out of the garage, because he’s drowning in paperwork the incumbent paid to have written.

And at the other end of it we have socialism for the rich. Get big enough and the gov will protect you… “Too Big To Fail”

Losses socialised, profits kept private. Pure crony-capitalism. End-of-empire stuff.

So when a commenter reaches for “taking it all and hand it ‘round”, I get it. Stare long enough at that rigged board and redistribution starts to look like the only fair move left.

The instinct is right.

But the target is wrong.

Because “Tax the rich” does NOTHING to the crony. He’s already three jurisdictions and four loopholes ahead of you.

They WROTE the loopholes.

The thing that’s actually broken sits deeper than any tax rate: nobody’s allowed to fail. Not the giant - we bailed him out and called it TBTF. Not the upstart - we buried him in paperwork before he could even try.

Fix that, and I believe you have a decent shot of making it.

Which brings us to a scribbled napkin somewhere around 1974.

Scene: Arthur Laffer, in a Washington restaurant, with two chaps named Cheney and Rumsfeld watching him draw it. The idea wasn’t even his - Ibn Khaldun beat him by about six hundred years - but never mind.

Tax everything at zero, and the state collects nothing.

But tax it all at a hundred, the state collects nothing again, because No1 will break their backs all year to hand over every cent.

Both ends: zero.

So obviously, there should be a peak somewhere in between, and once you’re past it you can raise the rate all you want, the take is going down.

I mean, this isn’t controversial, right? The real fight happens when we’re discussing where the peak sits.

Diamond and Saez - proper economists, not napkin-doodlers or financial bloggers - put the revenue-maximising top federal rate up around seventy percent. Miles above anything America charges now. So on paper, loads of room.

Tax away.

Except seventy percent assumes those rich people are bolted to the floor.

They ain’t.

The optimal rate is the one people will still sit through before they start rearranging their whole lives to dodge it, and that number sits a long way south of seventy.

My best guess? Around fifty in most of Europe. Lower still in the US - call it forty, forty-five. Because the Americans pay for everything twice: you hand over a slab of your cheque and get back potholes, a GoFundMe page where the healthcare should be, and a retirement he’s told to fund himself.

Pay that much for that little, and the breaking point comes earlier.

Europe charges more but at least posts a doctor at the far end. People will grumpily pay fifty percent for a state that works (-ish), and stay. Ask the same for a worse one and the calculator comes out a lot faster.

So where’s the peak?

You won’t need a chalkboard. The government finds it for you, every time, the same way: it reaches, the money flinches toward the door, the take comes in light, and a year or two later the tax quietly disappears off the books while everyone agrees never to mention it again.

In 1696 England decided it could read your wealth off the number of panes in your house and taxed you by the window, so people bricked them up. Whole terraces went dark on purpose, and you can still spot the blank arches today, three centuries of architectural middle finger.

Rome taxed urine.

Denmark starts taxing cow flatulence in 2030.

Any time the state wants additional revenue, it breeds avoidance, every time, and the fatter the wallet the prettier the detour.

These days the detour skips the bricks.

California tops out at 13.3 percent, highest in the union, and over a million it stacks onto a federal rate that swallows more than half your next dollar.
Texas charges zero. Florida charges zero. Nevada, sitting right there over the line, charges zero.

The man who covered the tab without blinking owns a moving van and has three Austin realtors on speed dial. He doesn’t have to hate the place; he just needs a calculator. The one paying the most is the one who can most easily afford to leave. And as it happens, he’s also the one funding the budget.

And it isn’t only states. It’s whole countries now, and they don’t even bother hiding how it ends.

Sweden, 1984, because they do love irony I guess. Always the exact same reason why they’re reaching: a hole in the budget. They created a new tax on share trades, which then doubled in ‘86. Within a few years more than half of Swedish equity trading had picked up and moved to London. The revenue was but a sliver of the forecast. And by 1991 they scrapped the lot. Pretty much the next day trading came straight back home.

France, 2012. Hollande campaigns on a 75 percent rate over a million euros. The full soak-the-rich fantasy, rally lights and all.

Depardieu packed a bag. Took a Russian passport from Putin’s own hands, which is a sentence I never expected to write. Quieter names followed him out.

The haul? About 160 million euros. A rounding error. Less than the wealth tax it was bolted onto. Two years later the thing was dead, buried by the same government that had sworn by it, the economy minister who killed it now flying the world telling investors France was open for business again.

Belgium, 2016. A little speculation tax on short-term share gains. Gone inside the year, having raised a fraction of the promise, after it spooked enough trading that the stock-market tax Belgium was already collecting fell by more than the new one brought in.

Britain’s running some live version as we speak. They scrapped the non-dom regime and the headlines scream a record exodus, sixteen thousand millionaires bolting for the door. Though I have my doubts because the figures are noisy and half the people quoting them sell second passports for a living, so I’m keeping that dramatic version at arm’s length.

But it doesn’t matter for my thesis. The pattern is already there, confirmed by country after country after country: any government that reaches for more taxes causes the money to flinch, and the government walks it back.

And it isn’t only the rich who bolt. Look at Denmark which taxed butter. Half the country drove to Germany for it. Inside fifteen months, they killed the tax. Or Norway which jacked up its sugar tax; Norwegians crossed into Sweden by the carload until that one got walked back too.

Humans have this annoying ability to adapt. Even to taxes.

And that is the thing the whole “tax the rich” has backwards.

IF a government could squeeze more out of the rich, it would have done it already yesterday. The idea that governments would be voluntarily passing up on easy money is charming, but unlikely.

So the reach-and-flinch, the nibble-and-retreat, over and over in country after country - that jittery little two-step is the curve drawing itself in real time.

Whatever country you’re reading this from, you’ll likely already happen to be standing on that peak.

And before this article starts to sound like some kind of European disease - America ran the cleanest version of the lot while mailing the bill to the workers.

1990: Congress drops a 10 percent luxury tax on yachts, private jets, furs, jewels. Textbook soak-the-rich. It was projected to pull in nine billion over five years.

The rich shrugged and bought their boats in the Bahamas.

The yacht tax brought in sixteen million the first year. Viking Yachts laid off four of every five workers inside eight months. And by the time that Washington quietly killed it in 1993, around twenty-five thousand boatbuilders were out of a job, and the thing had cost the Treasury more than it ever raised.

Same as ever. The workers ALWAYS pay the tax. Directly or indirectly.

And then there are the invisible results.

The tax revenue that never came to be, because you pushed the rate on capital high enough for the business to never be created in the first place.

They simply get born somewhere else. Or there’s a holding company under a friendlier flag. The profit gets booked where the number’s lower. And the local operation is just run as a subsidiary that sadly never makes much of a profit.

Or a surgeon who turns down the Friday list once half the next dollar is spoken for. The builder who skips adding a second crew. Or the founder who eyes an expansion, checks the after-tax crumbs, and decides that next year is probably fine for that decision.

No headline runs for the factory that wasn’t poured. None for the job nobody got the chance to lose.

And EVERY. SINGLE. TIME, the same people are left holding the bill.

The billionaires? They lobby. The merely-rich relocate. The corporation restructures through Dublin. But the salaried man in the upper-middle? With a W-2, a mortgage, and not a scrap of anything offshore - he can do none of it.

He can’t move his job to Dubai. He can’t write himself a loophole. He can’t book his salary in Ireland.

So the buck stops where it always stops. On the one back in the room that can’t get out from under it.

The collapsing middle. Again.

The main problem was never the revenue.

It’s always the spending that’s out of whack.

But why do they try to increase the tax anyway? Because TINA. Even though most countries are already at peak-tax-rate. TINA.

It’s the debt… Global debt clocked a record 348 trillion dollars mostly thanks to governmental borrowing. The US sits near 125 percent of GDP, and the interest alone now runs past a trillion a year, more than the entire military.

For decades the move was to kick the can: grow out of it, inflate a slice away, roll the rest at cheaper rates. But all three doors are swinging shut together. Growth is limp, the easy inflation has been and gone, the cheap rates are a memory.

So they turn around and come for us.

Taxes climb across the whole developed world in lockstep, and not because the rich got greedier this Tuesday.

The money simply has to come from somewhere, and somewhere always turns out to be us, the ones who can’t leave.

Which is the bit my commenter sailed straight past. You cannot tax your way back to hard money. Hard money died from a government spending more than it takes and printing the difference, year after year, world without end, not from some surgeon shaving his return.

The hole is structural.

So go on. Tax the rich. Fifty percent, sixty, whatever number feels fair by Thursday. Just remember how the night ends. He’s in Austin. You’re on the stool. The round’s on the table, going warm.

And there’s no one left at the bar who can pay for it.

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[Daily Digest] → The news in 5 minutes, without the forty open tabs.
[Portfolio] → What I do with my own money