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(Mods, let me know if I need to delete this and repost in Small Questions Sunday.)
The US Supreme Court (SCOTUS) hears Moore v United States today. According to SCOTUSBlog, at issue is "Whether the 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states". Since that's not very helpful, I'll quote The Atlantic's summary instead:
Mother Jones, NPR, CBS, and Foreign Policy (of all the friggin' places) are running articles breathlessly proclaiming DOOM! for the US tax code, or at least the ability of Democrats to pass wealth tax laws. This Forbes article seems to be a pretty good explanation of what's at issue but I'll admit that I'm not well-versed enough in tax law to understand the full ramifications of what a Moore victory would mean for the ability of the federal government to raise revenue. On the other hand, I can't say I'm sad about the idea of a wealth taxes getting a bullet to the head. What am I missing or not considering as I read about this from the various outlets?
All else equal, all wealth should be taxed equally (say, flat 1%/y) , not income from wealth. Current tax laws encourage bubbles and poor investing. Just buy a garbage bond or shitcoin and uncle sam will barely touch it, but god helps you if you invest in a company actually making money. And don’t give me the hard-luck grandma story.
It’s like a poll tax on wealth, and like a poll tax, it’s very tax efficient. The problem with income tax is that it discourages economically beneficial behaviour, like working or good investing. Every time you engage in it, the state wants a piece, and possibly, an even bigger piece, the better you are at it. So the state, counter-productively, eggs you on to be a bum and to stack your wealth under the mattress (ignoring inflation). Your lazy bum money should be taxed at least as much as superstar cancer-curing money.
In principle I'm open to almost all kinds of taxation - I was in favor of georgism before it was cool, for example (though I'm tentatively against it now that it is cool, so I guess you may call me a tax code hipster?).
It just so happens that wealth is absolutely horrible to tax in practical terms. The state can only meaningfully tax anything for which it has easily accessible bookkeeping. We already expect companies to have accounting software & books anyway, which means income & sales are easy to tax. For wealth, only investment & bank accounts are easily accessible. So in practice we have two extreme outcomes of a wealth tax (and a spectrum of combinations inbetween):
a) only bank accounts and investments are taxed, maybe in addition to some reasonably easy to estimate forms of wealth such as land ownership. This will strongly incentivise, as you put it, lazy bum money, and other difficult to access forms of wealth.
b) Every individual will have to do extensive bookkeeping of all their belongings, and the state will regularly need to check homes (in fact, any place where valuable assets might be hidden) to make sure that these books are accurate. Aside from the extreme inefficiency of forcing people to keep books of their belongings, this is utterly impractical for the state as well. In practice there will probably be arbitrary limits on both individuals and goods - you only need to keep book about your belongings which are worth >X / only individuals who have a net-worth >Y need to keep books. But this will again strongly encourage people to move their wealth into assets that are below these lines / to get themselves below the line.
Either way, even if a wealth tax might be efficient in a world with a theoretic omniscient tax AI, I have yet to see an actual implementation that isn't horribly distortive AND impractical.
Why's Georgism gone sour for you? I've only been tracking it loosely and casually, not to the point of going hunting for counter-arguments to it, and I'm certainly not qualified to generate them on my own.
I think that its central claim, namely that it's not distortive since you can easily separate out "true" land value and development, is straightforward false. In practice, what we call land value is extremely dependent on the development around it. As a simple toy example, a neighbourhood group that works together to keep the streets clean increases the land value of their own houses, which in a pure georgist world would actively impoverish them.
That said, directionally speaking I'm not entirely opposed to moving into the direction of more georgism, I'm just opposed to going full george. Right now for example we have a questionable NIMBY feedback loop where real estate owners have an incentive to block any development nearby even if it does not actually bother them just to drive up their own land value. This means that you often have a small number of dedicated NIMBYs that genuinely are bothered by something, and a larger associated block of people that are tentatively on their side just because when in doubt, more land value is always better for you. A well-chosen land tax around 1 or 2 % might balance this out a bit better ( assuming 5%+ as full georgism). But you then also need to be dedicated to this tax. In the worst case, you grant extremely common exceptions so that everyone is paying land value taxes from de facto something like 20 years ago, and then it's strongly in everyones best interest again to drive it up.
Similarly, there are some decent georgish models for resource extraction such as the norwegian petroleum tax / oil fund system. I'm also in favor of those.
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