Louis Woodhill: Why Taxing the Rich Does Not Work


In other words, the rich own most of the “nonresidential fixed assets” of the nation. These assets certainly count as “wealth”, but what they are physically are the tools that workers use to produce America’s GDP.

The government doesn’t want factories, office buildings, or oil wells. It wants cash. So, taxing the rich forces them to liquidate assets. This liquidation is accomplished financially, rather than by actually tearing down factories and selling them for scrap.

At the concrete level, what happens is that money that would otherwise have gone to create new nonresidential fixed assets is redirected to buy some of the rich taxpayer’s existing assets. The rich person then hands this money over to the government. The end result of this process is that government has more money, and the rich person-and the economy as a whole-has less nonresidential fixed assets.


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