Ep. 174 They Are Really Coming After the Rich

2 February 2019     |     Tom Woods     |     73

The proposals to tax the rich much more heavily are coming fast and furious from Democratic presidential candidates. We examine the ideas and so-called economics behind it all.

Krugman Column

Elizabeth Warren Does Teddy Roosevelt” (January 28, 2019)

Related Article

Alexandria Ocasio-Cortez’s Tax Hike Idea Is Not About Soaking the Rich,” By Emmanuel Saez and Gabriel Zucman

Video Mentioned

After watching this, watch the blooper video.

Related Episode, Contra Krugman

Ep. 171 The Economics of Soaking the Rich

Related Episode, Tom Woods Show

Ep. 1314 Ocasio-Cortez Wants 70% Top Marginal Tax Rate

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  • Robert Smith

    Name them Stan D… Short for standard libertarian disclaimer…

  • Erin Fleming Sweet

    The “contrarian libertarian”!

  • Dj Seeds

    You should refer to the guy as “Bernie from Weekend at Bernie’s” (very specific as to distinguish from another Bernie who coincidentally is also always wrong).
    The guy you’re talking about is truly dead inside and being operated by others who ensure he always has the wrong opinion. “And then Bernie from Weekend at Bernie’s chimed in and said ‘Facebook is a private company.’”

  • Harvey Allison

    Perhaps another point:
    A major effect of this type of proposal is to significantly raise the value of loopholes, which will greatly benefit the political party that offers them, and only available to billionaires of the “correct” party. I suspect many billionaires are liberal or silent not as a function of their belief, but because they conclude they have to be out of self-interest.

  • Adam Schwartz

    Dopey libertarian guy who doesn’t get nuance?

    Sarwark

  • Paolo Moore

    Stu Pittman

  • SomeGuy3_42

    You know who doesn’t get nuance and just won’t go away?

    NPC Chad

  • Gene Firman

    How about Warren for a name of the idiot.

    • ProfessorBernardoDeLaPaz

      “Warren Putz”?

  • Eric

    Obvious name for “that guy” is Carl. Almost like Karl Marx, but without the ability to back up his claims.

    On a more serious note, who do they think will actually pay that tax? Take at look at this real estate transaction that took place last fall in Aspen Colorado:

    What’s the Big Deal: $9.55 million for vacant Aspen lot

    December 24, 2018

    Share Tweet Comments (1)

    “What’s the Big Deal?” runs Mondays and is based on the most expensive property transaction recorded in Pitkin County through 3 p.m. each Friday.

    Price: $9.55 million

    Date recorded: Dec. 20

    Address: 333 and 335 S. Second St., Aspen

    Buyer: Aspen Hideaways LLC

    Seller: Lot 20 Little Cloud LLC

    RECOMMENDED STORIES FOR YOU

    Property type: Vacant lot, two home sites

    Lot size: 39,26 square feet

    Property tax bill: $34,081.96

    https://www.aspentimes.com/news/local/whats-the-big-deal-9-55-million-for-vacant-aspen-lot/

    Notice anything? The property was sold by one corporation to another corporation. Several times a week I drive past Sardy Field, AKA the Aspen Airport. I can pretty much guarantee that none of the airplanes on the tarmac are owned by individuals.

    Rich people put their money into various corporations for a bunch of reasons, including for tax reductions. They then get dividends from these corporations so that they are taxed at capital gains rates instead of FICA rates. Remember Warren Buffet “complaining” about how his secretary had a higher tax rate than he did? This is why. Although I imagine the primary driver isn’t tax savings but to limit exposure in the case of a lien or other legal action taken to only the property, not his whole fortune.

  • Matt Simonson

    Was anyone else yelling “Paul” when Tom was asking for a name? Seems fitting..

  • Tom Foran

    Other than the immorality of the proposal, there is always little depth of thought regarding implementation, probably due to the belief the rich do nothing to earn their wealth. It does not take much of an imagination to see that this scheme could be easily circumvented by shifting from asset ownership to leasing arrangements. Similarly, homes would no longer be bought outright; they would be mortgaged so the asset is offset with the liability. I am making a big assumption that lawmakers are distinguishing net worth from total assets.

    It also worth noting that property taxes already exist at local levels to help pay for services towards which the rich supposedly contribute nothing. Although arguing that it would not be fair to then tax the rich again at the federal level is clearly a meaningless route to go down with proponents of these proposals.

    Finally, building on the point raised that this legislation would require full disclosure, it would also require full valuation of assets and liabilities. Will there be annual appraisal requirements on real estate? How will illiquid, bespoke, used assets be valued? Because it is wealth based, a simple depreciation model cannot be used. Will there be a requirement to calculate the market value of debt (e.g., will rising interest rates devalue fixed rate debt taken out at currently low rates thereby increasing wealth)? Will receivables have an allowance for bad debt? How will all this be carried out on extra-terratorial assets and liabilities? Noting Warren has said money will be set aside to give extra attention to the super-wealth and their related financial submissions, I think she may be underestimating how much time could be spent accurately determining the net worth of a billionaire.

  • ProfessorBernardoDeLaPaz

    Are you referring to “Dim Woods?”

  • Jimmy S.

    Call the voice « Bubba »

  • Danan

    What about Paul K. for the generic dumbo? No, that’s giving it away too much. How about P. Krugman?

    But enough with this nonsense, Bob’s great explanation of the economics of “hoarding” made me think about a comment I’ve left on a youtube video about “A Christmas Carol” done by the Austrian(-adjacent) “Academic Agent.” He, in proper libertarian fashion, tried to ruin people’s childhood memories by exonerating Ebenezer Scrooge, of all people. And he did a great job by pointing out Scrooge wasn’t hoarding, he was employing the whole town and, through re-investing profits, growing their wages. Good stuff.

    But what he missed was the knock-out argument. Had he actually been hoarding all this time, he would have actually done exactly the “generous,” “altruistic” thing unintentionally all this time, that he later on does intentionally. He was, in effect, buying them Christmas dinners for decades, by allegedly abstaining from consumption (and new net investment). Their argument seems to be that through his ingenious entrepreneurship, Scrooge built the most, and only, successful company in town. Yet all the profits from said business, he never consumed. The output, effectively, went entirely towards the workers, all these years.

    These ghosts that visited him should have read some Menger. I know that hadn’t been written yet, but you’d think at least the Ghost of Christmas Yet to Come would have known.

  • martinbrock

    Half of this episode debunks a “hoarding” argument that’s entirely a straw man. It’s not Krugman’s argument, and I’ve never heard it from anyone other than a straw man. Even if opposition to “the rich” is simply envy of their yachts, owning yachts is not hoarding wealth. Owning yachts is organizing real capital (land, buildings, machinery) to produce goods consumed by relatively few, very powerful people, as opposed for example to building cruise ships entertaining many more, less powerful people.

    The objection to an economy entitling a few people to consume yachts is that the capital could instead produce cruise ships and the like, and most people, including most libertarians, don’t accept the axiomatic assumption that entitlement to organize capital is a sacred right that only the current title holders may exercise. The current title holders generally don’t accept this axiom either, because they’re continually engaged in a rent-seeking game and know very well that their current holdings are an outcome of this game.

    “Hoarding”, as Bob notes, is more like filling a swimming pool with cash and bathing in it, laughing at the cashless poor all the while. No one anywhere, worthy any consideration, imagines “the rich” employing wealth this way. Of course, Bill Gates’ billions are shares of Microsoft, representing all sorts of capital producing computer software that I use every day. Believe it or not, practically everyone older than twelve with an IQ over 80 already knows this, so unless the podcast targets young children and the mentally disabled, you’re missing the mark.

    Much of the rest of the episode is similar. Taxes on “the rich” (capital) need not be, and typically are not, distributed to “the poor”. Elon Musk is not poor, but it he is a one man Green New Deal, so any tax on “the rich” financing a Green New Deal would likely benefit Musk more than it taxes him, both by exempting his wealth from the tax and by channeling the tax revenue to his projects. And Solar City (now a subsidiary of Tesla) desperately needs an infusion of cash, so the sooner the better.

    This comment is not a defense of Warren’s tax on individual net worth over a billion dollars or AOC’s 70% marginal income tax rate, any more than it’s a defense of recent “tax cuts” (which combined with increased spending, championed by the same forces supporting the “cuts”, only shifts taxes from income tax payers to inflation tax payers). I don’t defend anything that anyone does with the Federal tax code. There are no good guys in this game, and “the rich” certainly are not its innocent victims.

    • http://www.TomWoods.com Tom Woods

      Wrong again, Martin. I’ve even reproduced screenshots in my email newsletter of memes circulating on social media arguing precisely what you say nobody argues. Yes, maybe the scholars don’t argue it. But hundreds of thousands of people are consistently liking tweets that make this precise argument. So you are wrong, and it would be healthy for you to admit it.

      • martinbrock

        I don’t receive the newsletter (because I generally limit email from all sources), but you can reference something here. If by “meme”, you mean a tweet or a Facebook post, I believe you. Young children and similar adults also claim that the Earth is six thousand years old, but debunking them is also a waste of time. Militant atheists debunking creationists (almost never face to face) is not an instructive dialog either, IMO.

        No. I’m not wrong about your audience. Listeners to this podcast aren’t producing the memes in your newsletter. None of this much affects my health, because I don’t produce a podcast aimed at an intelligent audience.

        • http://www.TomWoods.com Tom Woods

          Martin, this way of thinking is absolutely everywhere. It is everywhere. I happen to think people should be equipped with the correct response to something that is all around them. If all I give them is a response to Paul Samuelson, that is of some value, to be sure, but it does not provide the full service people need. If you believe that what most people are saying is too stupid for you to hear a refutation of, then I recommend you simply block your ears during those portions of the program.

          • martinbrock

            If it’s everywhere, you can cite an example of the “hoarding” argument, as Bob presents it (swimming in cash or the like), in less time than it took to write the post to which I’m responding.

          • http://www.TomWoods.com Tom Woods
          • martinbrock

            The Facebook post is an example (posted on my birthday no less), but I exclude it from “practically everyone older than twelve with an IQ over 80”, so it doesn’t prove me unhealthily wrong.

            But it’s not on this very site.

          • Dr. Weezil

            Jesus, you’re obstinate, Martin.

          • martinbrock

            I explicitly concede the existence of Facebook posts asserting this “cash hoarding” argument before Tom links the post, so I don’t see obstinance here.

          • SomeGuy3_42

            As I mentioned in another comment:
            The “swimming pool of cash” thing only comes up as an “even if that were true” to point out this would push prices down, helping everyone else (26:23).

    • SomeGuy3_42

      The rich hoarding wealth is standard lefty stuff. Just google around a bit — for example: https://www.brookings.edu/book/dream-hoarders/

      • SomeGuy3_42

        There’s a little game on that page saying:

        If you’re a top earner, helping your child succeed can mean hurting the chances of a less privileged child.

        Wow, how can people take this seriously

        • martinbrock

          If you’re helping your child succeed by erecting barriers to market entry, like zoning laws and occupational licensing, then I take the idea very seriously, and I could link Tom Woods taking the idea seriously as well.

          • SomeGuy3_42

            The questions in that game are so rigged its ridiculous. The state hurts the poor more than anyone else. Helping your community doesn’t hurt other communities. It’s not zero sum.

            It’s like a backwards version of seen vs unseen: every time you help your child, some other unseen child goes unhelped. So.. don’t help your child and now both are equally unhelped? What nonsense.

          • martinbrock

            Your argument is nonsense, but it’s not the argument in the article you link. That’s why it’s a straw man. No one anywhere believes that feeding your toddler harms other toddlers. Sure, my mother told me to eat my green beans, ’cause children starve in India, but that’s not quite the same argument, and my mother isn’t part of the conversation here anyway.

      • martinbrock

        The “hoarding” in your article is not the “cash hoarding” in Bob’s story.

        “Various forms of ‘opportunity hoarding’ among the upper middle class make it harder for others to rise up to the top rung. Examples include zoning laws and schooling, occupational licensing, college application procedures, and the allocation of internships.”

        Most libertarians, including Tom and Bob, would agree that this “hoarding” is a problem.

        • SomeGuy3_42

          It’s just an example of the general sentiment — they are using the word “hoard.” It’s funny how the left finds a nugget of truth of how the poor are harmed by the state, but fail to trace the problem to the state and the use of coercion. Instead, they target people that are doing well (middle class).

    • SomeGuy3_42

      The objection to an economy entitling a few people to consume yachts is that the capital could instead produce cruise ships and the like …

      So if people have lots of money then that’s the economy “entitling” them to buy fancy stuff for them and their buddies? On cruise ships vs yachts, it sounds like you’re failing to understand how markets work out how many resources to put into what — i.e. how the pricing system works.

      and most people, … don’t accept the axiomatic assumption that entitlement to organize capital is a sacred right that only the current title holders may exercise

      You mean just cuz somebody owns something this doesn’t give them the “sacred right” to do with it what they want?

      Ok, I see now. You’re making the hoarding argument you claim nobody makes… but the “adult” version… with lots of “words”.

      I suppose you may have a point about the “swimming pool of money” thing being a more cartoon version. But this is the exact kind of imagery the left uses.

      So economies “entitle” people — this is backwards… economies don’t do anything. Individuals do things. The “axiomatic” thing you’re really objecting to is individualism. It sounds like you’d prefer having overlords with enough power and guns to solve your yachts vs cruise ships “problem” — and fail to see the cronyism this approach turns into.

      • SomeGuy3_42

        That cronyism, by the way, is really how the “rich” protect (hoard) their power. They get in bed with the overlords (politicians and regulators), limit competition, and funnel tax money their way. So I guess the left is kinda on to something…

      • martinbrock

        The economy doesn’t “entitle”. The statesmen defining “entitlements”, including title to property, entitle people.

        In markets, title holders exchange titles. Markets don’t determine what title holders are entitled to exchange. Tesla routinely exchanges ZEV credits with General Motors, but this exchange occurs only because the Central Committee of the United State wants more EVs; otherwise, Tesla has no ZEV credits to exchange, and GM doesn’t want to exchange its FRNs for them.

        So how do I fail to understand the pricing system?

        No. Politicians decreeing that Tesla “owns” ZEV credits, for producing electric cars, and also obligating GE either to produce electric cars or to obtain ZEV credits for Tesla, gives Tesla a statutory right, not a sacred right, to sell ZEV credits to GE. I don’t much believe in “sacred” rights at all. In my way of thinking, God doesn’t give a flip about any of this. We’re discussing entitlements constructed by men for men, i.e. we’re discussing artifacts, not products of nature or nature’s God..

        No. I’m not making the hoarding argument at all. The hoarding argument is stupid. If Bill Gates sells shares of Microsoft and then buries the hoard of cash, or sets fire to it, the banking system replaces the cash with more cash. Anyone whose opinion matters understands this fact. Cash is not real wealth, any more than figures in a spreadsheet are real wealth. Cash is an accounting device. Gates certainly understands the fact, and so does Krugman.

        The swimming pool of money is Bob’s cartoon. It’s not Krugman’s story, and this episode is supposed to reply to Krugman, so it’s a straw man.

        I never say that economies “entitle” people. States enacting entitlements entitle people. Individuals don’t define their own entitlements.

        I don’t prefer overlords with enough power and guns to solve any yachts vs. cruise ships problem. I oppose overlords imposing a yachts vs. cruise ships problem, and I see the cronyism in this problem while you seem blind to it.

        • SomeGuy3_42

          Ok, so it sounds like you agree with Bob and Tom, but don’t like the approach made in this episode.

          But Bob did clearly state Krugman’s view that rich people are dangerous and form an oligarchy, and so their wealth needs to be limited/reduced/etc (7:38) — and he went into a lot of detail there.

          Tom brings up the hoarding thing later, and Bob even explicitly mentions rich people aren’t just sitting on cash (24:14). The “swimming pool of cash” thing only comes up as an “even if that were true” to point out this would push prices down, helping everyone else (26:23).

          So I’m not even sure what you’re objecting to.

          • martinbrock

            The richest form an oligarchy, but the state doesn’t discourage this oligarchy. The state actively encourages it. Organizing a few billionaires to enact the state’s will for the deployment of capital is much easier than herding a million millionaires in one direction. As libertarians, we don’t want to limit the wealth of this oligarchy. We want to deconstruct the state constructing it. If Bob had made this point, I’d agree with him even more, but he instead deplores the state’s “theft” from the oligarchs, portraying a Robin Hood state robbing the rich to give to the poor. The Robin Hood state is a myth, has always been a myth and must always be a myth, even under state socialism.

            States tax the wealth of oligarchs largely to distribute the revenue to other oligarchs or steers the investment of oligarchs through tax incentives. This taxation is not “theft”. It’s directing constituents of the state to carry out the state’s will, like appropriating tax revenue for the DOD or NASA or the EPA. The warfare state doesn’t tax the rich to give to the poor, and neither would a Green New Deal. The CEOs of Boeing and Tesla are not poor, and neither are their large shareholders.

            Of course, the rich aren’t sitting on cash. This “cash hoarding” story is a straw man, and it’s not less a straw man because someone on Facebook actually believes it. It’s a straw man, because Krugman doesn’t assert it. The podcast is supposed to teach economics by dissecting the errors of Krugman, not by “debunking” naive Facebook memes.

            A swimming pool of cash wouldn’t push prices down, because our monetary system continually creates cash. If Bill Gates sold a billion dollars of Microsoft stock and set fire to all of the cash, you’d hardly notice. M2 increases by over a hundred billion dollars in a typical month. A swimming pool full of cash is a rounding error. “The rich” understand this system very well, because they’re active participants in it and generally support it. If you don’t believe me, ask Donald Trump. He’s a “low interest rate guy” who “loves to play with debt”.

    • Kristian

      Wait so are you saying that Keynesians do not buy into the hoarding argument? If so I think you need to review the general theory, as its the wellspring from whence all demand side neoclassical economics arises. It may not be a pool, but its certainly either not made clear or implied that Keynes does mean cash on hand increases, as its pulled from I and C in the market…which is literally his whole point for G spending and the multiplier. No hoarding, no point to Keynesian macroeconomics.

  • Tyler Colford

    Krog Paulman

  • James

    His name is Clyde.

  • Luke

    Marty Midwit

  • Matthew Yates

    Wilbur Dolittle. If that doesn’t work, my second choice is Don Lemon.

  • davegrille

    All taxes are taxes against employment .

  • Figmo

    Craig Jongus. You’d have to be a real Jongus not to choose that name.

  • http://smallfirmlegalmarketing.com Max

    “Dopey Douglas” or “Dopey Daniel”

  • Just-a-me

    So, if I buy like $1000 in gold coins every month and store that stuff in a coffee can in the closet, would that not be a form of wealth? Are they OK with violating the 4th amendment to prove that I have this much in wealth?

  • Bob_Robert

    It’s not just at the Federal level.

    With all the hype and hatred generated over the last two years, the Democratic party was able to get a majority in the New Hampshire house and senate this cycle. What a horror show! Tax tax tax, spend spend spend, and on things it’s going to be extremely difficult to roll back once they lose again.

    The Socialists are in full fury everywhere. The Civil War is on, right now.

  • Bob_Robert

    Seriously, a name for someone who’s always wrong?

    “Paul”

  • Jim Catalano

    I thought you drank tangerine juice Tom? How about Tangerine Man as the name for “that guy”?

  • Dan Mott

    Erroneous Ernie

  • Michael Wood

    The guy’s name is Lobotomy Larry.

    What do I win?

  • Mark

    Name him: Bernie Warren-Cortez

  • ohlerone

    Name for the guy should be Opie. It works if we want to rhyme: “Dopey Opie.” It also works if we want to be alliterative: “Opinionated Opie.”

    And, running the risk of being a Dopey Opie, I need to say that Dr. Murphy missed a great opportunity. Dr. Woods said that he was sitting around in air conditioning drinking his orange juice, being angry about how the rich were keeping him down. Murphy should have replied, “if it weren’t for the rich, you might be able to have tangerine juice!”

    That would have been gold for us long time listeners.

  • Tim Dunn

    Name Suggestion = Chumley: the dimwitted sidekick of Tennessee Tuxedo in the old cartoon. “Duhhhhh, gee Tennesee…” See 6:34 at the following video and tell me I’m wrong. 🙂 https://bit.ly/2REE5Nv

  • NoMoreFed

    How about Mr. Slugman?

    I’m glad Bob made that last point. Billionaires don’t have hundreds of millions of dollars sitting in a checking account. Imagine if Jeff Bezos had to sell a billion dollars of Amazon stock to pay his annual tax. I think a potential stock market crash might prevent this idea from coming to fruition.

    One other interesting tidbit is that Trump, about 20 years ago, proposed a one-time wealth tax around 17% to pay off the national debt.

  • Scott Coleman

    The VOICE/…Thoughts are from TMA Temporary Mental Apparition IT is known as “SHADOW” Shadow appears to be sincere, timely, and intelligent to himself. IT misses the mark more often than not. My response would be “Those of U from SHADOW LAND U R TEMPORARY” DID U JUST INCREASE THE SHADOW SUPPLY BY GIVING IT ATTENTION.

  • Chris

    I realize this is not particularly original, but the character which Tom plays; the dumb lummox exists in a children’s cartoon and he sounds exactly the way Tom portrays him: http://angelorules.wikia.com/wiki/Walter_Manetti?file=Picture1.png

  • Adam

    Name for smart/dumb libertarian:
    Joe Shmukatelli

  • Ancap Man

    Perhaps the always wrong name could be Suavé Statist?

  • Eric O

    “Mot” – Tom spelled backwards

  • lagreider

    Dopey lib guy’s name has to be “Maynard”.

  • lagreider
  • AnnCapp

    The name for your 3rd voice should be “Stu” or “Stew”, to describe a guy who is always stewing about something and bellowing his opinion. (not that there’s anything wrong with that, Mr. Woods!)

  • https://www.facebook.com/app_scoped_user_id/YXNpZADpBWEZAVUmhwRGxMUHlJdXZAuYk52YVNabDBtUTMwWGxEOWtPMVV2YlRmRlE3UndiUVZAKQ25OOE9kSlQ2b29ESzVzaVgyS3c0a1hTNVNPa1U2bS0zMUdQSDR6LUxqdnF4NVJvNGRk/ Leo Sowers

    Mike Shipley seems like a great name…..

  • Icy Blast

    Dr. Woods, the awkward segue joke was stale two years ago. Please drop it. You should be able to tell it is lame by Dr. Murphy’s (unenthusiastic) response. Also, we are ready for video. Contra Krugman would be great with split screen video. Beards are in style and Dr. Murphy could treat us to vistas of West Texas.

    • http://www.TomWoods.com Tom Woods

      It’s almost as if the unenthusiastic response is part of the joke, or — imagine this — that I actually know Bob better than you do.

      • Icy Blast

        Of course! Any joke gets better with years of repetition. What was I thinking? And certainly a future senator knows a lot of things better than I do.

      • Matt Hartley

        You know where you won’t hear people complaining about your segues?

      • Icy Blast

        Imagine this: You are stuck at 48K subs while others with more courage race past you.

  • Brian

    My 13 year-old said that if taxation is theft Krugman’s name should be Paul Crook-man.,

  • Ohad Osterreicher

    Should totally be “Maynard”

  • khodge

    I don’t see this point often…in the sixties, the best, most skilled workers who enjoyed and willingly worked longer simply would not work past a given marginal rate. Why should an expert work for nothing? Why spend valuable money paying a tax avoidance expert?

  • Ludwig van El

    My #suggestion for the name of your begrudger: Jesse.

    Warning: That’s the first name of the leader of the Khmer Vert, a Dutch political party (officially called green left(one of the former communist parties), Jesse Klaever. Yes…. he is that unpleasant. Also keen on maintaining traffic jams since 1955. Thus keeping emissions high. And punishing the people for CO2.