Piketty's Taxation --> Transparency Argument

The benefit of the global progressive tax on capital is that it will help to stop tax havens and make wealth inequalities a matter of public record:

3E. Lack of Transparency: r > g entails high levels of wealth inequality that are easy to hide under present legal conditions. This makes the true distribution of wealth inaccessible to the voting public, preventing them from making rational collective decisions.

3P. Increasing Transparency: A global progressive tax on capital will stop tax havens and other institutions that make it difficult if not impossible for the general public to know the distribution of wealth, as the taxing power will generate accurate records.

Piketty is happy to place a great deal weight on 3P. This means that if 3P fails, it is an enormous problem for the normative arguments in the book.--Kevin Vallier

Vallier and I agree that 3E/3P play a huge role in Piketty's book. I had called attention to them in one of my earlier posts, but Vallier's post is very useful for the careful focus he puts on them. Vallier goes on to argue that (i) that taxation is not necessary for generating this transparency; (ii) the goal of transparency can’t justify the level of taxation Piketty endorses. Let's grant (ii), although Piketty has different arguments for the level he advocates. Let's grant (i), too.

Even so, all Piketty needs is the argument that (i*) taxation is among the most likely to succeed means for generating transparency. One might worry that because Piketty has been working with tax-related-data he might be biased in favor of (1*). So, here's an argument-strategy (3P*) in favor of (i*) that Vallier does not consider and that I am pretty sure is what Piketty is after and that deploys premises that are independent of his framework:

• When governments have an interest in the matter then they will do their very best to get the data on the table.
• Governments survive on taxation.
• There is a LOT of global wealth
• So, once governments tax global wealth, governments will put their full power behind getting the best data on global wealth on the table.

That's a kind of public choice argument for an unusual end. (Recall that this argument relies on the fact that if we leave it to markets, ordinary incentives are such that people will hide their wealth.) It does not follow, of course, that governments would be perfect at getting the best data--tax evasion exists, after all, under even the best functioning government bureaucracies. But that just reminds us that merely demanding "disclosures" will be far less effective than 3P*.

So, Piketty's argument has been vindicated (for now) against Vallier's criticism.