Wall Street Journal, What Fewer Billionaires Could Mean for the Rest of Us:
What does it mean for economic growth if scientists and entrepreneurs have less incentive to amass fortunes greater than $1 billion?
Steep taxes on the ultra-wealthy are, for some, not a means to an end but an end itself. They see the very existence of extreme wealth as inimical to economic growth, middle-class prosperity and democracy. “Every billionaire is a policy failure,” goes one progressive meme.
Sen. Elizabeth Warren doesn’t go that far. Yet her tax plans are in the same spirit. Her wealth tax of up to 6% a year, coupled with several other levies, would serve to shrink the fortunes of many billionaires and multimillionaires. It would disincentivize the accumulation of fortunes above $1 billion much as a cigarette tax discourages smoking. (They are called “Pigovian” taxes, after the economist Arthur Pigou, who proposed using taxes to discourage undesirable behavior.) ...
But should they be taxed to the point that they are no longer billionaires? That’s a tougher case to make. In a 2016 book, economist Caroline Freund, now global director for trade at the World Bank, found that countries with a lot of billionaires per capita had higher incomes per capita. She also found a country’s share of the world’s billionaires, as compiled by Forbes, corresponded closely to its share of the world’s largest, most successful companies. While this doesn’t mean billionaires make an economy successful, it does show the two go hand in hand.
How a billionaire earns his or her fortune matters, of course. Some are “rent seekers,” meaning they skim off the productive efforts of others via corruption, royal prerogative or control of some valuable market or resource. ... Ms. Freund says countries with less self-made and more inherited wealth do seem to grow more slowly. ...
By contrast a wealth tax, also embraced by presidential candidates Sen. Bernie Sanders (up to 8%) and billionaire Tom Steyer (1%), makes no distinction between when or how the wealth was acquired. It would hit not only Walmart founder Sam Walton’s children, but also future Sam Waltons; not just Bezos today, but Bezos when he became a billionaire in 1998 and Amazon sold just books and music.