Here’s a letter to the Wall Street Journal.
Editor:
At least two confusions discredit Mayra Castañeda’s attempted defense of California’s proposed wealth tax (Letters, February 3). First, she claims that “billionaires pay less in taxes on their overall wealth than working families do.” She gets away with this claim because the research that she cites in support, although it postures as measuring the taxation of incomes, in fact measures the taxation of wealth by classifying unrealized capital gains as taxable income.
But unrealized capital gains are not classified as taxable income by any government in the U.S. And for good reason: Were these gains classified as taxable income, many taxpayers – including some middle-class families – would have to liquidate a portion of their assets in order to get the cash needed to pay their tax bills. One result, in addition to this annual hardship, would be a shrinkage of America’s capital stock which, in turn, would slow wage growth as workers, having less capital to work with, would be less productive than otherwise.
Second, Ms. Castañeda ignores the most prominent argument against the proposed tax – namely, that it will drive billionaires, along with their taxable incomes and wealth, to states that are less greedy to seize the fruits of high-earners’ efforts. This exodus of billionaires would occur even if, contrary to fact, classifying unrealized capital gains as taxable income were a sound idea.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
