GAVIN KEETON: Taxes on wealth risk aggravating woes
The proposed annual wealth tax ignores the vast mobility of wealth
The Davis Tax Committee has invited comment on its proposal to tax wealth in SA. The committee is looking specifically at taxing land, a national tax on property (in addition to existing municipal taxes) and a wealth tax. In justifying these proposals, the committee points to SA’s exceptionally high levels of income and wealth inequality. It correctly notes that inequality "inhibits economic growth and undermines social, economic and political stability". In believing wealth taxes are the way to tackle inequality, the committee appears to be influenced by the popular work of French economist Thomas Piketty, who provided important evidence that inequality is rising globally. Much more controversially, Piketty claims rising income inequality is caused by wealth inequality. So, it must be deal with by taxing wealth. Piketty argues that in capitalist societies, the return on capital outstrips economic growth and wage increases. So, the income gap between the owners of capital (the rich)...