To understand the socialist agenda, one needs to see that it is all based on egalitarianism and Marxist class struggle. Thus, its tax agenda is not a math problem but immoral theft masquerading as a revenue-raising measure.
Two errors hold the socialist program together, and neither one is economic.
The first error is egalitarianism. According to leftists, inequality is not a situation to be managed but an injustice to be corrected. Thus, a great fortune is not merely “too big”—it’s illegitimate.
Under that logic, a wealth tax becomes necessary, not to raise money for social programs, but to level the injustice of wealth. The revenue is a pretext, and the amount collected is irrelevant.
The second error comes straight from Karl Marx. Leftists argue that wealth is not created; it is extracted. Every fortune is a product of theft. By expropriating wealth, leftist politicians can finally settle accounts. Listen to the socialist rhetoric: no one says “fund the program.” They say “make the billionaires pay.” The goal is retribution, not budgets.
Thus, confront a wealth-tax enthusiast about how little this policy will yield, and the person will quickly change the subject. If the tax is a punishment, the receipts don’t matter.
Class Struggle Assumes the Wealthy Class Stays Put
However, the socialist confiscatory policy only works when the defendants show up. The good news is that they often don’t.
Ask Zohran Mamdani how his pied-à-terre tax (French for “foot on the ground”) is working out. This tax is a penalty for owning a second home in New York City.
Owners are reacting by moving. Indeed, Florida’s Chamber of Commerce named New York’s mayor “Florida’s Economic Developer of the Year” for driving Manhattan money south. The award was a taunt, but the migration was real.
This phenomenon is not limited to the U.S.; it’s a global disease. For example, the UK has lost nearly 10 percent of its millionaires over the last decade. Investable assets worth hundreds of billions of dollars left the country due to non-domiciled tax status and Brexit trade barriers.
In 1991, the book Quicksilver Capital, co-authored by Dwight R. Lee and Richard B. McKenzie, argued that the rapid global movement of wealth and capital drove major political and economic changes in the eighties. They referred to this rapid movement as “quick silver” capital because that is how modern wealth behaves. As relocation and communication costs collapsed over the last century, capital grew steadily more mobile. This forced governments to compete for capital, usually by offering favorable tax rates.
Margaret Thatcher and Ronald Reagan understood this quicksilver movement and cut personal and corporate tax rates to loosen the state’s grip on private enterprise. Success was contagious. Other governments followed rather than watch money leave. Thus, firms moved their headquarters, plants and bank accounts to friendlier jurisdictions.
Capital Has Turned Digital
Since the eighties, income and corporate tax rates have kept falling, albeit more slowly of late. Shipping and travel costs continue to drop. Communication costs have gone through the floor. Trade barriers came down for decades—until the neo-protectionists arrived, Donald Trump among them, who may yet discover what this does to American competitiveness.
This migratory trend of wealth is made even easier by the digital revolution. Capital can migrate digitally across the planet with a few keystrokes. No one foresaw how email and the Internet would unleash immense wealth exchanges. No one imagined that working from another state—or another continent—would become unremarkable. And certainly, no one imagined the impact of artificial intelligence, which now promises workforces of digital agents that respect no border and answer to no legislature.
Marx wrote about mills and mines. He targeted tangible capital that could be occupied, fenced in and seized. Today, capital moves through servers, contracts and companies without a significant physical footprint. A founder with a laptop and a second passport can go anywhere. Many overtaxed owners have nothing holding them and plenty of options to leave.
Here is the structural problem of jurisdiction. Governments are locked in place while capital is footloose. If wealth is taxed more, the predictable result is less revenue and less growth, which is why so many governments have stopped attacking wealth and started courting it.
The Dilemma No Manifesto Solves
This reality is the irony facing down the egalitarian project of today’s socialists.
Its architects promise to level the playing field in the name of egalitarianism and redeem the exploited and downtrodden in the name of class struggle. What they deliver is a shrunken tax base, a thinner payroll and a moving van getting loaded in the driveway of the neighborhood they swore to defend.
The wealthy relocate and do just fine. However, those families who depend upon those overtaxed firms suffer. Their jobs and payrolls are not relocated.
Progressives and socialists may win some elections on the basis of this erroneous Marxist rhetoric. Their program will still fail, checked not by the right, but by every state, like Florida, that reads the socialist hostility toward wealth as an invitation to court wealth.
Wealth does not surrender. It relocates.
The workers once employed are the ones left holding the bill.
Photo Credit: © Natee Meepian – stock.adobe.com
First Published on TFP.org