Ethan Fenn's Response to My Letter to Sam Harris
Ethan Fenn's Response
All right, with some time to read and reflect, I think that you have hit all the key reasons why Harris is wrong: the rich systematically invest their wealth, which creates value in the economy and is also a perfectly sufficient moral justification for their keeping it; technology does not destroy net jobs for reasons of comparative advantage; a tax on wealth is ultimately a tax on saving and investment; and government is no more trustworthy than the private sector in allocating resources. I would add one fundamental criticism and three somewhat derivative ones.
The fundamental criticism is that if Harris is going to posit that a certain accumulation of wealth, through otherwise unobjectionable means, is morally or economically opprobrious, then the burden is on him to provide a moral or economic theory why this is so, and he has completely punted on this burden. All he offers is an argument by intimidation: "How many Republicans who have vowed not to raise taxes on billionaires would want to live in a country with a trillionaire and 30 percent unemployment? If the answer is 'none'—and it really must be—then everyone is in favor of 'wealth redistribution.'"
The first of my three more particular objections is that nobody would trust that Harris's "one-time" wealth tax would really occur just once. There is a long history of emergency government actions becoming regular occurrences, and after such a tax was levied once there would be tremendous uncertainty in the economy over when it might be levied again. (I might add an off-hand suspicion that a one-time levy on existing assets could legally constitute a "taking" rather than a tax, and therefore raise constitutional issues.)
Second, I would add that any additional tax on capital in the present tax environment would be particularly destructive because capital is already double-taxed. Corporate income is taxed when firms report profits, then capital income is taxed again when it is returned to investors as interest, dividends or capital gains. The problem with this is that the deadweight loss from a tax varies with the square of the tax rate, so that when you double the taxation, you quadruple the deadweight loss. If you triple-tax capital by taxing accumulated wealth on top of corporate profits and capital income, then you will nonuple the deadweight loss---and people should never have to use the word 'nonuple.'
Finally, regarding technical change, we do not simply have to trust in theory to avoid worrying about job losses. We have about 75 years of excellent, systematic economic statistics, and about 100 years before that of looser statistics and estimates; and every bit of relevant statistical evidence says that technical progress has showed a steady increase over the decades while unemployment has fluctuated around a fixed, low average. To suggest that technical change destroys net jobs flies directly in the face of all recorded economic experience.