Taleb on Taxes

Pubblico una roba di Taleb che ha scritto oggi su FB sulle tasse, in particolare il divario tra tassazione del lavoro e del capitale. Non so se lo fa apposta, ma non cita la mobilità del capitale, argomento spesso usato dagli economisti per spiegare la ingiusta differenza. Ma essendo egli ben più intelligente del sottoscritto, penso che parli solo di teoria astratta. Chissà... intanto fa sempre bene leggere cose Talebiane. 

Tra poco uscirà il suo nuovo libro sulla "fragilità" dei sistemi. Sono proprio curioso di leggerlo. 

ANY ECONOMIST IN THE ROOM? ANY ARGUMENT FOR THE DIFFERENTIAL OTHER THAN INFLATION?

I would like to see implemented a decrease in the difference in tax rates between capital gains and current income. Such a difference in taxation is based on a misperception of the following property of randomness in life. Skills coupled with hard work provide their fellow with a large BMW with small variance; but it takes skills, plus hard work, plus a huge amount of luck to get a private plane. By the mathematics of large deviations, extreme variations are more likely to be attributable to variance (read "luck") than expected drift (read "skills"). This has been exacerbated by winner-take-all effects as these are coming planetary: consider the Google or Apple effects: he who wins now gets the entire planet.
Now, the tax treatment in Europe and the United States is such that those working hard and getting current income, with the type of performance that leads to a BMW, will be paying full income tax; whereas the share coming largely from speculation (and chance), the net difference between the BMW and the private jet, will benefit from the considerably lower capital gains treatment.

Not only such a system is absurd, designed in days when performance in life was thought to be entirely linked to skills and analyses made no allowance for randomness (let alone fat tails), but it has other fundamental flaws. It is highly unfair, increasing inequality in society. The one percent of the one percent did not get there because of cash flow, rather through capital gains. Measures of inequality in wealth are much greater than inequality in income.
Most of all, the taxation gap leads to the overfinancialization of the system, the kind of disease that got us into the current troubles. And it can be gamed, in addition, to generating investment banker fees. Capital gains should ultimately match a stream of income. Say a hard-working fellow opens a bakery, producing great tasting croissants and baguettes that attract the local espresso-drinking and Volvo-driving crowd. If successful, he can earn a steady cash flow over the next decade or so, and pay full income tax. But should he package his business as a financial asset and sell it as such, he would be able to cash-in and pay the lower capital gains tax on the very same cash flow. The taxation difference leads to pathologies of serial entrepreneurs having derived their wealth from promiscuously selling companies to other people, with many of these businesses have never made any income. And, what's more unfair, the individual investor does not have the same tax advantage from speculative activities: in the U.S., gains for individuals are taxable but losses are not easily deductible, making it a statistical loser for nonprofessionals. Even more absurd, dividend income has an unfavorable treatment compared to capital gains when the source is supposed to be the very same company. For a Martian or someone from the outside, this looks like a conspiracy in favor of speculative income and against current income; in favor of packaging companies for trading and against operating them.

This wish is politically neutral: it is not meant to increase or decrease the overall level of taxes, simply switch the burden around (this author happens to be a supporter of limited government). The typical argument behind the gap in taxation is that such a treatment meant to encourage investments; one can flip it around and show that it encourages speculation and securitization, as well as window dressing. The only credible argument in favor of the differential concerns inflation, and there is such a thing as inflation correction (i.e., adjust the capital gains tax by an inflation factor: someone selling a property after forty years should not pay the same tax as one selling it after two years).

Finally, by a more involved argument, the taxation differential leads to an increase in fragility, owing to the reliance of the economy on volatile tradable financial assets.