A 75% tax after all, has been tried, and while it doesn’t appear to have been a good idea, it didn’t sink the countries in question into abject poverty.

Michael

Substantially reducing the flow of dividends associated with stock ownership should cause a large one-time shock to the level of the stock market. (Roughly speaking, shares should drop by about 3/4.) However, because the Fund collects uniformly, it should not distort relative prices, which are what matter for purposes of capital allocation.

This is wrong. While the value of stock as an investment would drop 75%, the value of stock as a representation of capital would be unchanged – you could still aquire a company’s assets by aquiring it’s stock. Investors would be selling the corporations stock, but the stock would get bought up by companies and investors (foreign or domestic) that want to acquire the corporations’ assets for use in a setting where the profits wouldn’t be so heavily taxed.

Even in a closed economy where corporations are the only holders of capital, the 75% tax would just vastly reduce the economy’s investment to consumption ratio by reducing the returns on delaying consumption (if $100 now or $200 later becomes $100 now or $125 later, a lot more people are going to take the $100 now).

just. Wow.

I got pointed to this here blog a few months back via catallarchy of all places. Despite theoretically sitting on opposite ends of the normal (read: broken) political spectrum, I saw an awful lot of agreement between the two cultures.

But we don’t appear to be in Kansas anymore. Looks more like Stockholm, circa 1975. Or even perhaps about 1000km to the east?

Please, cosma, tell me that “modest proposal” was intended to be a signal that you are not to be taken seriously. That you are satirizing some proposals (unclear which) you’ve seen out in the blogosphere, or a particular viewpoint of which you believe this represents the reductio ad absurdam.

Yes. That must be it. This almost reads like it could have been written by a catallarchist in a swiftian mood. Perhaps this is a triple-entendre, satirizing the potential satirizer?

Brilliant!

Michael

No, actually it IS beyond our capabilities, in the long run. The only really effective way of preventing capital flight is by not giving capital a reason to flee.

As others have said, investors do not have to purchase shares in publicly-held companies. Investors can put their money in all sorts of things. If the US government stops capital flight in response to this policy, then bonds or invseting in private companies or any other of a multitude of options will become a massively more popular way of investing. If you were to implement this policy you’d not only have to stop companies moving offshore but stop investors moving their money around inside the economy, with all the inefficiencies that entails. (Eg my grandma could not keep any of her money in shares, she would lie awake at night worrying about them so much that Dad insisted she stay invested in government bonds. At the moment I am not putting any of my money in shares since I don’t want the risk of a capital loss over the next 2-3 years. Any policy to make us invest in shares would make us worse off.)

Speaking as a knowledgeable American, allow me to assure you that such babies are indeed a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled, and will equally serve in a fricassee or a ragout.

Okay, what about privately owned enterprises thinking about going public? There is a big benefit to shareholders in a private enterprise to be able to trade their stock on a liquid market, but obviously its a bad idea to go public if you give up 3/4 of your value in an enterprise.

It seems to me that this would severely restrict the ability of a start-up to collect capitol, b/c it is this future possibility of trading ownership on an open market that attracts investors. What do you think?

I don’t know what Cosma thinks, but I think your point is exactly correct.

It is one of many reasons why this proposal is utterly insane.

at #19

corporations would be foced to allow the market to decide the best use of capital.

And the market would make no capital available to corporations.

My recollection of Roemer’s version (which I read a while ago, so don’t hold me to it) is that each citizen initially receives an equal per capita endowment upon reaching adulthood. However, shares of individual companies can then be traded (but not sold for cash) on an open market, and dividends are indeed paid in proportion to share ownership, thereby accepting the premise of unequal returns accordings to individuals’ luck/pluck in this market. Ownership and control do remain fully separated, per Cosma’s more egalitarian version.

US citizens who reside abroad and have no US income or assets in the US are still required to pay US income taxes, although the IRS has no real ability or interest in tracking down non-payers unless they have seven figure incomes or more. It even assesses punitive taxes on people repudiating US citizenship on the presumption that any person with a meaningful income who gives up their citizenship must be doing it for tax purposes. Why should corporations get different treatment?

Which would, of course, require unilaterally repudiating every tax treaty signed over the past sixty years… The issue of what constitutes a permanent establishment is occupying a lot of my work time right now.