"In Radical Markets, University of Chicago law professor Eric Posner and Microsoft senior researcher Glen Weyl propose a radical restructuring of property rights, immigration policy, and voting, as well as a substantial change in corporate law. Their most radical proposal is to completely overturn property rights so that people would need to continuously “bid” for property they already own. They want to alter immigration policy to allow about 100 million more immigrants into the United States, but change who decides whether or not to allow particular prospective immigrants to enter. They want to switch to “quadratic” voting as opposed to the current one citizen–one vote method. They also want a major change in how investors can hold shares in corporations.These are the opening two paragraphs of “A Radical Restructuring and Redistribution of Wealth,” my review of Radical Markets by Posner and Weyl. It appears in the Summer issue of Regulation. (Scroll way down to see my review.)
For all of these positions, they make clever and sometimes compelling arguments. The most compelling one is on voting. The least compelling, and also absolutely horrific, one is on property.
Some highlights on their stiff 7% annual tax on wealth:
What would prevent people from underestimating the value of their assets? This is where Posner and Weyl’s proposal is horrific. Once a homeowner, say, has stated the estimated value publicly, he would have to sell his house to anyone who offers more than that value. So, for example, suppose my aforementioned house is worth about $900,000 on the open market. If I estimated the value at $900,000, my annual tax under their proposal would be a whopping $63,000. If I estimate the value below that, I would risk losing the house to anyone who bids more than my estimate. To be safe, I would probably estimate the value at $1 million because I like living there. But then I would pay $70,000 in taxes on my home annually. (Notice that a 7% annual tax on an asset would amount to an implicit tax of over 100% on the income from many assets.)
In short, Posner and Weyl would fundamentally undercut property rights, making them conditional. If you’ve lived in your home for 32 years, as my wife and I have, and put a lot of sentimental value on the place where you raised your children, then you would have to put a number on that value. And in case you think you can handle that, you must remember that they want to do the same with virtually all of your net worth.
Toward the end of the book, they even toy with having people pay taxes on their human capital. They give an example of a surgeon who announces that she would perform gallbladder surgery for $2,000 and pay a tax accordingly. She would be obligated to provide that surgery to anyone willing to pay $2,000. So if the surgeon was thinking of retiring, forget it. The only satisfactory solution for her would be to estimate the value of her services at a number that really would make her indifferent between working and retiring.
The authors are aware that they’re treading on sensitive ground here, writing, “A COST on human capital might be perceived as a kind of slavery.” Might be? They claim that such a perception is incorrect, but the reasoning behind their claim is weak.
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