The discussion around taxing wealth, and in particular billionaires, has been illuminating. Not in the sense of learning something new but rather seeing who is willing to make or defend bad takes instead of engaging in any level of critical thinking. To make it clear on where I am on this issue, I am in support of a wealth tax, although I think there is a lot of room for discussion on how to best accomplish this.

There are a few takes out there though that particularly bother me. The first is that Bill Gates deserves all his wealth. This is rooted in a near tautology “markets are good, so all the outcomes of markets are good.” Now I love well-functioning markets. They are amazing at information aggregation and capital allocation. Please note the important modifier: well-functioning. Most of the time real regulatory effort is required to wind up with a well-functioning market and as I point out in World After Capital, there are hugely important problems that cannot ever be solved by markets.

So back to Bill Gates and markets. Unpacking the idea that Gates deserves all his wealth based on a belief in markets you would have to be willing to sign up to something roughly as follows “Microsoft succeeded in a competitive market through delivering a better product.” Without a doubt Gates was a pioneer. But Microsoft was also a ruthless machine that built and exploited market power at every turn. So at a minimum to make an actually consistent argument about Gates deserving all his wealth you have to be willing to defend gains coming from the exercise of extreme market power as “deserved.”

The second and related take that bothers me is the idea that Gates should keep all his wealth because he is a better allocator of capital now than some politician. The astonishing thing is that many people who make the “he deserves it based on markets” take above are the same ones offering this take also. At a minimum to make that argument at least somewhat internally consistent, you would have to say that Gates instead of concentrating his wealth in his foundation should be giving it away in small portions to lots of people so that the market can work better (e.g. give lots of people money that they can spend on education). Beyond that it is also worth pointing out that of course neither Gates nor a politician allocate money personally (for the most part). In the case of Gates there is a huge foundation and in the case of politicians there is a budget process. So to provide anything other than a hot take on allocation you would have to engage in an actual argument about foundations versus democratic processes.

I doubt that this post will do much (or anything) to move the people who are most loudly proclaiming these takes. But maybe it is a bit of help to those who have kept an open mind about where we are today, how we got here and what to do next.

Addendum: Some people objected strongly to this post on the basis of the word “deserved.” Never mind that I was using it as a word to describe a specific hot take by others, one can obviously and easily substitute another word, such as “earned,” above without any change in argument. Now let’s dig a bit deeper beyond the word choice. Most people will likely agree that wealth that’s obtained through illegal means can in fact be taken back by society (you don’t get to keep a stolen car, for example). A critique of my post then would be: wealth earned legally should never be subsequently taken away by society. While I agree that we should not make such decisions lightly, societies do make mistakes and circumstances change. Our current dysfunctional income and wealth distribution is the result of a series of such mistakes, including poor regulation of digital market structure and failure to address power law outcomes through more progressive taxation. So to make the “earned wealth is sacrosanct” argument you have to also believe that society never gets to correct mistakes, no matter how bad they are.