A Solution To Piketty's Capital: The Put Capital To Work Tax | Exploring Markets

A Solution To Piketty's Capital: The Put Capital To Work Tax

Wealth inequality has become one of the biggest discussions on Capitol Hill.

In-fact, people are already calling the book Capital by Thomas Piketty the must-read of the year. It's one of the most in-depth books ever written about the distribution of wealth. The topic is definitely worth exploring, too:
"Wealth inequality is even greater than income inequality. NYU economist Edward Wolff has found that, while the highest-earning fifth of U.S. families earned 59.1% of all income, the richest fifth held 88.9% of all wealth." - Pew Research on Wealth Inequality in the U.S.
While everyone can see that wealth inequality facts are extremely daunting, the one topic consistently missed is the steps that should be taken to ensure that it does not get any worse.

A very real possibility is a tax on cash.

This essentially means that every idle dollar over a certain threshold would be subject to a tax. The only way to avoid such a tax would be to put idol cash to work via private investment, donation, non-profit, government loans, etc.

Everybody wins with such a policy. Let's look at a quick example:

If a wealthy elite has more than $300 million in cold cash to his name, the government could essentially say that they will tax every dollar over $100 million a whopping 50%. The wealthy individual is then incentivized to put at least $200 million of his own money to work.

The wealthy individual still has claim to his wealth but he's also now transferred, what was a large sum of inactive cash, into the American economy to be invested, lended out, or even given away.

Think about this for a moment.