Social owner ship and shared voting rights in firms are impor tant tools for tran
scending capitalism, but by themselves they are not enough. Once one accepts the idea that private property will continue to play a role in a just society, espe
cially in small and medium firms, it becomes essential to find institutional ar
rangements that will prevent unlimited concentration of owner ship which does not serve the general interest, regardless of the reasons for such concentration.
In this re spect, the lessons of history are quite clear: the extreme concentration of wealth that we observe in nearly all socie ties (and especially in Eu rope) up to the early twentieth century, when the wealthiest 10 percent owned 80–90 11. Why have such attempts failed? Perhaps because the profit motive tends to under
mine the values of disinterestedness and intrinsic motivation that are essential to the educational enterprise. For similar reasons, experiments with offering students mon
etary bonuses based on exam results have generally produced very negative results (with intensive cramming on frequently posed questions and accelerated loss of competence in other areas). See the online appendix (piketty.pse.ens.fr/ideology).
12. See Chap. 11.
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percent of all property (and the wealthiest 1 percent owned 60–70 percent), did not serve the general interest at all. The clearest proof of this assertion is that the very significant reduction of in equality that followed the shocks and political
ideological changes of the period 1914–1945 did not inhibit economic develop
ment. The concentration of wealth was significantly lower after World War II (with the top decile reduced to owning around 50–60 percent and the top cen
tile 20–30 percent) than before 1914, yet growth accelerated.13 What ever the wealthy of the Belle Époque (1880–1914) may have thought to the contrary, ex
treme in equality was not the necessary price of prosperity and industrial devel
opment. Indeed, all signs are that the excessive concentration of wealth exacer
bated social and nationalist tensions while blocking the social and educational investments that made the balanced postwar development model pos si ble. Fur
thermore, the increased concentration of wealth that we have seen since the 1980s in the United States, Rus sia, India, and China and to a lesser extent in Eu rope shows that extreme wealth in equality can reconstitute itself for many diff er ent reasons, from profiteering on privatizations to the fact that large port
folios earn higher returns than small ones, without necessarily yielding higher growth for the majority of the population— far from it.14
To prevent a return to such extreme wealth concentration, progressive taxes on inheritances and income must again play the role that they used to play in the twentieth century when rates in the United States and United Kingdom ran as high as 70–90 percent on the highest incomes and largest fortunes for decades— decades in which growth rose to unpre ce dented levels.15 Historical experience shows, however, that inheritance and income taxes alone are not enough; they need to be complemented by a progressive annual tax on wealth, which I see as the central tool for achieving true circulation of capital.
There are several reasons for this. First, the wealth tax is more difficult to manipulate than the income tax, particularly for the very wealthy, whose tax
able income is often a small fraction of their wealth, while their actual economic income accumulates in family holdings or special purpose vehicles. If a pro
gressive income tax is the only available tool, it is almost inevitable that wealthy individuals will pay risibly small taxes compared to the size of their fortunes.16
13. See Figs. 10.4–10.5 and Figs. 11.12–11.15.
14. See Figs. 13.8–13.9 and Table 13.1.
15. See Figs. 10.11–10.12.
16. For instance, Warren Buffett paid $1.8 million in federal income tax in 2015 on a fortune estimated at $65 billion or a tax rate of 0.003 percent of his wealth. See E.
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to common expenditures—an indicator at least as relevant and consistent as annual income, which can vary for all sorts of reasons (some of which are ir
relevant to deciding what a just tax should be). For example, if a person owns impor tant properties (such as houses, apartments, ware houses, and factories) that for one reason or another legitimately generate no significant income, per
haps because they have been set aside for some purpose or have not been maintained, he should still be required to pay taxes. In fact, in all countries where there is a tax on real estate ( whether housing or offices or professional equipment of any kind), such as the property tax in the United States or the taxe foncière (real estate tax) in France, no one would think of exempting large owners ( whether private individuals or firms) on the grounds that they derive no income from their property.17 But these taxes date from the eigh teenth or nineteenth centuries, and for historical reasons many types of assets are exempt (such as intangible and financial assets). What is more, the tax is strictly pro
portional: the same tax rate is applied to all assets, no matter how large the port
folio to which they belong. Hence the redistributive effect is much smaller than it would be if total assets of all kinds (net of debt) were taxed at progres
sive rates.18
Saez and G. Zucman, The Triumph of Injustice (Norton, 2019), pp. 155–156. Public data on billionaires in other countries, such as Liliane Bettencourt in France in the early 2010s, paint a similar picture: taxable income of a few million euros com
pared with a fortune of several billion. One possibility would be to apply the in
come tax schedule to an “economic income” estimated on the basis of wealth (for example, by assuming a realistic yield), but this would require accurate declaration and registration of wealth (and not simply of income).
17. Except where the property owned is of little value. But no one would think of giving a property tax exemption to the owner of numerous apartment buildings, ware houses, or offices on the grounds that she was not deriving significant income from them when it would suffice to sell a small portion of the property to pay the tax. What is more, this would contribute to circulating wealth into the hands of more dynamic owners. This is the classic argument in favor of the property tax, in
de pen dent of income, and it is relevant here to a certain extent. If the whole system depended on capital owned, then a firm making temporary losses would pay as much tax as another making enormous profits (on equivalent capital), which could push the first firm into bankruptcy for the wrong reasons. That is why an ideal tax system should always strike a balance between taxing property and taxing income.
18. On the history of property taxes in the eigh teenth and nineteenth centuries and debates surrounding them, see Chaps. 4 and 11.
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Compared with the progressive inheritance tax, which is also a tax on wealth (in that it depends solely on owner ship and not on income), the advantage of the annual wealth tax is that it can adapt much more quickly to changes in wealth and in the ability of each taxpayer to pay. There is no need to wait for Mark Zuckerberg or Jeff Bezos to turn 90 years old and pass their wealth to their heirs in order to collect taxes. The inheritance tax is by its very nature not a good tool for taxing newly amassed fortunes. The annual wealth tax is better suited to the task, especially in view of today’s longer life expectancy. Note, moreover, that current wealth taxes (such as the property or real estate tax), for all their limitations, have always generated more revenues than inheritance taxes, yet they are less unpop u lar. Indeed, it is striking to see how unpop u lar inheritance taxes are in all surveys, while property and income taxes are rela
tively well tolerated. Progressive wealth taxes (such as the ISF in France or the
“millionaire tax” mentioned in US polling on the subject) are very popu lar.19 In other words, taxpayers would prefer to pay an annual tax on the order of 1–2 percent of the value of their property over a period of de cades rather than having to pay 20–30 percent when they pass their estate on to their heirs.
Of course, the hostility of some lower and middle class taxpayers to the inheritance tax may be due to a misperception of the actual incidence of that tax (a misperception that those hostile to progressive taxation naturally do what they can to sustain). But it also reflects a comprehensible fear on the part of people who have recently purchased property and who may have limited cash reserves and financial assets that their children will be obliged to pay a lump
sum tax so large that they may be forced to sell the property (be it a home, a vacation house, or a small business) in order to pay the tax.20 In fact, when one considers all these aspects of the issue, it seems reasonable that the annual prop
19. On this subject, see A. Spire, Résistance à l’impôt, attachement à l’Etat (La Décou
verte, 2018). This survey also shows that lower and middle class taxpayers have a fairly accurate understanding of the overall low progressivity of the tax system and of the regressivity at the top (given the weight of indirect taxes such as value added taxes, gas taxes, and so on and of social security taxes on low and medium wages as well as opportunities for tax avoidance and manipulation at the top of the hier
archy) as well as the in equality of access to certain public expenditures (such as education and health). See also M. Forse and M. Parodi, “Les Français et la justice fiscale,” Revue de l’OFCE, 2015. On the tax structure and the issue of progressivity, see Fig. 11.19.
20. On the composition of small, medium, and large fortunes, see Fig. 11.17.
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enue), provided that the annual tax is made progressive.21