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Billionaire Tax Proposal Meets the Uninvited Guest: Behavioral Response
· New York time
A new analysis by Stanford economists cautions that a California billionaire tax could have unintended consequences. The finding adds an economic assessment to a debate that can otherwise sound deceptively simple: identify enormous wealth, apply a tax and count the proceeds. The warning concerns possible outcomes rather than a demonstrated result. Tax design must account for responses to a new levy, rather than treating the tax base as a stationary item on a spreadsheet. That makes projected benefits a question for analysis, not just arithmetic. The stakes include public services and budgets. A policy can have an appealing stated goal while still requiring careful work on its structure and effects. The existence of possible consequences also leaves room for debate over whether a proposal can address them. Billionaires are excellent subjects for a slogan and less cooperative subjects for a tidy equation. A spreadsheet would prefer every cell to remain exactly where it was placed. Public policy operates in a world where the cells can hire advisers. The practical question is whether the design can produce the intended result. A memorable name may help sell the proposal, but it cannot do the job of the tax machinery.
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