The relatively high income of the most wealthy isn't the problem unless your primary motivation is spiteful envy of the wealthy. The real problems are that it's harder than it was in the past to maintain a middle class lifestyle. The necessities of such a lifestyle have only gone up in price: health insurance, college education, real estate/rent, and maintaining a vehicle. This causes debt to pile up and drives people into depression or serious stress.

In turn, fewer people in this class are investing in the future or hold stock, which means they feel little investment in the world. Instead of feeling like part-owners of the country, they feel like wage slaves with little power to escape the bondage of debt.

On top of this, it feels like just barely getting by with these things requires more time and effort than it used to. People are working more part-time jobs and both parents of a family need to work.

Taxing rich people does little to make these very real problems go away.

I mean... it absolutely does. You put the money taxed from the rich into social programs to ease the stress and risk of the lower classes - or just give it directly to them as lower taxes. That could make a huge difference.

If you argue that insurance/college/rent etc would scale to accommodate the larger budgets the lower classes would suddenly have, then obviously some other legislation is needed there though.

Also raise taxes on investment income and implement a land value tax.

I believe lower taxes stimulate productive investment of both human and financial capital so I'd prefer to lower income and investment taxes. But this only seems fair and sustainable if you raise the inheritance tax to a very high level. The problem isn't wealth so much as dynastic wealth. Land value tax I support 100%.

Everything happening around us indicates the opposite: that the rich prefer to invest in that which gets them richer, not that which benefits society.

Don't some investments benefit society? For example: Invest in real estate that turns into housing or businesses that weren't there before, or investing into businesses so they have the money to grow to a larger building or hire more people to meet demand.

Well, sure. It's easy to say some investments benefit society, but most of the time they are solely for the benefit of the wealthy.

One just needs to look at the land stratification California has been going through to understand why. Most of the issues they face are a result of the wealthy doing everything in their power to prevent land from being upzoned or rebuilt because that devalues their property or ruins their view.

In this case there's no growth happening despite a desperate need for growth because the wealthy don't want it.

A land value tax would fix this - the more land appreciates in value, the more property tax the owner would pay to the public coffers. California would also have to repeal proposition 13 which limits property tax increases. Proposition 13 is one of the biggest giveaways to the wealthy in the history of US tax policy.

Taxes on income and taxes on investment gains should be the same. In the UK, a 20 year old contributing to society by doing £45k worth of work every year keeps 69% (£30,737)

Meanwhile a 70 year old seeing their BTL property appreciate by £45k a year due to crossrail (paid for out of income tax the 20 year old is paying) keeps 87% (£39,060)

Isn’t this a restatement of trickle down economic theory (sans raising inheritance tax), which has not really panned out when attempted?

The problem with trickle down economics is that it involved decreasing the taxes of the wealthy so that in theory that money would trickle down to improve the lot of the poorer.

This doesn't work because the rich can opt to do a lot of different things with their money including hide or invest it overseas.

Taking the money of the rich and using it to directly improve the lot of the less fortunate has been tried and actually works as one would expect.

My understanding of trickle down economics is that you get more economic activity by putting a dollar in the hands of the bottom 10% than the top 10%, which makes sense since the propensity to consumer is higher at the bottom. By investing, the top % supports invention and innovation. By consuming, the bottom % validates those inventions and innovations that are worthwhile, versus those that are worthless. Both functions are required in order to keep the economy humming along producing and consuming new goods and services at a rapid pace. There would seem to be some function which maximizes the utility of each group in their respective roles. That's what I would want tax policy to reinforce.

I like the idea of progressive property tax rates.

Figure out the median property value, make the first 50% of that tax free. Then the next 50% is taxed at the previous rates. Then tax values above that enough to make up for it.

Could apply the same idea to land value taxes too.

That "figure out the median property value" is the hard bit.

The value is determined in a voluntary exchange, such as a sale, and results of sales of similar property serve only as approximations.

Same problem is with the land value tax. It's like trying to buy / sell your property every time you do taxes.

There is a known mechanism to limit attempts do show an excessively low value. Back in the day, the British Empire's customs reserved the right to immediately buy the entire freight of a merchant ship for the value declared at customs. That could work with land and even realty, too, but would be much more disruptive.

Unless you’re taxing something at the time of exchange on a free-market, there’s always approximations.

Plenty of jurisdictions do market-value property taxes by using market data and creating models to approximate the rest.

It’s never perfect, but the line in the sand must be drawn.

Other taxes have the same approximation issues. Income taxes don’t really tax all the value I provide. Any social person barters plenty of value that goes untaxed, but technically should be.

>>> Back in the day, the British Empire's customs reserved the right to immediately buy the entire freight of a merchant ship for the value declared at customs

Can you elaborate on this/help me out with what to google for? I've never thought of this but it's actually a brilliant idea - would love to read more about it!

To have a progressive property tax schedule, don't you need the progressive scale to apply to the whole portfolio of holdings? It doesn't make sense to me for it to be applied per-property as this just creates a loophole to sub-divide property titles. Why should one person be taxed less to own many small properties than someone owning a single large property of the same total value?

And if so, how does this get applied to corporations and REITs? Do they get taxed out of existence, or do their holdings get apportioned to individual shareholders and included in their personal portfolio, so that individual progressive schedules are applied to each portion?

It seems unlikely to me that you can construct a sound set of rules for this that are workable (no glaring loopholes) and appreciably different from a progressive wealth tax, which might be much easier to formulate...

Or we just have a Universal Basic Income and tax everything without any exemptions.

The problem with property taxes as they are usually implemented is that they put a very high burden on farmers and are often passed on directly to renters by their landlords.

A farm is industrial property. If it’s highly valuable land, it’s either producing a high value crop, and can pay the tax, or better used for some other function.

If the farmer is struggling because of property taxes driven by their own increased property value... sounds like a good position to be in.

As for passing them on, that argument could be made for all taxes. If true, at least this structure would lower rents for low-value dwelling occupants and increase for those in more luxurious situations.

Raise inheritance tax... So people can inherit their family home then immediately have to sell it because they can't afford the tax bill just because their parents purchased in a cheap part of London that boomed 30 years later? No thanks.

100% tax on inheritance and other hereditary wealth-transfer schemes, eliminate loopholes, use the (substantial, I assume) takings to supplement existing funds and implement a universal basic income. Also do something about education and healthcare. You can work and compete as hard as you like during your life, and get as rich as you possibly can in that time, but you can't take it with you and your wealth is used to give everybody in future generations the same chances you had yourself.

I don't believe it will ever happen. There's too much inertia and rot in what we have now, and nowhere to go to build something new.

A 100% inheritance tax is destructive and the government doesn't know what to do with objects that are very valuable for their previous owner and their children but worthless on the general market. How do you liquidate a family business without shutting it down because you're removing the family that is working for it?

The way inheritance should be solved is by not allowing a single person to inherit more than 50% of the total net worth.

What we have now is destructive, and what I'm talking about is science fiction. It would require significant legal and economic changes. Coincidentally, it appears now that the long-term survival of industrialized human society will require significant legal and economic changes. So, that's why I would say such a crazy thing.

With the wealth distribution curve we have today, I don't think your proposed solution goes anywhere near far enough to stop the consolidation of wealth in the hands of a very few who hoard it and use it to buy governments. But maybe your definition of "solved" in this context is not the same as mine.

At what percentile in the net worth distribution?

The primary metric in OP is income inequality, which is historically high. You're primarily addressing wealth, which is connected, but not the same. Taxing inheritance will do very little towards income inequality.

The very essence of capitalism is using wealth (ie capital) to gain income. A wealth tax very much would reduce inequality, both in wealth and income.