Greg Mankiw's column over the weekend, "How inherited wealth helps the economy" is the latest entry into a burgeoning genre of Thomas Piketty's rebuttals that appear to be written by people who aren't familiar with what proposals Piketty is advancing.
But Piketty isn't against the idea of wealth accumulation or even against the idea of young people inheriting accumulated wealth from their ancestors.
Indeed, worrying about unfair inequities in the distribution of wealth would not make much sense unless accumulating wealth was a good thing. Nobody really worries too much about arbitrary inheritance of freckles because freckles aren't important. But wealth is great! That's why Piketty thinks it's sad that so much of the wealth is in the hands of so few people, and it's why he's frightened by the prospect of a world in which the best way to get wealth is to be lucky in your parentage.
So what's the solution? Well, Piketty told me lower taxes on ordinary people's wealth accumulation paid for by a small tax on the wealth of the very wealthy:
When I talk about the progressive wealth tax, I'm not thinking of increasing the total tax burden. Think of the US right now where you have the property tax, which is a lot of money. That's a very big tax.
Now what I would propose is to transform it into a progressive tax on net wealth. That means that I would reduce the property tax for all those who have low net worth, and increase it on those who have billions. The way it would work is,that if you own a house worth $500,000, but you have a mortgage of $490,000, then your net wealth is $10,000 so in my system you would owe no tax. Under the current system, you pay as much property tax as someone who inherited his $500,000 home or who paid off his debt a long time ago.
My point is not to increase taxation of wealth. It's actually to reduce taxation of wealth for most people, but to increase it for those who already have a lot of wealth.
This is not a world in which nobody will have wealth or in which nobody will inherit wealth. The idea is that it would be a world in which possession of wealth is less skewed, and therefore the typical person is more likely to inherit some.
In many ways, this is a less exciting proposal than what many of Piketty's left-wing fans seem to want. Imposing a progressive wealth tax and using the proceeds to finance a giant middle class tax cut is hardly a sweeping rejection of capitalism. But by the same token, Piketty's right-wing critics should engage with the fact that imposing a progressive wealth tax and using the proceeds to finance a giant middle class tax cut is hardly a sweeping rejection of capitalism. The question he's putting on the table is whether it's really necessary for a small number of people to live so large for so long and leave so little for the rest of us.