Dirigiste Plan Features Pigovian Tax

Learned two new words the other day.

Steven Rattner's op-ed, critiquing Senator Warren's plan for funding universal Medicare by "taxing the  rich," introduced me to dirigiste. The noun form is dirigisme, borrowed from the French, and it means state control of economic and social matters. Dirigisme is the opposite of laissez-faire.

Neil Irwin's column describes Warren's proposed 6% annual tax on billionaires' wealth as Pigovian. A Pigovian tax is "intended to reduce the prevalence of whatever it targets." Taxing cigarettes helped to reduce the number of smokers. Taxing billionaires could help to turn them into an endangered species.

Almost nobody (probably including Senator Warren) expects the wealth tax to become a reality in 2021. What might a Democrat controlled Congress do instead to raise revenue from the rich? Here's what Rattner suggests:

Raise the top federal income tax rate, imposed on incomes over half a million or so, from 37% to at least 42%.

Tax capital gains at regular income tax rates and do away with stepped-up basis for calculating gains on inherited assets.

Close egregious loopholes, like treating fund managers' "carried interest" income as tax-favored capital gain.

How many proposals to tax carried interest as regular income have you heard over the years?

Some tax breaks seem indestructible.