Nat O'Connor: The Irish Times had a major article on Thomas Piketty on Saturday (click here) They also had an interesting angle on Ireland's property tax, with Professor Piketty suggesting it should be altered.
This gets us into one of the interesting issues raised by Piketty, which is how we define wealth or 'capital' - that being the key word in Piketty's tome, Capital in the Twenty-First Century. Piketty bundles together all assets - financial, housing, etc. - into aggregate wealth. And he allows the inclusion of negative numbers in this equation, in the form of debt.
One of Piketty's policy proposals to tackle rising inequality is the introduction of wealth tax. He says: “For the same tax revenue that you will get from a proportional property tax, I would transfer it to a progressive tax on net wealth, meaning real estate property value plus financial assets, minus debt, minus mortgage and other financial debt." As a result, he suggests that Ireland should re-calculate the residential property tax based on net value rather than nominal value.
But by extending property tax to include all property (i.e. making it into a comprehensive wealth tax), Piketty argues that "it would serve an important democratic purpose in bringing greater transparency to the distribution of wealth, allowing citizens and public representatives to make more informed decisions."
Crucially, better data on wealth would enable policy-makers to determine whether or not the wider economy and society is being served by wealth concentration, in terms of a jobs dividend. If not, wealth taxation could be adjusted until a better balance is struck.
A joint TASC-NERI paper exploring the potential of a wealth tax for Ireland can be read here