Streetwise Professor

Wealth taxes are all the rage these days, especially in left coast states, but not only. Some alleged economists, like Thomas Piketty and Joseph Stiglitz, recently published an opus advocating high wealth taxes and massive wealth distribution. How high? Piketty et al advocate a 90 percent wealth tax.

Although the idea already had widespread appeal among leftist politicians, the SpaceX IPO and Musk’s ascension to trillionaire status has put that political momentum into hyperdrive. As evidenced by geniuses like Elizabeth Warren:

If Elon Musk paid my ultra-millionaire wealth tax, we could pay for child care for all three and four year olds in America.

— Elizabeth Warren (@SenWarren) June 17, 2026

And Adam Schiff-for-Brains:

Adam Schiff released a video fantasizing about what “we” could pay for “by the wealth of our first trillionaire."

"$1 trillion, if we decided to distribute that equally among American households, your household would get $7,500…"

Sounds downright utopian, Adam. pic.twitter.com/uPFT11u3a0

— Western Lensman (@WesternLensman) June 18, 2026

Both the alleged economists and the politicians seem to have the idea that since the value of disparate goods and assets can be expressed in a common unit of account, they must be completely interchangeable. So it’s easy peasy just to shift these interchangeable things from greedy capitalists who have too much to the hoi polloi who have too little.

This is basically the shmoo theory of the economy. “Shmoo” being a term used by Robert Solow (an actual economist) to describe a homogeneous good–the only one in the economy–that can do everything. (Solow was basically critiquing economic theory that assumed the existence of a single good).

You can use shmoo as capital to produce more shmoo. You can consume shmoo. It slices! It dices! You can eat it! You can wear it! It satisfies your every need! In shmoo world, you can take the shmoo capitalists employ and give it to starving waifs who wolf it down hungrily.

The real world and shmoo world bear no similarities whatsoever. Let’s take Musk for example. His wealth consists largely of ownership claims on companies, like Tesla and SpaceX. These companies have assets, like the Gigafactory. Well, if you take away the Gigafactory from Musk, it will feed precisely zero waifs, because they can’t eat the building, tools, equipment, etc., that make it up. Well, you say, we’ll continue to operate the Gigafactory and . . . . And what? You’ll produce batteries, which will again feed zero point zero starving waifs, let alone provide childcare for every three and four year old in ‘Merica. (As if that makes sense anyways: recall Sherwin Rosen’s droll remark: “Women are paid at public expense to provide household services for other families.”)

But it gets better! The bulk of Musk’s wealth is attributable to stuff that doesn’t even exist yet. SpaceX is a prime example. I recall reading shortly before the IPO that at the IPO price, SpaceX was valued at 95 times revenue. Given the stock’s appreciation, that figure is now around 130. Meaning that the value people are assigning to SpaceX is based on an expectation of highly valuable production that will take place in the future.

Lacking time machines, there’s no way to turn those goods (rockets to Mars!) to be produced in the future into goods (again, rockets to Mars!) to be consumed today, let alone into child care or SNAP benefits or whatever today.

But that’s not all. Nobody in their right mind will invest today to produce goods in the future if the fruits of that investment are expropriated. So even if you had a time machine, there would be nothing to bring back from the future.

Not finished! Much of Musk’s wealth is attributable to his human capital, and the human capital of his employees. No one but cannibals can consume that (well the bodies that contain it anyways).

What a wealth tax would do is reduce the production of certain goods and services, especially those that are physical and human capital intensive, and which would be produced in the future. Resources would eventually move into the production of other things, presumably those encouraged by the government guided by Liz Warren’s brain spasms. But society as a whole–not just plutocrats–would be substantially poorer. That is, they will lead to a systematic restructuring of the economy, and the restructured economy will be profoundly less productive.

The edge cases illustrate this. Think the Khmer Rouge, who drove everybody into the countryside in what was basically a massive destruction of human capital–even of those who didn’t end up as contributors to the skull piles–in a radical restructuring of the economy in a monomaniacal drive for equality. Which kind of worked. Everybody was either equally dead or equally poor.

But maybe the taxers are fine with that. After all, Piketty, Stiglitz et al also advocate “degrowth.” That is, reduced output. To them, this is a feature, not a bug.

Many of these consequences would also occur in shmoo world. You expropriate capital there will be less investment. Labor productivity will decline leading to lower wages–there will be less shmoo in your paycheck, workers of the world. Overall consumption will decline (because less shmoo is produced) and this loss in consumption will not be confined to the capitalists. It will be spread widely.

Yes, depending on how the expropriated shmoo is spread around, some people, likely the least productive, will consume more. But that will come at an exorbitant cost that will be widely shared.

Numerous analyses conducted by legit economists (which Stiglitz sorta was at one time, but no longer) demonstrate that capital taxation is highly inefficient, precisely because of its effects on investment and thus on labor income. But leftist politicians (and some right-populists too) want to tax capital in the worst way. And with a wealth tax, they’ve found it.

So how do these insane ideas get traction? Arguably because understanding their consequences requires understanding the second and third order effects, which is all too rare. The deceptiveness of a standard unit of account which permits comparisons between things in a way that insinuates interchangeability and seduces people into thinking they live in shmoo world is a big part of it. Another big part is a failure to understand incentives and crucially a failure to understand that labor benefits from capital investment.