To reduce inequality, give money to babies

As capital’s share of national income continues to rise past levels thought possible, inequality (we are told) will increase.

But is this necessarily the case?

What makes it true for the time being is that capital is mostly owned by the very rich.

The chart above shows people’s investment assets — stocks, trusts, business equity, financial securities, and non-home real estate — by wealth distribution.

Given the concentration of capital in the top 1%, then, a rising share of income to capital is going to drive up inequality.

But there is no reason that capital has to be concentrated in this way. Were we to de-concentrate capital so that it was owned more equally, then increasing capital’s share of national income would be a cause for celebration.

One straightforward way to do this would be to provide a capital grant to every child funded by a bucket of taxes on inheritance, financial transactions, and wealth — in other words, taxes that mostly impact the top 1%.

The capital grant could be held in something like a sovereign wealth fund until the recipient became of age, at which point they could collect the principal plus however much the principal appreciated in value over 18 years.

This sort of universal capital grant would have the added benefit of political durability, connecting a whole bunch of taxes to a direct payout that everyone receives when they turn 18.

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