Piketty in America: A Tale of Two Literatures

Abstract

Thomas Piketty’s widely-noted and bestselling book, Capital in the Twenty-First Century, does much to advance our empirical understanding of rising high-end wealth concentration, which is one of the central issues of our time. But its theoretical approach and policy recommendations differ sharply from those that have been prevalent in recent decades in the Anglo-American academic tax policy literature. We adjudicate this “confrontation” (insofar as it is one), and find that each approach in some respects both undermines and enriches the other. We find that the optimal tax response to wealth concentration is significantly more complicated than Piketty’s analysis recognizes. This is particularly true in the United States, where rising high-end wealth concentration has been driven by heterogeneous human capital, and where Piketty’s proposed wealth tax would face a substantial risk of being held unconstitutional.

Keywords: Piketty, inequality, distribution, income taxation, wealth taxation, consumption taxation, taxation of gifts and bequests, savings, capital

JEL Classification: A10, A12, A13, H00, H20, H21, H23, H24