Tyler Cowan told NYT readers that he is concerned that one response to growing inequality might be a renewed push for wealth taxes. I have some sympathy for his position, not because I am concerned so much about the inefficiencies created in taxing wealth (those are not good), but you tend not to get the money.

Wealth can be pretty easy to hide. (Ever see a Picasso painting?) If we give people a large incentive to hide their wealth, it is reasonable to assume that they will. This means that we will get much less from a tax on the wealth of the rich than a simple arithmetic calculation would imply.

However there are other ways of getting wealth from the rich to everyone else, most importantly by reversing the policies that redistributed wealth upward. The patents held by Pfizer and other drug companies would be worth much less money if we had publicly financed drug research so that most, if not all, new drugs were sold at generic prices. If we didn't allow monopoly prices by cable companies then people like Al Gore would not be able to pocket hundreds of millions of dollars from selling cable TV slots. And if we adopted policies to promote rather than obstruct full employment then ordinary workers would be able to get their share of productivity gains instead of having it all go to profits.

These, and other policies would reduce the income of the rich and therefore also their wealth. In fact, if we are bothered by wealth, a rise in interest rates would go far toward reducing the wealth of the rich, as well as the market value of national debts, since the value of government bonds held by the rich would plunge. (This is especially true in the case of Japan where many long-term bonds have been issued at interest rates of less than 1.0 percent. If the interest rate on 10-year bonds were to rise to 3.0 percent, the price of these bonds would be cut by close to 50 percent.

So, we need not worry about taxing wealth if we reverse the policies that have redistributed so much income upward over the last three decades.