Expropriating Wealth

Plutonomy Series

Citigroup Plutonomy Report, 2005, Excerpts

Organized societies have three ways of expropriating wealth - through the revocation of property rights, through the tax system, or to slow down the rate of wealth creation. The three levers governments and societies could pull on to end plutonomy are benign. Property rights are still intact and taxation policies are neutral to favorable.

There seems little threat from the first of these challenges: blatant expropriation of property by governments. There are few examples of governments changing the rules in the plutonomies and engaging in widespread nationalization, or asset re-distribution. Governments have learnt the lessons of regulatory certainty and the sanctity of property rights.

The more likely means of expropriation is through the tax system. Corporate tax rates could rise and personal taxation rates could rise. Dividend, capital-gains, and inheritance tax rises would hurt the plutonomy. In the U.S., the current administration’s attempts to change the estate tax code and make permanent dividend tax cuts plays directly into the hands of the plutonomy.

So long as economies continue to grow, there is little threat to Plutonomy.