I’m not commenting on whether a wealth tax is good or bad. You should make up your own mind on whether a wealth tax is appropriate and necessary for the federal government to generate revenue. This is not a critique of the content of Leonhardt’s argument, it is a critique on the form of his argument.
Leonhardt began with a desired conclusion in mind and then constructed multiple arguments to support it. His argument is complex, and it’s confusing. The essence of his overall argument is that:
The federal government needs additional revenue to pay for society’s needs. The federal government should tax the wealthy to get (at least some of) it, because the wealthy aren’t paying their fair share, and taxing the wealthy helps to counter the increasing wealth gap between the rich and the poor.
Let’s dig in and follow Leonhardt down the rabbit hole…
Property tax is a wealth tax
Leonhardt’s first argument is from his first paragraph:
Most Americans pay an annual wealth tax on their largest asset. It’s called property tax. Each year, they pay an amount equal to a small percentage of the estimated value of their house, and a house is by far the most valuable item that most families own.
His premises are:
- Most Americans are homeowners.
- A home is an asset.
- Homeowners pay annual property taxes on the value of their home.
- For most homeowners, their home is their most valuable asset.
- A wealth tax is an annual tax that is calculated as a percentage of the estimated value of an asset.
Therefore, his conclusions:
- Property tax is a wealth tax.
- Most Americans pay an annual wealth tax on their largest asset.
Proposition (1) is true. Even though Leonhardt doesn’t offer any evidence to support his assertion, I was able to find that the U.S. Census Bureau’s measure of homeownership rate (the percentage of Americans that own a home) as of Q2 2021 is 65.4%.
Propositions (2) and (3) are also true.
Leonhardt doesn’t offer evidence to support proposition (4). That doesn’t make it false, but that does make it difficult to prove true or false.
The U.S. Census Bureau no doubt has this information, but it’s not clear if we can gain access to the necessary level of detail. The closest I could find was the 2019 Wealth, Asset Ownership & Debt of Households raw data tables. While that data does reaffirm proposition (1), it does not affirm proposition (4) because it does not show the correlation of people that own their home and where their home equity is the majority of their net worth.
Since intuitively it seems likely that Leonhardt’s assertion certainly could be true, we will accept it. For the purpose of validating his conclusion, I will substitute “more than 50% of homeowners” for “most homeowners”.
An invalid inference
Leonhardt’s first error in reasoning is that his conclusion, specifically proposition (7), does not follow from proposition (4). While most Americans are homeowners, it does not follow that for most Americans their home is their largest asset.
Since we provided evidence that 65.4% of Americans are homeowners, and we agree that for more than 50% of homeowners their home is likely to be their largest asset, the strongest affirmation we can make is:
For more than 32.7% of Americans (that is, half of American homeowners), their home is their largest asset.
Therefore Leonhardt’s conclusion cannot be inferred from his premises. To affirm Leonhardt’s conclusion, we would need evidence that for more than 76.5% of American homeowners, their home is their largest asset.
To properly quantify his conclusion, we need to modify proposition (7) to say that:
Some Americans pay an annual wealth tax on their largest asset.
This is a basic logic error. Perhaps it was just a careless mistake. Unfortunately, we can’t say that about the flagrant reasoning fouls that Leonhardt commits throughout his remaining arguments.
A false equivalence
Leonhardt doesn’t explicitly define wealth tax. That alone makes his argument suspect because his title asserts “you pay a wealth tax,” yet his unwillingness to offer a concrete definition of what he means by wealth tax is a hint that there may be some deception afoot.
Instead, we must infer his definition from his one example, which we assert in proposition (5).
From propositions (2), (3), and (5), Leonhardt asserts proposition (6): Property tax is a wealth tax.
This argument demonstrates a fallacy of false equivalence, more commonly known as comparing apples and oranges. It’s deceptive because superficially it seems plausible, but on reflection it doesn’t ring true and it’s not obvious why.
An argument of false equivalence is one of oversimplification and ignorance, where someone asserts that two things are equivalent because they share some basic characteristic(s), and at the same time ignores notable differences.
In this case, Leonhardt exaggerates the similarity that both property tax and wealth tax are, generally, taxes on assets. Then he disregards significant differences. Notably:
- Wealth tax is generally understood to be a tax on the net value of all assets, or net worth, whereas property tax is a tax on the estimated total value of a specific asset: A parcel of land and the improvements on it, located within a municipality — which raises the next key difference:
- Property taxes are municipal taxes. A municipal wealth tax does not support Leonhardt’s claim. Consider that if local governments taxed all assets of residents, that could satisfy an equitably distributed wealth tax, but it would not satisfy Leonhardt’s claim that a wealth tax is the best answer for the federal government to raise additional revenue in order to provide for society’s needs.
Leonhardt’s argument is a redux of a tweet by Senator Elizabeth Warren in April 2019. Senator Warren continues to use this argument to promote a federal wealth tax. It’s simple, familiar, memorable, and superficially it seems that it could be valid. It’s genius marketing, but it’s not sound reasoning.
The argument that property tax is a wealth tax is irrelevant: It does not directly support Leonhardt’s claim. He contrived this false equivalence in order to serve as a premise that he relies on to construct a straw man argument.
Today’s wealth tax is inequitable
Leonhardt’s second argument is from his second paragraph:
The very rich are different. While they pay property taxes too, their homes tend to make up a tiny share of their net worth. The bulk of their assets are not taxed.
Here Leonhardt sets up his argument by signalling that tax on the value of property and a tax on net worth are both wealth taxes, but the former is not living up to the expectations of being an equitable wealth tax, therefore the latter is the remedy.
The premises begin with proposition (7), which he relies on from his previous argument:
- Some Americans pay an annual wealth tax on their largest asset (their property).
- Americans don’t pay annual wealth tax on their non-property assets.
- For wealthy Americans, most of their net worth is not from property assets.
- Wealthy Americans don’t pay an annual wealth tax on most of their net worth.
From propositions (7) and (10), it follows that
- If some Americans pay an annual wealth tax on most of their assets, and wealthy Americans don’t pay an annual wealth tax on most of their net worth, then the current wealth tax is not equitable.
This is a straw man argument. First Leonhardt intentionally defined an inequitable wealth tax into existence, now he disputes its fairness. Leonhardt manufactured this conflict — a dispute that the current wealth tax is equitable — because it’s easy to defeat and supports his argument that to remedy the inequitable wealth tax, we must implement an equitable one.
Hence, Leonhardt’s asserts that the existing wealth tax is inequitable because (surprise) it’s really the municipal property tax that he asserted was a wealth tax — where none existed previously.
Tax the rich, or the poor will suffer
There’s one more paragraph from Leonhardt’s article is worth reviewing, because it’s cleverly written, confusing and deceptive, masking its fallacies well:
Today, the wealthy both own a much larger share of the country’s assets than they once did and pay less tax on each dollar of assets. This combination creates problems for everybody else. Many Americans own only modest assets, and the federal government struggles to raise enough tax revenue to pay for society’s needs, like education, health care, transportation, scientific research and the military.
The easiest way to parse this argument is to distill it down into three cause-and-effect relations:
- Since the wealthiest Americans have a lower effective tax rate that they once did, the government is collecting less revenue today than it once did.
- When the government collects less revenue, it is unable to fund necessary programs.
- When the government is unable to fund necessary programs, it creates hardship for citizens who are not wealthy and rely on government services.
We can reduce it further by collapsing the transitive relations into one final proposition:
- When the wealthiest Americans pay less tax (and they have been paying less), it creates hardship for citizens who are not wealthy.
This argument is a false dilemma: It is a trap designed to force an opponent into choosing from one of two only two possible alternatives, ignoring that other alternatives may exist.
In this case, Leonhardt serves up the dilemma that either (a) We must raise taxes on the wealthiest Americans, or (b) the less wealthy Americans will suffer. He ignores other alternatives: For example, exploring other ways for the federal government to raise additional revenue, or ways that the government could reduce operational inefficiencies, or that programs that have no direct impact on the poor could be reduced.
Composition of fallacies
The purpose of this commentary is not to refute Leonhartdt’s argument; It’s to spotlight fallacious reasoning that he employs to persuade his audience. This is the formula for Leonhardt’s overall persuasive essay, using the arguments of false equivalence, straw man, and false dilemma together to support his claim:
- Define a wealth tax into existence, by claiming that the municipal property tax is a wealth tax.
- Show that the current wealth tax is unfair because it taxes most of the assets of some Americans — Americans for which their home is their largest asset — but doesn’t tax most of the assets of the wealthiest Americans — where most their assets aren’t their home
- Conclude that a federal wealth tax is the only single solution that provides for all of the following social benefits:
- Remedy the inequitable wealth tax situation (that he manufactured) where less wealthy Americans bear the majority of the burden of the wealth tax today.
- Address the growth of the wealth gap between the rich and the poor, presumably by taxing away any annual growth in the wealth gap.
- Provide incremental revenue to the federal government so it can adequately fund necessary programs.
- Prevent the suffering of the less wealthy, because federal government programs that provide for society’s needs will be adequately funded.
Why it matters
The New York Times has the most digital news subscriptions globally, with nearly 7 million subscribers. They eclipse the Washington Post, who is in second place with 3 million. In 2011, David Leonhardt won the Pulitzer Prize for Commentary for his columns.
The New York Times and David Leonhardt aren’t just representative of mainstream news; This is ground zero for mainstream news.
Neither Leonhardt’s feature articles nor The Morning newsletter are promoted as opinion content. The Morning tagline is “Make sense of the day’s news and ideas. David Leonhardt and Times journalists guide you through what’s happening — and why it matters.” Leonhardt introduced his feature, You pay a wealth tax, with the query “What are the pluses and minuses of a wealth tax?”
Taken at face value, I expected an evidence-based exploration of both sides of an important social issue, but instead Leonhardt delivered a persuasive essay lacking in supporting evidence. His argument is complex, convoluted, and confusing because it is poorly constructed and riddled with logical fallacies.
All too often, the media today relies on fallacious reasoning to manipulate their audience and promote their agenda about important social issues that shape our world, rather than surfacing facts that we can agree upon and then encouraging civic discourse.