¶ Welcome Back And The Big Question
The Feudal Future Podcast.
Hello and welcome to another episode of the Feudal Future Podcast. I'm Marshall Taplinski. I'm Joel Kotkin. And by the way, welcome back, Joel, from your sabbatical. We're delighted to have you back.
Well, I'm not so sure. I'm so delighted to be back from Italy, but that's uh another story.
Well, it sounds like it was a great adventure. It was a great adventure. Terrific. Well, so today we're going to bring you back to reality. Yeah. We're going to talk about a topic that is almost as fun as pizza and pasta, which is the issue that is really facing society, but how do we actually fund society? How do we fund a prosperous life for the largest swath of society possible?
I know we've been dealing with questions of uh, especially in in most recent times, of uh taxation of rich people's wealth, uh redistribution of in of what is obviously a uh somewhat skewed uh uh distribution of income. And then all sorts of ideas that are swirling around about how to actually deal with this. To help us today, we're gonna go. We have two wonderful guests uh to help us. One is uh Hef Militades, who is an instructor with Class Unity.
Class Unity is a volunteer political organization that is focused on life for the working class. And here in studio, our good friend Hank Adler, who is a professor at Chapman in the uh accounting area and former tax partner at Deloitte. Gentlemen, welcome. Thank you. Thanks for having me.
Joel, you want to kick us off with the first
¶ Do Wealth Taxes Ever Work?
question?
The the first question, maybe start with half, is is there any evidence of um an example of where this sort of redistribution of income working um on tacking wealth has actually worked?
Is there any example of a redistribution of income um working to top based on wealth society? Yeah. Based on wealth taxes. Um difficult question to answer. I um I I I can imagine um the um social democratic welfare states of of Europe and um America a few decades ago being example of um uh of of countries that you know heavily taxed and ha had a strong welfare state. Um I I'm not sure if the wealth tax was a reason for for that, though. It's um uh that's uh difficult to say.
Um those states are more based on income tax as opposed to uh very significant income tax as opposed to wealth tax, correct? Well, and uh and you're a VA fee.
Yeah, and basically it's a role like sales tax. Yeah.
How about you, Hank, is there are there any examples where uh taxing people's property has led to uh greater prosperity or uh that kind of thing?
¶ Why The Wealthy Move Away
Yeah, all I can say from a historical standpoint is that when you have significant wealth taxes, generally the population moves. So we had some significant wealth taxes, I think, in France just five or ten years ago, and they immediately began to bleed away those that had wealth. They just moved out of the country into someplace else somewhere.
And and so today there's a there's a proposal on the plague here in California to do a one-time uh property or uh wealth tax uh on citizens, on people who have more than a billion dollars in assets. Uh what's your sense on that?
Well, my sense on that is it's it's it's it's played out exactly as I spoke to France. You know, in in the United States, you can move from state to state to state. So over the past, it really goes back. I'm gonna talk for a couple extra minutes here. Uh, it really goes back prior to this wealth tax and and California's non-favorable business environment.
So just putting that extra couple of years on the current wealth box proposal, we had six, it's California has the weirdest population, rich population dynamic probably in the world. We have a couple hundred people that are billionaires that are worth less than 30 billion, and there were six of them that were worth more than 150 billion, and nobody in between, which is just uh odd to beat the band.
Um so today, whatever today is April 2026, five of those six hyper wealthy are or have left California as a result of high income taxes, but certainly with respect to the possibility of wealth.
And and what has been the impact of just those five people leaving?
Well, thus far there's been no impact because it is that's unfair. The ones that have announced that they're leaving, there's been no impact because it's just started. Uh Ellison and Musk, who are obviously the top of the financial tone pole, their income taxes are no longer being paid to California. So if Musk decides to sell, pick a number, $10 billion of stock in one of his companies, we're not going to get that billion $200,000 of insurance.
My view is, and I think it's I I think it's accurate, is we're going to lose beginning to end probably five or six billion dollars a year of uh of income taxes as a result of these people, Dolby.
¶ California’s Billionaire Tax Risk
Well, and you know, the the question really, and this is for both of you guys to consider, is and California may in fact be more skewed than other places, but New York has a similar problem. Very similar. A relatively small number of people are basically funding the government services that affect everybody, um, the large mass of population.
It's an easy calculation in California. Traditionally, 40 to 50 percent of the income taxes are paid by the top 1%. That's now declining since we've lost Ellison and Wask and undoubtedly will decline further, with the other three guys, Paige, Brandon, Zuckerberg leaving, and undoubtedly a whole list of others.
So so given that, right, given the fact that there is a this skew, and at the same time, we're seeing homelessness that has been off the charts. We've been seeing social services cut, we've seen uh uh companies leaving and employment. Unemployment happening, people leaving, right? Seems to me that somehow we need to rethink the way in which wealth trickles down to people.
Yeah, I no, I I agree entirely. There was an article recently in Bloomberg, which you know said, oh, California has the best economy in the world. And the entire article is about how much how much money has been made by a certain group of people, never looking at the fact that California has the highest unemployment, the highest youth unemployment, the greatest gap between middle and wealth, wealthy people, uh terrible job creation.
Um so you know, part of it I think is that if I could use the term that Heft will appreciate ruling class, um if the if the ruling class um under their auspices these things happen, it sort of um makes uh uh somewhat of a mockery of the idea that capitalism works for most people.
Yeah, I'd I have I'd love your to jump in here and give us your thoughts
¶ Trickle Down Versus Rent Extraction
on that. And then we'll move over to Hank and Topana too.
Um sure. There are there are a few um sort of threads there. Uh I'll just start with one and and we can take it from there. Um does wealth trickle down um from the top to bottom in the form of taxes? I think at the state level, uh that logic makes sense.
But we also have to consider um the way that wealth trickles up from ordinary working people to um I I'd prefer instead of ruling class the asset owning class, because it's by virtue of the ownership of assets that the asset owner uh asset owning class can uh make a claim on the incomes of ordinary people uh via rent.
And you know, concretely I'm talking about um uh landlords uh renting tenants, um banks um uh charging interest on um increasingly uh big loans um and um the the insurance sector taking a bigger and bigger portion of the the income of working people. Uh I think that really has to be considered because these are um uh tools that the the the acidonian class uses to capture portions of other people's income.
And uh yeah, I hear I hear what you're saying about the flip side of that. The flip side of that is what is the incentive to people who provide insurance services and provide loans to people if they can't make any money. Right. So how how do we how do we resolve that that tension in the in the society?
Well are you are you stimulated by the give me the hardest question of a place mincer earth? Um I I would argue, start, you if you're going to rebuild and and and and let me say on the front end, I'm not sure I understand what wealth is. You only get one meal a day, and we can kind of compare some of these super wealthy to each other where Bezos has the conspicuous consumption award of the century, right? Of the and must seems to live at the same level as normal people.
Um if you're going to get a better result for the working person, I think first you have to get control of government spending so that government spending on, and this is I don't think half's group that he's focusing on, not on the working people, but on the really troubled people. And that we s we seem to have developed a system where to help the homeless, to help the underemployed, we provide jobs to an enormous number of people who working people who don't provide much value.
That if I want to uh increase the the economics of the lowest working class, I seem to be giving the money to somebody else. So I I I I I refer to the Superman theory, which I think Joel's heard of, which is when when Superman goes to that closed door that's locked and he wants to get into the room. We watch him. He knocks the door down, it goes through the wall, instead of using his X-ray vision to just break the lock and walk in.
And I I think we need huge reform at that level before we can get to the next steps.
¶ Government Waste And The Superman Theory
That may sound crazy to you, Evan.
No, but I think you know, that kind of brings up the question of the mechanism by which we actually do the allocation of resources from people who have it to people who don't have it. And right now, the mechanism has been, especially since uh FDR, right, the with with uh the start of the New Deal, the mechanism has uh has been the government, right? Federal government, state government trying to parallel whatever the federal government has put in place.
And I just don't know that that is the most effective way to be able to actually allocate resources. To your point, that may just be smashing through the door instead of using X-ray vision, especially the fact that we now have new technologies that could potentially do a better job of figuring out who needs what and allocating the resources that way. I don't know. What do you guys think about? Are we relying too much on government to pick up the slack here?
¶ Sweden’s Growth First Welfare Model
Yeah, I I would um I've studied quite a bit about with Sweden, um, which I think is uh as good a case as there is, uh at least until recently, of being able to provide a decent life for most people, for the vast majority of people. But we have to understand what made that possible was the industrial growth of Sweden. Sweden has a very vibrant entrepreneurial economy. Um, and by the way, much more concentrated than ours is on the a small number of people, but they are able to fund things.
A, they do have high income taxes, and they also have the VAT. Now, the VAT is a value-added tax, is a regressive tax because poor people pay it as well as rich people. But if we want to look at the Swedish formula, we have to also uh understand that much of that was done with the fact that the government encouraged economic growth, encouraged industrial growth, built dams, did all the things that were needed so that Sweden could be a wealthy country and then divided it.
What my concern is that when progressives get control of government, what happens is the economy shrinks, and then there's that then there's a fight over disadditioning resources. So I would like to see my friends on the left to begin to become more concerned with how do we create wealth and opportunity, and then we can think about redistributing.
F, what do you have any thoughts on that?
Right.
¶ Deindustrialization And Rent Seeking Profits
I I think the biggest issue we're seeing in today's uh deindustrialized and financialized economy is that there isn't enough um value being created um in in by businesses. Um it's the the biggest um the biggest companies are not companies that make money by uh producing a commodity to sell. They are uh companies that um make their income through um the the um uh rent seeking, uh basically.
So I think really the best way to to grow the wealth is to focus on industrialization and how do you promote a productive industry?
I think that's the Wow, that sounds very Trumpian to me. It sounds like make America Great Again, let's the way sure our industry. Well, you know what? Well, I'm I'm all for it.
I'm all for it.
You know, I mean, if if you take a look, I I'm just writing a piece now for Unheard on on this. There are some very compromising signs, which is first of all, I think the Artemis and and and SpaceX going public is is a very a great indication of what's going on. The shift of of young people into trade schools, the the um this tremendous uh um information that I've been getting now about the decline in high-end professions and obviously particularly in the tech world.
So so maybe what we we can make that transition. So there may be elements of what Donald Trump you know, because you know Donald Trump says so many things that it's hard to come on to the vlogter level. But but I I think that that this is really, I think, the the the key issue. How do we create real value? If you know, Marshall, you and I have worked a lot on the space industry. That is uh employing quite a few people at high wages, including blue collar workers.
Um if we can move our economy away from Facebook and towards what SpaceX is doing, I think we'd be a lot to hurry.
I hear you. And I this I really want to get Hank's perspective on this as a as a professor in the accounting and economic area. Is it wrong to say that monetary value that is created, even if it's illusory and it's not under your fingernails, kind of like here's a job or here's a piece of something that I created? Is the creation of monetary value bad?
Or it can't it can't be has to you have you have to have incentives. Right, that's right. You know, you guys talk space. You know, when I look at it and I say, you know, we live in California, which is which is a nightmare half. I don't know where you are, but our economics of this state are nightmare.
Chicago. Well, that there's another, another, I mean maybe time.
But we have this incredible need of desalinization plants. Right. We have the most fertile ground of the world, we have no water to do it with, and we can't get past the barriers of government to do what's necessary. So it seems to me that you can build wealth, you can build jobs, you can build success by, in some ways, picking an industry that we need to get past government to be successful.
Well, uh to me, it's going back to some extent to the old Milwaukee sewer socialism. You know, the sewer socialists weren't trying to kick the rich people out, they were trying to build the foundation for a prosperous economy, which worked for many years.
Well, this seems to me to be so if the theme here is that government is inefficient and that government gets in its, gets in society's way for being able to create real value, however you want to define real value, this seems to me to be an area that both the right and the left can can have in common, right? Because the right is basically saying, hey, we would like the opportunity to create opportunity, right? However we define that, right?
We want to be able to have an unfettered environment to be able to grow things, to grow businesses, grow wealth, even if they define that wealth and value differently than the left does. And the left is basically saying, hey, you know, the parsing mechanism to be able to take whatever good stuff is being created in society and it and redistribute it out to the rest of the world isn't working because the government's getting in the way.
Also, this seems to me to be a bonding, possible bonding area. Is that or am I just naive?
I the the big problem I see is that the um, and I, you know, and I think it's pretty true, the left here in California is the public employee unions. So they have no incentive for efficiency. Nope, they they they don't seem to care whether the economy contracts or grows. Um and that's part of the problem. Because no, and I think part of it is reflected in when I first came to Los Angeles and started covering LA in the 70s, we we had a uh the Democratic mayor, Tom Bradley.
Um, but the trade unions were very interested in growth. They were there they were the they were in construction, um uh they they were in in the oil um industry, um, which of um Southern California had an enormous oil industry at one time. Um and we still have the oil, we just don't have the industry.
Um and and so there was a a there was a meeting of the minds in some ways where you know Bradley was a democratic politician at um at but he worked with the business people, but also with the unions, the unions who were part of the industrial economy. The problem is now we the unions are predominantly uh public employees, so they're tax takers, not wealth makers.
Yeah, well, and I'd love to hear Hef's take on this, because if if um the proletariat is the uh uh is responsible for owning the means of production, but that the new proletariat produces nothing with their labor. But you see the essence of what public employee unions are, which is you're saying this isn't this a false analogy, a false syllogism. Isn't this uh does this just not work anymore? This notion that the that workers actually create value.
Um I believe that value is created in the productive process. Um value is created when things are made. Um and if of course those workers that make those things um are productive, and the the capitalists that invest the capital in those things are also productive in that sense. Uh uh but really uh I think um industrial capitalism, if we had it, would be great compared to what we have now.
I think the real issue that we're facing, to use the term uh of the podcast, uh feudalism, is the shift in the American economy from uh productive profit formation, which is a good thing. It's a good way to invest money because it creates things and value. Um the the reduction of profit formation, the crowding out of it by uh uh by financial uh economic rent extraction.
Uh I think these are uh opposed um uh ways of making money and increasingly the um uh uh uh the the I'll use another word, the investing class, the people who have money to invest, chase the highest rate of return and the highest rate of return. Of return is in the most parasitic extractive methods available.
Or, or to maybe phrase it slightly differently, in the delivery of services as opposed to goods, right? And it and the question I have is whether or not for economies like the United States economy, say versus the Chinese economy, right? Where the bulk of what is produced are actually services, not goods. It's about 70-30, I believe, is the way that works in terms of GDP development. Um, are we just at that stage of evolution where we're producing services?
So inherently it's going to seem like we're not, quote, producing anything.
Well, I think some services are producing something. I think there there is this rent seeking. And the thing that, of course, I find most difficult is we have these quasi-monopolies that control enormous percentages of the some of the most lucrative areas.
¶ Monopolies AI And Real Competition
All those are now basically controlled by companies that are that are about 50 years old and now have complete consolidated power. That worries me more than than anything else, because you you know, we're not getting the kind of innovation that we were getting. I covered Silicon Valley in the 80s when there were 50 disk drive companies, and eventually obviously they were gonna all exist, but they were fighting each other.
What amazes me is, and I so I would even say this in services is Microsoft programming any better than it was 10 years ago? Does it really work any better? I don't think so. I don't think it's any more stable than it was, but they can get away with it because there's no competition. So what they are, as my friend Mike Lynn puts it, they're toll booth companies.
Yeah, well, that's your point about extracting. My argument to that, and I'd love to hear where you're coming out on this, is that actually you might think that there's not competition there because it's not the head-to-head competition of 50 disk drives against each other. But in fact, there's tremendous competition against these um uh invested interests that are coming from new technologies like AI that's up uprooting them.
And so um, and in fact, if you look at the where the if you take venture capital as an early indicator of where future competition is going to come from, most of that, I mean, we're spending hundreds of billions of dollars investing in new non-Microsoft, non-uh, you know, well, that non-big interest uh companies to develop that technology.
Trevor Burrus, Jr. Except then as you know, the the the olive barks have major stakes in most of these companies.
Well, in that they they definitely buy out the companies that show promise. All right. So in that sense, there is a potential of concentration, but it's actually, I think, bigger than even what they can deal with in terms of that competitive environment. What's your sense?
I'm in the who cares movement. Uh-huh. I I don't I don't think that's relevant. And and and I think my friend here, I really don't know, might agree with me. All I care about is that the jobs get down to people who need jobs. And I'm my my own view is I don't care if PISOs is worth a gazillion dollars. What I care about is that everybody has an opportunity to participate in the economy.
And and my view on AI is it's gonna make some of these companies like Microsoft and Micron, they're gonna disappear. Because the level of sophistication in that machine learning is gonna take those companies and just push them aside.
Well, you know, from uh from your mouth to God's ears.
Well, the other thing that's that's gonna be interesting to see how this plays out is you and I have you and I have had this conversation about whether or not AI is going to eliminate jobs or whether it's just going to reframe how people actually do the jobs. And I have to say, uh, and you know me, I'm like La Via Amrose, right? So I'm inherently much more of a uh optimist on these kinds of things.
I see just in my little world of Chapman University entrepreneurs who are coming up when thinking about ideas, all sorts of new business ideas that aren't gonna be really dependent upon the Microsofts and the Big Boys that are coming out of uh applications that people are doing with AI that have the potential of being really good-sized, maybe not, you know, the next megalith business, but definitely good-sized businesses that could be quite interesting.
Well, because what I think we're gonna see is we're gonna see a transition period button's gonna be tough.
Yeah.
You know, it'll be a while. But there is that possibility. Also, the thing that I find interesting is now the the because AI can do so many of the things in the service sector, now it makes more sense to actually make your money in the industrial sector or in the energy sector. Um, and that's a that that would be a very good uh long-term uh policy. Unfortunately, uh our political system doesn't work so well.
So, you know, the the idea of there being any you know consistency between different administrations is is hard to imagine.
¶ Entrepreneurship Jobs And A Guarantee
But you know, the the the the contrast here, and I think this is something that you alluding to, Hef was alluding to, is so if you take my point of view, which is we need to create an economy that generates opportunity and and wealth for people so that it we have a pot to be able to work from. Um, it's the ticket to that is entrepreneurship. What do you do about people who aren't entrepreneurs?
And what do you do about the fact that these entrepreneurial companies may not need as many people to actually be in them? And so how do you handle the day-to-day life of people who are kind of dealt out of that equation, right? And that that's that's an interesting question. I mean, uh Hank and Hef, I'd love to hear your thoughts on that.
Go ahead, Hef. I need a minute.
Are you uh are you thinking maybe like universal basic income kind of thing? Or uh where do you come? Where do you come out?
So uh I I I would I would most definitely prefer something that employs people and uh engages them in productive activity. I would I would like to see some sort of a jobs program, um, even a uh um a jobs guarantee uh of the sort that Bernie uh used to advocate for. Uh I mean look, uh uh uh uh uh America uh being as rich as it as it is, uh has um uh has uh what uh a crumbling infrastructure, uh terrible health outcomes.
Uh I I think there's a lot of work that can be done to improve people's lives. It's really a matter of how do we get the right people in the right places and employ them in ways that can can can can produce value in better society.
Like a a a modern version of the New Deal WPA.
Well uh that's why D shell new issue because I'd like your opinion. I've I've been writing on wealth and legislation in that with for 20 years now, I guess.
¶ Minimum Wage Automation And Price Controls
And one of the things I wrote on fairly recently was the state of California voted to increase the compensation for fast food workers. Guys like me are saying all you're gonna do is you're gonna increase the machine that takes your order, and we're gonna cost all those, and we're gonna lose a lot of jobs. Sadly, I've turned out to be right. We've lost about 36,000 jobs in California over $2 an hour, which is kind of boggling in itself. How do you get there?
How do we create how do we create jobs increase income without making those jobs go away?
How do we create jobs that increase income without making those jobs go away? You circle. Right. Well, well you how do you so yeah, so how do you so right, it's it's um you have to you have to find the virtuous cycle of production and consumption. Why do people invest in um in in in the production of commodities for sale? They invest that with an expect expectation of return. So if Ford makes a car, they're expecting to sell it to somebody for for a return on their investment.
And in order for that to be possible, that somebody needs to have the income and the wealth to buy that. Um that somebody, and and the vast majority of people don't have um you know saved up wealth, they they live on their income, they make an income through through their work. They need to be paid enough to be the consumers um to justify those productive investments.
So how how do I pay them sufficiently not to kill off their jobs? I raise because this is clearly what's happened in f in fast food, again, an area where I have some expertise. You said we decided as a society in California, right? Not fair. Right. We increase their wages by pretty close to $4 an hour, and we cost ourselves $36,000, $36,000 jobs. How do we get from A to B without losing those $36,000 jobs? That's the magic question.
Well, and and the answer, I mean, the answer, you got to uh uh prohibit robotics and prohibit automation to be able to then make businesses more efficient. That doesn't seem like a realistic subject.
So back to the cartoon of the 30s. So we're of the woman who's watching, you know, a steam shovel dig a big hole, and the person next next to her says, you know, she complains about why can't we have shovels instead of the steam shovel? And the guy next to her says, Look, why not give them all teaspoons? I mean, we can't stop progress. And that's to me, that's the dilemma.
Yeah. Right. I and my my instinct, and I I'm not an expert on you know uh uh policy specifically the minimum wage, but my my my instinct would be look at um um what look at the companies for which that's actually true. I mean there are companies that pay their workers very little but profit very much. And that that to me is um um that to me already gives you the answer of how do you pay workers?
You just you just take a little bit small smaller of a profit as long as you're making a profit, that's okay. Um in cases that's where that's not the case, and it might not always be the case, I would look at what is causing um what is what is making it the case that a worker uh needs to be paid double or triple the the minimum wage in order just to make a living and to be able to be a um a good consumer in the economy.
Um you know, look at look at what is their rent, what is their, you know, what are what are they how much of their income is going to rent to um you know uh loans, you know, interest on student loans. Um and um that to me, the the reduction of of that sort of rent seeking is the way you make it the case that uh a worker can be paid less but still have the the spending power to to be a valuable consumer.
Well, which would imply price controls. Right. Right? And so then the question really is when has price controls have actually worked? Do we have any history of that other than crisis times, say, within World War II? Right. Do we have any other examples of uh times when price controls have worked?
No, we have one example. It's old, I remember this stuff. I was a wage price expert in 1979 or whatever it was, and we couldn't control prices and we couldn't control wages, and we crushed the economy.
Yeah.
We did stop inflation, but we crushed the economy.
I ironically, the the the impetus for that wasn't that was the Iranian uh oil embargo. Yeah, which is it was the same talk about cycles coming out.
¶ No Perfect Fix Yet Closing
Well, this has been so I think the problem that we've got is the lines aren't crossing, right? We we don't have uh there is no there is no um solution that anybody can point to that says this this works for everybody. And so I think it's a work in process. And so I want to say thank you to Hank and Hef for providing us with your insights. And Joel, thank you for your thoughts and coming back here to be uh to be uh part of the Future Future podcast uh once again.
And we're delighted to have you here and look forward to having you in a future episode.
Thank you. Thanks a lot.
Great, thank you.
The future future podcast.