In a recent column, Mark Schieritz wonders to what extent the land tax on real estate could serve as a model for a possible reform of the wealth tax. As a result of the reform initiated by the Constitutional Court, standard land values on which the tax is based must be recalculated and adjusted. Which is nothing other than a valuation of assets. However, this is precisely a popular counter-argument in discussions about the feasibility of a wealth tax.

Since the real estate assets of private households are about three times as high as assets in bank accounts and share deposits, they are an important component of wealth, while at the same time the evasion effects are likely to be smaller. Why not expand the property tax into a kind of wealth tax?

The political stipulation is that the reform of the tax must not lead to additional revenues for the state. That is why it has been constructed in such a way that the amounts to be paid should not change very much in the end. But that could be changed. With a few tweaks, it could be expanded in such a way that the wealthy would participate much more in the financing of the state’s tasks. The corresponding data are being collected right now. Another practical aspect is that the increase – or decrease – in the value of a property could be taken into account in a relatively uncomplicated way when calculating the tax. One would then simply have to query the value on a regular basis.

The whole column can be found here.

What Drives Innovation? – Article
William H. Janeway, Project Syndicate, 20.01.2023
After decades in the wilderness, industrial policy is now being rediscovered as a tool for addressing climate change and navigating a fraught new geopolitical environment. This development is long overdue, and fully justified by economic history since the dawn of the Industrial Revolution.

The Unfair Costs of Care – Article
Nancy Folbre, The Prospect, 18.01.2023
A very different kind of inflation.

The planned reform of EU budget rules gives the EU Commission too much power – Article (Paywall, German)
Philipp Heimberger, Handelsblatt, 16.01.2023
The EU Commission wants to change the Union’s budget rules. But the Commission’s plans would create a dangerous arbitrariness, warns Philipp Heimberger.

Corporations and the Super-Rich are Crisis Winners – Article (German)
Die Zeit, 16.01.2023
Food and energy companies made billions of US dollars in windfall profits last year, according to a report. At the same time, extreme poverty increased again.

France Wants to Revolutionise Europe’s Industrial Policy – Article (Paywall, German)
Martin Greive, Julian Olk & Gregor Waschinksi, Handelsblatt, 15.01.2023
The EU has so far failed to find a common response to US industrial subsidies in the wake of the Inflation Reduction Act. France is also pushing for new EU funds – the German government is sceptical.

Necessary Targeting – Article
Achim Truger, Aus Politik und Zeitgeschichte, 02.01.2023
The relief measures should be precisely targeted. In the case of private households, they should preserve energy-saving incentives and focus on lower and middle incomes.

In a recent interview with the Süddeutsche Zeitung, Tom Krebs, one of the authors of the study ‘Mapping the State of a Shifting Paradigm’, explains how the economic policy debate has changed.

The market regulates everything, the state is supposed to stay out of it: This policy is over, fortunately, finds economist Tom Krebs. Why the government should intervene again with the minimum wage, but would rather have left it alone with higher earners.

The economic policy debate has changed over the past 30 years, among economists and in international organisations. In the 1990s, the International Monetary Fund (IMF), the World Bank and the OECD argued in a market-liberal way. They called for privatisation, deregulation and flexible labour markets, which often meant low wages. The market should regulate everything. Today, they postulate an important role for the state and think reasonable minimum wages are right.

Read the whole interview here (German, Paywall).

In a recent Tagesspiegel article (paywall), Harald Schumann argues that state is taking over more and more tasks from the market as faith in its efficiency dwindles. He sees a new paradigm entering economic policy: The state as steer, investor and entrepreneur.

Based on a new study by the Forum ‘Mapping the State of a Shifting Paradigm’, the article describes a reorientation of economic science. This can be seen in the fact that all leading institutions from the International Monetary Fund to the EU Commission are abandoning faith in the market and calling for massive state intervention against inequality, climate change and financial crises.

However, it is uncertain whether the ideological turnaround will lead to practical success. A new consistent paradigm is yet to come, so far there are only experimental approaches. In addition, there is now a lack of insight and competent experts in the state apparatuses. In addition, there is a danger of subsidy races and the looting of state coffers by a few beneficiaries. Full transparency is therefore the sine qua non for a successful new economic policy.

The full article is available here. The full study on the state of the paradigm shift is available here.

Is capitalism the crisis? – Podcast (German)
Petra Pinzler & Stefan Schmitt, Die Zeit, 12.01.2023
The loss of nature and the climate crisis show that our economic system is eating away at its own foundations. How can it contribute to the solution?

Monetary policies that do not subsidise banks – Article
Paul de Grauwe & Yuemei Yi, CEPR, 09.01.2023
Central banks pay interest on commercial banks’ holdings of cash reserves at the central bank. Thus, recent rate increases imply larger interest payments to commercial banks and loss of revenue for national governments. This column argues that a better policy would be to combine sustained sales of government bonds with higher minimum reserve requirements. This would avoid transferring central bank profits to commercial banks, which essentially amounts to a subsidy paid by the central bank.

A US Inflation Reduction Act for Europe – Article
Tom Krebs, Project Syndicate, 10.01.2023
While some European policymakers are ambivalent about the US Democrats’ signature climate-change legislation, the American plan’s targeted, government-centered approach is far more credible than the market-based approach guiding the EU’s current green agenda. Instead of fighting the IRA, Europe should embrace its pro-worker bent.

What’s Beyond Beyond Neoliberalism? – Article
Amy Kapczynski, LPE Blog, 09.01.2023
Part of the nature of a governing paradigm is that it is shapes how we see things. But something we look through is, of course, hard to see beyond. Perhaps there’s an iron rule at work here. So suggests Hegel’s claim about the Owl of Minerva flying only at dusk. But if we seek not just to interpret the world but also to change it, it is especially important to try to glimpse the future that might be emerging in our present

Warum die Weltwirtschaft ein neues Betriebssystem braucht – Article (German)
Moritz Schularick, Der Spiegel, 06.01.2023
Wir stehen vor einer neuen Phase der Globalisierung. Deutschland braucht dafür eine Weltwirtschaftspolitik, die auf Europa setzt und die Interessen des Landes als Ganzes von denen einzelner Branchen trennt.