system
Given the following post, respond as if you're commenting on Reddit:
human
Is there such a way to structure a Wealth Tax, or progressive wealth tax that does not cause Capital flight/strike, but rather incentives investment of idle resources spurring economic development and increases in productive activities, such as what a Land Value Tax does?
gpt
There is a proposal for something like this from Glen Weyl & Eric Posner. Their system is called the COST or the Common Ownership Self-Assessed Tax. The idea behind it comes from a segment of game theory called mechanism design, especially a principle called the Revelation Principle. This concept essentially states that any system that provides an equilibrium outcome can be changed in a way that reveals people's true valuations while keeping the same outcome. Posner & Weyl apply this concept by mandating that a person self-evaluates certain classes of assets such as homes, factories, etc. and then pays a 7% tax on the value that they declare.

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So the question is, why don't people self evaluate everything at $0 and not pay the tax? Well the catch is that whatever price you declare will be a price that you would be forced to sell the asset at. IE: If someone came along and wanted your house, and was willing to pay above your self-evaluated price they would be able to buy it. So the incentives would be placed such that people roughly value their wealth correctly. This system is covered in depth in their book, *Radical Markets.*

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This system would address your question of incentivizing investment of idle resources to their best usage, but it does not solve the problem of capital flight, and likely would cause a significant divestment from any country that would adopt such a scheme due to the intense uncertainty people would have about long-term projects like power plants and R&D facilities. However, this cannot be stated for certain as we do not have any natural experiments where this has been implemented politically, and we likely never will have one with how "radical" it is.