Sunday, December 30, 2007

Taxing the Rich Hurts the Poor

Unlike socialists, I observe that wealth is something that is created and not some fixed pie in the sky. Progressive taxation, where one pays a higher percentage in taxes as he earns more income, is justified on the grounds that one should pay more to the government because he or she has a larger share of that fixed pie. In that way, a benevolent class of politicians can vote on how to redistribute that wealth amongst the masses.

The fixed pie theory assumes that taxing “the rich”, whose definition depends on who you ask, will have no negative consequences on the poor and everyone else in between. From the socialist point of view, only good can come from taking money from those who have it and giving it to those who don’t have it. One of the reasons is because of the assumption that rich people horde all their wealth under some mattress somewhere in their homes. Many believe that their achievements of happiness came at the expense of the rest of society and had no indirect, unintended or some “invisible hand” benefits to anyone else in the community.

Bah! Hum Bug! You will hear leftist political commentators on TV proclaim that “the rich” only buy things like Rolexes and Ferraris. This is supposed to stir some feeling of jealously in a viewer like myself because I can’t afford to buy a Rolex but have purchased a Citizen watch instead. But who makes Rolexes and Ferraris, and what do they purchase? And who makes whatever the makers of Rolexes and Ferraris purchase, and what do they purchase? And so on and so forth.

I work at a timeshare property whose owners I consider to be pretty wealthy. If you are willing to pay $40,000 and up for a week’s worth of ownership, you’re likely to have a lot moolah backing you up. Where would a person like myself be when a future President Hillary Clinton taxes the hell out of our customers? Will “the rich” still come to our property bringing in the necessary revenue that keeps me employed and pays for my and my son’s healthcare?

I’m disgusted with politicians who think I don’t know a little something about economics, assume that I won’t notice the unintended or intended consequences of their tax hikes and expect that I will appreciate their redistributed welfare when I’m standing in the unemployment line.

But let’s say that “the rich” don’t spend and instead only save their money. Wouldn’t it then be economically beneficial for government to tax and spend their money?

Most people don’t save their money under a mattress. Instead, they’re likely to invest in conservative portfolios or stash it in a bank with low returns. Or they may assume some risk to get higher returns in aggressive investments. In this way, “the rich” provide the liquidity in the financial markets where risky start-up companies can find the cash they need (through high interest loans) and future homeowners can take out mortgages (through relatively low interest loans).

We’re not likely to hear politicians consider any of these facts however. Class warfare gets crusader politicians elected, even though government in America , unlike some other countries, enforces no classes of society. All men are created equal here, but it will be your individual talents, motivation, determination and values that determine how far you will go.

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