Four Problems with Taxing the Rich
According to The Wall Street Journal, President Obama would like to raise taxes on the rich. Apparently, he wants you to believe that this will reduce the federal government’s budget woes. There are four problems with this:
- The rich don’t consume that much…most of their wealth is in the form of capital (factories that employ wage-earners, for example), which is needed to make others more productive. By taxing that capital away and giving it to an out-of-control government, we are just squandering our capital and reducing the average worker’s standard of living. Remember, it is government that does not earn a profit, that must get its revenue from profit-earning people, and that funds boondoggles with taxpayer money. Businesses that act wastefully go out of business (unless the government wastes more money by bailing them out).
- President Obama also wants people to believe that by raising taxes, we can do away with the alternative minimum tax (AMT), which was aimed at the rich, but later affected the middle class. Of course, as inflation continues, even at "reasonable" rates, the same thing will happen with any new taxes aimed at the rich. It’s just a matter of time before the new taxes will affect the middle class as well. Rich is a relative term. Someone who earned a million dollars in 1900 was rich and they didn’t have to pay any income tax. Someone who has $100 million today is rich. In 2017, someone who has 10,000 ounces of gold will be rich (the U.S. dollar will have been inflated out of existence by then). Remember, inflation raises all boats and in a country with a progressive income tax, everyone’s tax rate goes up as incomes go up. Eventually everyone will be in the highest tax bracket unless the government, in its benevolence and wisdom, allows its citizens to keep some of the money they (the people) earned (which is what President Obama is trying to do by eliminating the AMT—a mistake from 1969).
The only kind of tax that taxes everyone equally is a per capita tax; i.e., a tax where everyone pays the same amount--$100.00 per head, for example.
- Higher taxes won’t solve the budget woes. The U.S. government could seize all taxpayers’ wealth, which was approximately $48.8 trillion in 2010 (NOT INCOME), and it still wouldn’t be enough to cover the federal governments’ debts, deficits, and contingent liabilities. In short, it’s a spending problem, not an income problem. The U.S. government has simply over-extended itself with welfare programs, wars, bailouts, and now health care. It’s just a matter of time before the economy collapses under the weight of the debt burden, or…the government (through the Fed) tries to print its way out of debt and destroys the U.S. dollar and capital market, for these are the long-term consequences of inflationomicsSM.
- The higher the taxes, the greater the incentive to shelter the income, work less…or leave! Wealthier people are better able to afford good tax advisors who can help minimize their tax bills.
Why work harder if the more you make, the less you get to keep?exit tax, if you will, is now in effect. Of course, (to borrow an expression from Star Wars) the more they tighten their grip, the more money will slip through their fingers. In the end, they’ll lose their war for control of the universe and the wealth they want to tax will be somewhere else—somewhere friendlier to capital.
Robert Jackson Smith