Debunking Hate-and-Envy Tax Policy

September 26, 2024 by Dan Mitchell @ International Liberty

On tax policy, our friends on the left are motivated by envy and hatred. As shown in this Stossel video, Robert Reich is a sad example of this mindset.

John Stossel understates his argument. It’s not that Reich is wrong. He’s wildly wrong.

There are four points in the video that deserve attention.

 

1. It is possible for everyone to get richer at the same time, showing that we don’t have a zero-sum economy. 
2. The rich get richer by making the rest of us richer (my favorite part because I make a cameo appearance).
3. Excess money creation by governments is what causes inflation, not mysterious  outbreaks of corporate greed.
4. There is nothing wrong with inequality if it is the result of some people producing more value than others.

The last point is especially important because we have a presidential candidate who believes in equality of outcomes rather than equality of opportunities.

For today’s column, I’m going to cite an unusual source. I normally criticize the U.K.-based Economist because of its establishment-left perspective on policy.

However, an article in May did a very good job of debunking the hate-the-rich mentality. Here are some excerpts.

How, exactly, can one abolish the rich? …that implies something very close to a marginal tax rate of 100%. Such a policy would provoke tax-avoidance on an epic scale. …many rich folk would emigrate. And if governments all adopted similar wealth-banning policies and enforcement was tight, as the authors desire, the effects would be even worse. …

Highly productive people—such as surgeons and engineers, never mind word wizards like J.K. Rowling—would have no financial incentive to keep working after that point was passed. …many would be tempted to kick back, relax and deprive the world of their exceptional skills, drive and imagination. Consider, too, the incentives such a system would create for entrepreneurs.

You have an idea for a better mousetrap. Under the old system, you might mortgage your house to raise cash to build a mousetrap factory, in the hope of making a fortune. …Even if your mousetrap is so good that the world might reasonably be expected to beat a path to your door, it would be irrational to borrow money to expand production. The financial risks of trying to build a global business fall on you. The rewards go to someone else.

In other words, marginal tax rates matter. As shown in my four-part series (here, here, here, and here), when governments grab larger shares of our income, the inevitable result is less prosperity for people.

And sometimes even less revenue for government (which shows the awful motives that sometimes exist on the left).