Agreeing With Statists For The Wrong Reasons: Tax the Rich

The rise of democratic socialism on the left and populism on the right have each produced a surge in proposals to raise taxes on the wealthiest people. So-called progressive tax codes, in which the wealthy pay a higher percentage of their income in taxes and/or face additional taxes that poorer people do not, date back to the Roman Republic, when property taxes affected only those wealthy enough to own property.[1] The idea was revived in modern times by British Prime Minister William Pitt the Younger in 1798 to pay for war against Napoleonic France.[2] War would likewise be the impetus for the beginning of income tax in America under the Revenue Act of 1862.[3] Over time, progressive tax schemes have been implemented in many countries.

The common arguments from each side are well-known. The leftists advocating increased progressive taxation believe that this will address income inequality, provide more revenue for social programs, and curtail elite influence over politics without taking from those who cannot afford it. Meanwhile, some elements of the right are advocating that the rich be taxed more because many of the current elites ask for higher taxes, and the growing national debt should be addressed by those most capable of doing so. Those who oppose raising tax rates on the highest earners may believe that taxation is an act of aggression that violates property rights, governments waste much of the taxes they already collect, taxes disincentivize productivity and alter economic behaviors to dodge taxes, and disparate tax rates contribute to class warfare. But there are reasons to encourage those who wish to bring the economic elites down a peg which have nothing to do with their face-value motivations. Let us see why taxing the rich can undermine both left- and right-authoritarians, and thus why one might agree with statists for the wrong reasons.

First, critics of progressive taxation will point out that the rich are the most capable of leaving a high-tax environment and taking their wealth with them to protect it. For example, people are moving away from New York state, and over 63 percent of those who leave have incomes over $100,000.[4] But what happens next? They must go somewhere, and their presence in their new location will have effects on that place's economy. A place that has low taxes for the purpose of attracting financial expatriates can experience economic gains that are not possible in places with high taxes.[5] A third-world country that lacks the governance structure to enforce high taxes provides even more opportunity. These countries are in dire need of capital, knowledge, and leadership to help their populations escape a degree of poverty that people in advanced countries can no longer imagine. Business elites from advanced countries can provide this better than anyone else, and high taxes in their native lands can drive them to move there and do that.

Read the entire article at ZerothPosition.com

References

1. Roman Taxes. com.
2. Harris, Peter (2006). Income tax in common law jurisdictions: from the origins to 1820, Volume 1. p. 1.
3. James, Kathryn (2011). "Exploring the Origins and Global Rise of VAT". Journal of Economics. 35 (4): 15–22.
4. 2018 National Movers Study. United Van Lines.
5. James R. Hines Jr. (2005). "Do Tax Havens Flourish". National Bureau of Economic Research, Tax Policy and the Economy. 19: 65–99.
6. Buffett, Warren (2011, Aug. 15). "Stop Coddling the Super-Rich". New York Times.
7. Botticello, Casey (2018, Jul. 16). "Warren Buffett is a Brilliant Investor but also a Hypocrite". Medium.
8. "Why the Middle Class Pays the Alternative Minimum Tax". Kiplinger.
9. Christensen, Mark (2018, Jul. 23). "We Need Tremendous Government: Why ConservativeMythology Must Be Disrupted". Social Matter.
10. Charles Blahous (July 2018). "The Costs of a National Single-Payer Healthcare System." Mercatus Working Paper, Mercatus Center at George Mason University. Arlington, VA.
11. Michels, Robert (1911). Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy. Trans. Eden and Cedar Paul, 1915. Kitchener, Ontario: Batoche Books.
12. Mills, C. Wright (1956). The Power Elite.