I’m tired of hearing Democrats say we should raise taxes on the rich or the rich should never receive a tax cut. To make matters even more frustrating, they often state this sentiment as if there’s something evil about being rich. Here are three things to consider before embracing the “tax the rich” notion.
1. Only people who earn more money than they need can afford to hire others.
Excessively taxing the rich kills the economy. Have you ever seen somebody barely scraping a living from paycheck to paycheck start a business and hire employees? Can poor people offer health insurance plans and pay benefits? Of course not. They don’t have any extra money to risk or invest. Excessive taxation of the rich takes their investment capital away which harms the economy.
2. The rich enlarge the economy by their consumption.
Let me illustrate this point by an example. Following the 1993 Clinton tax increase a large surcharge on the sale of new luxury yachts was imposed. That luxury tax almost put the the American yacht construction industry out of business. Who builds the yachts? The rich? Of course not. So guess who was laid off when nobody was buying yachts? The lower class yacht construction workers suffered for that tax (and from the government’s point of view it raised almost no revenue because domestic yacht sales dried up).
3. Who decides what qualifies as rich and how much to confiscate?
Taxing the rich is a Marxist income redistribution scheme. It punishes work, risk and capitalism. It deprives poeple of their individual freedoms and personal property rights. In a free society government has no right to decide who needs how much money and what amount they get to keep.
In conclusion, excessive taxation of the rich is like killing the goose that lays the golden egg. It’s also like poisoning the village’s only water well just to get even with one person. As in both of these cases, the greed and jealousy inflicted via excessive taxation on a select few ends up hurting everyone.