Should We Tax the Rich is the Wrong Question
Are we going to ever address the real issue?
Not so long ago, the richest man in the world, Elon Musk and “Senator Karen” had a Twitter spat about the taxes he was paying:
This was nothing unusual because, in America, we obsessively debate about whether we should raise taxes on the rich. Conservatives correctly point out that high taxes stifle economic growth and that if we tax the wealthy and corporations too much, they have the ability to go elsewhere. Then, liberals say the rich are “greedy” and aren’t “paying their fair share,” so we need to tax them more. Of course, conservatives then respond that if we’re trying to figure out who’s greedy, is it the people who are already paying massive amounts of taxes or the ones who keep wanting more and more money that they haven’t earned? We could go even further and trot out that classic parable about our tax system that features a rich man and his 9 friends paying for dinner. You remember that one, right?
Each and every day, 10 men go to a restaurant for dinner together. The bill for all 10 comes to $100 each day. If the bill were paid the way we pay our taxes, the first four would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The 10th man – the richest – would pay $59. Although the 10 men didn't share the bill equally, they all seemed content enough with the arrangement – until the restaurant owner threw them a curve.
"You're all very good customers," the owner said, "so I'm going to reduce the cost of your daily meal by $20. I'm going to charge you just $80 in total." The 10 men looked at each other and seemed genuinely surprised, but quite happy about the news.
The first four men, of course, are unaffected because they weren't paying anything for their meals anyway. They'll still eat for free. The big question is how to divvy up the $20 in savings among the remaining six in a way that's fair for each of them. They realized that $20 divided by six is $3.33, but if they subtract that amount from each person's share, then the fifth and sixth men would end up being paid to eat their meals. The restaurant owner suggested that it would be fair to reduce each person's bill by roughly the same percentage, and he proceeded to work out the amounts that each should pay.
The results? The fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $14, leaving the 10th man with a bill of $50 instead of $59. Outside the restaurant, the men began to compare their savings. "I only got one dollar out of the $20," said the sixth man, pointing to the 10th man, "and he got $9!" "Yeah, that's right!" exclaimed the fifth man. "I only saved a dollar, too! It's not fair that he got nine times more than me!" "That's true!" shouted the seventh man. "Why should he get back $9 when I only got $2? The rich get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine outraged men surrounded the 10th and brutally assaulted him. The next day, he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they faced a problem that they hadn't faced before. They were $50 short.
Here's the problem with this whole debate. It keeps the spotlight focused on exactly the wrong place. We have these passionate debates about whether the rich are paying enough in taxes, but is that really the most important question?
Shouldn’t we be asking other much more relevant questions like, “Almost no one would argue that our government is doing a good job spending the money it already has, right? Well, if so, then why does the government need more money? If the government wants to spend more money on one program, why can’t it just get that from somewhere else in the budget? Instead of trying to create programs, shouldn’t we be getting rid of old programs? Instead of bringing in more tax dollars, shouldn’t we be reducing the size of government so less money is needed from the public?”
At this point, America is like a family and the government is like the lazy, seedy, good-for-nothing son who keeps complaining that everyone in his family is “selfish” because they won’t give him some money to “get back on his feet.” Of course, he ignores the fact that they’ve already done that a half dozen times, and every time he blew the money on partying, drinking, and drugs. He also blows right past the fact that the family has offered to pay for rehab over and over and he “just didn’t feel like it was the right time for that, and people need to respect his decision.” Then, he starts trying to guilt-trip the family. “This time, it’s DIFFERENT. All I need is a little more money from rich uncle Elon, rich uncle Zuck, and rich uncle Bezos. They have so much, they won’t even notice it. Aren’t we family? Aren’t you supposed to help family?”
We’re at the point now in America where the government is literally spending trillions on new programs that do absolutely nothing to make the life of the average person better. That’s why the government doesn’t dare go to the middle-class and ask them to pay more taxes for these programs because they know what the answer would be. So instead, they promise that the “rich” will pay for “it.” What’s “it?” EVERYTHING. They’re going to fund Social Security, expand Medicare, pay for the Green New Deal, fund giveaway programs, they’re going to pay for childcare, free college, paid family leave and every other utopian proposal you can imagine. In reality, under the best of circumstances, the Democrats couldn’t fund even a quarter of all that by “taxing the rich” because the rich already pay so much in taxes, they only have so much money, and because they didn’t get rich by being stupid, so many of them would rather leave than hand everything they’ve earned over to ungrateful government looters.
However again, this sidesteps the real debate because we shouldn’t have programs in America that the middle-class aren’t willing to pay for with their tax dollars. If the middle-class was willing to take a significant hit to their wallets to pay for free college, the Green New Deal, and expanding Medicare to everyone, it would be a mistake, but the American people would at least be able to see for themselves if the juice is worth the squeeze. Instead, the middle-class is being sold a false choice. They’re being told they can have all these programs at no cost and “the rich” will pay for it… except that isn’t actually what happens. What happens is that yes, we do soak the rich, but it doesn’t even come close to paying for any of these programs because it’s not possible. So, to make up the gap, the government borrows and prints more money, which ends up brutally punishing the poor and middle-class with inflation. Everyone is noticing inflation right now because it’s so high, but the target rate for inflation in a normal year is “2%” and as you’d expect, the government rigs the way it’s calculated to make it look much lower than what it is in the real world.
There is a time and a place to raise taxes, including on the rich. Unfortunately, all of us are likely to learn about that as we get deeper and deeper into the iron jaws of the trap our country has created for itself by severely debasing our currency (whether you are a fan of Bitcoin or not, the sentiment from Dylan LeClair about the situation we’re in is correct):
At this point, our nation is like an alcoholic that first and foremost desperately needs to sober up. Until it does and we start shrinking government, any new programs that are supposedly going to be paid for by “taxing the rich” are just us getting a little bit more of the “hair of the dog” – and that’s the path to collapse and ruin. Until we reduce the size of government, start adding more assets to back up our currency, and at least TRY to get our spending under control, raising taxes on anyone will just lead to throwing more good money after bad.
Maybe if the middle class understood that the national debt is going to be solely their responsibility they might get angry enough to get involved.
Someday, the national debt will come due. Who will pay it back?
Not the poor, they don't have any money.
And not the rich. The rich will say, "We make up only 5% of the population (or 2%, depending on how you define "rich") why should we pay off a debt that was run up by 100% of the population?"
And then the rich will drop out of the economy and live off their wealth, leaving the middle class - and the middle class alone - tens of trillions of dollars in the hole.
Moral of the story: the national debt is a middle-class debt.
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