Whenever I hear Obama or the Democrats talk about soaking the rich (usually not coached quite that honestly, though — usually it’s about “making them pay their fare share” or variations on “they make too much money in ways we don’t like” or such), I find myself arguing against them. This usually gets me accused of “sticking up or the rich” or the like.
I tend to take that position for several reasons. And none of them are overly toadying.
First, I’m not an overly jealous sort. I don’t see someone else’s success as coming at the expense of mine. It’s rare that I see someone else doing well and resent my own circumstances or begrudge them their own.
Secondly, and more importantly, I try to look at things rationally, and with an eye towards the big picture. Suppose the CEO of my company makes a big hunk of money somewhere in the vicinity of 32,100 times as much as I did last year. (There are advantages to working for a very large, publicly traded company — such as one’s top boss’s compensation being public.) Do I resent that?
Well, yeah, a little. I mean, I’m only human. I didn’t get a raise at all last year. None of the employees got raises last year. And a lot of us had our hours cut and other compensations reduced. (We didn’t have the best year.)
But do I think that the government should do something about it?
As I said, I try to think these things through. And from what I know about government, several things immediately come to mind.
First up, do I trust the government to fairly and intelligently and efficiently decide how much is “enough” for businesses to pay people? I already see how that works at the low end, with minimum wage laws, and I think that’s badly done. I simply don’t think the federal government can come up with a magical “one size fits all” formula that works, And if they don’t find that single formula, then the exceptions will be a playground for lobbyists and special interests, where everyone will pushing their cases for why they should be allowed to pay more — or exempted entirely.
Secondly, and far more importantly, where do I think the money will be more appropriately spent?
Let’s say my ultimate boss pulled in around 9 million last year. (A certain CEO of whom I am aware did just that.) What’s he going to do with it?
He’ll invest a bunch of it in things that’ll make him more money. Which is money pumped back into the economy, specifically in areas that grow the economy.
He’ll spend a bunch on personal luxuries and benefits. Those will have to be bought from businesses, made by workers, using raw materials.
He’ll save it, putting it in a bank. Which will then re-lend it out.
In brief, the vast majority of it will be put right back into the economy. Our economy is not a closed system, a zero-sum game.
On the other hand, let’s say the government decides to impose confiscatory tax levels on compensations above what it considers “fair.” What will happen with that money?
First up, don’t believe for an instant that it’ll be applied for whatever the government said up front it would be used for. We’re already seeing that with TARP.
When TARP was passed, it was sold as loans to troubled banks that would repay the money, and — after interest — would be a net gain for the government. The money would be applied directly to the debt.
But the Obama administration is already planning on spending that money on new programs, with a casual sop to the existing law by saying “we’ll get that law changed.” They haven’t even introduced a bill to do that, but they’ve built that presumption into their budgets.
Pretty much any time the government talks about tax or other revenues being “dedicated” to a specific cause, that promise has an extremely short lifespan. In short order, it gets dumped into the general fund and spent on whatever the government chooses.
Which brings up the second point: how will the government spend that money?
Look at how the government spends money now. Anyone want to argue that it’s efficient? That it’s, by and large, productive and meaningful and worthwhile?
It’s been a truism for years that if you want to find the most expensive, least efficient, most corrupt way of doing something, have the federal government do it. And while there are exceptions, it’s true far more often than it’s not.
Besides, there’s a fundamental question at play here: whose money is it, anyway? Who earned it? Who negotiated for it, who showed up and performed as agreed for it, whose name was on the check?
It wasn’t Uncle Sam. And while he’s entitled to a portion of it (taxes being a necessary evil), there has to be a limit. There has to be a certain level of reality involved.
I have some friends who are very devout, who tithe to their church. They set aside 10% of what they earn to repay God for their blessings, to pass it along, to pay it forward.
If the Creator of the Universe can get by on 10%, why does the government deserve so much more? The current highest marginal tax rate is 35%, and Obama wants to raise that. And with CEOs, they’re talking about making it 100% above a certain level (to be determined later).
Thanks, but no thanks.