Eat the Rich?

There is a growing class warfare movement afoot in America that is best exemplified today by the so-called Occupy Wall Street groups that are apparently protesting anything and everything relating to personal and corporate wealth.  Notwithstanding the lack of a concisely expressed objective by these folks, it seems clear that there is plenty of envious anger directed at those whose personal success has far exceeded their own*.  This general notion is fueled, naturally, by some of the wealthy and powerful themselves who irresponsibly make factually questionable statements to facilitate broad social and economic changes that will ultimately serve their own interests.

Recently, for example, ultra-wealthy Warren Buffet implied that the rich in America are getting away with murder by not paying “their fair share” of taxes.  He also claimed – technically correctly – that his 2010 tax liability was a far lower percentage of his income than was his secretary’s.  Notwithstanding that any notion of fair is purely subjective and likely to change with a given person’s interest and agenda, his statistical analysis in this particular case is very misleading and borders on the downright disingenuous.

It has been a long time since Mr. Buffet has worked a traditional job and as such he does not pay traditional income taxes.  As with most extremely wealthy people, his income in this sense is not derived from wages earned while performing a job but rather largely from dividends earned from personal and corporate investments.  Such investments are in fact taxed at a significantly lower rate than most income taxes, but what is not mentioned by Mr. Buffet and his supporters is that dividends are paid from corporations’ net income – that is, from income remaining after revenues have been recognized and income tax liabilities paid.  In short, this means that the dividends-derived income that Mr. Buffet receives has already been taxed at applicable income rates.  One can easily observe there is a huge difference between the message that the superrich are paying lower rates than secretaries, and the reality that the superrich are drawing income from sources that have been double-taxed.

Mr. Buffet does make some good points regarding the existence of loopholes and inconsistencies in how taxes are applied to various corporate structures and types, but the broad and irresponsible way in which he tried to express this analogously is exactly the type of rhetoric that drives the weak-minded and ignorant in society to adopt the “eat the rich” mantra.

Additionally, there is a special level of hypocrisy on display when people such as Mr. Buffet make such claims.  Rather than fashioning himself as a wealthy martyr, why not just go ahead and voluntarily contribute his own self-determined “fair share” to the nation’s debt reduction if this issue is in fact so important to him?  There are few things quite so insultingly hypocritical as ultra-wealthy individuals such as this (and in Hollywood) vilifying the very human and beneficial drive to be successful from the perches high atop their ivory towers.

There is a practical side to this debate that cannot be ignored.  America’s richest people already progressively pay the lion’s share of the overall income tax burden – though it is our unborn children who are involuntarily being saddled with the majority of the debt load we are currently accruing.  In 2008, for example, the top 10% of earners in the nation paid almost 70% of the income tax bill.  The top 50% of earners paid almost 98%.  But more immediately important to this issue, aggressively taxing the rich will not solve our current problems and politicians are certainly not ignorant to this fact.  The deficit spending generated by untenable social and frivolous defense programs has put the bar far too high for simply raising rates to realistically account for.  They espouse this approach not because it is sound economically but because they know it plays to our more primitive envious instincts and serves their immediate collective interests politically.  In short, they vilify the rich to foster agitation in their political base – amongst the young, especially.

Targeting progressive taxes at corporations makes them less competitive domestically and internationally – which actually makes the taxation in question regressive in terms of economic growth and consequent job creation.  Progressively taxing the wealthy reduces the private cash available in a free market for much needed investment in corporate ventures.  This makes the government the de facto investor of necessity – something anyone who has been following the Solyndra debacle can recognize as a bad idea.  For the planned economy supporters that trumpet “corporate greed” as the source of all that ails us, this is a boon.  For those that believe consumer empowerment through choice is important in a free society, this development should be quite frightening.

Ethically, there is no such thing as a fair tax, but there are structures that are certainly more equitable than others.  Targeting certain entities or individuals over others with progressively impactful rates does not fit this criterion.  From a common sense perspective (if such a thing is truly common), voters who share equitably in the power to utilize tax revenues ought to share the burden equitably as well.

I, for one, do not support income taxes at all from an ethical perspective because this approach effectually places a tax on the fruits of our labor – something we have a natural right to enjoy without involuntary interference from a power-wielding body of our fellow citizens.  Absent the obvious associated violence, there is not much difference in my mind between this approach and antebellum slavery.  Consumer-oriented taxation is the more ethically favorable approach to taxation for me because it is inherently based on voluntarism (the greatest power a free people can exercise over their government) and does not ride on one’s labors. But absent this possibly unachievable goal today, a flat-rate income tax that eliminates all loopholes is another alternative that can level taxation somewhat in relation to spreading the burden to everyone who potentially wields a vote on how to spend the revenues.  This approach would actually increase revenues in most cases, even in reducing the overall rate.  But to tackle the national debt and annual deficits, spending must be dramatically curbed which can only be realistically achieved if the citizenry forces government to exist and operate within its very limited legitimate role.

Undoubtedly the tax code in the United States is horribly convoluted and allows many – from all walks of life – to avoid this equitable share of the burden.  But progressively vilifying those who have achieved success through weaponized taxation is not the answer to diminish social and economic unrest or the growing national debt, nor is it in keeping with individual rights, constitutional protections, and the justifiable role of government in our lives.  We have no hope of long-term survival as a cohesive nation if we cannot develop some greater degree of principle in our collective dealings with each other.  The bottom line is that using government as a tool or weapon to wield against someone else is not in keeping with freedom or prosperity and will inevitably cause much more suffering and despair than it can ever solve.

The character inherent in the American people has done all that has been accomplished; and it would have done somewhat more, if the government had not sometimes got in its way.  For government is an expedient, by which men would fain succeed in letting one another alone; and, as has been said, when it is most expedient, the governed are most let alone by it.  Trade and commerce, if they were not made of india-rubber [sic], would never manage to bounce over obstacles which legislators are continually putting in their way; and if one were to judge these men wholly by the effects of their actions and not partly by their intentions, they would deserve to be classed and punished with those mischievious [sic] persons who put obstructions on the railroads.

*On a side note, if rising student loans and healthcare costs are among the chief complaints expressed by the protestors, as the Huffington Post reports, why are these groups assembling on Wall Street rather than local university and college campuses or hospitals?  Just something to consider…

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