Is Soaking the Rich the Right Answer?

By:  Brian Farmer
02/15/2013
       
Is Soaking the Rich the Right Answer?

Calls echo and re-echo for the government to tax the rich more, always based upon the supposition that such a tax is fair and moral. But is it really fair, moral, or just?

Eat the Rich: there’s only one thing they’re good for Eat the Rich: take one bite now — come back for more Eat the Rich: I gotta get this off my chest Eat the Rich: take one bite now, spit out the rest.
— Aerosmith

There has been a lot of talk about taxes lately, particularly as it relates to the recent fiscal cliff negotiations. Democrats wanted a tax increase on the highest income earners, that is, single taxpayers making more than $200,000 annually and married couples making more than $250,000 annually, as part of any deal, while the Republicans did not. In the end, a compromise was reached and various taxes went up on single taxpayers making more than $400,000 a year and married couples making more than $450,000 a year. That is on top of the two-percent Social Security payroll tax increase, which applied to all wage earners and was actually a reinstatement of the two-percent Social Security payroll tax cut that was part of President Obama’s stimulus plan in response to the recent so-called Great Recession.

The issue of raising taxes on the rich, and the progressive income tax in general, brings to mind a question: What is the difference between a socialist and a scientist? The answer is: If socialists were scientists, they would have first tried out their theories on rats! The topic under consideration here also brings to mind the story about the congressman who was held up on the steps of the Capitol. He was accosted by a thief who demanded, “Give me your money!” The congressman responded, “Do you know who I am? I’m a congressman; I work right here in this building.” To which the thief replied, “In that case, give me my money!”

The question above hints at the economic arguments for or against raising taxes on the wealthiest members of society. The story hints at the ethical arguments. It is worth first focusing on the latter because, if one cannot hold the moral high ground in this discussion, then the economic arguments are almost irrelevant. So long as people believe that raising taxes on the rich is a noble idea, there is almost no way to discredit it. The only way one can try to attempt to convince people that such an idea is flawed is to reveal it for what it really is and to show that it is the very opposite of noble.

The notion that the rich should pay more taxes raises the obvious question: Why? We are told that it is because the federal government is running enormous budget deficits and needs more money. But are the rich responsible for those budget deficits? 

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