Posted on 09/08/2024 10:08:00 AM PDT by econjack
There's a lot of discussion these days about Capitalism versus Socialism as an economic system. Most Democrats, including Harris and other left-leaning people, favor Socialism. The key tool for them to bring this about is to tax the rich and give it to the poor to even out the distribution of income. That is a flawed solution to the problem.
First, it assumes that an equal distribution of income is a desirable goal. It is not. It's the human condition to want to improve one's lot in life. If the gov't makes everyone's income the same, it removes the desire to improve, innovate, and grow.
Second, such a policy provides an incentive for the rich to go elsewhere to escape the taxes that are used to redistribute income. The exodus from high-tax states (e.g., CA, IL) is proof, as is the Brain Drain from England in the 1960's and 1970's and the wealth migration from South Africa, Spain, Cuba, and elsewhere.
Finally, politicians have tried this scheme for decades yet the distribution of income figures have barely moved. Why? Because politicians say one thing but do another. Don't forget: it is the politicians who wrote the Tax Code and, if they were serious about penalizing the rich, who are also political donors, they would have already change the Code to accomplish that goal.
Instead, lets use Capitalism as the assumed economic system. First, it rejects the idea that society wants an equal distribution of income. Instead, it wants members of its system to enjoy a rising standard of living no matter what's happening to the distribution of income. As example will show the difference.
Suppose you and I are the only two people in the economic system. I have 90% of the income and you have 10%. Under Socialism, politicians pass tax plans that, let's assume, leaves me with 80% of the income and you now have 20% of the income. Note your gain only comes at my expense. That is, income redistribution is a zero sum game.
With capitalism, the rich invest in ways that create jobs and economic opportunity. Under this system, the size of the economic pie increases. Note what this means: Even if your share of the economic pie stays at 10%, your income and standard of living increases because of economic growth.
Also, as Thomas Sowell has shown, all people move between economic brackets through time. That is, when you're in high school flipping burgers, your in the lower 10% of the income distribution. Ten years later, you might be in the 30% bracket. When you're 50, you might be in the 80% bracket, and when you retire, it might drop down to the 60% bracket.
Socialism has never worked anywhere in the long run because income redistribute penalizes those who invest and create jobs, economic opportunity, and economic growth. The goal of an equal distribution of income means everyone's paid the same regardless of effort. The system stagnates for lack of economic growth and the system eventually dies.
The arguments today are for the socialism of republicans or the socialism of democrats. Both parties support massive top down government that either supports the finger on the scale of tax breaks toward certain interest, or grants and other expenditures toward certain ventures.
There are no capitalist out there. We have lobbyist and other rent seekers directing government expenditures and directions to what they want. Capitalism died long ago, also the responsibilities and ownership of said capital.
In “distribution of income”, I’m using it as a noun, not a verb. It is a statistic that tells how income is spread across those who earned that income. It is not being used as a verb here.
Not entirely true. There are taxes on both wealth and income in the US and, if some leftist get their way, there will be a tax on unrealized income (e.g., tax on potential capital gains).
Capitalism has to do with capital; Socialism has to do with governance.
No. Both are concerned with the control of capital. One promotes free ownership of the factors of production the other promotes gov't ownership of those factors. Yo9u recognize this in your 3rd paragraph.
Not true. There is plenty of private capital with individuals having say over who owns it and how it is used. Even my paltry savings account is private capital. There are plenty of capitalist out here, but, alas, there are more who just want the capital with no effort and that where the political socialists like the Democrats dwell. They promise to take from those who have and give to those who don't have. This transfers capital from productive uses like investment to consumption. You can only do that so long before the system fails. Socialism is like trying to lift a bucket while you're standing in it.
Not true at all. Your savings account is backstopped and protected by
I still disagree. There are plenty of stores of capital that have nothing to do with the FDIC. If you choose to do so, you could store your capital in Switzerland in the form of gold bars.
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