Why Taxing the Rich Does Not Work

Real Clear Markets ^ | 08/09/2011 | Louis Woodhill

[SeekAndFind]

President Obama has said that he wants to "spread the wealth". He proposes to raise taxes on "the rich" to get more money for "stimulus" spending, such as longer unemployment benefits. Let's look at how this "spread the wealth" thing would actually work.

Joe Lunchbox works in a factory owned by Reginald Bigbucks III, a billionaire. Obama stops at the factory during a "Jobs" bus tour through the Midwest. Joe and his coworkers assemble in the lunchroom to hear Obama speak.

"Good news," the president tells the workers. "We are going to be spreading the wealth. We are raising taxes on millionaires and billionaires-like Reginald Bigbucks III-and we are going to spend the money to benefit the middle class, people like you."

Joe raises his hand. "What do you mean?" he asks. "I mean, like, what is actually going to happen?"

Obama explains, "To pay my new taxes, Mr. Bigbucks is handing this factory over to the federal government. We are going to tear it down and sell it for scrap. Then we are going to use the money to extend unemployment benefits for another 99 weeks."

"Oh," Joe sighs. "Well, then, I guess that I'm going to be needing those unemployment benefits."

If the above example strikes you as fanciful, consider the following. To "tax" is to take away something from someone and give it to the government. "The rich" are rich because they own a lot of assets. So, what it means to "tax the rich" is to take assets away from rich people and transfer them to the government.

So, what are the assets that the rich own? The rich don't have money bins full of cash, like Scrooge McDuck. Rather, they own things like factories, office buildings, and oil wells, either directly, or indirectly via stocks and bonds.

In other words, the rich own most of the "nonresidential fixed assets" of the nation. These assets certainly count as "wealth", but what they are physically are the tools that workers use to produce America's GDP.

The government doesn't want factories, office buildings, or oil wells. It wants cash. So, taxing the rich forces them to liquidate assets. This liquidation is accomplished financially, rather than by actually tearing down factories and selling them for scrap.

CLICK ABOVE LINK FOR THE REST

[Darksheare]

Well, since I’m doing this as a field enlistment, they weren’t certain what they’re doing with me either.
So it’s, “Uh, well. How about this? Does this work?”
Like I’ve said, this is very different from my previous enlistment.

[fanfan]

Thanks Cindy.