Even if you buy into the notion that “taxing the rich” is a fair and appropriate way to raise more money for government programs, Thomas Sowell‘s latest column ought to convince you that the idea doesn’t work.
Sowell starts with a discussion of efforts to tax the rich 90 years ago, then applies the lessons to today’s political landscape.
If anything, “the rich” have far more options for putting their money beyond the reach of the tax collectors today than they had back in 1921. In addition to being able to put their money into tax-exempt securities, the rich today can easily send millions — or billions — of dollars to foreign countries, with the ease of electronic transfers in a globalized economy.
In other words, the genuinely rich are likely to be the least harmed by high tax rates in the top brackets. People who are looking for jobs are likely to be the most harmed, because they cannot equally easily transfer themselves overseas to take the jobs that are being created there by American investments that are fleeing high tax rates at home.
Small businesses — hardware stores, gas stations, restaurants — are likewise unable to transfer themselves overseas. So they are far more likely to be unable to escape the higher tax rates that are supposedly being imposed on “millionaires and billionaires,” as President Obama calls them. Moreover, small businesses are what create most of the new jobs.
Why then are so many politicians, journalists, and others so gung-ho to raise tax rates on the rich?
Aside from sheer ignorance of history and economics, class-warfare politics pays off in votes for politicians who can depict their opponents as defenders of the rich and themselves as champions of the working people. It is a great political game that has paid off repeatedly in local, state, and federal elections.
