Billionaire Warren Buffett and economist/actor Ben Stein have made public pronouncements supporting higher taxes for "the rich." In a new column posted at Human Events, economist Mark Skousen explains why they're wrong.
Of course, Buffett and Stein are correct in one way: The rich can afford to pay more in taxes. The rich (I’m in this category) have surplus wealth that we can draw on to send to Washington.
The real question: Is that a good idea?
Suppose an American entrepreneur earns $1 million, and is able to save half of it after paying taxes and his living expenses. He can use that half a million dollars in a variety of ways:
1. Expand his business, or start a new business (creating new jobs).
2. Invest in other successful businesses, i.e., invest in stocks and bonds, or through private venture capital.
3. Place funds in bank savings or CDs, which in turn might be loaned out to businesses.
4. Give money to good causes—charities, churches, think tanks and alma maters (e.g., scholarships for needy students).
5. Make improvements on his home by hiring skilled workers, etc., or spend the money in other ways.
Or send the tax money into Washington in hopes that the money will be used appropriately.