TAX THE WEALTHY?

TAX THE WEALTHY?

OK – let’s be honest. We’re conservatives, but most of us are in the 99% and we’re not interested in paying more taxes. We have some moments when “tax the rich” sounds like a pretty good idea. Traditionally republicans think that is a bad idea because the rich can use their money to create jobs and help us out by doing so. Democrats seem to believe that there is a certain amount of money floating around and the amount is unaffected by who has it. Therefore, redistribute it more evenly so it’s more fair. The argument often comes down to tax the wealthy vs. lower the tax rate for the wealthy. I cringe when I hear these two statements because they are way oversimplified. It’s a very complex issue.

First of all, there is a certain minimal level of funding that the government needs to provide infra structure and take care of the poor and needy. Infrastructure would include roads, utilities, armed forces, minimal regulation and in my opinion, education. People can argue one way or another for additional items to be classified as infrastructure; I won’t address that in this post. We need taxes to provide this funding.

                Taxes should be as low as possible and should be progressive in my opinion. Those who have more money should be able to pay a larger percentage to the government, but it cannot be so oppressive as to kill incentive to make more money. Our capitalistic system depends upon having people with more money be able to use that money to help the economic engine run better and faster. We need to make sure that extra money is available for this use and is not all swallowed up by big government. Tax credits and deductions are used by government to provide incentive to invest and to hire and to purchase items to help the economy move forward. This usually results in the more wealthy people paying a lower percentage of income than the graduated tax rates would normally require. That is OK.

                However, these tax incentives should not be used to allow the wealthy to indiscriminately spend large amounts of money on opulent lifestyles instead of paying taxes. I’m not saying they shouldn’t live luxuriously, just that they should not be given tax deductions and credits to do so. Let them take that money out of their excess funds. I also see no reason why the IRS cannot tell the difference between a small business with an income of one million dollars and an individual taxpayer with an income of one million dollars. Tax the individual if they’re not using the money to grow the economy, not the business. Some may disagree saying the rich should not be told what to do with the money that they earn. I believe that all who are able should pay taxes to run the government. The rich should certainly pay more than the poor. The government has the right to determine what tax incentives will be given to both parties and everyone in between.

                One reason I’m advocating this is that it is true that over the last 50 years in America the rich have become proportionately wealthier than the middle and lower class. A CEO making 10 times the average salary of a worker in 1960 may now make 100 to 1000 times the income of the average worker. This may be a reasonable amount in terms of incentive, but it does produce class envy and distrust. I think this is a real problem for republicans. In addition I believe that republicans don’t want to tax ANY of the wealthy because of lobbyists who, legally of course, pay congressmen lots of money. This idea of not taxing the rich is not just because of philosophy.

                Let’s look at a few examples of tax incentives. First of all there are two basic kinds of investments. One kind increases capital without producing anything, including jobs. The kind we like better, investing in companies that manufacture things for sale, helps the economy to grow and thus helps all Americans. So buying expensive art and then waiting for it to increase in value certainly produces capital. The capital that it produces usually just goes to other wealthy people, who again may use it for consumption or in one of the two ways of investing. Investing in oil futures may also increase capital, but it does it at the expense of the people who need and use fuel. My opinion is this does not help the economy. Another person may buy stock in Apple or General Motors. This action does help the economy to grow.

                Some might argue that a rich person buys stuff and this also helps the economy and this is true to a certain extent. But, what they buy is critical. Typically they tend to buy high end merchandise. Most high end products are really low end products which have been minimally modified by adding features. The profit margin for such products is very high because not much additional manufacturing is required. Buying a bunch of Chevys is far more valuable to the economy than buying a single Rolls Royce. For the same price one could buy maybe 20 Chevys instead of a single luxury car. This would keep 20 times the number of people employed, although the owner of the company would make more on the Rolls. Besides if it was a Rolls Royce the money would probably go to foreign workers, not Americans anyway, so it’s a bad deal all the way around. You might ask why a person would buy 20 Chevys. Of course they wouldn’t, but give the tax incentive to the larger middle class, instead of the rich person; they will buy the 20 Chevys.

Therefore, give selective tax incentives to the rich, depending on where they spend and invest, instead of just reducing tax rates for all of the rich. Tax small and large businesses less all the way around, but even here you also need some selective incentives. The idea is to give tax incentives to people who grow the economy, not just incentives for people to become wealthy or more wealthy.

Elmer Grubbs

A semi-rational conservative