Would you work just as hard if the government took 90 percent of what you earned over a certain amount? Fabian Kindermann, from the University of Bonn, Germany, and Dirk Krueger from the University of Pennsylvania, not only think you would but that it would be good for America.
“The top tax rate that makes all citizens, including the highest 1 percent of earners, the best off is ‘somewhere between 85 and 90 percent,’ Krueger told The Huffington Post. Currently, the top rate of 39.6 percent is paid on income above $406,750 for individuals and $457,600 for couples.
“Fewer than 1 percent of Americans, or about 1.3 million people, reach that top bracket.”
Before I deal with the economic implications of this argument, I want to take a look at the politics of it. If “fewer than 1 percent of Americans, or about 1.3 million people, reach that top bracket,” there is no incentive for them to vote against raising the tax rate to 90 percent since they believe it will most likely never affect them.
Then there’s the sin of envy. The covetous person says, “I wish I had what he has, and I’m miserable that I don’t have it.” Envy is quantitatively different. “I’d like to have what he has, but I know I can never get it. Nobody should be allowed to have it or at least that much of it. I’ll work to destroy it. Maybe I can get the government to make it illegal to own or too expensive to keep.” The Bible describes envy as “rottenness of the bones” (Prov. 14:30; Gen. 26:12–15).
One of the first steps to success is not to be concerned with what’s in somebody else’s wallet, bank account, or stock portfolio.What’s more, the professors’ call for such a huge tax, no matter what the reason, is theft.
When the income tax amendment (16th Amendment) was passed, at the time only the rich would be paying it. The Amendment was sold to the people as a tax on the rich, thus, playing to the sin of envy.
But inflation moved everybody up into higher and higher tax brackets. So the people who did not protest the 16th Amendment when it was ratified because only the “rich” would be taxed set the stage for the progressive income tax, the IRS, and the welfare state. Now everybody is taxed.
It’s obvious that these two professors, paid with confiscated tax dollars as university professors, don’t know much about real-world economics. I wonder if either of them has operated a business.
If a person is going to be taxed 90 percent on any money he makes over $400,000, then what incentive does he have to make more than $400,000 if he’s only going to get 10 percent of it?
And where does the confiscated money go? To the government. And what does the government do with it? Pay it out to people who don’t work. What incentive do they have to leave the constraints of poverty if they’re being paid to remain poor?
Tax dollars are used to buy votes.
Rich people create jobs for other people. Their millions of dollars are spent and invested. If it’s spent, people make money selling what the rich are buying. Rich people buy new products when they are very expensive. In time, however, the cost plummets because the research and development costs have been recouped. Consider what the first home computer cost or the first cell phone. Only the rich could afford them. Now they are everywhere.
If the money is invested or loaned, it helps in the creation of new businesses and products. This means employment and new services for everybody at an ever lower cost.
Don’t envy or tax the rich. Admire and try to be like them.
You don’t need to have a PhD to understand any of this. It seems that you need a PhD NOT to understand how an economy works.