Taxing The Wealthy

Economics 101 includes a basic principle many never learned. It relates to one of the only two certain things in life: taxes. In every society those in authority want them and no one else does. In Ireland recently I learned why old castles had so few windows. There was a tax on daylight. It was based on how much light was allowed in a house. Wait until Washington hears of that one.

In America the subject of taxing, tax breaks, and deductions rages. One theory is tax cuts favor the rich. I should hope so. Why? Because that benefits everyone else. That is the purpose. It is to allow entrepreneurs to have more money so they can invest it in products and services. That provides jobs and jobs put money in the pockets of those less wealthy.

The investments by entrepreneurs is a way of putting money into the pockets of others. In doing so it alleviates the government having to put money in their pockets.
Elemental observation number two. Higher taxes do not keep the rich from being rich. They know how to protect their wealth. Some persons who are the strongest advocates for increased taxes are very wealthy. They have made and sheltered theirs.
Conversely higher taxes keep some people from getting wealth. Higher taxes discourage adventurous investors from creating jobs that generate taxes and salaries for employees. This results in unemployment.

Tax cuts allow money to circulate more freely among the people rather than through government. An example of this was the recent tax break related to the purchase a heavy equipment. 60% was allowed on new equipment and 30% on used equipment. This allowed one local contractor to purchase 40 pieces of heavy equipment. This meant jobs were provided for the people selling the equipment, making the equipment, and those wage earners personally purchased items they needed and paid taxes. Without that tax break none of that would have happened. Those people would have been unemployed. That local scenario was played out countless times across America.

Lamentably some wealthy persons have selfishly spoiled this cycle. Critics of tax breaks use them as the norm. Like all systems it is dependent upon honest people to make it work.

There are numerous horror stories of government agencies misusing tax funds. Waste in government is a well documented reality. That doesn’t mean taxes in general should be abolished.

Lowering tax rates encourages investments within the country. Higher tax rates sends investors looking for foreign markets with a more favorable tax rate. It robs America of jobs. Fewer jobs mean more unemployed people looking to the government for money they could have otherwise earned in a job the government taxed out of existence to get the money to give them.

It is true that wealthy entrepreneurs make money. They also take the risk of possibly losing it.

The principle involves an old Biblical axiom: “Give and it shall be given unto you.”