Tax the Rich, Screw the Poor

By: - November 9, 2019

Making sense of all the loopy proposals for my happiness emanating from the political spectrum is making me dizzy.  Maybe sick to my stomach would be a more apt description, and I’m nowhere close to wealthy. I’m just glad to be an experienced sailor in case I decide to go to Hawaii after fossil fuels are trashed.

It is comforting to know that our wealthy are a viable source of the extra hundred trillion or so it will take to bring my happiness to fruition. I wasn’t aware they had huge piles of thousand-dollar bills they don’t know what to do with. I am truly Deplorable!

So much for the reported news; a clash with reality is inevitable. Let’s begin by asking: Where does this money come from? It’s not the government; they own nothing. Their only financial activity is shuffling money around between you and me while glomming enough off the top to pay bureaucratic salaries…which leaves tax increases as the only source of the needed trillions.

In that regard, it is useful to note that, adjusted for inflation, the per capita cost of government has tripled since 1960. How much more is there to get? Don’t worry, they say, we will only tax the rich. Although we don’t say it out loud, we think it’s about time those guys felt some pain. Here is the pain they will feel: nada, none, painless. They won’t give up one luxury car, one yacht, one airplane or one summer home. Additional taxes will come out of their portfolio.

And there’s the rub no one ever talks about. Rich people don’t sleep on mattresses stuffed with money. Their wealth is put to work for them in the form of investments in stocks, bonds, loans or other financial instruments, further building their wealth literally 24/7.

On the pie chart of rich people expenditures, where do taxes fall and what do they take away from? Unless under duress, none of “the comforts of home” or accoutrements of wealth will be sold to cover taxes. Money left over from disposable income gets invested.

Using a hypothetical example, David is a young man at the front end of his career and he has an idea for something new which will be attractive, save money, or accomplish any of hundreds of things in the footsteps of progress. The Davids of the world are the keystones of innovation. To implement his idea, he needs money, much more than he has so far accrued on his own.

He will need a place to do his new business, employees to perform the needed tasks and other numerous expenses up front before he is able to produce the first dollar of income. Personal assets are not enough to support a bank loan sufficient to cover his start-up costs.

Through a consultant, David connects with a wealthy person who is intrigued by his idea and, after due diligence, decides to fund start-up costs in return for a piece of the action. David is now able to hire 15 people who might otherwise be on food stamps.

David’s business does very well and, after a year, he is ready to expand and hire 10 more people. Cash is tight —not unusual at this stage of the business cycle— and David contacts his original investor for more working capital. In the meantime, there has been an election and the “tax the rich” mob is setting policy, and so David’s investor must pay more taxes making it impossible for him to meet the request for additional capital.

The 10 people who would have been hired will remain on food stamps. Here is the essence of the quandary: like guns, an economy needs a continuous source of ammunition to go boom. In the case of a prosperous, growing economy, that “ammunition” is a continuous supply of new venture capital. It is like a population without babies: everybody gets old and dies.

While “tax the rich” has political appeal (the government is going to give me more and it won’t cost me a dime), the real damage is done to the folks on the lower rungs of the “success ladder.”

An important sidebar to this story is —for the rich especially— money and power are the major aphrodisiacs of life.  Once the first half has been sated with wealth beginning with a B, the quest for power becomes an obsession, with a major irony: instead of reaching for power in the conservative free enterprise, limited government system which fostered such wealth, they become politically liberal with a governing philosophy concentrating power in the hands of people who can afford to buy it.

And where do they buy that kind of influence? By funding political campaigns of candidates who are for sale. Once elected, they support passage of legislation providing more power-purchasing opportunities. A good example is man-made climate change, the biggest swindle in human history.

This is how the Deep State Swamp is built. The Obama administration loved regulations which governed everything from farm ponds to tail pipes, and built a federal bureaucracy to support them while telling us there was nothing anyone could do about the disappearance of American manufacturing and sub two-percent growth. At the same time, they were railing about the widening gap between rich and poor.

Along came Trump who cut taxes and got rid of regulations, putting people to work in the most prosperous economy in history, thus giving us our title, “Tax the Rich and Screw the Poor.”