Skip to comments.Refuting the economics behind the 'rich don't pay their fair share' fallacy
Posted on 10/05/2011 2:00:33 PM PDT by NevadaPolicyResearchInstitute
See yesterday's post for a refutation of the "rich don't pay their fair share" fallacy.
Today, I'd like to address the economic philosophy behind that statement and why it is also wrong.
The unstated, underlying economic assumption that many leftists make is that the rich have to pay their "fair share," because the rich are wealthy only because they have taken from society or the poor and that government must right that wrong through taxes or "spreading the wealth around."
Nothing could be further from the truth.
What's amazing about free-market capitalism is that the way you get rich is by meeting the needs of other people and making their lives better. Generally, rich people are those who've created the most wealth or value for other people. They've grown the economic pie.
This idea of creating wealth is critical. If you think the amount of wealth in the world is limited, it might make sense for government to take from the rich and give to the poor, because the economic pie is finite and if someone has more, than someone else has less.
But that's not the way the world is. The amount of wealth in the world is rapidly increasing.
You have to make a distinction between wealth and money. Wealth is stuff cars, cell phones, medical care. Money is the ability to buy stuff. Theres little point to having $300 billion in money, if theres nothing to purchase.
An easy way to think about this is to imagine yourself with your car, income, internet access, indoor plumbing, A/C, refrigerator, cell phone, TV, etc. living in the early 1900s. With those modern conveniences, you'd be the wealthiest person in the world. John Rockefeller would have more money than you, but you and I would have the best stuff and the best standard of living.
Your TV is bigger and gets more channels. He never had a microwave. Your cell phone is better than any form of communication he had. He never had a DVD player or even a VCR. Through the internet, you have access to more information at virtually no cost than he could have imagined. He never had access to a CAT scan, MRI or Lasik. The twelve-second flight at Kitty Hawk didn't even occur until 1903.
I drive a 1994 Mercury Sable, and I have a better car, in terms of performance, than Rockefeller, a man who would have been worth over $300 billion in today's dollars, ever did.
Think about that. It's stunning to consider.
You and I are wealthier in terms of stuff than John Rockefeller, who would have been worth over $300 billion in today's dollars.
Because over the last 100 years, thousands upon thousands of inventors and entrepreneurs have created stuff that made the lives of people they didn't even know much better off.
Why did they create and invent? While, given the complexity of human motivation, it's impossible to give a definite blanket answer, for most entrepreneurs making money is a significant motivation. And the best way to make money is to create something that another person will pay for. And what do people pay for? Things that improve their lives.
As a result of entrepreneurs ability to make things that are beneficial to others, some of these inventors and businessmen and women became rich some fabulously wealthy.
Their wealth has not detracted from our wealth or quality of life. In an uncountable number of ways, you and I are indirect beneficiaries of the wealth they created.
Rich people aren't the enemy of the poor. In many ways, rich individuals (through their businesses and inventions) have made the lives of the poor in America better than the lives of rich Americas 100 years ago.
Via the Heritage Foundation, consider these facts about poverty in modern America.
80 percent of poor households have air conditioning Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks Nearly two-thirds have cable or satellite television Two-thirds have at least one DVD player and 70 percent have a VCR Half have a personal computer, and one in seven have two or more computers More than half of poor families with children have a video game system, such as an Xbox or PlayStation 43 percent have Internet access One-third have a wide-screen plasma or LCD television One-fourth have a digital video recorder system, such as a TiVoAs he often did, Milton Friedman explained this best. Enjoy this clip of him talking with Phil Donahue about how the masses escape poverty through the free market.
Because the economic pie is always growing in a free-market economy, the richer the rich get, the better off the rest of us are.
It’s primitive superstition that people get rich at the expense of the poor.
Entrepreneurs create wealth generators that shower the people under and around them with wealth they wouldn’t otherwise have.
Taxing people and giving money to people will eventually sputter and die, because the source of wealth will dry up.
It will run out of gas like a hybrid car that runs out of gasoline when the power company has a blackout.
Take one filthy rich inventor/entrepreneur ANY inventor/entrepenauer, ie Henry Ford, Bill Gates, Wilbur-Orville Wright etc and then calculate the flow of money to the treasury as a DIRECT result of their efforts. Sheesh.
1) increasing efficiency of production
2) increasing capital accumulation
3) increasing saving and investment
4) increasing total productive ability
5) increasing standard of living
6) increasing demand for labor
7) increasing average money wages or employment or both
8) increasing capital intensiveness
9) increasing technological progress and technological advances
10) increasing economic progress
11) increasing innovations applied to production
12) increasing ratio of (demand for capital goods)/(demand for consumer goods)
13) increasing ratio of (production of capital goods/(production of consumer goods)
14) increasing productivity of labor
15) increasing production of consumer goods
16) increasing supply of consumer goods
17) decreasing prices for consumer goods
18) increasing real wages
19) increasing share of consumption by wage earners compared to the rich
20) preserving and protecting the natural rights of the rich, helps preserve and protect the rights of all, including to non-rich
The problem with the Marxists is that their “wealth” comparisons are always about you and someone next to you; not about you and your ancestors, or what may yet be when your “wealth” is compared with your children’s lives in the years ahead.
The problem with the Marxists is that their “wealth” comparisons are always about someone you are suppose to think is greedy, or someone who is supposed to think you are greedy.
The problem with the Marxists is that their wealth comparisons are not about wealth at all, they are about wealth “equality”.
The problem with the Marxists is that their wealth comparisons, and where their wealth comparisons lead their policy prescriptions, is that their agenda cannot create wealth because it is not concerned with wealth creation. It is only concerned with the distribution of “wealth”.
Their policy prescriptions can only steal from the economic pie, not create it and not grow it. Socialist policies are always policies blessed with diminishing returns. In that regard Europe is leading the way today.
And all the Democrats want is for America to follow Europe down that road of diminishing returns. Why? Because they are the tools, the useful idiot hand maidens of Marxist fools like Obama.
Funny thing is whenever I deal with socialists, they always talk about how Society this, Society that and these people like to really butt in into your personal life and judge you on how you do things and make comments that whatever you do is wrong. And they are so full of themselves and make sure you know their “superiority” !
Always lost in the discussion is the fact that taxes are a component in the prices of goods and services produced.
In other words, if you increase taxes on the “rich”-that would be our economy’s employers, investors, and corporations-then in the end consumers will pay the increase. Rich and poor.
It is simply not a free lunch for those clamoring for the government to increase taxes on everyone but them.
Never has been.
This is the angle we should use when discussing the tax issue, IMHO.
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