Wealth: The Democrats Don’t Get It
THE PUBLICATION OF our
“rich list” will fan the fevers of plundering politicians, especially those “soak the rich” Democratic presidential candidates looking for seemingly easy sources of loot to finance their socialist fantasies. They're delusional.
To hear these White House wannabes tell it, you'd think the people on our 400 list are like the Disney character Scrooge McDuck, sitting in their money bins loaded with coins, gold, jewels and paper currency. Tax it, and voila! You've got all that lucre for your pet projects. It just ain't so! Look at what the people on this list actually own, and you'll quickly see that only a small portion of their assets are in ready cash. Anyone who's ever owned a home or a car can attest to the distinction between property and cash.
A wealth tax would mean less wealth to tax. Taxing the mere possession of property and securities, by definition, makes them less valuable. Many people would have to sell assets to pay for the tax on what they own.
The value of an asset, especially a financial one, can be heavily influenced by the health of the economy. The radical tax and regulatory schemes (regulations are a form of taxation that today costs us nearly $2 trillion, which is more than the GDP of all but a handful of countries) proffered by the Democrats would slow the economy to a crawl. This, in turn, would cause tax revenues to fall far below expectations. Despite thousands of years of experience, these political hacks cavalierly assume that costly, burdensome rules and higher taxes don't affect people's ability to do business.
Wealth taxes would be an unprecedented assault on people's privacy that would make the transgressions of the so-called FANGs look like small, innocent transgressions. Government bureaucrats would have the right to demand lists of all your assets—as well as the right to examine your home, storage facilities, brokerage accounts, bank accounts and everything else—to determine if you have crossed the wealth-tax threshold. They would, at a click, have—for the same purpose— access to the records of everything you have bought or sold.
This is the road to serfdom.
Profit Is Good, Not Evil
DEMOCRATS (as well as some Republicans) don't understand the crucial role profits play in a vibrant economy. Their plans for higher income, business, payroll and death taxes, not to mention new exactions such as a levy on carbon emissions, would make for a bleak future, because such taxes would seriously harm the key sources of capital: savings and profits. Without investment the economy will stagnate. As the legendary economist Joseph Schumpeter (“creative destruction”) pointed out, profit is essential for progress. It, like depreciation, is really a business expense. It funds expansions and the cost of productivity improvements. It must replace the capital destroyed by new technologies. The internet, for instance, washed away tens of billions of dollars in legacy newspaper and
magazine wealth. Most startups flop, consuming savings. Existing businesses constantly fail, eradicating capital. Schumpeter recognized that commerce's successes must not only cover their own expenses and reward their investors but also, in essence, recover the costs of unsuccessful ventures.
Ample capital for startups is essential for the discovery and development of new products and services that will enhance future living standards. Like experiments in the laboratory, startups and research and development are crucial to gaining new knowledge that will enable us to advance.
Profit also provides critical information about people's preferences. A high-margin product or service will attract competitors, which will, in turn, offer buyers an improved and/or cheaper version.
Truths About European Paradises
FREE COLLEGE! FREE healthcare! Free day care! Huge minimum wages!
Europe, in general, and Scandinavia, in particular, are hailed by Democrats as models for how the U.S. should do things. Their social welfare programs, after all, are so much more generous than ours.
What these pols leave out is that the non-rich get whacked hard for the costs of these freebies.
Europeans' income tax rates are higher than ours. All of these countries are afflicted with a super sales tax called the value-added tax (VAT) with rates that routinely range from 20% to 25%. With few exceptions in the U.S., sales taxes are around 6%. Wouldn't it be fun during the next Democratic presidential debate to ask each candidate how he or she would avoid the imposition of an effective sales levy of 20% on just about everything we buy in order to cover the costs of European-style healthcare? To get a sense of what we'd hear, just take a look at how Elizabeth Warren responded when Stephen Colbert pressed her on whether her healthcare nostrums would mean socking it to the middle class with higher taxes. She clumsily tried to dance around the question, embarrassing herself. At least Bernie Sanders told the truth: Yes, they would. (But then in Obamaesque “You can keep your doctor and health insurance” style, he claimed they would come out ahead because medical care would be so much cheaper and better when Washington bureaucrats ran it.) Poor Colbert was pilloried by the left for being so mean to Warren.
As if more income taxes weren't bad enough, European nations are also crushed with sky-high payroll levies. In the U.S. the maximum tax rate for the payroll tax dubbed “FICA” on your pay stub is 15.3%. In Europe the norm is 35% to 50%!
Indeed, the best things in life are not always free.