There's a critical problem with conventional leftist economic theory that taxing the rich will somehow reach a good result: It doesn't work.
Ok, ok, I'm starting in the middle. Let's back up.
Commonly, as with "health care reform," the primary solution offered by liberals when someone asks from whence the funding is intended to come, is "tax the rich!"
After all, they got money, right? Po' folks ain' got money, so THEY cain' pay, but them rich folks, they got money, take it from them!
If you buy this, you are an idiot.
Whoa, blunt statement!
...That's ok, I will back it up.
The left loves to dismiss "Reaganomics" as "just a package of tax cuts." They also love to claim that it didn't work.
Sadly, they're wrong. (I'm being charitable and assuming they're actually simply ignorant of the facts, rather than deliberately lying to the public.)
So, let's examine the notion of "tax the rich," and why it doesn't work, and why it relentlessly injures the economic circumstances of the poor.
First, what do rich people DO with their money?
They can do a lot of things; they can BUY things, whether normal everyday stuff from Wal*Mart, or luxury goods; they can SAVE it in banks and investment vehicles; they can INVEST it, in stocks directly or through mutual funds, bonds, and hedge fund accounts; they can buy REAL ESTATE; or they can give it to the government, by PAYING TAXES.
Let's discuss each, why don't we?
- First, rich people can BUY things. It doesn't really matter whether it's normal everyday goods, or luxury goods you and I are never likely to touch; when they buy things, they give business to the manufacturers, who employ...
...The poor. That creates jobs, allowing companies the funds to employ, well, YOU.
- Secondly, rich people can SAVE their money. They do this by depositing their money in banks, be it in standard savings accounts, interest-bearing checking, or money-market investment vehicles, it all adds up to the same thing: liquid capital for the banks. It increases their capital reserves, which allows them in turn to invest in stocks - thus passing money along to the companies, which increases their stocks' value, thus improving the 401(k) portfolio values of...
...The poor, as well as allowing the companies greater liquid capital in their own turn, who then employ...
...The poor. That creates jobs, allowing companies the funds to employ, well, YOU.
But the banks ALSO extend loans - to new homeowners, to small businesses, to large businesses. This allows...
...The poor to own homes, as well as get jobs with the businesses invigorated by those funds, who then can employ, well, YOU.
- Third, rich people can INVEST their money, which drives up stock values, increases capital liquidity in companies, and coincidentally increases the value of the 401(k) portfolios of...
...The poor, which means that when they get old, they can maybe retire, instead of spending their twilight years as a Wal*Mart greeter.
But when rich people invest in companies, they also allow those companies to employ...
...The poor, which creates jobs, allowing them to hire, well, YOU.
- Fourth, rich people can buy REAL ESTATE, and since they are far more likely to pay off their mortgage loans than are, say, a couple of "retired" Wal*Mart greeters, the banks can use that money to invest - providing the benefits listed above - or extend loans - providing the benefits listed above - which drives up stock values - benefitting YOU - and allows companies to employ YOU.
- Fifth, and lastly, they can give their money to the government in taxes, and the government can piss it away on meaningless programs with no true value, like, say, $3 BILLION in 12 days on a "cash for clunkers" program, or measuring bovine ges excretion - cow farts - to determine its effect on the so-called "greenhouse effect."
In fact, there is NOTHING the rich can do with their money that does not DIRECTLY benefit the poor - except give it to the government.
The leftists who constantly push for higher taxes on the rich are either mistaken, and have the idea that the rich keep their money in Scrooge McDuck vaults somewhere, or they are deliberately planning to bring our entire population into equal degrees of poverty, as communism always does.
