WASHINGTON: Congresswoman Alexandria Ocasio-Cortez (D-NY) wants to raise the top marginal income tax rate for those earning more than $10 million annually. Ocasio-Cortez’s plan would increase the income tax rate from the current 36% to 70%. Democratic Senator Elizabeth Warren has suggested that not only should the federal government highly tax income, but should also tax wealth.
She suggested a 2% or 3% annual tax should apply to those who have earned large amounts income and have accumulated at least $50 million of wealth. With a hearfelt Thank you very much to the burglars stealing their wealth.
Americans deserve to keep what they have earned.
Warren thinks this is fair and society’s welfare would improve if some of the wealth is shared more evenly. She reasons that those who have earned so much don’t really deserve it all. “After making a killing from the economy they’ve rigged, they don’t pay taxes on that accumulated wealth. It’s a system that’s rigged for the top if I ever saw one” Warren recently tweeted.
The rich & powerful run Washington. Here’s one benefit they wrote for themselves: After making a killing from the economy they’ve rigged, they don’t pay taxes on that accumulated wealth. It’s a system that’s rigged for the top if I ever saw one.
— Elizabeth Warren (@ewarren) January 24, 2019
They believe that an individual’s success, particularly if it is a great success, is not primarily the result of the individual, but rather the result of the individual being helped by others. As such the successful individual should share their wealth. Nothing could be further from the truth.
The explanation is really simple to see
Option A – Socialism
Suppose we have 100 people who get together and produce 1000 units of output. At the end of the day, it must be decided how the output will be divided. There are basically two choices. One is we could simply divide the output evenly so that each of the 100 workers receives 10 units.
This is the theory of a communistic society.
Workers are encouraged to contribute according to their ability and are paid according to their need. Since all have about the same need, everyone receives the same amount of output.
In reality, there may be some variation, but all members would receive the same 10 units.
This represents an equal distribution of output so there would be no income inequality.
The problem with this system is that there is no incentive for any individual to try to increase their production. That’s because no matter how much more is contributed, the payment received would be exactly the same as other workers. As a result of the lack of incentive, these economies tend to stagnate.
Option B – Capitalism
The second choice for dividing the output is to pay each worker according to the value of their contribution. In that system, there may be one individual who figures out how to make the product better, organize the workers better, improve efficiency and determine the exact needs of the consumers.
That person may get 20 or 30 units of output.
Another worker who contributes very little to the production process receives very little output, perhaps receives only 2 or 3 units. This is not an equal distribution of output. Nonetheless, many argue it is a fair distribution since each worker is paid according to the value of their contribution.
That’s the theory of Capitalism. Capitalists see much more advancement since each worker knows that if she can increase the value of her contribution then she will receive more output.
Each time an action takes income away from earners and gives it away, growth slows. Ultimately the more growth in an economy the higher the standard of living and the more opportunity that is available.
For those willing to work for it.
The US needs lower, not higher, taxes.
Alexandria Ocasio-Cortez and Liz Warren want to take income away from the biggest contributors in order to give the money one earns to those who have contributed less. Including those that have contributed nothing.
This is anathema to the effort or improving a standard of living for all.
There are nearly 8 billion people in the world today. Jeff Bezos, the owner of Amazon, figures out how to make the retail sale of goods much more efficient. He takes selling products to the internet, establishing a complex distribution system. He returns us to the days of the Sears Roebuck catalog. Only that catalog is now online.
This has arguably improved the welfare of nearly every American and millions of people around the world.
That single person makes the largest contribution to the economy. That contribution reaps its own reward.
In fact, Bezo’s is the wealthiest person in the world. If we look at the list of who has been the wealthiest over time, like Bill Gates, John D Rockefeller and Andrew Carnegie, we see that each made a huge contribution by providing goods or services that greatly benefited nearly everyone.
The Best Option
The best option for individual growth is to set up a system where each person is able to keep the majority of what they have earned. The Democrats’ move toward high taxes on income, taxes on personal wealth, toward Socialistic economy is counter-productive. Especially to American exceptionalism.
The high taxes would slow economic growth, reduce the opportunity for Americans to increase their personal wealth. Reduce the incentive to make growth-oriented investments and ultimately worsen income equality. This is especially true today since it is the highest income earners who supply the vast majority of the investment capital we need to propel our capital intensive economy.
The high taxes and overly generous government transfer programs are exactly opposite to the principles that made this country great.
So Alexandria Ocasio-Cortez, let’s thank all of the wealthy people for their generous contributions. Thank them by allowing them to keep the money they earned, no matter how much it is.
Lead Image: Cartoon by Branco – https://comicallyincorrect.com/a-f-branco-cartoon-hot-mess/