President Obama and those who advise him on financial matters seem bent on financing the Federal Government with taxes collected from the wealthiest among us. They, after all, are the ones who pay the bulk of federal taxes. If that is the plan, it seems prudent to keep Margaret Thatcher’s quote in mind: “The trouble with socialism is that eventually you run out of other people’s money.”
If I were planning to rely upon the rich for financing, I’d be sure to take steps to insure that they would always remain rich. One step toward that goal would be to lower this country’s corporate tax rate, now one of the highest in the world. It would be foolish to kill the geese who lay the golden eggs.
Another significant danger of the “soak the rich” approach is that the rich can afford to live elsewhere and to take their money with them. The plan would have to include incentives for the rich to stick around.
An old saying goes that “it takes money to make money,” that one sum of money can be increased over time by prudent investing. Many of the rich got that way by successfully investing in the stock market. Warren Buffet springs to mind. The plan, then, should encourage investing. Lowering capital gains taxes would be a sensible step in that direction. Pitting “Main Street” against “Wall Street” seems counter-productive, especially since, increasingly, Main Street IS Wall Street through 401K’s, pension funds, and the like.
The rich are generally motivated toward wealth. A few just get lucky or have wealthy forebears, but most are working to better their circumstances and, if you will, get richer. One way for the government to (excuse the expression) “capitalize” on this is to encourage wealth building. Denigrating the rich by calling them names like “fat cats” doesn’t work toward that end.
Class warfare is not the way to secure the constant stream of taxes-from-the-rich upon which the Obama administration plans to rely.
Dwight Boud ©2010
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