Taxes and Democracy

by The Rhetor

I was trawling the internet last night searching for a blog post when I came across this gem. This statement really stood out for me: “I believe that a Democracy has a duty to prevent the formation of dynasties“. Jealous much? Behind this article seems to be a belief that the aim of a democracy is to create equality in society. It isn’t. The aim of a democracy is to protect the political rights of individual citizens against the oppression of tyrannical forces (monarchs, dictators, the proletariat, etc.). This is achieved by placing the competing elements of society at odds with each other in government, human behaviour then ensures that no one group maintains a strangle hold on power.

But let’s see how the evil dynasts would be dealt with under our authors system:

“We should incrementally increase taxes on estate values over $20 million. There’s no reason a family needs or deserves to retain full ownership of assets over $20 million or $50 million. Tax estate assets over $25 million at 80% , over $50 million at 90%. Tax estate assets over $100 million at 95% and tax estate assets over $500 million at 98%.”
Ok I will concede that 2% of 500 million dollars is still a hell of a lot of money but such a system would have some fairly huge flow on effects for the economy. Remember that the über wealthy aren’t actually like Scrooge McDuck, they don’t have huge vaults filled with money which they can swim in (with a few notable exceptions in Epsom) any tax bills would have to be funded out of asset sales. This will already be the case with existing estate taxes however could the economy handle the kind of fire-sales demanded by 98% taxes?
Furthermore is it right to tax the rich more solely out of envy? While I am not trying to suggest that we can all stand to benefit from a trickle down economy, crumbs are still crumbs no matter whose table they come from, there is a fine line between asking some one to pay their fair share and robbing Peter to pay Paul. Particularly when the only justification seems to be “They have it and we don’t”.
This is not a new problem. Wealth redistribution was at the heart of many ancient social conflicts, notably the reforms of the Gracchi in Republican Rome. It will likely continue to be a major sticking point between societies well into the future. It won’t be solved by marely moving wealth from one group to another.

One response to “Taxes and Democracy

  1. It is rank economic illiteracy to think you can build a cohesive democracy on capping maximum wealth.

    The central conceit in the simplistic idea that there is a fixed amount of wealth to be shared around. This idea is false. Wealth is created or destroyed as people lose the incentive to create it.

    The fact that Bob Jones owns a massive yacht isn’t the reason why I have a crappy car – and taking away the yacht isn’t going to upgrade me. It’s more likely to destroy that wealth and the economic activity associated with it . There may be more equality, but it will be the equal sharing of misery.

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