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Memories of the 28th Century

Financial Equality

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Recently the idea of taxing billionaires out of existence was brought up by Elizabeth Warren as part of her run for president. She wants to use the proceeds from this tax to fund her idea of Medicare for everyone, so she thinks that a tax that discriminates against some people is a good idea, even though it would be a statutory taking and a violation of due process. Such ideas have come up in the past, but the basic problem with it still is that removing the incentive to be successful will stop many people from doing things that would make lots of money and make their customers happy. Another problem is that rich people can afford to find ways to keep from paying much in taxes, and they have also paid for legislators to tailor tax laws so that people can avoid paying lots in taxes. Yet another problem is that, if he tax is successful, then billionaires will be taxed out of existence, then there won’t be people to pay the tax to pay for Medicare for all. The whole concept of a graduated income tax creates incentives and techniques for saving money from being taxed, but that does not have to be.

Getting people to pay their fair shares of taxes is simple, but first we would have to decide what is a fair share. Once we have that, we will have a tax rate, and what is fair for one is fair for all. When any asset type, source of or type of income is given special treatment, people can start twisting their ways of making money to take advantage of the special treatments. A given amount of income should be taxed the same for everyone.

Allowing some people or other entities to be treated differently is also subject to abuse, as we recently saw with Donald Trump's foundation. If an organization is doing something that should be recognized as a public service, then they should apply for grants that would cover tax payments, but blanket exemptions for certain kinds of organizations are absurd, and in the case of religious organizations of doubtful validity.

If people are unhappy that there are people who are ridiculously wealthy, then they should look at the situations that allowed them to become so wealthy, and in most cases the wealthy found and took advantage of some technique that was perfectly legal. Recently people have been complaining about Jeff Bezos being so rich, but all he did was take a model that was developed more than a century ago and move it to the internet, but it is just an updated version of catalog sales. Sears should have done the same thing long before Bezos blazed the way, but they didn't. Then there is the matter of Bill Gates. He was one of the luckiest people in history; he was in the right place at the right time. Paul Allen hired him to write software for the company that he was starting, and they survived for a few years, and then IBM asked if they could provide 50,000 copies of a Disk Operating System by a certain date. They took the contract and subbed it to Tim Paterson of Seattle Computer Products. Tim did the job, and IBM got the OS, and Microsoft became the primary source for PC operating systems as an alternative to the evil empire of big blue, IBM. Over the next few decades, became very large and wealthy, and Bill Gates got a significant part of that, because Paul Allen got out after medical problems. But IBM had only bothered with Microsoft because the head of Digital Research was not available when they called.

There are many other examples of people being in the right spot and taking advantage of it, and we should not discourage them with confiscatory taxes, nor should we allow life to look hopeless to people with less luck. A flat tax with a large basic exemption would be helpful to many people who don't make a lot of money, and someday people may want to look at the idea of a negative income tax, such that everyone would make a minimum income, even if they could make anything. Nixon proposed the negative income tax in the early 1970's, but it was defeated in Congress. It was considered too expensive and disincentive for working (both complaints probably are still valid).

I haven't looked at the costs of medical care for everyone, but I do know that the medical industry has trouble delivering services efficiently and effectively, but Government bureaucracies have always had trouble delivering services, so I am dubious about having government take over the medical industry. The way that the insurance industry is handling things is bad enough. If the average citizen were more knowledgeable about health and related matters, then we could do a lot better, but that's a large can of worms.

For now, let's just see if we can have everyone pay a fixed percentage of their income after expenses that is above a set standard exemption. Twenty percent of everything over $30,000 might be a good place to start, especially if there are no other adjustments are allowed.

Updated Yesterday at 07:01 PM by PeterL

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