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Tax the Rich

Entry 1348, on 2011-12-14 at 13:44:53 (Rating 3, Politics)

Is our society fair and equal? Should it be? And what do we mean by those terms anyway? I think it's becoming increasingly obvious that society is a lot less equal than it used to be and to most people that means it is also less fair. Most people (although certainly not all) would say that we want a fair society but the last point: what fairness and equality actually mean, is the tough one.

A recent OECD report highlighted the increasing unfairness in most societies and put the blame on modern economic policies. This is quite extraordinary from an organisation which has been associated with the economic mainstream in the past. There does seem to be a developing consensus that something must change (a point I've been making for years) and even the IMF has admitted the current system has gone too far.

New Zealand was once seen as a very egalitarian society but recently the gap between the rich and poor has increased here faster than most other countries. Between 1985 and 2008 this was particularly obvious. Of course this was triggered by the great 1984 economic experiment where neo-liberal economics was forced on the unsuspecting New Zealand public.

Predictably the current advocates of this ideology disagree that we have a problem. National and Act (the two right wing New Zealand parties) think we should stick with the same policies, but more of them! Yes, the policies which got us into the mess are what we need to get out of it, apparently. I think few people would agree with this analysis now.

The OECD report totally rejects the famous "trickle down" theory which claims that more money going to the rich also results in increased wealth for the poor. How anyone could believe such nonsense is almost incomprehensible but now we have official confirmation that it's a lie, or worse maybe, a wrong but sincerely held belief of the neo-liberal camp.

It's interesting to listen to our politicians discuss the subject. They just spout a load of unsubstantiated propaganda. Why do the interviewers let them away with this stuff? Still, at least Peters, Dunne and Banks commented. The finance minister didn't even bother. I can imagine his thoughts on this: we've decided what we want to believe, please don't bother us with the facts!

So I think it's beyond doubt now that the economic theories most countries base their politics on lead to greater inequality, unemployment, worsening conditions, and social unrest. The question is this: would we be even worse off following a more interventionist Keynesian approach and is having distinct economic classes like this necessarily a bad thing?

Some people say the rich deserve what they have. They say they work hard for their money. But how do they know that? Many assume that if someone is rich they must have worked hard and they assume that if someone works hard they will get rich. It's just worthless nonsense. In general (and this is a generalisation which there are exceptions for) the rich are rich because they are self centered and greedy and they have found a way to exploit society for their own benefit.

I say tax the rich hard (if they make over $250,000 tax them at 80%) Most people with extreme wealth say they don't do it for the money anyway, and many are actually asking to be taxed more. Let's give them their wish! If they don't like it they can leave, because we don't want them anyway.

Interventionist economics can be taken too far. Most people would say it had gone too far in New Zealand before the 1984 "revolution", but that doesn't mean it isn't a good approach if used more sensibly. Correcting one extreme economic situation by going even more extreme in the opposite direction isn't a valid approach. Interventionism is really the only sensible solution but it must be used correctly.

When the so-called "markets" are allowed to rule we just end up with a very efficient system to do nothing of any value. We get people making a fortune by trading non-existent financial packages and manipulating markets and whole economies for their own benefit, while other people who are doing scientific research, trying to find a cure for diseases, and producing great art have no money to produce genuinely worthwhile outcomes.

We get real progress when long-term research, good education, and social equality are allowed to flourish. For that we need guidance from some entity which has real values beyond simple greed. Unfortunately that generally means governments, which have their own problems, but they are the best we have.

We need a revolution in how society works but that can't happen quickly. Until that revolution happens (and it will) we need to re-align our current systems. We need to re-distribute the wealth. Yes, that is what the OECD said. We do need to tax the rich and tax them hard. But we should be careful with what we use that extra tax income for. It should go to truly useful education, health, technology, and scientific projects, because they are the only route to real progress.

Comment 1 (2978) by OJB on 2012-01-01 at 14:58:01:

After some feedback I have a couple of points of clarification on this entry.

First, I suggest the 80% tax rate for people earning over 250,000 only for the parts of their income above that figure, also those numbers are arbitrary suggestions and some research would be needed to establish the best actual numbers.

And second, I know that high earners sometimes make a big contribution to society (Steve Jobs being an example) but these people still should pay high tax because the majority of high earners don't make much of a contribution, they are often not motivated by factors other than money anyway, and the money they don't get to keep might be even better utilised elsewhere (obviously this depends on intelligent use of tax which is always a problem).

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