Most progressives, socialists I know subscribe to the Scrooge McDuck theory of economics.
It’s an appealing theory inasmuch as it portrays the wealthy to be niggardly hoarders who would rather swim in a pool full of cash than share their wealth.
So appealing is this Disney vision of wealth that politicians in North America are pushing one form or another of a wealth tax.
In the United States, Democratic presidential candidate Elizabeth Warren is campaigning on a wealth tax that she estimates would bring in $2.75 trillion over the next 10 years.
In Canada, Jagmeet Singh is predicating his support of Prime Minister Trudeau’s Liberal government on the introduction of a wealth tax that would bring in $6.8 billion annually by fiscal year 2023/2024.
The motive, of course, is growing inequality.
According to the Canadian Centre for Policy Alternatives, fewer than 100 families in Canada with net worth exceeding $1 billion have accumulated more wealth since 1999 than bottom 12 million Canadians.
In the United States, Warren says that the richest 130,000 American families hold as much wealth as the bottom 117 million families.
Progressives argue that this growth inequality is the result of the inherent unfairness of capitalism and needs to be addressed through taxation policy.
Raise taxes, in other words, and then redistribute the proceeds to the afflicted.
It’s little wonder these tax the rich schemes are so popular. Who wouldn’t like getting money for doing nothing?
Of course, progressives argue that the wealthy have built their fortunes on the backs of workers, so the workers are merely getting their due.
For those of us less motivated by envy, the proposition is not quite so clear cut. Those of us interested in having an economy that generates the greatest good for the greatest number have our doubts.
First of all, the wealth that the continent’s rich families possess is not resting in vaults. It resides in stocks, bonds, houses, planes, cars, businesses, etc… I’m sure that the very wealthy no doubt have a few hundred thousand in cash tucked away in wall safes, ready for a quick get-a-way.
In other words, the money – capital – is productively employed doing what all capital is meant to do – generate wealth.
Those billions and trillions are invested in the production of goods and services and, thus, create millions of jobs.
Think about it. Every house, yacht, limousine has to be built and maintained. It’s what we call an economy.
Now, there is no doubt wages have not kept up with inflation. Real wages have been declining for quite some time. But why is that?
In a word, competition. Labor is not immune from the law of supply and demand. More and more workers mean increased competition for jobs and, as a consequence, lower wages.
Ironically, that is a direct consequence of increased immigration. You cannot add millions of new workers to an economy and truly expect wages to rise.
Monetary policy that discourages saving, of course, doesn’t help.
The second problem with a wealth tax is the power that it gives to bureaucrats. Governments would have trillions to spend as they see fit.
It’s a frightening proposition given the failure of bureaucrats to invest wisely. After all, it’s not their money, so what do they care if an investment succeeds or not?
With trillions of dollars at their disposal, I can see hundreds of wasteful renewable energy projects and one boondoggle after another.
The third objection to this transfer of wealth is the effect it would have on people. Most people would rather have a well-paying job than a meager handout. There is pride in work; there is none in stealing from others.