NationStates Jolt Archive


23-10-2003, 16:15
Ah, the old redistribute the wealth syndrome.

Here's the crux of your problem. The inherent flaw in your assumption is that people who make more than a million dollars don't have a great deal of debt. You also assume they live as modestly as your average joe, or that they don't employ a number of people.

Lets take an area where there's a lot of wealthy people today. Here in the US, we have a lot of people who are millionaires on paper - but who don't actually have that money. How? They received a large number of stock options through an employer and at some point, that stock became worth a huge amount of money. Under the compensation laws that previously existed, many of these people traded their lower value options for higher value shares of stock. Under the tax law, these people owe a great deal fo money for the compensation they received.

One problem. Many of these employers were in the high technology and communications sector which has lost more than 50% of its value since the market crashed in 2000. These people already owe huge amounts of money in federal taxes they can't pay.

A flat "pay everything about this amount" tax encourages people to move their compensation out of sight, making it harder to enforce taxes. The US had a similar tax model at one point, where the high end of the tax scale was around 90%. Compliance was a huge problem, as people with that kind of wealth were able to move the money out of the US and into foreign tax havens.

Your proposal also assumes that there's a flat rate of cost for everyone. Let's think about this. Is the cost of living the samein London, England as it is in Kenosha, Wisconsin? No. The cost of living in Kenosha is low than in Milwauke than it is in Chicago. A million dollar home in Chicago is a heck of a lot more impressive than a million dollar home in New York City, Washington, or San Francisco.

The net effect of such a proposal is that the high end real estate market would collapse. The very wealthy would do what they've always been able to do: pick up their families and leave the country - and leave behind the highly mortgaged properties they own. The banks that underwrote those loans would swim in the debt until they drown, and then look for their federal governments to bail them out - just as we did here in the US when the savings and loans collapses occurred in the mid to late 1980s.

The end result would be higher taxation, but not on the rich. It'll be on the very people you claim to want to help.

Even worse, for every million you'd actually collect under such a scheme - the government would consume 3/4s of it before it ever got out to people who'd benefit. The cost of government operations is a vast enterprise, and unlike non-profits would are measured on their efficiency, government has no such compulsion to restrict its operational costs.

That's why soak the rich fails and has failed everywhere.