Should We Tax Away Inequality?

The New York Times op ed below says that we should.

Cover of Are the Rich Necessary by Hunter Lewis

Click here for Where Keynes Went Wrong by Hunter Lewis.

The proposal is to tax away completely any annual income higher than 36X the median household income in the US the prior year. The proposal comes from Ian Ayers, professor of law at Yale and Aaron S. Edlin, professor of law and economics at the U. of Ca. Berkeley.

We certainly don’t agree with this proposal. But we  will leave it for others to argue the fairness of this or to point out what it  would do to the economy and in particular to saving and investment. We will instead ask another question? Why is it a good idea for government to receive this income? Quite apart from the fairness or economic results of capping income, why do the authors  think government will make the best use of it? Ayers and Edlin do not even consider these questions. They just take it for granted that the only way to make incomes more equal is to make government bigger. But what evidence is there that government will actually use any additional revenues in ways that actually  help the poor, much less the middle class? Is the only point of the proposal to pull down the rich? Or is it actually supposed to benefit those who are not rich? And if it is supposed to benefit the non-rich, how will it do so, especially since many would be expected to lose their jobs as saving and investment by the rich plummeted?

Let’s look at this from another angle entirely. If the goal is to cap incomes out of concern for inequality, why don’t Ayers and Edlin propose giving wealthy taxpayers facing confiscatory taxation a tax credit if they give the money to charity? That way, the rich would at least have the choice of supporting private charity instead of government. Is bigger and bigger government the only way even to imagine reducing income inequality? Did giving all the money to government in the Soviet Union in any way decrease economic inequality? Of course the answer to that is no. Communist societies ended up with more, not less economic inequality.

Isn’t it time to think about building up the charitable sector, by one means or another, rather than making government bigger and bigger?

And in this context, why is President Obama constantly proposing to cut back charitable tax deductions, which would make the charitable sector even poorer?

Click here for the story.

Hunter Lewis 12-22-2011

Filed under
Tags

About Hunter Lewis

A Photo of Hunter Lewis

Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 11 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times). He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as Forbes.com, Fox.com, RealClearMarkets.com, and Townhall.com. His most recent books are Economics in Three Lessons & One Hundred Economic LawsCrony Capitalism in America: 2008–2012, and Where Keynes Went Wrong. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, and cultural and global development organizations, as well as the World Bank.