Opinion

Why wealth taxes will not work

(Photo by Duane Prokop/Getty Images for MoveOn.org)

Op-ed views and opinions expressed are solely those of the author.

If the political left ever creates a religion it will be to bow down, worship, and swear fealty to–wait for it— taxes. Ah yes, taxes…. the elixir that enables leftists to control the people and reward themselves. Taxes are how a government amasses power. With taxes, the left is able to build up government to huge proportions, penalize political opponents, create an internal judicial system to protect itself, and use taxing power to perpetuate itself. The left uses taxes to create the nanny state where government is the mommy and daddy for everyone, making tens of millions of people dependent. Dependence, you see, assures the necessary votes to re-elect the politicians who run the nanny state.

The left’s latest stunt is to sing the praises, shout the hosannas, for the “Wealth Tax”. Socialist countries love wealth taxes. The reason? Socialist leaders are ignorant about how to run a country. They have no grasp of the lessons of history. But they know how to drain the rich and the wealthy. In the U.S., some candidates for President are openly and fervently preaching their love for a wealth tax. These are emotional saps who promise pie-in-the-sky to get your vote. Secretly, they know such a tax won’t work (because it kills economic growth), which means they are lying to us to troll for votes. They should be frog-marched to jail for deception.

According to the left’s high priest Barack Obama, the wealthy didn’t earn their wealth anyway. Remember the infamous Obama line, “if you’ve got a business, you didn’t build that. Somebody else made that happen”. For the left, this means the easy next step is to take away from you–confiscate– the financial value of whatever you own because you “didn’t build” it.

A wealth tax is a levy on all personal assets, including bank deposits, your home, real estate, stocks and bonds, insurance, pension and retirement plans, ownership of businesses, accumulated savings, and personal trusts.

A war on wealth is a bad idea on several fronts. First, wealth taxes never produce as much revenue as projected because such taxes are evaded. It’s easy to hide assets by spreading them among family members to get below the minimum. Such taxes destroy more productive uses of assets. Capital always takes flight from the countries imposing a wealth tax– “Capital flows to where it is welcome”. Other casualties are brain drain and loss of jobs. Ultimately, there is always a big loss of tax revenue.

We all remember the parable of the goose that laid the golden eggs. Well, in all societies, that goose is wealthy people. As wealth grows, it can be used to create businesses and jobs, new ventures, innovation, purchase all kinds of goods and services that are produced, philanthropic projects and giving, sending young people to college. Without wealth in a society, nothing gets created except for what government creates and owns/regulates. Yet, somehow, the chosen few at the top of the socialist government ladder always become rich. And if the government owns/ rules the companies, there is no question that the government will intrude into the companies.

Six European nations have tried the wealth tax, and all but three have ended it.  The reasons for failure are notable. Relatively small revenue was collected, compared to the costs of collection. There was a big problem in Europe of how to value assets that are private businesses. But the most serious problem was that huge amounts of the assets of rich people were producing economic growth, but were illiquid. If the owners were forced to sell these business assets in order to pay wealth taxes, the nation’s economic growth would be harmed. The U.S. should take all that as a dire warning.

Finally, if a wealth tax hits the U.S., the wealthy will surely find ways to reduce their taxes, which means that accountants and attorneys will be eating very high on the hog. But the real shame is that people like Bernie Sanders, Liz Warren and other presidential aspirants are irresponsible to be proposing new entitlements when we can’t pay for the ones already in place.

John R. Smith

John R. Smith is chairman of BIZPAC, the Business Political Action Committee of Palm Beach County, and owner of a financial services company. He is a frequent columnist for BizPac Review.
John R. Smith

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