Redistribution of wealth is already occurring in the US and it has not worked. It has never worked for any sovereign country at any time in human history and it’s not working now. There is no Nirvana. There is no Utopia. There never has been and there never will be.
However, free markets and free enterprise is the best system we have to create wealth and raise the living standards for all people. The basis of the free market is the ability to create a good or service in exchange for a monetary benefit where both the buyer and seller win.
If you remove the degree of monetary benefit through taxation, you reduce the effectiveness of the free market, and subsequently reduce or stagnate the living standard for all people.
To put this into the context of redistribution already occurring, according to IRS data from 2010, the top 1% of income earners pay an average of a 24% effective tax rate. The top 10% paid an average 18.5%. However, the bottom 50% paid 2.37%. We are already distributing wealth, and it’s not working. This is already a more than fair progressive tax system.
But the argument of a redistribution of wealth always comes down to morality. The underlying question is “how is it moral for a person to make over x amount of dollars (whether its 250k or $1M) and be able to keep most of it?” The argument continues to say that “there are many poor people who could use that money.”
Of course, if you do that, the person making a lot of money has less of an incentive to create and the person receiving the wealth has no incentive to create. Redistribution erodes the incentive to create wealth. But don’t take my word for it, just look at the US Treasury Department’s data on expatriates, in other words, the number of Americans renouncing their citizenship. In 2008, we had 231. The number almost tripled a year later in 2009 to 742. Then it doubled in 2010 to 1534 and even higher in 2011.
The numbers are small relative to the population, but you know what..if those guys are millionaires and billionaires, then proportionally speaking, that’s a lot of money leaving our country. And where are they moving to? Not the UK or other European nations, but to Asia.
In Hong Kong a person can be paying as little as 15% for income tax, and in New York it can be 40%. Many Middle Eastern countries don’t tax income at all. We should have policies that keep people and their incomes here in America. It’s this progressive tax system that has created over 600 banks in the Cayman islands. Redistribution does not work.
So how do you fix the problem? It’s a simple solution, but hard to implement. Reduce government spending and reduce taxes for all. Give people their money to invest, create businesses, and pursue their dreams. Playing this shell game of taking money from one hand and giving to the other does not create wealth. Wealth is not a zero sum game and the basis for redistribution assumes that it is.