Take a billionaire to lunch. If he doesn’t choke to death on the Baikal caviar or fois gras, strangle him yourself. That might seem a touch harsh, but there is nothing specially useful about billionaires. In fact, they are downright harmful to society and to your health. You’ll be doing the world a favour.

 

I’m not saying there aren’t billionaires in other places, but this article will focus on North America, and a little bit on Britain – home of about 1,100 of them, the worst of the bunch and the cause of our biggest social blight.

 

The Problem

In case it has escaped your notice, we don’t live in an equal society. That, in itself, is not necessarily problematic; after all, it is not entirely unreasonable that those who work harder or have greater skills or take greater risks should enjoy greater benefits from their labour. The problem arises when that inequality flourishes out of control, leaving the top and bottom so far apart as to stagger the imagination.

 

Using the United States as an example, we can see how the gap between top and bottom has widened immensely. And it isn’t because those at the top have become smarter or more capable or more skilled or more innovative – it’s entirely because they’ve won the ear of governments and the general population who have let them dictate the agenda.

 

Government has permitted – and even encouraged – the raping of the progressive income tax system that lifted North America out of the 1930s Depression and created a flourishing society where generally everyone was doing better. In 1970, the gap between what the top 100 CEOs in the US and the average worker earned was about 45 to 1. By 2006, it was 1,723 to 1. This didn’t come about because these CEOs were any better than their predecessors from earlier decades – it came about largely because they have been able to avoid paying taxes on their obscene incomes.

 

The same phenomenon is true in Britain and in Canada.

 

So how has this happened? Well, partly with the cooperation of governments who have been persuaded that rewarding rampant greed is a good thing. After all, most elected and many un-elected government officials are sucking up swill from the same trough. But it has been easy for them because the Left has entirely abandoned the debate. The Left has focused on poverty while utterly ignoring the fact that it is the growing inequality of our societies that is the greatest source of this poverty.

 

Of course, the rich preach that their uncontrolled greed benefits us all. Hard evidence shows beyond any doubt that this is simply untrue. But our governments and media have repeated the lie so often we’ve come to accept it. The fact is that the rich have become increasingly dominant in the past 4-5 decades, ensuring deregulated markets and low taxes for themselves, soaring wages for themselves, and stagnation for everyone else.

 

We are living in a plutocracy. And it isn’t pretty. The rich are able to buy politicians more readily than at any time in history. They push for new laws and loopholes that allow them to become richer, allowing them to push even harder, making them still richer, and so on.

 

So Why Is Inequality Bad?

In its simplest terms, too much money at the top is bad for everybody.

 

The glittering lives of billionaires may seem like a harmless source of entertainment. But such concentrated economic power reverberates throughout society, threatening the quality of life and the very functioning of democracy. It's no accident that the United States claims the most billionaires—but suffers among the highest rates of infant mortality and crime, the shortest life expectancy, as well as the lowest rates of social mobility and electoral political participation in the developed world.

 

Our society tends to regard large fortunes as evidence of great talent or accomplishment. Yet the vast new wealth isn't due to an increase in talent or effort at the top, but rather to changing social attitudes legitimizing greed and government policy changes that favour the new elite.

 

Linda McQuaig and Neil Brooks,

The Trouble with Billionaires

 

One of the petulant cries often heard from the elite – particularly the financial elite – is that the government must stay out of the marketplace in order to allow for the natural economic order to bring about social justice. The fact is, government never stays out of the marketplace. Nor should it. The difference today is that its intervention is designed entirely for the benefit of a shrinking number of people and entirely to the detriment of society as a whole.

 

At some point, most of us acquiesced to the view that the payment of taxes is bad. In fact, taxation is the price we pay for citizenship in our countries. It is the price we pay for a prosperous society. We have been willing to accept that the burden of running our countries should not be the responsibility of the rich because, well, that just wouldn’t be fair. Taxing the rich would stifle innovation and job growth, it would cause capital flight, it would destroy the incentive of people to work hard. Or so we’re told.

 

But hard work and wealth have almost nothing to do with each other. Sure, there are examples of those who have worked very hard and who have contributed enormously to society and got rich doing so. And they deserve to be rewarded for it – even though, in almost every case, they have merely been able to capitalize on the ideas or inventions of people who went before them. But they don’t deserve the unfathomable wealth that is heaped upon them by fawning governments and the hyper-greedy elite.

 

McQuaig and Brooks use Microsoft’s Bill Gates as one of their exemplars in a chapter entitled ‘Why Bill Gates Doesn’t Deserve His Fortune’.

 

They point out that if Gates had set about counting his fortune a dollar at a time, one dollar every second, non-stop day and night “back in AD 330 – the year the Roman emperor Constantine had his wife boiled alive and chose Byzantium as the empire’s new capital – he’d just be finishing up now.” They feel, and they are right, that this concentration of essentially unearned wealth is obscene.

 

It isn’t Gates in particular that distresses them, and they acknowledge his philanthropic work. But they use him as an example of someone who was coincidentally in the right place at the right time, with the right insider influence, and the right lack of moral rectitude that allowed him to screw over a friend. Gates invented nothing; he created nothing; he only managed to figure out how to parlay the work and talent of others into a huge pile of money for himself.

 

Gates won what his (almost) equally rich friend Warren Buffet calls “the ovarian lottery”. Buffet acknowledges that there is nothing special about himself or any other billionaire that isn’t clearly explained by the luck of birth.

 

Again, that’s not to argue that some wealthy people have not contributed enormously to society. But we have apparently accepted the lie that it is only by giving these huge rewards that we can get these ‘talented’ people to put out for us.

 

Rubbish.

 

When taxes in North America on the wealthy were in the 70-90% range, they were just as innovative and just as hard working as they are now. And their work generated large tax revenues for government who were then able to build infrastructure and help the disadvantaged to get ahead. Yet none of these rich people refused to develop and innovate. They didn’t all take their money and flee to tax havens or to countries where their wealth could grow at obscene rates, unimpeded by having to contribute. Instead, they kept on working and kept on getting richer than everyone else – but not to the stratospheric degree we see today.

 

How Did We Get Here?

We blinked. The rich pressed our governments, the Left stopped trying to defend us, government abandoned any pretense of service to society. And we let it happen.

 

Tax scholar Henry Calvert Simons called himself a Libertarian. He heavily influenced the Chicago School of Economics, including its least desirable graduate – Milton Friedman. But, Libertarian or not, Simons taught that capitalism cannot survive in a democracy unless the general public benefits from it. That requires redistribution of wealth, and he viewed progressive taxation as the least intrusive way to bring that about. He pointed out that this involves the least government interference and does not hinder the Market’s ability to match price and supply and to work on its own logic.

 

But the graduates of his school soon forgot the lesson. Beginning around 1970, more and more pressure was being applied by the wealthy to keep even more of it.

 

Let’s not rely solely on Simons. We can turn to the putative father of capitalism, Adam Smith. Although the financial elite has been able to lift some of his words out of context to support their views, Smith favoured taxation – including heavy taxation for the rich. Smith’s writings make clear that he was actually somewhat wary of the emerging capitalist system and, in particular, he fretted about inequality. Throughout his magnum opus, The Wealth of Nations, he consistently argued for the rights of workers against those of merchants and owners. In fact, far from rejecting taxes, he devotes much of the language in this book to discussing the best means of collecting taxes.

 

It is not very unreasonable that the rich should contribute to the publick expence, not only in proportion to their revenues, but something more than in proportion.

 

Adam Smith,

The Wealth of Nations

 

But this isn’t what we’re hearing today. We’re told that unbridled greed is what makes the world go round, it is what makes for progress and innovation, for invention and exploration, for building and feeding. What we’re told is plain, unvarnished, industrial-strength bullshit.

 

In 1936, Franklin Roosevelt addressed a crowd in New York. He was complaining about the special interests of “financial monopoly, speculation and reckless banking”. And he did something about it. Part of what he championed was progressive taxation, much more heavily weighted at the top end, and much stricter government regulations on banking and stock market activity. After all, he was first elected during the Great Depression and he had a big row to hoe.

 

“Government by organized money,” said Roosevelt, “is just as dangerous as government by organized mob.” Imagine a leader making that speech today.

 

Following Roosevelt, progressive taxation stayed around and allowed us to grow and prosper in the post-WW2 years and right up into the early 1970s. But by then, Milton Friedman had become the idol of the business and government class. Ultimately brainless, it was his teachings that allowed for the rapid rise of ravenous greed that has led us to where we are. His ideas were appropriated by Augusto Pinochet, Margaret Thatcher, Ronald Reagan, and a long string of bastards who followed them.

 

Just this week, US presidential hopeful Mittens Romney released his 2011 income tax return after months of ignoring opposition pressure. On an income of $13.7million, he paid taxes of $1.94million – an effective tax rate of 14.1%. Without special loopholes that favour the wealthy, he would have paid 35%. It’s estimated that this same income would have attracted an effective tax rate closer to 80% five decades ago. Poor bastard would have had to struggle by on about $3million.

 

The present maximum tax rate for the US citizens is 39.6%, but most taxpayers are unable to make the investment income deductions that Romney can make. In fact, it appears he may have deliberately NOT taken all the deductions available to him for 2011 because he knew he might have to cough up his return to public scrutiny.  

 

The point here is not to dump on Romney, regardless of what a despicable creature he is. It is to point out that if you’re rich, you might pay more taxes in absolute dollars than the average citizen, but your take-home is so immense that you could readily pay more. My argument is that you should.

 

Rich people become rich because they have managed to grab something from their society. Everyone in society contributes to that, in at least some small way. Elizabeth Warren, who is a candidate for the US senate in Romney’s home state of Massachusetts, says:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you!

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea — God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

 

We are told that deficits have grown and we all have to learn to do more with less. Except the wealthy. Our small wealthy super-elite seems determined to ensure that nothing gets in the way of its right to fully indulge its greed, and that the burden of deficit-reduction is imposed on others.

 

But let’s be clear, the deficit derives almost entirely from the persuasive power of the rich to push the tax burden to someone else – me and you.

 

How To Fix This

First and foremost, we need to look at a successful model: Scandinavia. Those folks pay taxes. Lots of them. And almost every one of them will tell you they get their money’s worth.

 

They have a social network and an economic system that provides cradle to grave backup for citizens. Nothing prevents a Scandinavian from becoming fabulously wealthy – think of the owner of Ikea or the singing group Abba. But the basic social premise is that no one gets to have too much so long as there is someone who doesn’t have enough. They have accepted the reality that we are all in this together, that it is our jobs as citizens of our nations to support one another. Scandinavians don’t mind that some are very wealthy because they know that everyone else is cared for. [In Finland, everyone’s income tax filings are made public.]

 

Defenders of the US economic model often point to growth rates. Looking at the growth rates from the late 1990s to the crash of 2008, this was true. US growth rates were 3.1 percent in the US, versus 2.3 percent in Scandinavia.

 

But once you factor in things other than just GDP, the picture no longer favours the US model. For example, despite their extensive social programming, the Scandinavian countries ran a surplus of 4.1 percent while the US ran a 4.7 percent deficit (2004). Measuring on such scales as ‘innovation’ (an index developed by the United Nations Conference on Trade and Development) the US scored lower than Scandinavia. When it comes to competitiveness, the US and Scandinavia are usually in a tight race for top spot. Scandinavians spend more on research and development.

 

All in all, there is little support for the argument that the US is a stronger performer. Despite its isolation and smaller population and landmass, Scandinavia outstrips the US in all the good ways while trailing far behind on all the negative measures – the violence, incarceration rate, life span, infant mortality, financial inequality, racial problems, and so on.

 

So,

• Bring back progressive taxation. Make the rich pay a higher rate and a graduated rate. This will still leave them with tons of money. The taxes can then be used to finance a rebuilding of the crumbling infrastructure of North America. It can be used to build hospitals and schools – hell, for the US, it would even allow them to finance more of those wars they seem to admire so much.
• Close the tax loopholes. These invariably benefit the rich; take them away.
• Introduce a ‘Tobin’ tax. Named for the British Nobel economist James Tobin, the idea is to apply a very small tax – less than 1% - on all foreign currency transactions. It is not intended to prevent currency speculation, rather to generate income for the countries affected by it. Because the tax would be so low, it wouldn’t interfere with the transactions. But because the number and value of these transactions is so huge, the revenue generated for the local economies would also be huge. Clearly, it is only the rich who are able to dabble in this kind of gambling.
• Advocate for international measures to clamp down on tax avoidance and evasion. A simple system that registers each off-shore movement of money – in the same way your passport alerts the whole world to where you are – would allow for ensuring that proper taxes were paid on money being moved.
• Shut down the tax havens. There are several countries around the world where the rich are able to move their money in order to hide it. International pressure should be enacted to kick these countries to the curb.
• Tax inheritance. Although this is taxed in some places, it isn’t everywhere. This is invariably unearned income for the recipient and should be subject to tax. That doesn’t mean that all the money left behind by ‘dear old dad’ goes to the government; but it means the beneficiary doesn’t simply receive a tax-free windfall that hasn’t been earned.
• Somebody hit the Left over the head with a shovel to get their attention. And then remind them of what they used to stand for.

 

And we need to start re-educating the population to understand the concept of citizenship. It begins with contributing to society and helping to pay the freight for yourself and everyone else. Taxes are necessary in any civilized country. But they should not be arranged to punish some and reward others, particularly not rewarding those who least need the help.

 

Again, let the capable and strong and intelligent get as rich as their abilities will allow. But never let them do it on the backs of those being ground into the dirt in order to support these obscene lifestyles. As Elizabeth Warren notes, none of them got there without a lot of help, and they should be obligated to return the favour.

 

A final word here from one of the world’s richest women, J.K. Rowling, author of the Harry Potter series. In response to a question about why she has not left high-tax Britain to live abroad, she replied:

 

I chose to remain a domiciled taxpayer for a couple of reasons. The main reason was that I wanted my children to grow up where I grew up, to have proper roots in a culture as old and magnificent as Britain’s; to be citizens, with everything that implies, of a real country, not free-floating ex-pats, living in the limbo of some tax haven and associating only with the children of similarly greedy tax exiles.

 

A second reason, however, was that I am indebted to the British welfare state; the very one that [Prime Minister David] Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under [Prime Minister] John Major’s government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism.

 

 

 

Paul Richard Harris is an Axis of Logic editor and columnist, based in Canada. He can be reached at paul@axisoflogic.com.

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