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Thursday, May 5, 2011

"Tax The Rich" Fallacy

State comedians like to say "Let's tax the rich more!" They're missing an important point. The whole point of the State is to enable insiders to steal.

Most insiders are negative taxpayers. The value of State subsidies is more than the value of any tax they pay. If someone is an insider and a negative taxpayer, there's no point raising their tax rate. If someone is negative taxpayer, the fact that they pay taxes is an illusion.

Who decides how much a CEO gets paid?

CEO: How much should I get paid?
Board of Directors: How much do you want to get paid?
There is no free market for CEOs and for CEO pay. It's a game that insiders play with each other.

In a really free market, if a CEO were overpaid, then competitors would compete and offer a cheaper price or better product. In the present, large corporations have a monopoly/oligopoly. If the CEO is overpaid, the cost is passed on to customers as higher prices. There are State barriers to competition.

A CEO is not chosen via a free market process. A CEO is good at playing political parasite games. Most CEOs could not build a successful business themselves in a really free market. They are chosen to lead a business that already has a State-backed monopoly.

Even "heroes" like Mark Zuckerberg and Steve Jobs earned their position by using parasite skills to manipulate others. They probably wouldn't have been able to build a successful business without the State.

If the CEO's tax rates are raised, then he can just raise his salary to compensate. He's a negative taxpayer.

Besides, most CEOs get paid via option grants and equity grants. Those are taxed *MUCH* more favorably than ordinary income. Also, insiders use trusts to dodge taxes.

"Tax the rich!" hurts successful small business owners. They are net taxpayers. Via income taxes, a small business subsidizes his larger corporate competitors. Via estate taxes, the small business owner is forced to sell to a larger corporation when he dies.

"Tax the rich!" is an evil fnord. Most insiders are negative taxpayers. Higher taxes hurt successful small business owners and professionals. Productive workers actually pay the higher tax rate. If someone is an insider and a negative taxpayer, it's a farce to pretend to raise their taxes.

There's an important fallacy. Some people make money via political connections. Others make money by producing something useful. The former is evil, and the latter is good. Most slaves can't make the distinction. Laws aimed to hurt abusive insiders wind up hurting productive workers.

1 comment:

Anonymous said...

The late Howard Katz explained this in detail. Too bad he is gone. I saw that some of his writings were taken care by Scott Silva, who keeps them online. Others I find on goldseek by searching for Howard Katz.

He devoted a lot of time explaining the inner workings of two party system, and especially the deal between the wall street and the Democratic party, where the Wall street enables the party to appear waging war on the rich, while the street plunders the people. I agree, it's like taxing Bill Clinton or Alan Greenspan. It is making no sense, because these people feed off the system in a big way.

Here lies the danger, however. It is precisely this corruption, that gets historically simplified to "rich = bad", and then the blood flows in the streets. Some may say that this is good, it "cleanses" the "slate" from time to time.

What they don't realize, is that it is during this cleansing that most capital is destroyed and some leaves the state.

Such outcome is now "baked in", I believe, for the USA.

At some point the emperor will declare the war against the speculation, of which the results, predictably, will be the shortages. The emperors usually plan for that, knowing the that the simpletons won't be able to connect the dots, and thus, planning to remain the hero both during the war against speculation and then during the plunder that ensues due to shortages. However, the crowd then turns on anyone with capital, thus destroying even the possibility of recovery. And next comes the only rule for capital-free society - social integration, control, followed by mass exterminations.

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