Jean-Jacques Rousseau wrote, "When the people shall have nothing more to eat, they will eat the rich." That's the thinking behind the many calls for a billionaire tax. Even the Wall Street Journal, the supposed fortress of capitalism, jumped on the wagon claiming "Billionaires' Low Taxes are Becoming a Problem for the Economy."
According to the Journal, billionaires often employ complex financial strategies to minimize their tax liabilities, resulting in tax rates significantly lower than those paid by average households. Yet, if that's true, why did the top 1% pay 46% of all income taxes? They paid twice as much in taxes as the bottom 90%.
The Journal wrote that lower tax payments from the ultra-wealthy diminish government ability to fund public services such as education, infrastructure, and social programs. If true, then why are federal revenues, mostly income taxes, holding at 17% of GDP, the average since World War II?
Finally, the Journal wrote that concentration of wealth may reduce aggregate demand, potentially slowing economic growth. This is Keynes' old nonsense microwaved that says consumer spending drives economic growth when good economists know that investment drives growth because people can't spend what they don't have. The great French economist Jean-Baptiste Say wrote 300 years ago that supply creates its own demand. F.A. Hayek considered that understanding Say to be the test of a good economist.
No empirical or logical reason exists for taxing the rich at a higher rate than the rest. Until the 20th century, most people considered that to be immoral because the government should treat all citizens the same and not discriminate based on wealth or income. So what really drives the issue?
Partially, the desire for a billionaire tax is evidence of envy. Few people will benefit from it; they just resent the rich and want to punish them. As Christianity recedes, envy explodes. Of course, no one will confess to envy. Most Christians will point to the many verses in the Bible that condemn the rich. James summarizes those in his chapter five:
"Now listen, you rich people, weep and wail because of the misery that is coming on you. 2 Your wealth has rotted, and moths have eaten your clothes. 3 Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. 4 Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. 5 You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. 6 You have condemned and murdered the innocent one, who was not opposing you."
According to the Nobel Prize winning economist Joel Mokyr, the "honorable" methods of gaining wealth until the advent of capitalism were looting in war, kidnapping for ransom and bribery. That was true in Jesus' time. James adds that the wealthy oppressed the poor by refusing to pay the wages of workers, but they also bribed judges to condemn innocent people to death to steal their lands, charged high interest rates on loans to the poor to make them default and give up their land, and many other evil practices. Josephus depicts the family of the High Priest as nothing more than a mafia. Capitalism made all of those methods of gaining wealth illegal.
The Bible never condemns great wealth. God blessed the patriarchs of the Old Testament with wealth. It condemns those who obtain wealth through immoral means. Greed is a desire for wealth so great that a person will resort to immorality to get it. The Bible condemns greed and envy.
Christians claim that no one could become rich today without committing similar evils, especially exploiting workers, but in doing so, they merely regurgitate old Marxist lies. They will claim not to be Marxists, but by spouting his lies, they condemn themselves. How did Marx lie? He thought that all profits in a business should go to the workers because all value is created only by them. So, all profits held by business owners are wages stolen from workers. Of course, the typical profit rate for all but new industries is only 5% so, workers would hardly notice if they got all profits.
The Bible doesn't tell us what a just wage is, although Jesus seems to accept the custom of his day that any wage agreed upon without coercion is a just wage in his parable of the laborers in the vineyard reported in Matthew 20. Theologians kicked around the idea of a just wage for 1,500 years. During the Reformation, they determined that only God knows a just wage or price. For humans, it can best be approximated by the wage attained in a free market. So, if a worker and a businessman agreed on a wage without coercing either, it is a just wage.
Socialist insist that billionaires hoard wealth that could be used to alleviate poverty. In Jesus' day, the richest held rooms full of gold that they could have given to the poor, but today, most of their wealth is tied up in a business providing jobs, goods and services for others. Who will they sell their business to in order to have the cash to give to the poor?
Billionaires are necessary today. Everyone admires small businesses, but which small businesses could finance the construction of planes, trains, ships, electrical generators or cars? Those require investments only groups of the richest can make. Of course, the government could do it, but we have over a century of experiences with the disasters of such government investments in the U.S., the old Soviet Union and Eastern Europe. Socialism has failed for 150 years, but people like the mayor of New York City are arrogant enough to think they can make it work.
P.J. O'Rourke wrote a hilarious book, Eat the Rich: A Treatise on Economics, in 1998 that explores the global economy by visiting rich and poor countries to understand why some prosper while others struggle. Everyone should read it.
A billionaire tax is just one more step down the Road to Serfdom that F. A. Hayek warned us about.
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