The notion of “soaking the rich”, which is to say, confiscating part or all of their “ill gotten” gains, is an idea that just will not go away. And, it is supported by far too many people who should know better. Why is this never a good idea?
Let us explore an imaginary scenario made up just for this discussion:
Most everyone knows that Bill Gates and Warren Buffett are two of the richest men in the USA, indeed, in the whole world. Both are supposedly worthy tens of billions of dollars. Surely more than either of them NEEDS. Many would say more than either DESERVES but without any idea how one might calculate how much another deserves.
Let us imagine that our National Nanny decides (by “popular” vote?) that all fortunes over some arbitrary amount must be surrendered to the government, for the betterment of all. Sounds pretty good so far doesn’t it?
For our little exercise, let’s set that arbitrary amount at 1 million dollars. Surely enough for anyone to squeak by on.
So, off we go after Bill and Warren, the biggest soaks we are likely to make. Now, do we suppose that either of these gentlemen has a room in their basement, bulging with heaps of currency or treasure? Some of you must or you would see immediately the fallacy of what you support.
No, the actual fact is that the supposed wealth each of these gentlemen commands is actually represented by full or partial ownership of wealth-producing enterprises. Companies. Businesses. Entities that not only create wealth and value for others, but also provide direct and indirect employment to thousands of people just like us. Well, I guess that is just too bad because we plan to soak them regardless.
That being the case, it is obvious that their ownership of those enterprises will need to be liquidated (sold if you prefer). Here we encounter our first real obstacle… only other rich persons would be able to afford to buy them and our plan is to eventually soak them all. So, who buys the stuff? Foreign interests? Our own government? Not so clear is it?
Indeed, this attempt at asset liquidation will also cause a severe decrease in their value. In any case, let us assume buyers are somehow found (perhaps each of us buys a few shares?). This raises the next serious question: Obviously the original owners, those we just soaked, made good decisions regarding the management of the enterprises in question, hence their high valuations. How can we know that the new owners will make as good or better decisions? Is there not a high likelihood that they will not (else, why are they having to buy those enterprises rather than starting even better ones themselves)?
Sorry to report this but the most likely outcome is that some (or most) of the enterprises in question will wither and some will even die – most especially, any that come under government ownership.
Let us pause to tally the score so far. Messrs Gates and Buffett still each have at least 1 million dollars (that we generously let them keep) while thousands of folks like me and you are out of work. Guess that will teach them!
To make matters still worse, entrepreneurship has dwindled to a trickle since the soaking started. After all, who wants to work that hard and take all those risks just to have their successes confiscated? Whoops, looks like even less employment in the making.
This sorry tale could go on and on, with increasing destruction strewn along its path but I think this should have been enough to make the point.
What is that point? Simply this… in a free society, with free markets, the rich mostly get that way by providing us with the goods, services and entertainment we value and with the jobs and income we need to purchase the things we want and need. While it is (and always has been) true that the great wealth creating enterprises make a few people spectacularly wealthy, the fact is that they make us all wealthier than we otherwise would have been.
Yes, it is true (and growing more so under the current system) that some people get rich through “crony capitalism” (buying government favors through bribes and other “contributions” to politicians). And, yes, this must be stopped if we are to continue to be as free and prosperous as we have been to date. But, the solution is to force government back into the confines of the constitution, such that there is little or no power for sale, little government largess to distribute, rather than punish the honest business people who are making the system work.
Rather than soak the rich, why not try to imitate them? Discover those traits and actions that lead to wealth and practice them yourselves rather than buying into the lie of the politics of envy. If you happen to prefer the lower stress and risk of a regular job, at least realize that such jobs exist because others did those things that create the wealth you propose to share – and that some of them are getting rich in the process.
Or maybe you should just go soak your head until the lights start to come on.
Troy L Robinson