Let’s start with a few, simple facts. First, most rich people actually deserve to be rich. Most of them have done something to deserve their wealth. They’ve provided society with valuable services (Microsoft, Google); products (cars, mobile devices), or entertainment (athletes, actors). I guess you could argue that those with inherited wealth that have done nothing with their lives but spend their inheritance don’t deserve it, however the majority of wealthy people earned their wealth honestly and by hard work.
Rich people also fund a good chunk of the government. I won’t bore you with a lot of facts and figures except to state that the top 10% account for 70% of income tax paid – with the top 1% alone accounting for 37% of it.
The rich don’t simply park their money in savings accounts, CD’s and Money Market accounts. They put their money to work so that it can make more money. And how do they put their money to work? By investing it in things that will make their money grow. Things like venture capital firms that fund start-ups like Facebook, YouTube, Instagram, Twitter, Harley-Davidson, solar panel factories, wind farms, etc. They buy bonds that companies issue to fund growth or make capital improvements.
These investments create tax paying jobs that range from minimum wage to six and seven figure salaries. The real fact is that the rich fund a good portion of the government and invest in things that create jobs and drive innovation.
Venture capital projects are also extremely high-risk investments. Many do not pan out and the investors lose some – or all – of their investments. If a wealthy person invests $1,000,000 in 10 different ventures, many of the 10 will be a loss, some will break even or make some money, and maybe a few will yield vast returns – at least enough to offset the losses with all the others.
If we start excessively taxing the income and/or assets of the wealthy we will turn off a flow of money that sparks innovation, creates numerous jobs, and makes everyone’s lives a little better.
Taxing the wealthy merely turns that money over to the government, which invests in nothing. The government uses money to fund badly run programs that are rarely effective: the war on poverty has cost trillions of dollars over decades and the poverty rate hasn’t budged; the war on drugs has also spent trillions over decades with no discernable results.
And I’m tired of the argument about CEO pay being too high when it doesn’t include groups like entertainers, sports figures, TV personalities, and actors. People scream when a CEO gets 30, 40, 50 times the average worker’s salary. Well, the main cast of Friends made 170 times that of the average camera operator. Sports stars make hundreds, if not thousands of times the income of referees, locker room attendants, vendors, etc.
CEO’s are also responsible for producing something valuable for society at large. All the other highly paid people produce nothing, except short-term entertainment. CEO’s can drive companies into the ground, costing thousands of jobs, or they can cause a company to soar, creating thousands of well-paying jobs and making investors a lot of money. A basketball player can put a ball through a hoop, making us happy – until they miss. An actor can fake crying, making us sad – until we walk out of the theater.
If we’re going to pick on the wealthy for making too much money and taking a larger portion of the pie than everyone else, let’s make sure we target the right group of wealthy.
Having said that, these wealthy entertainers and athletes – at least the really rich ones – fall in to the group of people who invest in companies and venture capital firms, so I’m not advocating that we over-tax them either. I’m just pointing out that their income is grossly higher – as a percent of what others in their industry make – that they should be lumped in with CEO’s when it comes to pay disparity.
Let’s not forget that many large firms that got their start from wealthy investors have created tens-of-thousands of millionaires along the way. Companies like Microsoft, Amazon, and Google have created tremendous wealth for the country and many, many individuals. Even companies like Wal-Mart and McDonalds have created many millionaires and tens-of-thousands of high paying jobs.
I say, rather than taxing the wealthy, we should lower their tax burden on certain types of investments to incent even more money to flow to creating companies like Microsoft and Facebook and Tesla.
Creating high paying jobs in the private sector should be the main goal of our government because it kills two birds with one stone: Someone with a private sector job isn’t a drain on the economy or government spending, rather they contribute to both the economy at large and pay, rather than receive, tax dollars.
So let’s drop the tired trope about pay and wealth inequities. Individual wealth is what drives a country forward as they pay the bulk of the taxes (the infamous 1% richest pay over one-third of all taxes) and their investments drive innovation, which create good, high-paying, jobs.