Why Taxing the Rich More may be a BAD Idea

Thursday, October 28, 2004
There is a proposition on the California Ballot, Proposition 63, that will increase the tax of people who make over $1million dollars by 1%. This would raise approximately $750 Million a year by taxing only about 25,000 to 30,000 people No big deal right? Sounds like a great deal "Because they have the capacity to pay it." It looks like it is going to pass. I'm here to tell you what a really bad idea this may be.

Imagine you are a very hard worker at your company and you are the best at what you do. While most people work 32-40 hours a week you voluntarily work 80 hours a week. You make a little more money than most, not twice as much but you like your job and you don't mind much. You know that your hard work will help everybody in the long run by making the company more successful.

Now the company decides to implement a new policy. It tells you that all the best workers are required to work more hours. Not a lot more just a little. It shouldn't be a big deal "Because you have the capacity to do it" Those who don't have the capacity, the people working 32-40 hours, actually will get to work less. They tell you that you are now REQUIRED to work 84 hours, just 5% more than you are currently working. Because you are good at what you do and so much more productive than everyone else everyone else gets to work 2 hours less.

Great plan right. I mean only the people who have the ability are affected. Everyone else, those without ability, get to live a slightly easier and better life. Why should you care? You can handle the extra small burden.

What would you do? I know I would leave the company and find new work. Where does that leave everybody? The company just lost one of its best workers who not only worked harder but also was more productive. That means everybody has to work HARDER now, 40-48 hours, than they did before or the company will do worse. Even a bigger problem is that most likely it doesn't matter how much harder everyone works, there are certain things that only you can do. No matter how hard I work, no way can I do the creative work of the Graphic Designer just like no way can the Graphic Designer come up with an elegant software architecture.

But it's only a little! The problem is that there is a domino effect. It takes one hard worker leaving the company. Let's say that is someone else. Well then production for the whole company goes down. What happens? Well, why don't we just make the most productive work a little harder? It’s only a little. What is another 5% right? So now you are working 88 hours. See the problem?

People sometimes say I lack compassion because I don't believe in helping the poor at all cost. I say that these people don't have a view of the larger problem. What happens to those without ability when the company goes under? How will they find more work? It's probably not a big deal for the hard workers to find new jobs but what about those that are not as hard working? Who was really hurt because you decided to ask for more from those most able? Have the people who said this ever had to lay someone off? It isn't fun. So who lacks compassion?

Think about it.


Kat said...

i don't think that comparison works. you can't compare paying more money to working more hours. working involves a very finite amount of time and it takes mere minutes to write a check, no matter where the money came from. and don't tell me super rich people work those same extra hours to get that money.

T said...

Where did the money come from that these people can just cut a check in a minute? From working. Most people don't work just for the heck of it and actually expect to get paid so its a perfect analogy to equate work and money. For more on my thoughts on the subject read my post about Money and Life.

And don't tell me that the super rich don't work hard. You need to see my post about earning moneyDon't think this happens? It does for sure. Many athletes choose teams in Texas or Florida because there is no income tax in those states. And I don't want to hear from the anti-sports people who say so what. These people earn millions of dollars. Those are millions of dollars that we get nothing from, taxes or spending wise, that we might otherwise see.

David Cho said...

If people are really interested in soaking the rich, they should start with the civil court system which is right now nothing more than a cash cow for trial lawyers.

Then corporate welfare. Yes, stop handing out fat and lucrative contracts to companies like Haliburton and big defense companies. Stop corporate subsidies in the name of "promoting business." Yes, it's a pipe dream, but doesn't hurt to fantacize.

Terrence is right. Millionaires will not just sit around and take the hit like a sitting duck. They will do what they can to avoid it, which includes moving out of the state. Then what? Position a bunch of cops around the state border and have them shoot people who try to escape much like the old Communist East Germany used to do stop their most productive citizens from crossing the Berlin Wall?

We used to collect the X amount from these guys. Now they are out of the state, so we just went from X to 0. They won't sit around and take it and say, "Thank you sir, may I have another tax increase?"

T said...

Yes Dave, I agree with you. I think our Civil Court system is broke. I don't know if I agree with alot of the proposed fixes but I too think its broke.

As for corporate subsidies, I'm all for eliminating those as well. I think all subsidies are a joke. As a free-marketeer I am opposed to government deciding what industries or technologies should and should not survive.

David Cho said...

It's that old saying.

Tax anything that moves. If it keeps moving, regulate it. If it stops moving, then subsidize it.

Jose Anes said...

Ohh... some of those rich people will just decide to move to a state with lower taxes. Then... there will be no more taxes from those guys/gals.

Some others will stay.
Just hope there are more than stay than those who leave.