Is there a better alternative to taxing the upper class? | Dafacto

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Is there a better alternative to taxing the upper class?

14 September 2011

It seems that each day we get to read comments from political leaders — whether Obama in the US, or Zapatero in Spain — arguing for increased taxes on those who have earned or saved more, with justification that it’s “fair”; that this segment of society should do more to help those in need.

Moral issues aside, the problem is that the reality is far less straightforward than one segment of society helping another.

The reality, as we all know, would be that one segment of society gives more money to government, who will then spend that additional revenue on social programs intended to help the needy, along with a lot of other programs completely unrelated to helping the needy (including their own salaries and pensions.)

And regarding those programs intended to help the needy, I think we can all agree that the efficiency with which government processes its revenue sucks, and gets worse as government gets bigger. And today, government has never been bigger.

As Milton Friedman often stated, the intentions of socialism are noble and good. But the unfortunate reality is that they never work in practice.

I would suspect that the majority of social spending here in Spain ends up in the hands of corrupt politicians, corrupt businessmen and corrupt individuals who learn to play the system. I see this every single day. And the nature of that corruption is just as relevant in the US and every other government in the world, as far as I can tell.

Who knows what percentage of a dollar or euro in tax revenue actually ends up helping somebody. I wouldn’t be surprised if it’s less than 10 cents.

So, if one segment of society is going to be coerced into helping another, let’s do it this way: Let them find their own way to provide that help, and then submit receipt of that help to the government, thereby cutting out the inefficient/ineffective middleman.

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