Saturday, September 29, 2012

Wealth, Taxes, and Society: Givers and Takers

It seems Germany is considering the efficacy of a tax on wealth. Several nations in Europe levy such a tax today. At one time such a tax was quite common in Europe. An article in The Economist reported on Germany’s deliberations.
"This old idea gained new life in July, when DIW, a think-tank in Berlin, argued that the sovereign-debt crisis in the euro zone could easily be solved if governments confiscated part of the ample private wealth that still exists in Europe, including Germany...."

The article provided this chart to support the notion that private wealth is large compared to public debt.

The United States has a ratio of private wealth to public debt of about 4.5. A family having assets that much greater than liabilities would probably consider itself fiscally sound. Unfortunately, nations can’t quite seem to function with the same sense of shared responsibility as families.

What does The Economist think of the notion of a wealth tax?

"The best argument against a one-time wealth tax in normal times is that it is antithetical to freedom. The state has no business helping itself arbitrarily to the belongings of any group of its citizens."

What a curious statement! Ignoring the diversion of "normal times" and the utility of the idea proposed, is it society’s role to provide people with freedom? Do people form a society in search of freedom—or in search of security? In order to accumulate wealth, what is more important: freedom or security?

A businessman needs society to define and enforce rules and regulations within which business can compete on the basis of competence. Businesses need society to prevent unfair competition and theft of their various forms of property. Without that security they could not accumulate wealth.

An investor needs society to provide and enforce rules and regulations for markets in order that there be a correlation between investment decisions and investment results. Without that element of security investors could not accumulate wealth.

Those who have accumulated wealth need society to provide the law and order that makes their wealth secure.

It is the great mass of wage earners who provide this security, and the economic conditions under which wealth can be accumulated.  They do this under the assumption that society will provide them with secure access to food, clothing, and shelter.

In a society everyone is a taker—and everyone is a giver.

In times of national need society has had the right to "confiscate" peoples’ lives and expend them on a battlefield. Members of society usually see this as a duty they will fulfill. In a time of national need society should not have the right to "confiscate" wealth? Has wealth become more valuable than life? In times of national need must wealth be protected above all else?

That is not freedom; that is license.

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