Why Societies Redistribute Wealth
Most modernized countries redistribute wealth. This means taking income from the wealthy and giving it to the less wealthy. Why do this? There are ethical, sociological, and economic reasons.
Ethical – desire/need to help the poor. See data links on
income and wealth.
· Taxing the wealthy at higher rates doesn’t affect their life chances. They still have plenty of income and wealth to support their higher standard of living and to maintain and expand their companies. In contrast, taxing the less wealthy, particularly the lower and working classes, at equal rates dramatically affects their life chances.
· Prevents revolt on the part of poor and exploited.
· Ensures workers can buy goods and services that are produced (without high consumption, businesses would fail and wealthy would lose income and wealth)
· Labor costs below true value (surplus value)
· Not an even playing field – wealth breads wealth. They usually don’t earn it in the rags to riches sense.
· Corporate subsidies are extreme and taxing the wealthy at higher rates is one way to offset these subsidies. Examples: roads, sewer systems, firefighting, water quality, air quality, education, incentives to relocate (Alabama and auto factories -- tax reductions), tax right offs, depreciations, SUV credit
Arguments against progressive taxation:
· The rich earned this income and wealth, so they should be able to keep the same percentage of it as do others who were not as successful.
· Taxing the wealthy at lower rates allows them to reinvest in their and other companies, and in the stock market, which leads to economic growth (jobs, higher incomes for workers, better benefits). Trickle down theory. However the latter does not always work because the wealthy use more income and wealth to buy luxury lifestyles than in reinvesting in economy.