Recent news reports are full of mentions of tax plans such as that offered by freshman Congressman Alexandria Ocasio-Cortez, who supports marginal tax rates of 70% on ultra-high income earners. According to Ocasio-Cortez, an economy that allows billionaires to coexist with those just scraping by to make ends meet is “immoral.” But what Ocasio-Cortez, Elizabeth Warren, Bernie Sanders, and others of their ilk fail to realize is that the socialist solutions they support won’t fix the problems with our society.
The left has tapped into a strong soak-the-rich vein in American society. With income inequality growing in the US and the perception of income inequality probably growing even faster, American society seems rapidly to be becoming a society of ultra-rich and have-nots, with not much in between. Leftists have tapped into the dissatisfaction that results from that to gain support for their policies. But because they misdiagnose the reasons the problem occurs they will inevitably fail to come up with viable solutions.
The difference between the ultra-rich and the have-nots is like being forced to run a 100-meter race against Usain Bolt, only he’s been given a 75-meter head start. The left points to the vast inequality and proposes a brilliant solution: weigh Bolt down with a 100-pound weight to make things more fair. No thought is given at all to the fact that Bolt has been given a head start or why. And the solution of weighing down Bolt won’t work, he’ll still win.
That’s exactly where we are in our society today, where barriers to entry, government licensing, and various rules and regulations make it very difficult for people to start a business, find a good paying job, and get on the first rung of the ladder to success. On the other hand, government rewards entrenched businesses and special interests, protecting them from competition, bailing them out when things get bad, and making sure that they remain in business.
The solution to growing inequality is not to soak the rich, not to tax billionaires until they’re paupers, but rather to eliminate the regulations and barriers to entry that keep people from being able to compete against them. It’s those regulations and barriers to entry that results in a billionaire class that then seeks to perpetuate itself. Tear those barriers down and let people build up the capital needed to challenge the billionaires and their empires and you’ll see economic growth and prosperity flourish.
