West Newsmagazine 5-20-20

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May 20, 2020
WEST NEWSMAGAZINE
I OPINION I 3
Walter E. Williams
Let’s not waste a crisis
Former Barack Obama adviser Rahm
Emanuel, during a recent interview,
reminded us of his 2008 financial crisis
quotation, “Never allow a crisis to go to
waste.” The COVID-19 pandemic has presented
a wonderful opportunity for those of
us who want greater control over our lives.
Sadly, too many Americans have already
taken the bait. We’ve allowed politicians
and bureaucrats to dictate to us what’s an
essential business and what isn’t, who has
access to hospitals and who hasn’t, and a
host of minor and major dictates.
Leftist politicians who want to get into
our pocketbooks are beginning to argue that
the COVID-19 pandemic is the best argument
for a wealth tax. Let’s first define a
wealth tax. A wealth tax is applicable to and
levied on a variety of accumulated assets
that include cash, money market funds,
real property, trust funds, owner-occupied
housing and other wealth accumulations.
Assume a taxpayer earns $150,000 a year
and falls in the 32% tax bracket. That individual’s
income tax liability for the year
will be 32% x $150,000 or $48,800. Say
the taxpayer has a net worth of $500,000
consisting of a business or home and the
government imposes a wealth tax of 32%,
the person’s tax liability is $160,000.
The problem with most politicians is
when they enact a law, they seldom ask,
“Then what?” They assume a world of what
economists call zero elasticity wherein
people behave after a tax is imposed just as
they behaved before the tax was imposed
and the only difference is that more money
comes into the government’s tax coffers.
The long-term effect of a wealth tax is that
people will try to avoid it by not accumulating
as much wealth or concealing the
wealth they accumulate.
A wealth tax has become increasingly
attractive because it lends itself to demagoguery
about the significant wealth disparity
in the United States. The Federal
Reserve reports that, in 2018, the wealthiest
10% of Americans owned 70% of
the country’s wealth, and the richest 1%
owned 32% of the wealth. That fact gave
Democratic presidential contenders such
as Bernie Sanders and Elizabeth Warren
incentives to propose a wealth tax as a part
of their campaign rhetoric. Leftists lament
that multibillionaires such as Charles Koch,
Warren Buffett, Larry Ellison and Sheldon
Adelson have not made charitable efforts
to address the coronavirus crisis.
My questions to these political leeches
are: To whom does the billionaire’s wealth
belong? And how did they accumulate
such wealth?
Did they accumulate their great wealth
by looting, plundering and enslaving their
fellow man, as has been the case throughout
most of human history? No, they
accumulated great wealth by serving and
pleasing their fellow man in the pursuit of
profits. Unfortunately, demagoguery and
lack of understanding has led to “profit”
becoming a dirty word. Profit is a payment
to entrepreneurs just as wages are
payments to labor, interest to capital and
rent to land. In order to earn profits in free
markets, entrepreneurs must identify and
satisfy human wants in a way that economizes
on society’s scarce resources.
Here’s a question for you. Which entities
produce greater consumer satisfaction:
for-profit enterprises such as supermarkets,
computer makers and clothing stores, or
nonprofit entities such as public schools,
post offices and motor vehicle departments?
I’m guessing you’ll answer the
former. Their survival depends on pleasing
ordinary people. Public schools, post
offices and motor vehicle departments’ survival
are not strictly tied to pleasing people
but rather on politicians and the ability of
government to impose taxes.
Some advocates of wealth taxes and
other forms of taxation might argue that
they are temporary measures to get us over
the COVID-19 crisis. Do not buy that argument.
The great Nobel Laureate economist
Milton Friedman once said, “Nothing is
more permanent than a temporary government
program.” The telephone tax was
levied on wealthy Americans with telephones
in 1898 to help fund the Spanish-
American War. That tax was repealed over
100 years later in 2006. One of the objectives
of the World War II withholding tax
was to bring faster revenues to fight the
war. The withholding of taxes is still with
us blinding Americans on the taxes they
pay. Let us not allow a crisis to bamboozle
us again.
• • •
Walter E. Williams is a professor of economics
at George Mason University.
© 2020 Creators.com
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