Tuesday, October 30, 2007

The Income Gap

Billionaire Warren Buffet is saying that he wants to be taxed more, saying that our current income tax rates are not progressive enough: "The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It's dramatic; I don't think it's appreciated and I think it should be addressed." Buffet makes most of his money investing. Capital gains are taxed at a lower rate than the top income brackets. Low taxes encourage investment and economic growth, high taxes hurt investment and economic growth (and abortion groups that depend on Buffet's handouts). I am mystified at how the tax system is "tilted" toward the rich. The fact is that the richest 1% pay 37% of all income taxes! The bottom 50% only pay 3.3%! I think our tax system punishes achievement quite enough. But wouldn't taxing the rich more close the "income gap?" The media has recently sounded the alarm that the income gap is growing. A growing income gap is a good thing. That means the economy is growing. Everyone benefits from that, only the rich benefit more, because they have more money invested in the growing economy. If we punish them with higher taxes, they will be less likely to take risks with their money. Think of a small business owner with a new product he's excited about. Should he take out a second mortgage on his house in order to afford more employees? Higher taxes means a smaller potential payoff should he succeed, making him less likely to take on the risk. The income gap talk is nothing more than stirring up class envy.

No comments: