Page 25 - Forbes - USA (October 2019)
P. 25
“With all thy getting, get understanding”
FACT & COMMENT
By Steve Forbes, Editor-in-Chief
Wealth: The Democrats Don’t Get It
21
THE PUBLICATION OF our “rich list” will taxes, not to mention new exactions such as
fan the fevers of plundering politicians, es- a levy on carbon emissions, would make for a
pecially those “soak the rich” Democratic bleak future, because such taxes would seri-
presidential candidates looking for seeming- ously harm the key sources of capital: savings
ly easy sources of loot to finance their social- and profits. Without investment the economy
ist fantasies. They’re delusional. will stagnate. As the legendary economist
To hear these White House wannabes tell it, Joseph Schumpeter (“creative destruction”)
you’d think the people on our 400 list are like pointed out, profit is essential for progress. It,
the Disney character Scrooge McDuck, sitting like depreciation, is really a business expense.
in their money bins loaded with coins, gold, It funds expansions and the cost of productiv-
jewels and paper currency. Tax it, and voila! ity improvements. It must replace the capital
You’ve got all that lucre for your pet projects. It destroyed by new technologies. The internet,
just ain’t so! Look at what the people on this list for instance, washed away tens of billions of
actually own, and you’ll quickly see that only a small portion of dollars in legacy newspaper and magazine wealth. Most start-
their assets are in ready cash. Anyone who’s ever owned a home ups flop, consuming savings. Existing businesses constantly
or a car can attest to the distinction between property and cash. fail, eradicating capital. Schumpeter recognized that com-
A wealth tax would mean less wealth to tax. Taxing the merce’s successes must not only cover their own expenses
mere possession of property and securities, by definition, and reward their investors but also, in essence, recover the
makes them less valuable. Many people would have to sell costs of unsuccessful ventures.
assets to pay for the tax on what they own. Ample capital for startups is essential for the discovery
The value of an asset, especially a financial one, can be and development of new products and services that will en-
heavily influenced by the health of the economy. The radical hance future living standards. Like experiments in the labo-
tax and regulatory schemes (regulations are a form of taxa- ratory, startups and research and development are crucial
tion that today costs us nearly $2 trillion, which is more to gaining new knowledge that will enable us to advance.
than the GDP of all but a handful of countries) proffered Profit also provides critical information about people’s
by the Democrats would slow the economy to a crawl. This, preferences. A high-margin product or service will attract
in turn, would cause tax revenues to fall far below expecta- competitors, which will, in turn, offer buyers an improved
tions. Despite thousands of years of experience, these po- and/or cheaper version.
litical hacks cavalierly assume that costly, burdensome rules
and higher taxes don’t affect people’s ability to do business.
Wealth taxes would be an unprecedented assault on peo- Truths About European Paradises
ple’s privacy that would make the transgressions of the so-
called FANGs look like small, innocent transgressions. Govern- FREE COLLEGE! FREE healthcare! Free day care! Huge
ment bureaucrats would have the right to demand lists of all minimum wages!
your assets—as well as the right to examine your home, storage Europe, in general, and Scandinavia, in particular, are
facilities, brokerage accounts, bank accounts and everything hailed by Democrats as models for how the U.S. should do
else—to determine if you have crossed the wealth-tax thresh- things. Their social welfare programs, after all, are so much
old. They would, at a click, have—for the same purpose—access more generous than ours.
to the records of everything you have bought or sold. What these pols leave out is that the non-rich get
This is the road to serfdom. whacked hard for the costs of these freebies.
Europeans’ income tax rates are higher than ours.
All of these countries are afflicted with a super sales tax
Profit Is Good, Not Evil called the value-added tax (VAT) with rates that routinely
range from 20% to 25%. With few exceptions in the U.S.,
DEMOCRATS (as well as some Republicans) don’t under- sales taxes are around 6%. Wouldn’t it be fun during the
GLEN DAVIS stand the crucial role profits play in a vibrant economy. next Democratic presidential debate to ask each candi-
Their plans for higher income, business, payroll and death
date how he or she would avoid the imposition of an ef-
O C T O B E R 3 1 , 2 0 1 9 F O R B E S . C O M
