Every so often the media gushes over a billionaire who supports higher taxes on the so called rich. ‘How wise, how generous, how progressive, how unexpected’ they rave at the likes of Warren Buffet or George Soros. Why do these businesspeople so often support higher taxes on ‘the rich?’ Some may guess that these billionaires have gone soft or feel guilty about their success. Maybe instead, billionaires have plenty of selfish incentives to support higher taxes.
First off, for the most part the Government does not tax the rich, it taxes high earners. Mr. Buffet is already rich, so higher taxes will do nothing to take his money away. To accumulate a million dollars requires earning about two million dollars, but once accumulated, the million dollars can sit around for free. Higher taxes do not make it harder to be rich; they make it harder to become rich.
Also, high taxes do not impact the lifestyle of extremely high earners. A successful family earning, say $250K (Pres. Obama’s definition of rich) still has to worry about procuring luxuries like private schools, a home in a good neighborhood, and saving for retirement. On the other hand, someone earning tens of millions per year is well beyond such concerns, regardless of taxes. Higher taxes may hurt the balance sheet of extremely high earners, but not enough to force them out of their country clubs; in other words, the pain of higher taxes recedes as wealth increases.
Billionaires do not continue to work simply to earn money. Rationally they should retire, relax, and enjoy the fruits of their hard work. Still, billionaires continue to produce because their hyper competitive natures drive them to dominate – wealth is like a score card in their game of life. Since absolute wealth is not important beyond some high net worth, high taxes give billionaires a competitive advantage. The world is filled with countless ambitious entrepreneurs who may someday challenge the current set of billionaires, so punitively taxing the upstarts maintains the established order.
Indeed, as Ayn Rand realized, socialism is really about keeping things the same. Somehow socialism never achieves the equality in conditions to which it aspires, but it does cement the powerful class’s status by reducing the innovation and change that constantly seek to elevate newcomers. From that point of view, high taxes on ‘the rich’ are a means of maintaining the elite’s dominance in the face of competition. In the US, most millionaires are self-made, but if taxes are made high enough, that would necessarily change.
Finally, one must consider the company billionaires keep. Billionaires like to rub shoulders with elites and Hollywood types – far more enticing company than the grimy entrepreneurs and mere millionaires from where they came. If high taxes are no real penalty to the super wealthy, even an advantage, why not subscribe to the politics of the beautiful people?
George Soros made billions by founding a hedge fund that used derivative bets on currency exchange rates. He embodies the greed, naked derivative bets, and market manipulation that Democrats allege caused the financial meltdown of 2008. He truly has nothing to do with the far left, high tax politics he supports. Given the benefits to his class from high taxes, perhaps Mr. Soros is using apparent altruism to raise the competitive stakes in the game of billionaires. Perhaps billionaires don’t change their stripes and they are actually playing a skillful endgame at the expense of economic growth, fairness, and opportunity.