I'm once again suffering from a head cold, which is my excuse this week for being a day late with my post (it's always nice when it's something tangible.) I'm going to just dip my toes into politics this week--I don't quite feel the need to wallow in it at the moment, because I think emotions are still running very high from a historic election and there's just no way to talk about it without someone being unhappy, but this is a bit more generic. Let's talk taxes.
We're all familiar with the "trickle-down" theory of economics, which is the idea that if you set government policies to benefit the rich (including, but not limited to tax rates), they'll have more money to invest in the economy, which creates jobs, which helps the poor make money. The benefits of the rich making more money "trickles down", you see.
But this ignores the basic rule of economics, which I am just now making up: In an environment of laissez-faire capitalism, money always flows from the poor to the rich, just like water always flows downhill. It's absolutely inexorable, because the rich have more money than they can ever spend, and the poor have to spend all the money they have.
This is really pretty obvious, easily supported by everyday observation and common sense. The richer you get, the more money you have, pretty much by definition. Income rises on an unlimited curve, whereas expenses don't--eventually, no matter how extravagant you are and how much you invest, you hit a point where new money you make just goes onto the pile. That money is removed from circulation--for all that it helps the economy, you might as well burn it.
Whereas on the low end of the curve, income matches or exceeds expenses all the time. This is what's known as "living paycheck to paycheck", and lots of middle and lower-class people do it, because there's always a car to fix or rent to pay or clothes to buy for the kids. And that money goes to the makers of the clothes...some of it to the individual workers who make them, who are themselves living paycheck to paycheck and spending money as fast as they make it, but some of it to the owner of the clothes factory, who is not living paycheck to paycheck. Everyone who's in the middle-class is spending money, everyone who is upper-class is hoarding money. Eventually, that money is bound to wind up in the hands of the rich, and pass out of circulation.
So what's needed is, yes, a "trickle-up" theory of economics. The rich need to be forced to get that money back into circulation, through policies that reward investment and punish large accumulations of capital. And yes, this does mean higher taxes on the rich, but the rich shouldn't care about this. That money will always come back to them. The government will spend that tax income to build roads (and who owns the construction companies?), make tanks and guns (and who owns the defense companies?), and aid banking, housing, and other industries (and yes, "industry" generally means someone well-off to own their own company.)
This is not socialism, this is simply tending the garden of capitalism. Farmers don't just rely on rain to water their crops, because they understand that water always flows downhill. They pump the water to where it needs to go. We need to irrigate the middle-class and keep it healthy, because they in turn support the rich on a sustainable basis. The rich can stay rich, but the mindless accumulation of capital is disastrous, in the long run, to the health of the economy...and that means they gotta spend money to keep making it. And if they won't do that voluntarily, then the government should help them out a little.