George Mason University economist Donald Boudreaux wrote a couple of articles asking people who complain about income inequality whether their solution of letting government redistribute wealth from some people to others makes sense. After he is done asking his questions, I am going to complain a little about what it is like to study hard things and do hard work
In the first article, he asked a series of questions to the wealth redistributers.
Here were a few that caught my eye:
Do you teach your children to envy what other children have? Do you encourage your children to form gangs with their playmates to “redistribute” toys away from richer kids on the schoolyard toward kids not so rich? If not, what reason have you to suppose that envy and “redistribution” become acceptable when carried out on a large scale by government?
Suppose that Jones chooses a career as a poet. Jones treasures the time he spends walking in the woods and strolling city streets in leisurely reflection; his reflections lead him to write poetry critical of capitalist materialism. Working as a poet, Jones earns $20,000 annually. Smith chooses a career as an emergency-room physician. She works an average of 60 hours weekly and seldom takes a vacation. Her annual salary is $400,000. Is this “distribution” of income unfair? Is Smith responsible for Jones’ relatively low salary? Does Smith owe Jones money? If so, how much? And what is the formula you use to determine Smith’s debt to Jones?
While Dr. Smith earns more money than does poet Jones, poet Jones earns more leisure than does Dr. Smith. Do you believe leisure has value to those who possess it? If so, are you disturbed by the inequality of leisure that separates leisure-rich Jones from leisure-poor Smith? Do you advocate policies to “redistribute” leisure from Jones to Smith — say, by forcing Jones to wash Smith’s dinner dishes or to chauffeur Smith to and from work? If not, why not?
In the second article, he had even more questions for the wealth redistributers.
Here are the two that I liked best:
When you describe growing income inequality in the United States, you typically look only at the incomes of the rich before they pay taxes and at the incomes of the poor before they receive noncash transfers from government such as food stamps, Medicare and Medicaid. You also ignore noncash transfers that the poor receive from private charities. Why? If you’re trying to determine whether or not more income redistribution is warranted, doesn’t it make more sense to look at income differences after the rich have paid their taxes and after the poor have received all of their benefits from government and private sources?
Do you not share Thomas Sowell’s concern that efforts to “de-concentrate” incomes among the people require concentrating power among the politicians? Asked differently, if you worry that abuses of power are encouraged by concentrations of income, shouldn’t you worry even more that abuses of power are encouraged by concentrations of power?
Mark Perry of AEI saw this column, and he had two more questions.
Many extremely wealthy people (movie stars, celebrities like Oprah, businessmen like Warren Buffet, filmmaker Michael Moore, and Robert Reich for example) who are in America’s “top 1%” by income (some are easily in the top 1/0 of 1%), often complain about income and wealth inequality in America. And yet these wealthy individuals rarely take any direct actions themselves that could reduce income inequality immediately, e.g. giving away a majority of their multi-million dollar annual salaries and unburdening themselves of millions of dollars of their wealth (stocks, real estate, cars, airplanes, etc.) and living on a modest, but still very comfortable incomes of say, $200,000 per year. Isn’t it inconsistent that most of these individuals hoard a majority of their income and wealth to live lavishly without taking immediate steps to redistribute their largess to those less fortunate and reduce the income/wealth inequality they complain about? If not, why?
Many Americans express great concern about income inequality in the United States, but seem relatively unconcerned about global income inequality. For example, nearly half of the world’s richest 1% of people live in the U.S., and the threshold required to make it into that elite group is only $34,000 per person, according to World Bank economist Branko Milanovic. Is it inconsistent for an American making $34,000 to complain about the incomes and wealth of the top 1% in the United States and yet show no concern for the fact that he himself is in the top 1% of the world’s population based on income? Many Americans making $34,000 and above support income redistribution schemes (e.g. raising taxes on the top 1%) to reduce income inequality in America. Because they are themselves in the top 1% of the world’s population by income, shouldn’t these Americans also support redistribution of income and wealth from themselves (the world’s top 1%) to dirt-poor countries like Zimbabwe? If not, why not?
One quick point about who pays taxes in this country as it is now.
CNS News reports on a study by the Congressional Budget Office (CBO).
The top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010, according to a new study by the Congressional Budget Office.
At the same time, households in the bottom 40 percent took in an average of $18,950 in what the CBO called “government transfers” in 2010.
Taxpayers in the top 40 percent of households were able to pay more than 100 percent of net federal income taxes in 2010 because Americans in the bottom 40 percent actually paid negative income taxes, according to the CBO study entitled, “The Distribution of Household Income and Federal Taxes, 2010.”
This is where the money comes from for all our lavish social programs, which I do not even use.
I remember growing up as the son of poor immigrants and having to struggle to do well in school. When I was growing up, I didn’t learn to ride bicycle until very late. We didn’t have a car to drive anywhere. We had a black and white TV. We took public transportation to go anywhere. I remember that we used to eat macaroni and cheese with sliced hot dogs quite a lot. We went to a sit-down restaurant for dinner less than five times as a family. I always took school very seriously from the beginning, and I remember having conflicts with the popular students, who were having more fun than me because they had more wealth and more friends and they did more expensive things for fun. I chose not to drop math, even though I struggled with it more than English and computer science. I remember my friends buying Apple IIe and Commodore 64 computers, and I didn’t have any video game system much less a computer. I would go over to their houses and play games at their houses. I never had a summer off. I was always in summer school or working, and that working summers continued through my undergraduate degree.
When the time came to go to college, I chose computer science. Some of the courses I took during that time were so hard that I cried. I had not been well-prepared for college in high school, it was a big stretch for me. I remember failing a test in second year calculus, the first test I ever failed. I can remember doing calculus problems and crying about how hard it was, and my Dad looking on wondering if he had made the right decision when he snudged me toward computer science, when I wanted to do something easy like English. But I graduated with a 3.4 GPA, and went on to graduate school, where I finished with a 3.9 GPA. I chose to do both of my degrees locally, and lived at home. I never went out drinking or to a club or anything like that. The school I chose was not the best, but I saved money, and graduating with a few thousand dollars in the bank was important to me. I didn’t want to go into debt in order to learn how to program a computer.
When I graduated, I started working in a different city, and I remember that my apartment had firebrats, which is a kind of insect infestation. I chose a modest apartment because I wanted to save money. I saved most of what I earned because I anticipated that I would soon be married and starting a family. During my career to this day, I have seen politicians express their desire to take what I earn and give it to people who were born in this country, but who made different decisions from me. Some of them dropped out of high school. Some of them had sex before marriage. Some of them drank alcohol. Some of them smoked. Some of them dropped math. Some of them chased women. Some of them drank and smoked and did drugs. Some of them went on expensive trips. Some of them went to movie theaters and bought popcorn. But I never saw these people in the computer lab at 3 AM trying to help me with my assignments. I never saw these people show up to work weekends when I was working 70-hour weeks in a startup company trying to build sweat equity.
Somehow, people in government, at all levels, have decided that I don’t deserve to keep what I earn. They have decided that other people can get subsidies, but I have to pay full price. I walk into the grocery store and see people buying better food than me, and paying with food stamps. I am paying for my groceries and paying for theirs, too. Somehow, a significant number of people in our society have decided that I should not be allowed to keep what I earn, buy the things I want, and live my life the way that I planned to live it. My earned income is my freedom to express myself, and the politicians have decided that I am allowed to get up and go to work to earn the money, but that I am not allowed to express myself using my earned income. They get to take the money I earned and express their views, instead.
To learn more about why income inequality is not something for government to solve, read this article from the American Enterprise Institute.