Tag Archives: Class Warfare

Economist Thomas Sowell explains why wealth redistribution doesn’t work

Thomas Sowell, an economist for the people
Thomas Sowell, an economist for the people

A whole slew of people are linking to this article by famous economist Thomas Sowell.


The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty. The communist nations were a classic example, but by no means the only example.

In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler’s Holocaust in the 1940s. [Professor Sowell is referring to the forced collectivization of the Ukraine.  If you want to inform yourself of the horrors thereof, I recommend  Robert Conquest, The Harvest of Sorrow: Soviet Collectivization and the Terror-Famine, Oxford UP, 1986.]

How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth — and that future wealth is less likely to be produced when people see that it is going to be confiscated. Farmers in the Soviet Union cut back on how much time and effort they invested in growing their crops, when they realized that the government was going to take a big part of the harvest. They slaughtered and ate young farm animals that they would normally keep tending and feeding while raising them to maturity.

[…]Among the most valuable assets in any nation are the knowledge, skills, and productive experience that economists call “human capital.” When successful people with much human capital leave the country, either voluntarily or because of hostile governments or hostile mobs whipped up by demagogues exploiting envy, lasting damage can be done to the economy they leave behind.

Fidel Castro’s confiscatory policies drove successful Cubans to flee to Florida, often leaving much of their physical wealth behind. But poverty-stricken refugees rose to prosperity again in Florida, while the wealth they left behind in Cuba did not prevent the people there from being poverty-stricken under Castro. The lasting wealth the refugees took with them was their human capital.

Stuart Schneiderman had this to say about the piece:

If the productive members of society are no longer working for themselves and their progeny they are going to be less productive. They have less incentive to produce when more of what they produce, or more of the profit, is going to be taxed or confiscated.

Besides, when you confiscate wealth people will resist and will spend more of their time and energy trying to keep what they have earned. This time and energy could be used for more productive activities.

Since wealth exists in assets whose value is determined in a market, a regime that confiscates assets will force the wealthy to liquidate their assets, thus lowering the value of everyone’s assets and making it far more difficult to attract investment capital.

I was happy to receive the 4th edition of Thomas Sowell’s “Basic Economics” textbook from one of our readers in New York city. (Thanks Tom!) If you are a Christian who is interested in economics, I really recommend that you pick up “Intellectuals and Society“, which is a great introduction to his thought.

I once was courting a young homeschooled lady who was skeptical of university degrees. She read one Thomas Sowell book, then read 5 more – all within a 6 week period. She then went on to do a B.A. in economics. If you are a Christian looking to branch out into economics, Thomas Sowell is your man. You can’t read just one of his books. It’s absolutely impossible.

Obama’s $1.5 trillion in taxes on the rich will hurt the middle class most

Sen. Jim Demint
Sen. Jim Demint

Consider this editorial from senator Jim DeMint.


Here are the facts.

Americans who make $200,000 or more a year make up about 3 percent of the country. Those 3 percent earn roughly 30 percent of our national income and pay 52 percent of all income taxes.

Raising taxes on these top brackets would mean that nearly 40 percent of all new tax revenue would be taken from hundreds of thousands of small businesses. About half of the top 3 percent, around 750,000 Americans, report business income on their personal returns.

The president talks about Warren Buffett, but his planned tax hikes would hit Mom & Pop businesses that employ your friends and family.

It boils down to simple economics. If we want the millions of jobs that small businesses create, then we cannot confiscate an even greater share of the incomes that generate those jobs.

When politicians talk about “the rich,” they want to conjure an image in your mind of an idle, entitled elite somehow exploiting the rest of us.  (That actually sounds more like the U.S. Senate.)

But the real picture is more like that of a man or woman who owns a small, local business, who started with little but has done well, and who now has a handful of employees with decent incomes and health insurance.

The fiction behind the “tax the rich” ideology is that these folks have extra money just lying around, and that the government can take a big chunk of it without harming anyone.

What the liberals fail to recognize is that the money isn’t just lying around, stuffed in a mattress.  It’s out in the world, growing the economy.  Rich people, like everyone else, put their money to productive use.

The top 5 percent of American earners account for 37 percent of all consumer spending, about as much as the bottom 80 percent put together.

The top 10 percent of families hold 64 percent of all major investment assets. Those making over $200,000 give 36 percent of all charitable contributions.

This is the heart of the liberals’ misunderstanding.  Raising taxes on America’s job creators who spend, invest and donate will punish  the middle class, not the rich.  It will hurt the local businesses they patronize, the companies they invest in, and the charities they support.

Money that used to create jobs, wealth, and opportunity will instead be sucked into the economic black hole of the federal bureaucracy, never to return.

The Bureau of Labor Statistics estimates that it costs businesses about $63,000 to create one job.  Put another way, every $63,000 in new taxes risks an American job.  And every $100 billion in tax increases – on the rich or anyone else – could threaten nearly 1.6 million jobs.

Now, who do you think loses those jobs?  Will it be “the rich,” or will it be the clerk at their grocery store, the mechanic at their gas station, and the receptionist at their dentist’s office?

Make no mistake: When the taxman aims at “the rich,” he ends up hitting everyone else instead.

Obama keeps talking about making people pay “their fair share”, so he has plenty of money to hand out hundreds of millions of bailout dollars to solar power companies linked to his Democrat fundraisers. But nearly half the people in this country don’t pay federal taxes. Are they paying their fair share? Why isn’t Obama going after them? Well, if what DeMint says is true, he will be going after them – but most of them don’t realize it.

There’s a reason why companies are not hiring domestically, but are instead expanding operations abroad, where corporate taxes are lower and regulations are less of a burden. Companies create jobs where they can make a profit. If the Obama administration attacks their profit-making ability, they will stop creating jobs here and move their production and capital elsewhere. Obama’s rhetoric isn’t going to change the way the world works.

Are the rich paying their fair share of taxes?

Do the rich pay their fair share of taxes?
Do the rich pay their fair share of taxes?

The Hoover Institute at Stanford University tweeted this article.


The Democrats’ position in the negotiations to raise the debt limit and deal with runaway government debt can be summarized in one mantric phrase: the rich must “pay their fair share” in taxes. White House communications director Dan Pfeiffer, for example, said a day before the Obama’s Sunday summit with Congressmen that any deal requires a “balanced approach that asks the very wealthiest and special interests to pay their fair share.” Earlier this year, Illinois Congressman Jan Schakowsky introduced legislation called the Fairness in Taxation Act, which she justified by saying “It’s time for millionaires and billionaires to pay their fair share.” Clearly, the Democrats think this is a winning formula going into the critical 2012 elections, despite the historically verified fact that raising tax rates on top earners will not over time generate more tax revenues.

Some political Socrates needs to challenge this formula by asking for a definition of “fair.” Clearly, having the top 10% of taxpayers pay 70% of all income taxes––while nearly half of taxpayers pay nothing––isn’t considered “fair” by those who want to increase taxes on high earners. So what would be fair? Having the top 10% pay 80%, or 90%, or 100%? The U.S. already has the most progressive tax system among 24 OECD countries, ahead of socialist heartthrobs like Sweden and Norway, so what more do Democrats want?

It might be a good idea to send this article to your friends, and bookmark it in case you get into a debate.