“Tax the rich / Feed the poor / ‘Till there are no rich no more ...” – “I’d love to change the world,” Alvin Lee, 1971
There are a large number of factors that can impact the manner in which an economy grows, or has its growth hindered – but the one thing no economy anywhere can live without, the one element that has to be present for it to even function, is investment capital.
Investment capital, in essence, is privately owned surplus wealth that has been infused into particular economic enterprises in order to generate profits – and, as the financial engine that creates such development, it is the vehicle that drives all new production.
Consider, as an example of this process, the field of calculators:
In 1968, when Hewlett-Packard released the first fully electronic 9100A calculator, it sold for $4,900 – something only a rich person would buy. By 1971, however, Sharp and Canon were releasing portable calculators for $295-$345. By 1974, prices had plummeted to well under $100, and by 1975, they could be had for under $20. By 2001, credit card-sized calculators sold for 50 cents.
So, in the space of 33 years, calculators – while also becoming micro-miniaturized and far more capable than HP’s original deskbound 9100A – crashed in price from $4,900 to 50 cents. Yet what is even more illuminating than those incredible price reductions is the nature of the course those savings took. Consider:
When HP’s 9100A hit the shelves, it was a plaything for the rich – “luxury” spending. As the high profitability of such manufacturing acted to attract huge amounts of research and investment capital, however, competitive forces kicked in and quickly brought those prices down to the point where the poorest person in the country could buy one.
Thus, it was the SPENDING OF THE RICH – coupled with their investment capital – that made that whole process possible and acted as the catalyst for everything that followed. Remove those elements and we’re back to buying abacuses.
What are we to make, then, of proposals such as this? Where state Rep. Cathy Connolly, D-Laramie, who never saw a tax hike she didn’t like, has a new income-tax scheme for us to take a look at:
“The bill we’re proposing, that wouldn’t kick in until someone has about a $350,000 personal income. Mom and pop on the street, you and your neighbor, that income tax rate would be zero.” (“Wyoming legislative leadership expects differences,” WTE, Feb. 13.)
Really, Ms. Connolly? Let’s consider what your proposed “soak the rich” income tax would actually mean in the real world:
For anyone making $350,000 or more a year, it stands to reason that any tax paid on that income is going to come not from consumption income, but surplus income instead.
It is precisely such “surplus” income, however – whether it is directly invested by the owners themselves, or saved and then invested by the saving institutions – that drives all capital investment. Reduce that, and you’ve just reduced your average standard of living by that same amount.
You’ve actually reduced it substantially more than that, however, since such taxes not only stunt the initial areas of investment, but also the additions to the economy that would have flowed from such investments had they been left to chart their own courses.
And, as we’ve seen with the calculator field, the impacts of such developments can be tremendous and far-reaching: Does anyone care to figure out how many jobs have been created in the calculator field since 1968? Or in its spinoff industries? Or of how many hundreds of billions of dollars have been added to our GDP as a result?
And, as we ponder such losses, inflicted to the extent that we simply “soak the rich” of their investment capital, does anyone care to trace out the impacts of such losses onto “Mom and pop on the street”? It’s precisely “you and your neighbor” who will be affected the most, since it’s your jobs that will be disappearing out from underneath you.
I predict, however, that Connolly will continue to trod her tax-and-spend path, completely ignorant of its devastating implications, acting as the savior for the “little guy.” But her plans, if implemented, would actually decrease the chances of any of us being able to produce anything for ourselves at all.
Whether or not YOU, Dear Reader, will fall for her communistic approach to your income, however, is still up for grabs.
Bradley Harrington is a computer technician and a writer who lives in Cheyenne. Email: firstname.lastname@example.org.