As I’ve written about before, I think income tax is theft, but since getting rid of the income tax isn’t in the spotlight as much as tax rates themselves are, I thought this may be a good thing to write about. There are a lot of people out there that would advocate taxing the rich at a higher rate than others because “they can afford it.”
This is an awful idea, because taxes themselves harm the economy. How, you ask? It is an extension of the broken window fallacy. If you want to stimulate the economy, you wouldn’t go break your neighbor’s window to create business for the local window installation company. All you’d essentially be doing is making your neighbor spend money that he would’ve spent on a new pair of shoes, for example, on a window instead. Now the window installation company is getting that money instead of the shoe company. You haven’t created work by breaking your neighbor’s window; you’ve just diverted that money to another purchase that your neighbor wouldn’t otherwise have had to make and caused more harm than good.
This, essentially, is what taxes are. If you start taxing a rich person at 75% like France is doing, then you are taking money away from them that they would’ve used to create jobs. You can argue that rich people don’t create jobs if you want, but they do, even if they don’t own businesses that actively employ other citizens. When a rich person buys a yacht, who do you think makes it? Who cleans it? Who fixes it when it breaks? All of these things are jobs that are created when money is spent instead of taken away through taxes.