There are at least 7 reasons why the idea of taxing the rich and giving it to the poor does not work. I'll break them down for you below.
1. "Not Rich" Syndrome
The definition of who is "rich" is a lot like a number of other terms that belong on sliding scales. Someone who is rich is usually someone who has more money than the person making the definition. "I'm not rich, but that guy over there making $30,000, he's rich." That guy says "Rich? You must be joking! I'm just getting by, but that guy, making $80,000, now he's rich." The third guy says "I'm not rich! Those greedy bastards making $250,000, they're rich, and they should be taxed more!"
2. "Not I" Syndrome
The people who do admit they are rich usually believe they deserve some exemption to having to pay higher taxes. A leftist who wanted to raise taxes on the rich called in to The Savage Nation a few days ago and he admitted that he was, in fact, rich. However, he believed he shouldn't have to pay higher taxes, only other rich people. You see, he takes every tax exemption he can so he only pays a fraction of what a less crafty person would at his income bracket, and he believes that his genius at finding these loopholes means he is entitled to pay less. The caller wanted to raise taxes but did not want to close the loopholes that would shield him from having to pay those higher taxes! Taxes, in this instance, become a penalty for stupid people.
3. Rich People Don't Pay Taxes
The 80 people who possess half the money in the world never pay taxes anyway. Warren Buffett pays as little taxes as possible, so do the Clintons and the Bushes. The really rich people don't get money from income, so they already don't have to pay income tax – the form of tax that people who want to "tax the rich" want to increase, and they have armies of lawyers to find every single loophole to get out of paying the taxes that do apply to them. Warren Buffett always says that income tax should be raised and that his secretary pays more income tax than he does, but what he never mentions is he makes very little income. Most of the money Buffett gets is in the form of capital gains, which he conveniently does not want taxed any higher. He's distracting the public with one hand to disguise what his other hand is doing.
Remember, in the US, the IRS does not care how much you pay beyond the minimum amount you owe. You can legally give them as much money as you want over what you legally owe. If you owe $50,000, you can legally give them a million dollars and they will gladly accept it to buy a new hammer or toilet seat.
4. Corporations Don't Pay Taxes
Just like rich people, corporations (which somehow count as "people" but unborn children are just "tissues") don't pay taxes either. Corporations are to people what Superman is to man. Corporations can deduct expenses, like utilities. If you try to get off having to pay your gas bill or make a car payment you'd get your gas shut off and your car repossessed. A corporation can get a tax break. Corporations can use past losses to offset future gains. In the red last year? It doesn't matter that you've made billions, you can subtract what you didn't make from what you did and get free money from Uncle Sam! Corporations can create smaller, shell corporations in tax havens to launder money and avoid paying taxes. And the big one, corporations that are really super in the red can get bailouts if they have their hands in too many cookie jars. If a big corporation like AIG were to go bankrupt it would cause a depression, so the government can't let that happen. You see, some corporations are "too big to fail."
5. Dekulakization
Whenever taxes are raised the only people who lose more money directly are kulaks. Kulaks are the mythical "tight-fisted" independent farmers (mostly Poles and Ukrainians) who Stalin murdered out of racial hatred while claiming to fight capitalism. In American terms the kulaks are the entrepreneurs. They are the people with two mortgages on their homes to fund a business that employs a couple dozen people. On paper they may be millionaires, but very little of that money is liquid. In fact most of these modern day kulaks are in the red, but few ever speak of real world economics, and so these paper millionaires must be taxed to the point where they lose their businesses. Destroying small businesses is a death sentence for the economy, because that's where most new jobs are created. Raising taxes is like pouring cement into a car's engine.
6. Eat the Poor
The only other group of people hurt by higher taxes are poor people. Fewer businesses means fewer jobs. Fewer jobs means more unemployment, and unemployment tends to go hand-in-hand with being poor. That's not the only way poor people are hurt by higher taxes. Those tax-exempt corporate people can raise their prices if they ever get in a situation where they can't weasel their way out of having to pay a tax, thus forcing poor people to have to pay whatever the corporations owe. Sure, minimum wage might go up every few years, but it's always behind inflation, so an extra dollar an hour is really less than what you were paid five years ago because the price of commodities has gone up. It really is the case that the rich get richer and the poor get poorer, whether taxes are increased or not.
7. To Each According to His Need
If we're going to redistribute wealth, and do it globally and do it right, chances are you won't see a dime. A billion Africans take precedent over the average poor person in America, because they are just that much poorer. Poor people in America have a car, a TV, and are obese, while poor people in Haiti literally eat cakes made from mud to eliminate hunger pangs because there's not enough food to eat a real meal every day.
And if we were to do this just in America? The people who would reap the rewards are the same people who reap them now: the welfare scam artists. Deadbeats who have ten children so they can get food stamps to pay for makeup and booze, people living together who all file separately so the household looks really super poor on paper, I've seen all types. There are people who know how to game the system to suck up as much welfare as possible, and they often live better than the people working two jobs who support them with their taxes. Do you think this would change if we just "tax the rich" more? In a country where 80% of government spending on welfare is lost in bureaucratic inefficiency and political slush funds, I don't think so.
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