The fallacy of sharing the wealth

Published 11:48 pm Monday, October 20, 2008

By By Tray Smith
Barack Obama’s now famous response to a plumber concerned his business will suffer under Obama’s tax plan concluded with the Democratic Presidential candidate’s plea that the plumber “share the wealth.” However, the plumber’s wealth will be shared regardless of what he does with the profits he earns. If the plumber saves his money in a bank, the bank will lend the money out to someone looking to build a home, sharing the wealth with that borrower. If the plumber invests his money in the stock market, it will be used to fund the development of businesses that create jobs, sharing the wealth with the workers who fill those jobs. If the plumber spends all of his money, it will go to companies that produce the items he purchases, thus sharing wealth with workers who make those products. If the plumber uses his profits to expand his own business, he will spread the wealth by hiring new employees or reducing the cost of his services.
By either saving, investing, or spending his wealth, the plumber not only shares it, but he creates it. For instance, if wealth saved in a bank is loaned to a home builder, and the value of the home built goes up, wealth is not just shared, it is created. If wealth is invested in a company that develops a way to teleport objects around the globe, wealth is created because that company increases its value and employs thousands of additional people. Thus, wealth is both shared and created by means that reward creativity, hard work, and ingenuity.
Through additional taxation, Obama’s plan will divert money from the consumption, saving, and investment necessary for sharing wealth in this way into government social programs designed to benefit people who do not contribute to the growth of the economy. Obama’s plan shares wealth with political constituencies rather than economic contributors. Therefore, he rewards behavior that is not conducive to economic growth, which not only hinders the efficient distribution of wealth but also prevents the creation of new wealth.
Effectively, Obama is asking voters to send him a check and allow him to decide who benefits from it, rather than share wealth according to their own desires. This is consistent with traditional Democratic economics, which views the nation’s economy as a pie that should be shared equally rather than a pie that should be expanded. Democrats value the redistribution of the nation’s wealth over the expansion of it; they would rather see the economy remain stagnant than grow to the benefit of the wealthy. Their primary goal is the government engineered reduction of discrepancies between household incomes.
This view serves as the foundation of Obama’s tax proposals. Obama’s professed desire to cut taxes for 95 percent of Americans has become a frequent refrain of his campaign. However, because over one third of Americans pay no income taxes, Obama’s plan is impossible. His actual intention is to implement thousands of dollars worth of tax credits. Although tax credits were originally intended to allow people to reduce certain expenses from their tax liability, Obama’s plan gives them to people who pay no income taxes. Therefore, Americans who meet certain criteria will receive a check from the government to offset part of their tax bill, even if they have no tax bill.
Effectively, millions of Americans will receive a check to offset taxes they don’t pay, which means that millions of Americans will simply receive a check. That is not a tax cut, it is welfare cleverly disguised as a tax cut. It allows Obama to claim he is cutting both taxes and government spending while actually ballooning both. Meanwhile, Obama will raise the marginal tax rate on high-income earners, using that money to “share the wealth” by funding the tax credits he plans to give the lower class.
During Wednesday night’s Presidential Debate on Long Island, Obama referenced his supporter Warren Buffett, the famous Democratic investor who is now the wealthiest man in the world, as someone who can and should pay more in taxes. Again, Obama sought to advance the tax code as a means of engineering economic fairness, rather than a necessary evil needed to support the government’s needs. The issue, however, is not how Obama’s plan will impact rich investors like Warren Buffett, who can easily absorb the impact of his tax increases. The issue is how Obama’s plan will impact Buffett’s competitors: small business owners like Joe the plumber.
That’s the bottom line.
Tray Smith is a political columnist for the Atmore Advance. He is a student at Escambia County High School and can be reached at tsmith_90@

Sign up for our daily email newsletter

Get the latest news sent to your inbox