Taxing the Rich Only Punishes Success and Stifles Growth

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  The following article is an op-ed written by readers and DOES NOT reflect, in any way, the views or positions of The Wale Perspective. Its publication DOES NOT imply endorsement by our Editorial Board.

When looking at economics and the market in times of crisis, we often see wealth distribution as a leading factor in causing events such as the Great Depression. Distributing wealth equally is a highly important ideology, as it occurred little over the course of history and determined where the cash flowed through the market. An answer we often come up with to solve this issue was often “tax the rich.”

But, does that help the question of distributing wealth? Or does it just make everything worse?

We cannot deny the benefits of getting more out of the select few that hold a considerable percentage of the total net worth of an economy. With the additional money, the government can implement better infrastructure and pass laws that increase medical and educational benefits, allowing more money to flow into public works. If everything manages to work out properly, there would be more money for the average civilian to spend as a result of having to pay less for services that are included in new benefits, allowing them to participate in more luxurious activities frequently.

For example, having enough savings to be able to buy a Gucci purse once every two months. We should also take into consideration that a portion of the wealthy’s income is made from investments, where in some cases taxes are lowered. Therefore, isn’t taxing the rich the right thing to do as the wealth tax shifts the economy towards equality?

The social class which we call the “rich” is made up of top-tier entrepreneurs, idealists and engineers who hold up the economy and stock market alike with their ideas and investments. As I like to think of it, the rich have a reason for being rich. 

Every individual that belongs to this category has to pass through multiple barriers of entry, most often involved with finding the right investments and having enough knowledge or skill to keep building on their assets. Most people spend decades learning and working towards the build-up of their portfolio fit for the top class, and money just so happens to be one of the key motivators for one to reach higher. The economy is a reflection of personal interests; if society runs on money, then so do people, because we can only get what we want in life if we have the money to make it happen.

If new wealth taxes are introduced, the government is cutting down the motivation for people to keep working as they are limiting the fruit of hard work. All people are looking for ways to make life easier and get the most out of the least effort; when the average citizen realizes that they are already coming by easily, they will be unmotivated to try harder as they will end up the same anyway, resulting in a slower work force and work spirit.

And what about the people already at the top and the ones that are ambitious? Well, they would be prompted to leave the country and move to somewhere else that suits their growth, resulting in the country losing talent, opportunity to high-end and high-paying jobs, and ultimately the slowing down of economic development that ends with the government having no more money to go around at a time where no one else is able to stand up and jumpstart the economy by creating new job opportunities.

By then, most major businesses would already have developed their center of control elsewhere, and Canada would no longer appeal to them. 

Jeff Bezos owns the online retail giant Amazon.

Let’s look at some classic examples of “rich” people. Take Jeff Bezos as an example; he is among the top ten richest people in the world. His company, Amazon, employs more than 1.5 million people across approximately 20 countries and has an annual net worth of 50 billion, 12.5 billion of which is generated in Canada alone.

On the other hand, BC’s Broadway Subway project is only projected to create 13 000 jobs that will conclude once the construction is complete. Looking at these two examples, we can conclude that the government is mostly limited to short-term job-creating projects focused in one specific area at a time.

Can we really be reassured that the government will circulate the additional wealth tax fee effectively in ways that we need, or will we be better off with the results of a single company? Can we really afford to risk losing such a valuable resource?

Furthermore, research concludes that the wealthy are already getting taxed significantly. Studies show that the top 20% of income-earning families in Canada pay nearly two-thirds of the country’s income taxes and more than half of total taxes when they make just under half of Canada’s total income.  Any further strain will directly impact these individuals, and those affected will immediately leave or lower the value of their assets to avoid high taxes, which hinders the development of the company and the section of the economy it runs under.

New policies may also encourage those who feel threatened by it to go into politics and spend huge sums to find the deal that will benefit them the most, a typical example being the backing up of the 2024 Trump campaign by Elon Musk. As the money goes elsewhere, ordinary citizens are getting less and the economy does not improve in any way as the money is spent unproductively.  

Establishing a wealth tax only decreases innovative incentives and reduces the size of the economy. Reducing the wealth of the rich does not reduce their power, and they may be threatened to use the size and strength of their companies or investments to encourage new political reforms that may cause upheavals within the society in general and transfer the center of their wealth elsewhere.

It is unfair on our part to raise the wealth tax when the rich are already paying the majority of taxes and we should come to realize that we do not get any real benefit by “taxing the rich”.