Good Rich vs Bad Rich
Much talk about “the rich” and inequality ignores two key points. 1) Not all inequality is equally bad. 2) The rich are mostly as replaceable as you.
Jag Bhalla is an entrepreneur, inventor and writer. His current project is Errors We Live By, a series of short exoteric essays exposing errors in the big ideas running our lives, details at www.errorsweliveby.com. His last book was I'm Not Hanging Noodles On Your Ears, a surreptitious science gift book from National Geographic Books, details at www.hangingnoodles.com. That explains his twitter handle @hangingnoodles.
1. Much talk that deals with “the rich” and inequality ignores two key points. First, not all inequality is equally bad. Second, the rich are mostly as replaceable as you.
2. Let me be clear that I am not remotely against the rich; it would be great if many more people were rich. But to simplify for the sake of a useful argument, let’s contrast two kinds of rich: the good (in-it-together) rich and the bad (in-it-only-for-themselves) rich.
3. The good rich seek ways to succeed without harming their communities (e.g. paying decent wages), and they shoulder their share of the costs of running the country (e.g. Mark Cuban “Get rich, pay taxes: it's a patriotic duty”).
4. But the bad rich exploit every situation ruthlessly, regardless of the costs to others (e.g., Mylan’s Epipen pricing gouging, “your money or your life,” business model).
6. Taxes are a key test (the burden of taxation has shifted from businesses and the rich to ordinary people).
8. The bad rich, however, create or exploit tax loopholes (avoiding paying for the infrastructure their success is built on). See Apple’s tax “fraud,” Trump’s ~billion dollar dodge (+Buffet on Trump), or The Panama Papers.
9. Here’s The Wall Street Journal quoting an expert justifying special private equity tax treatment. If we only get “to keep $6.5 million of every $10 million fee—[not the] $8.5 million we now get—we'll just retreat to the golf course.” And millions will suffer because we won't turn around their companies.
10. That’s their best leverage to extort special treatment? Fear not. Those bad rich are replaceable.
11. There are plenty of talented folks around, and other hungrier, harder-working, smarter, soon-to-be-richer folks will step up and figure out how to make “only” $6.5 million. That’s still a huge incentive (like the economist’s proverbial $50 “on the sidewalk" it won’t go unclaimed for long).
12. Speaking of incentives, those who claim that higher top-folk taxes hinder economic growth are ignoring history. Growth has been higher in times of higher top tax rates.
13. Are today's rich different than those who built prior booming economies? Are they less strong? Less driven? Less passionate about building great businesses? Or just lazier? Greedier?
14. If some rich folk choose to work less because they can’t stomach paying taxes at the same rates as the rest of us (on so-called ordinary income), so be it. We can do without these whiny tiny-minded titans.
15. Again, we need as many good rich as we can get. Let’s use things like tax laws to encourage the bad rich to go golfing, and get themselves replaced by the better-for-us-all good rich.
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