The time this goes to print, the first round of the Democratic debates will have just concluded. I’m hopeful that a few leaders with great ideas and strategies have risen to the top of the list. Infrastructure, healthcare, Welfare reform, all need to be addressed and I’m excited for solutions to be presented. I’m also hopeful that a candidate emerges who isn’t focused on disincentivizing those who have made the American Dream a reality.
I refer to the 2% “net worth tax” one candidate proposes as a way to eliminate student debt and allow “free tuition for all.” In an article written by The Reformed Broker, Josh Brown of Ritholz Wealth Management, he states that “a 2% tax on America’s 75,000 wealthiest families would raise $2.75 trillion over the next decade.” This program is supposed to use the tax on the wealth of America’s best innovators and creators. I understand the good-natured attitude behind free tuition for all, but what about the kid from Carman-Ainsworth who made good choices, dug deep, showed GRIT, worked two jobs during college and managed to go to Mott for two years and UM-Flint and just graduated with no debt? How is this new program fair to that person?
I am more concerned with the slippery slope of the “Tax the Rich” mentality. Leaders sell the idea as a tax on the .1% and “it’s okay to vote for this, because it won’t affect you.” They propagate that it’s not fair that ultra-wealthy people have worked within the laws of the U.S. and provided American and global consumers with superior products that met the needs of millions. Well, guess what? This is how politicians start down the path to socialism, a true redistribution of wealth and then possibly, full-blown government control of everything. If you think I’m being “Chicken Little” about the situation, new taxation schemes almost always come in the form of “this will only affect the rich.”
Regarding our very first income tax passed in 1862 to help fund the Civil War, Thaddeus Stevens was quoted: “While the rich and the thrifty will be obliged to contribute largely from the abundance of their means … no burdens have been imposed on the industrious laborer and mechanic … The food of the poor is untaxed; and no one will be affected by the provisions of this bill whose living depends solely on his manual labor.”*
It all sounds good when the “rich” have to bear the initial tax burden. Congress can get behind a “Tax the Rich” mentality because it doesn’t affect many of their constituents. Before long, though, government starts moving that taxation hand down the scale, lower and lower, until it’s in the pocket of the average American. So, even though a net worth tax sounds like a good idea because it only affects people with a $50 million net worth, our income tax started as a tax on only those with excess, and guess what? Now, anyone with a decent job pays into the system.
Taxing the best and brightest creators is not the solution I would choose to eliminate student debt. I would be much more in favor of instituting a national tuition freeze, limiting debt availability and encouraging people to work and pay for college. Starting down the path of wealth redistribution is the opposite of what has made America the leader in innovation and why so many desperately want to come here to start a better life – a life without limit, where hard work and determination are rewarded with the hope that your children will experience a better life than you did. I believe the quote from the great Margaret Thatcher applies here: “The problem with Socialism, is that you eventually run out of other people’s money.”
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