01 December 2011

Obviously The Superrich Need to Spend More

Here's an intriguing editorial by Nick Hanauer about why we should tax the rich more and poor less.

It reminds the reader that most of the debate about tax rates is more about moral judgment than economic policy.

There are cliched narratives that seem to color most discussions about tax rates.

Democrats argue that the rich are greedy crooks who raise spoiled children and the poor all had unfortunate childhoods and might still have recovered to become something if only they hadn't run into the fore-mentioned greedy crooks. Obviously, Democrats say, the rich should be taxed more and the poor should not be taxed at all - should in fact be given money from the rich.

And the Republicans, of course, argue that the poor made themselves that way by smoking crack and having babies out of wedlock and sleeping in the back of class and not brushing their teeth regularly. Meanwhile, the rich are all that way because they work harder, have saved more, and are generally someone you'd  want to sit beside at jury duty. For this reason, Republicans argue, it just seems wrong to penalize the hard working rich folks in order to give their money to people who'll blow it all on beer and bingo.

Instead of focusing on judging the poor or rich, Hanauer focuses on a really practical matter. Rich don't spend money at the same rate that they earn it. If a community wants to grow the economy, it has to grow spending and a poor person will spend a greater portion of an additional $1,000 than will a rich person. (A fact born out by studies of marginal consumption.)
As Hanauer puts it,
"there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally."

So, unless you think that economic growth itself is immoral, the practical thing is to shift some money from those who save it to those who spend it.

1 comment:

Anonymous said...

I don't think I'd go so far as to call economic growth "immoral," but I do agree with Edward Abbey that "growth for the sake of growth is the ideology of a cancer cell."

The bigger question is "How can we make our lives better?" Bigger/Faster/More isn't doing it.