Okay, maybe that’s a bit strong. You deserve some of your money. But we need to get over the idea that we deserve everything we have and that it’s all a product of our hard work and ingenuity.
The notion does have some validity of course. In White America, hard work is typically rewarded with wealth because almost all possible opportunities are bestowed upon this demographic. This isn’t, however, the case for everyone. Whether we like to admit it or not, barriers exist for most people. The notion that a single black mother in Detroit has the same opportunity as an upper middle class white man is just not true. Hard work and intellect are not rewarded equally for those two people.
But that’s not really what this post is about.
Taxes have become an increasingly contentious issue, especially in light of growing libertarian movements. And some people actually contend that taxes are akin to stealing. I earned my $100,000 salary, so the government taking 30% is nothing more than theft.
Okay. Well, what if I told you that you didn’t earn $100,000? That, instead, you “earned” about 10% of that, and the rest you owe to government, to society and to people who lived before you? Most wealthy individuals brush this off, as they have come to believe that they deserve their special place in society (which this interesting study proves via a rigged game of Monopoly).
But the truth of the matter is that someone like Bill Gates owes much of his wealth to government (for inventing the Internet), his high school (for providing him with pretty exclusive access to the use of a computer), John Vincent Atanasoff (for inventing the first digital computer), Douglas Englebart (for inventing the mouse), government again (for protecting copyrights), government again (for providing peace and security), and so on. To that end, Warren Buffet is famously quote as saying:
I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil… I work in a market system that happens to reward what I do very well – disproportionately well.
The Nobel Prize-winning economist Herbert Simon studied this, and found that “social capital” is responsible for about 90% of what a person earns in wealthy societies. On moral grounds, Simon said that we should really be taxing at 90%.
Of course, for policy purposes, we need to keep in mind a tax rate that still encourages people to work hard and take risks. But that is most certainly a tax rate higher than we have now, and it is most definitely higher than the absurd calls for tax rates near or under 10%.
But the point is simply this: you don’t deserve all of your money. Statistically, you deserve about 10%. The rest has come by sheer luck and also by (taxpayer-funded) government investments, including roads, clean water, a police force, copyright enforcement, subsidies, regulations, etc. All of this makes possible the vast wealth that people now acquire in our society. Giving some of that money back is not only a smart long-term investment, but it wasn’t really that person’s to begin with.