Redistributing wealth from top to bottom
By: David Coughlin
Redistribution of wealth is not fair, no matter how you define it or where you apply it. Redistribution of wealth starts from a false premise that government can confiscate wealth from one and can decide who better deserves that wealth. When one possesses more than someone else, the fairness of that inequality is called into question. Fairness implies free from bias, dishonesty, and injustice, unclouded by class envy, class warfare, and populist rhetoric. The idea of redistribution of wealth crept into American politics during the beginning of the 20th century, with the 16th Amendment authorizing income taxes. One of the bedrock principles of Karl Marx’s communism is that the rights of the community outweigh the rights of the individual, justifying confiscation of wealth. Like boiling a frog, incremental changes were slowly implemented to embed the idea that government knows better than individuals how to spend their own money. The size and reach of the federal government has grown dramatically over the last century and is rapidly approaching unsustainability and bankruptcy. Obamanomics is the most recent example of government hubris and the clearest from of tops-down redistribution of wealth and income. Monies are collected and doled out to favored individuals, more deserving states, and even other sovereign countries.
The American Dream builds on economic freedom to provide the opportunity for prosperity and success. This dream is predicated on personal freedom, personal responsibility, and belief that there is a reward for hard work and achievement. This dream also provides the opportunity for income mobility rewarding risk-taking as a means to improve income and the accumulation of wealth. On the contrary redistribution of wealth aims for equality of results irrespective of risk-taking or personal effort. Personal (or business) taxes are fair if everyone paid the same from the first dollar to the last, but instead this country has evolved into a progressive rate structure with higher rates for higher income, penalizing hard work and achievement. The income tax code is now over 75,000 pages long containing a maze of deductions, exemptions, and loopholes to favor one group, company, or special interest over another. The result is personal and business income taxes with 47% of people either have such low income that they are exempt from federal income tax, or they quality for enough tax credits that they get back what they pay. The top 10% of wage earners pay an unfair 70% of all federal income taxes. The solution for personal redistribution of wealth is to repeal the 16th Amendment income taxes and replace with a flat “Fair Tax” with no exemptions and no deductions.
Our entitlement programs began as temporary “safety nets” for those less fortunate, but have evolved into an overly complex redistribution of income. When first conceived these entitlement program were envisioned as personal accounts to protect individuals, with a small amount to subsidize the less fortunate, but unfortunately the federal government has grown them into socialized programs requiring large bureaucracies whose main charge is now to penalize the rich and give to the dependent class. The two biggest entitlements, Social Security and Medicare, are rapidly approaching bankruptcy, spending more money each year than is collected. The solution for entitlement redistribution of wealth is to transition Social Security and Medicare into personal accounts. Since this solution requires dramatic changes to longstanding programs, the transition will require protecting those who already or are about to use the existing programs, and require at least a 10 year gradual transition for new users. The overall solution to reverse redistribution of personal wealth is actually quite simple in concept, but will be very painful to implement.
The federal government has assumed powers not delegated in the Constitution and collect money which is then redistributed back to the states where it belongs. The 10th Amendment embodies federalism, the idea that federal and state governments have separate areas of activity and that federal responsibilities were “few and defined.” Entire cabinet departments have been created to manage activities that are reserved for the States, such as agriculture, education, energy, health and human services, housing and urban development, and transportation. These departments centrally plan the national spending priorities and then allocate how much should be spent by each State. Federal Aid to States (FAS) transfer payments ($610 billion in 2010) are then used to redistribute the monies collected back to the States. Why should Maine subsidize dairy farming in Iowa? Why should Connecticut be forced to fund rebuilding schools in Mississippi? Why should Washington subsidize solar energy production in Nevada? Why should Alaska fund urban development in Detroit? Why should California fund bridge maintenance in New York? Corporate welfare is another form of redistribution providing loans, subsidies, and tax breaks to favored industries and companies. Political influence rears its ugly head in earmarks that are amended to other bills to target redistribution for pet projects. The solution for intrastate redistribution of wealth is to enforce the 10th Amendment and abolish those cabinet departments not covered under enumerated powers. Devolve any activities still needed, that are currently performed at the federal level, back to the States where they belong.
The latest, most insidious effort is to institutionalize redistribution of wealth between countries. The United Nations and other major international organizations, like the World Bank, International Monetary Fund, World Health Organization, and the World Trade Organizations, are funded by member assessments and voluntary contributions. These international organizations are independent and driven by their member needs and wishes. Lately there have been a number of initiatives to establish stronger global governance and global taxing authority. The tax schemes are clear to confiscate money from the rich countries and redistribute to the poor countries. Unfortunately these international organization’s goals and directions do not always align with United States goals and direction, to include funding countries and activities that are contrary to our national interests. The solution to international redistribution of wealth efforts is to veto any efforts to grant global taxing authority to any international organization. A better solution is to repeal automatic funding and link annual funding to achievement metrics, cost benefit analysis, ROI, and pay for performance.
The federal government has expanded into roles never envisioned by the Founding Fathers. Norman Matoon Thomas, a leading American socialist, explained that “The American people will never knowingly adopt socialism. But, under the name of liberalism, they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened.” The Democrats have embraced class warfare as their primary political strategy and redistribution of wealth as their primary political tactic. The unintended (or perhaps intended) consequence for redistribution of wealth has been the creation of a permanent underclass totally dependent on the government for their well-being. Political power is maintained by retaining this dependence in exchange for political support. Abraham Lincoln is misquoted as saying “You cannot make a poor man rich by making a rich man poor.” Unless you are an unrepentant Marxist praying for a class uprising, this permanent underclass is condemned to a government subsistence existence and an inability to participate in the American Dream.
David Coughlin is a political pundit, editor of the policy action planning web site “Return to Common Sense,” and an active member of the White Plains Tea Party. He retired from IBM after a short career in the U.S. Army. He currently resides with his wife of 40 years in Hawthorne, NY. He was educated at West Point (Bachelor of Science, 1971) and the University of Alabama in Huntsville (Masters, Administrative Science, 1976).