The popular narrative doing the rounds is that capitalism is an inherently bad system that only serves to generate wealth for the few at the expense of the majority. It is this narrative that is used to justify progressive taxation and using the law to foster economic equality. This is nothing but an extremely superficial argument based on virtue signaling and emotion. Allow me to explain why taxation is theft no matter how much money a person has, as well as why rich people are important for economic growth. But before we go further, there are two principles that have to be identified and elaborated on; principles that are universal and their application non-negotiable (except to pragmatists).
The first of these principles is that nobody can take what is not rightfully theirs. If this principle is transgressed, it is colloquially known as theft. The only time a person’s property can be expropriated without their consent and without compensation is when they acquired it in an unlawful manner. This is what is known as legal restitution.
The second principle is quite simple: it is not for anyone but the owner of certain property to decide whether he or she has enough or too much of it. Sure, anyone can voice their opinion on how they think someone has too much money, land, etc., but nobody can use this to justify taking that property if it was not unlawfully acquired. To do this via the power of the government is not a valid exception.
I am quite sure that everyone but thieves and criminals can agree that the two above-mentioned principles are universally applicable to all. Now let’s move on to those pesky rich folks who are “robbing” society.
The wealthy are probably some of the most unpopular folk to have ever strolled the face of the earth. Whenever the state is not to blame, rich people are the scapegoats by default. Their wealth is considered to be something that is withheld from society and the general populace. Progressives view money lying in a savings account as bad for progress and one of the main causes of poverty. It is thus justified for the less fortunate to take what doesn’t belong to them from these “hoarders of wealth” via the coercive force of the state. The fact that this type of theft is committed via the state apparently justifies it. Nothing can be further from the truth. Here’s why.
There is this fallacious and irrebuttable presumption that holds that the richer a person is, the more they owe society. This presumption is based on the narrative that rich people are greedy thieves who exploit the masses to acquire massive amounts of wealth in unlawful and unjust manners. This is simply not true. The majority of rich folk acquired their monies through voluntary economic relationships (unlike the government). Their level of wealth is thus in proportion to their contribution to the market and thus to society. Sure, it is inarguable that there are wealthy individuals who have acquired their wealth through unlawful manners such as fraud. This does not, however, justify assuming that this is probably true for most wealthy people and that we should now enforce blanket taxes on them in order to ensure that they “give back” to society what they “took.” As mentioned earlier, the only time a person’s property can be taken without their consent and without compensation is when it can be proven in a court of law that the property in question was acquired unlawfully. No exceptions. Massive levels of wealth cannot possibly be deemed as unjust by default by any stretch of logic whatsoever. What matters is the method of acquisition of that wealth. But how does wealth lying around in a bank account benefit the rest of us?
The Austrian school of economics holds that the supply of savings drives an economy. People store their hard-earned monies in a bank. These savings constitute a bank’s cash reserves. Banks then lend fractions of these reserves out to aspiring entrepreneurs in the form of loans. More reserves cause two advantageous consequences to materialize: banks are more willing to lend out money and they also do this at a lower interest rate. The logic behind this is quite simple: excessive cash reserves make it less risky for a bank to grant loans to people. In essence, when more people invest more of their savings in a bank, it is easier for entrepreneurs to borrow money from that bank and invest it in whatever business opportunities they see fit. This is why investments in the form of savings are crucial to economic growth. Without capital to invest, entrepreneurs cannot create new wealth and the economy will simply stagnate. It is also clear how income taxes can halt economic growth: the less money people have to invest in savings accounts causes interest rates to rise, which results in less money being borrowed and the creation of new wealth to be hampered. Governments try to rectify this by loaning money to private banks from central banks at low repo rates. This causes interest rates to drop to levels that aren’t sustainable and banks to lend money recklessly, as happened in the 2007-08 financial crisis, according to Investopedia.
It is easy to argue that rich people owe the rest of us something when the sole basis of the argument is emotional rhetoric about inequality and how a select few wealthy individuals have transgressed the law for their own benefit. It is, however, crucial that we do not take it upon ourselves to create exceptions to certain principles just because we are offended by someone’s level of wealth. It is crucial that we value basic economic concepts above empty rhetoric. It is not fair to blame all wealthy folks for the misdeeds of a few. It is not justifiable to take from somebody else what does not belong to us. The fact that this is done via the coercive force of the state changes nothing.