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Wealth is a reflection of reality.

From Marx to the present day, and for a variety of reasons, many cannot accept this basic fact, and insist that we continue to increase poverty by striving to live in a world that does not exist.

This can be demonstrated by three examples.

Suppose a “compassionate” group of aliens landed on the planet, took control, and redistributed all wealth equally to all living humans. There would be zero differences between the rich and the poor. The socialist earthly paradise would now be a reality. Suppose further, that the aliens departed and returned 20 years later. What would they find?

They would discover that the world would still have the rich and poor very much as it was before they redistributed the wealth. In addition, and with few exceptions, the people who were poor would have become poor again, and the previously rich would have become rich again.

Wealth is not arbitrary; it is seldom only the result of “life’s lottery.”

Now let’s apply this reality to taxes.

Other than governmental greed, why do governments impose high taxes and fees on certain items and behaviors? For example, what is the purpose of a tariff? It makes foreign products more expensive and decreases their appeal to the benefit of domestic producers.

Governments will raise taxes when they want to socially engineer certain behaviors. A carbon tax is purposed to decrease the use of carbon. A cigarette tax is raised to decrease the use of cigarettes.

An income tax is raised to decrease income. What?

No. No. Giving more wealth to the government will increase wealth. Isn’t that what we have been told almost forever? Yes, and it is all as false as the idea that the government can give you something for free. Wealth is created in free exchanges. Wealth is destroyed in forced exchanges. Taxes are forced exchanges.

Saying that wealth is a reflection of reality has some implications about wealth itself. Ultimately, it can only be taken from someone who actually produces it.

As a government takes more and more of a nation’s production, the wealth that could have been created by that production must be extracted from producers. There is no other option. Much of socialistic thinking on this topic comes from a world that no longer exists. Marx’s ideas are 150 years old. In a modern world, wealth is not produced by the socialist old school idea of a “worker.” Most “workers” in this sense are now, or soon will be, machines. These machines were built by machines. The question then remains: who produced production?

Irrespective of how politicians justify their proposals, the overwhelming amount of tax will ultimately come from the middle class. It may appear that the rich will pick up the tab by paying their “fair share,” but this is only an illusion created largely by the rich’s ability to corner and transfer wealth, which was produced elsewhere.

It is true that governments can produce wealth primarily through projects that are too large for smaller groups. The balance will, however, always be negative. Governments are ineffective and wasteful. Even so-called transfer payments have a high overhead. It is not an accident that four of the five richest counties in the U.S. surround Washington DC.

Those places most hurt by costly governments are the same places the politicians hypocritically pledge to support, and use as examples for more taxes. The consequences can be seen by simply looking at the poverty of rural areas that do not have freeways, state colleges, or government installations.

Wealth is a reflection of reality. Ignoring this truth makes individuals and nations poorer.

Dennis Clayson is a business professor at the University of Northern Iowa. The opinions expressed in this article are those of the author, and do not reflect those of the University of Northern Iowa.


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