Jamin2112 wrote:In case you do not know (which would not surprise me the least bit), we have a fractional reserve banking system in the United States; meaning that only a tiny fraction of the money you deposit is in the vaults, and the rest is being invested. If everyone put their money under a matress, we would not have a functioning economy. Every dollar the government takes from the rich is a dollar that gets spent and not invested.
How can you possibly believe that our nation would benefit in the long run from taxing the rich to put more money in the hands of the government?
Several possibilities:
The rich tend to spend money on houses, causing house price inflation, when they outbid each other for 'desirable' properties that are in limited supply (eg they are in a popular area). This is not money that is 'invested' in a capitalistic sense - it does not have the chance of increasing production. It is more akin to gambling on future house prices.
The rich also spend money on scarce items of luxury (eg jewelry, antiques) that have the same problems.
The rich are also likely to spend their money abroad - importing luxury international goods, going abroad for holidays, buying property abroad. This is money lost to the American economy.
The rich tend to spend money on extravagances, that are inherently wasteful. This destroys physical value; for instance, fuel that is used purely for pleasure is wasteful, but fuel that is used to make something, or transport someone to a job, has helped produce something.
If the rich did truly invest all of the greater amount of money they have, in terms of increasing capital in, or lending money to, developing American companies, then this would grow the American economy. But that turns out to be only part of what rich people do with their money. Much is wasted, gambled, or sent abroad (without importing anything productive in return). A government can redistribute wealth so that it gets used more productively for the country's economy - keeping people healthy (spending largely internal to the country, and meaning the workforce is still healthy enough to work), investing in the infrastructure which lowers the cost of production for American companies, increasing the spending ability of people of modest means, who tend to spend money inside the country on simple goods and services, keeping law and order for a stable society, which encourages investment rather than hoarding or sending money out of the country in case of disaster.
There are some wasteful things a government can do too, of course, such as overspending on unnecessary defense projects that are never used.
- By Pants-of-dog
- By JohnRawls
- By Tainari88