Thursday, September 11, 2008

Taxing The Wealthy

We hear pretty often in politics these days about "tax cuts for the wealthy" and about taxing the wealthy because they can afford to pay. The underlying assumption of those who speak of such things seems to be that reducing taxes on the wealthy would surely not be in the interest of those who aren't wealthy. Perhaps there is something to be learned from Ludwig von Mises on such issues:
"Popular opinion is inclined to believe that the taxing away of huge incomes does not concern the less wealthy classes. This is a fallacy. The recipients of higher incomes usually consume a smaller proportion of their incomes and save and invest a larger part than the less wealthy. And it is only through saving that capital is created. Only that part of income that is not consumed can be accumulated as capital. By making the higher incomes pay a larger share of the public expenditures than lower inncomes, one impedes the operation of capital and eliminates the tendency, which prevails in a society with increasing capital, to increase the marginal productivity of labor and therefore to raise wages." [Ludwig von Mises, Interventionism, p. 51]

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