Billionaires Asking to be Taxed More


Billionaires Asking to be Taxed More

Every once in a while, you see something like this: One or a few billionaires come out and ask the government to raise their taxes. And every year, you see pretty much the same set of arguments against it.

This is particularly concerning because this is one of the best ways for the world to not just handle the many pressing issues (such as the environment and inequality) in the present, but also to make it harder for them to raise their ugly heads in the future.

So here is my attempt at trying to address some of the most common arguments against raising taxes on billionaires.

These billionaires are talking about this just because they are worried about their heads rolling when the pitchforks come out (referring to the French revolution).

The truth is, even if such a revolution were to occur (extremely unlikely), the billionaires heads are the least likely to be the ones rolling. All of them are constantly surrounded by security details, they go around in armor plated vehicles, and they have private jets fueled and ready to take off to remote Xanadus with nuclear-war-safe bunkers and food / water to last for years.

As an aside, I think the heads that are actually more likely to roll are those belonging to the more common garden variety rich, those who drive around in nice cars and live in the nice houses at the top of the hill (or down at the beach), but don’t have the doomsday security apparatus.

But let me reiterate again that anything like this is extremely unlikely.

If they care so much, why don’t they just pay more taxes than what is necessary?

The US government does allow an individual to make a voluntary contribution to the US treasury. But there are two clear reasons it makes no sense do so for anyone, on their own, to do this.

One is simple: the numbers just won’t work. To handle the major challenges like climate or economic inequality you need all the billionaires to contribute. If just a few billionaires do it, it won’t make a dent in these large problems. (Currently, the US has more than 2000 billionaires!)

The second reason is a little more subtle – it is based on the Prisoners Dilemma. (I won’t go into the details of describing the dilemma itself, you can go here to learn more.). Basically, the best outcome for both prisoners is that they work together. The worst outcome for the prisoner who wants to work together is that they try to work together but the other prisoner doesn’t. So it is best for the “good” billionaires to ask the government to force all billionaires to work together rather than doing it themselves.

These people are saying such things just for publicity. They don’t really mean it.

Look at the list of people who signed this latest letter. Pretty much the only name that is in the news often is that of George Soros. All others are either mostly unknown or known only in some limited way for something completely independent of their stand on taxes. They could spend a small fraction of what they are offering to pay in taxes and become a lot more famous.

Low taxes stimulate the economy. (A more nuanced argument is to say that low taxes lead to a more efficient allocation of resources.)

The underlying assumption here is that people are better at spending money on the right things than the government. This is generally true. But we aren’t talking about raising taxes on everyone – particularly not on those who would immediately go out and spend the money on necessities. We are talking about billionaires who don’t need the money. Not only that, but the same reason that makes governments not very efficient at spending money on the right priorities apply to the billionaires also – they don’t have the right information to decide what to spend the money on and the right means to do so effectively. So they also end up spending the money on the wrong things or not spending it – thus either not stimulating the economy or leading to inefficiencies.

This nuance is actually lost on a lot of people. The case for more efficient allocation of resources isn’t based on some political concept of liberal vs conservative ideology, it is based on who has the best information about what to spend money on and can be the most effective in doing so.

Raising taxes on the rich is a slippery slope – they will raise my taxes next.

Once a government gets addicted to raising taxes, it can keep going further and further until it kills the economy. But slippery slope arguments assume that there’s no opposing force. Why would we have a slippery slope when we are allowed to have a high friction upward incline? Are people going to sit idly by if taxes go up on everyone? Can’t we make the law in such a way that every further tax increase becomes harder and harder? We can be realistic about the pitfalls and still ask the government to raise taxes in a targeted way and provide the necessary checks and balances to make sure it doesn’t overreach. That’s what we are all here for.

Anyway, so there you have it. If one of your friends (or, more likely, a troll on the internet) makes any of these arguments, you can throw these responses at them.

Yes, it’s true that someone is always wrong on the internet, and it is absolutely our duty to correct them, even if it means we lose some sleep! 😉