The Sanders campaign boasts of fighting for a radical new approach to taxation: a wealth tax. Unlike the traditional income tax, this plan does not tax money coming in but rather all assets a man has to his name. His wealth tax was the focus of another article on The Conservative Critique which can be found here. That article makes the point that by the campaign’s own words, this tax’s reason for being is the confiscation of wealth from the rich as opposed to funding actual aid to the less fortunate. What wasn’t covered was the unintended consequence of the wealth tax: brain drain.
Brain drain is an economic phenomenon which happens whenever there is a strong incentive for the rich and innovative to leave a state. When this arises, those most affected by the incentive to get out of dodge start doing that. What results from this is a loss of the most productive classes of the nation. The rich are ones who bankroll investment. Firms requiring large amounts of capital cannot start without them nor can old ones be upgraded and, in some cases, even maintained. The innovative are the ones who create the lightbulb, the car, harness electricity and develop computers. It cannot be argued that the main thing that drives innovation is not the profit motive. People invent new things because they see a niche and therefore the possibility of earning a pile of money. If the fruits of one’s labor (especially high yielding intellectual labor) are confiscated, they have a strong reason to innovate elsewhere or not innovate at all. Why would one take risks and put in inordinate amounts of labor hours for the sole purpose of financial advancement if the advancement is to be confiscated from one’s hands upon its achievement? That is the exact purpose of this mode of taxation, to confiscate. The proof of this lies in its aim which is clearly stated to be the destruction of the resources of the rich. Straight from the horse’s mouth:
“Under this plan, the wealth of billionaires would be cut in half over 15 years which would substantially break up the concentration of wealth and power of this small privileged class.”
“Third, the wealth tax includes a 40 percent exit tax on the net value of all assets under $1 billion and 60 percent over $1 billion for all wealthy individual seeking to expatriate to avoid the tax.”
“In order to reduce the outrageous level of inequality that exists in America today and to rebuild the disappearing middle class, the time has come for the United States to establish an annual tax on the extreme wealth of the top 0.1 percent of U.S. households.” (emphasis added).
Cutting wealth of billionaires in half. Taxing the net value of all assets leaving the country over $1 billion at 60%. Reducing the outrageous level of inequality. Avarice in its rawest form. Skimming some of the resources of the rich off the top is incompatible with gleefully proclaiming that billionaires will be out half their net worth in a few years. All proposals that sees certain classes of people laid waste to in a few years to the extent that half their resources are taken are confiscatory. One can prosper with a high income tax but not with a high wealth tax – that is the difference. Potentially, the precedent set by this could be even more destructive. Just as income tax rates have shot up astronomically under the presidency of Franklin Roosevelt and others, what will stop a future congress and president from making the wealth tax so high that the resources of the rich are wiped out in full?
If Sanders is successful in his baneful venture, this tax will target just these people: the rich and innovative. Pray tell, if a president Sanders vows to launch a campaign of persecution against these special classes, why they would stay in the country at all? If they have resources that sprawl ad infinitum as the radicals claim, they certainly have the means to pack up and move elsewhere. No doubt his exit tax will make fewer flee abroad but it will tend more to force increasing amounts of wealth into the shadows where it will be harder to tax and even harder to do good for the economy. It should not be difficult to understand that when a man flees a country with his resources in tow, his resources can no longer be expropriated by said country. Beyond that, if the climate for commerce becomes hostile enough in the United States, these same people may begin to make the calculation that their money would be better invested elsewhere. Slackening investments make maintaining and accumulating capital harder which is bad news for business. When business suffers, the jobs of regular people suffer.
Confiscatory taxes and the brain drain they cause have no place in the American republic. Reject socialism. Reject Sanders.
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