Symposium 2015: Should the federal government increase progressive taxation or the federal minimum wage as a way to address income inequality?

Cartwright—Neither!  Income inequality and the efforts to address this issue are typical socialist arguments and policy initiatives.  It’s not for the federal government to redistribute wealth though the Democrats would certainly like nothing more than to legislate income equality via redistribution of wealth.  What politicians and those who want income equality fail to understand is that you can’t tax your way to prosperity.  At some point, they rich are going to take their money and go somewhere else or worse.  They aren’t going to sit idly by while the federal government continues to take more and more from them and punishing them for being successful.


There’s a fundamental problem with progressive taxation.  It’s punitive.  The more successful you are, the more you’re punished for that success by having to pay higher taxes.  You end up paying for those who don’t contribute anything at all to the system.  But it’s not just the rich who get screwed by the tax code.  The middle class and small business owners get screwed the most.  The tax code is messed up, and I don’t think anyone will disagree with that.  Everyone knows that the rich people have the best accountants and lawyers to ensure that they minimize their tax bill.  Middle class Americans try to do the same thing but not quite as effectively.  This is the very reason I have always supported a consumption tax of some sort.  With a consumption tax, everyone pays a fair share.  If you’re a multi-billionaire and you purchase a $500,000 car, you’re going to pay more in tax than someone who purchases a $10,000 car.  If you buy a new iPhone every six months, you’re going to pay your fair share over someone who buys the cheapest cell phone and uses it for three or four years.


The naysayers of a consumption tax say this hurts low income workers the most since they don’t pay any taxes now.  It’s hardly fair that they pay no taxes but get all the benefits offered by the government at basically no charge.  But let’s address this.  I would exempt grocery store purchases of unprepared food from the consumption tax since low income workers still have to eat.  However, I’d slap the tax on prepared foods at restaurants.  If you’re a low income worker, you probably shouldn’t be eating out or getting the latest technology every time something new comes out.  It’s a bit hypocritical that low income workers whine about not having any money but they have a cell phone with internet service, cable TV, Netflix, etc.  Perhaps they should try being more frugal with their money.  Alternatively, get a second job or get the skill sets you need to get a better paying job.


Politicians in America have had a war on poverty for decades.  They’ve been taxing and spending non-stop for decades.  Have they eliminated poverty in America?  No.  Have they closed the income gap in America?  No.  All the politicians are doing is taxing more and spending it on bloated federal programs or giving it to other countries.


How do we close the income gap in America?  Let’s make the American economy the strongest, most competitive, most dynamic economy in the world.  Cut taxes and give businesses an incentive to create more and better jobs for Americans.  Ensure that the economy is vibrant enough so that anyone who wants to work can work and advance.  But we also need to change the culture of Americans and make sure they have the skill sets necessary to compete on the international business stage.  We need to educate kids and give them K-12 educations that rival those of other industrialized countries.  We need to help them make better choices when it comes to either going to college or going to a technical or vocational school.  By doing this, we can help millions of working Americans lead better lives.  Not everyone is going to have everything they always want.  Not everyone is going to be a multi-millionaire.  If you want everyone to have equal financial resources, you should move to a socialist or communist country.  See how that works out for you.


With regards to the minimum wage, there is absolutely nothing wrong with the minimum wage as it is.  I’ve talked about this at other events in the past.  In fact, the minimum wage has done more to kill jobs than anything else.  Ever wonder why we don’t have full service gas stations anymore?  Thank the minimum wage.  The business economics don’t support the payroll for service station attendants at the minimum wage.  If they were like waiters and waitresses and relied on tips, perhaps it would be a different story.


Raising the minimum wage isn’t going to lift anyone out of poverty.  If you raise the minimum wage, do you think  McDonald’s is going to take a hit to their profits?  No.  They’re going to pass along the cost to the consumers.  So, the dollar menu becomes the two dollar menu.  Oh, wait a minute, that’s already happened, hasn’t it?  How did that work out for the minimum wage workers?  You get a raise but now the food at McDonald’s costs you twice as much.  You go to buy groceries at the grocery store and your bill is higher…might be because the minimum wage is higher and the store is passing along the costs to consumers.  Let’s look at Walmart and the layoffs they announced recently.  Those people who got pink slips can probably thank the higher wages for their demise.


Abolish the minimum wage and let the free markets determine the right wage for a job.  If someone is willing to work for $5 per hour, so be it.  If not, the business will have to raise the hourly rate until they find someone who will work for the advertised rate.  The free markets work.  Attempts to manipulate the markets through socialist policies rarely have the desired  outcome in the long-term.

Read more here at Thinking Outside The Boxe

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s