A growing idea being promoted by various politicians and parroted by hoards of well-intentioned segments of the population is that the rich don’t contribute their fair portion to the nation’s economic pie. According to them, the wealthy steal mountains of hard-earned money from the working class and callously hoard it for themselves, counting their yachts and refusing to help the less fortunate.
After all, the bottom 90 percent of people accounts for less than 22 percent of all wealth in America, while the top 1 percent controls a staggering 39 percent. Many urge the rich to reduce their consumption for the sake of the hungry poor. No one’s asking them to radically change their diet, but only to give a greater slice of their unseemly rich pie to the workers who baked it.
This seemingly virtuous demand is predicated on three basic assumptions: first, the rich don’t need their mountains of wealth, so it’s only fair they share it with those who do. Second, the working and poor classes carry well above their weight; it’s about time the rich start carrying their load. Third, and often used to justify one and two,the meer fact that the rich possess such a wildly disproportion of wealth indicates they’re swindling the poor, and worse yet, their economic success is dependent on the poor’s economic demise.
The first reason, independent of the second and third, suggests a fundamental misunderstanding of what “fairness” means. If one’s property is taken away and the justifying factor is “because you don’t need it” and not “because it’s aligned with a set standard applied to everyone equally,” it’s not a fair system. Applying harsher rules to those subjectively deemed capable of bearing their effects is the antithesis of fairness.
The second justification is patently wrong. The rich pay significantly more of their money into the system than the ones they supposedly exploit. The bottom 50 percent of income earners pay 2.83 percent of all income taxes, and 45.5 percent of households don’t even pay federal income tax. On the other hand, the top 10 percent pays about 71 percent of all income tax, while the top 1 percent pays approximately 39 percent, yet only account for less than 21 percent of all income.
The notion that the wealth gap indicates an economic system tilted toward the rich is incorrect for two critical reasons. It suggests that to become rich, you must exploit lower classes opposed to creating a product they value. Furthermore, it categorizes the rich and poor as stagnant groups, without accounting for the fact that they are constantly moving up and down income brackets.
The economic mobility of individual people must be assessed when determining whether an economic system is fair. According to 2014 data, 73 percent of Americans reached the top 20 percent of incomes at some point over a 44-year period, 56 percent reached the top 10 percent and 12 percent reached the dreaded 1 percent. The top 1 percent aren’t a fixed group of greedy charlatans continually accumulating mountains of cash as some suggest. It’s a fluctuating category of momentary success and rapid replacement by those who climbed their way to the top.
If the sheer disproportionality of total wealth in a country is evidence of an unfair economic system, it’s worth analyzing the billionaires who account for the greatest fractions. The three richest people in America (Jeff Bezos, Bill Gates and Warren Buffett) are wealthier than the entire bottom half of the country. While this is surprising to some, many insist that their unprecedented levels of wealth compared to the rest of the country is inherently damaging to the poor.
Bezos invented Amazon, a fast, cheap delivery system that provides an unmatched service to much of the world. Gates, a man who has revolutionized the technology industry by creating efficient and innovative products, has undoubtedly served the lower class by making fast and reliable computers affordable. Does their gargantuan wealth represent a ruthless exploitation of the working class, despite the fact that they benefit by saving both time and money?
This commonly held belief is predicated on the idea that the total wealth of a country is finite. In reality, the economic pie of total wealth expands when someone creates a groundbreaking product, which usually leads consumers and new employees to get a larger slice.
For example, for a company to consistently grow they must continually upgrade the quality of their product so it’s more desirable than the competition’s. This can be done in two main ways: reducing the cost, which saves consumers money, or hiring more skilled workers, which requires a higher salary to make the position more competitive.
This isn’t to suggest there’s no amount of economic corruption, insider trading or isolated cases of discrimination. Our current economic system isn’t perfect, yet the fact still remains that the fundamental pathway to economic success is to provide a product or service someone values more than the money they pay for it.
Inserting an additional penalty for every rung of the economic ladder you climb isn’t only unfair, it’s counterproductive. Requiring innovators and employers to shovel more of their money into taxes simply because they can does nothing to help those who work for them and benefit from their products. Although the ever-changing 1 percent have a greater share of pie, their success is largely dependent on providing larger and better tasting slices to lower classes.