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The Trouble With Billionaires
McQuaig, Linda; Brooks, Neil
Publisher: Penguin, CanadaYear Published: 2010 Pages: 272pp ISBN: 978-0-670-06419-9 Resource Type: Book Cx Number: CX12573 The glittering lives of billionaires may seem to be a harmless source of entertainment, but authors Linda McQuaig and Neil Brooks argue that such financial power not only threatens everyone's economic and social well-being but also upsets the very functioning of democracy. Our society tends to regard great wealth as evidence of exceptional talent or accomplishment. Yet spectacular fortunes are often attributable to luck, ruthlessness, cheating, or advantageous positioning that allow some to build on the work and insights of others who have paved the way. Abstract: - Table of Contents Return of the Plutocrats Why Pornography Is the Only True Free Market Millionaires and the Crash of 1929 billionaires and the Crash of 2008 Why bill Gates Doesn't Deserve His Fortune Why Other Billionaires Are Even Less Deserving Hand Aaron and the Myths about Motivation Taking the Fun Out of Tax Havens Why Billionaires Are Bad for Your Health Why Billionaires Are Bad for Democracy The True Badge of Citizenship Revamping the Ovarian Lottery Notes Acknowledgements Index Excerpts: The "market" is a creation of the state, every bit as much as the tax system is. Both are based on an elaborate series of laws devised by humans and enforced by governments. The profit level of a company, for instance, is determined by a whole range of laws: environmental laws that determine how much it may pollute or what fines it will face if it exceeds those levels, labour laws that determine whether its employees are allowed to form a union and whether they are permitted to withdraw their services, contract laws that determine what it can collect from a client who fails to live up to the terms of an agreement or what it must pay a landlord if it wants to break the lease held on its factory. After these (and many other) laws determine the company's profit level, there are a whole different set of laws governing how owners of the company will transfer those profits to themselves - what right shareholders have in determining how the profits will be divided, who will get paid and who won't in the case of the corporation's bankruptcy, and so on. (The very existence of the company, for that matter, is made possible by laws that allow for incorporation, thereby limiting the personal financial vulnerability of the company's officers and owners in the event of a lawsuit. Once a shareholder is allotted his share of the company's profits, he may perhaps invest some of this money in bonds. Once again, the hand of the government will be involved in determining how much he will profit from his investment, since the return he receives on his bonds will be determined by interest rates, which are determined by the actions of government-appointed central bankers. Their decisions affecting interest rates will hinge on whether they (and ultimately the government that appointed them) give priority to controlling inflation (as wealth-holders tend to want) or to encouraging employment (as those without wealth tend to want). The market is nothing but a complex web of government interventions. The income tax hike stands out in these people's minds only because it's an intervention that goes against their interests, whereas so many of the other laws and government policies favour them. As Murphy and Nagel wryly put it, "people care more about what unjustly harms them than about what unjustly benefits them." The favourable interventions tend to become invisible to their beneficiaries, as it they were just part of the natural order of things. Today's gigantic fortunes seem to be less a reflection of the innovative genius of current billionaires and more a reflection of how uniquely adept they've been at elbowing their way to the front of the trough. A number of important social theorists have argued for greater acknowledgement of the role of society in generating incomes - and greater payback through the tax system. The neo-conservatives' intense focus on the right to private property is, in itself, revealing. It allegedly springs from a deep respect for the rights of the individual. But why limit the notion of the individual's natural rights to that of property ownership and economic entitlements in the marketplace? Why not assume the individual also has a natural right to the fulfillment of basic social needs - such as, say, access to a decent education or adequate health services? When it comes to defining natural rights, neo-conservatives seem to care fiercely - but exclusively - about the individual's entitlement to property, and his right to accumulate unlimited amounts of wealth. It is almost an article of faith among conservative economists and commentators that anything which diminishes the size of the financial rewards for society's most talented members - such as high taxes - saps them of their motivation to work at full capacity, thereby impeding the overall growth of the economy. The proposition that high taxes are detrimental to growth and prosperity is so widely accepted that it is put forward as if it's self-evident. Economists Joel Slemrod and Jon Bakija draw attention to this apparent paradox: "The strong growth periods were the periods when the top tax rates were the highest." Interestingly, however, the argument about higher pay being necessary for greater motivation is primarily used to justify lower taxes on the rich, not on the poor - even though the arguments seems to apply better to the poor. Indeed, in the case of the poor, the opposite argument is often made - that too much income will cause them to slack off. Hence the need to keep welfare and unemployment insurance benefits low, lest those at the lower end be encouraged to remain idle. When people of modest means break the law by stealing - perhaps because they don't have enough income - the government's response isn't to make sure they have more income, but rather to punish them, even to strengthen the penalties so that others will be discouraged from considering such activity. But when the rich break the law by hiding income offshore, the government often responds by lowering tax rates so the rich will have less incentive to engage in such behaviour. Not to have money is not to have freedom. The greatest constraint on freedom in our society is undoubtedly low income. So when the government taxes someone, it restricts that person's freedom, but it greatly enlarges the freedom of those who receive transfer payments and other government benefits. For that matter, taxation can also potentially enlarge the freedom of all, by, say, investing in something that will benefit the whole community - such as a cleaner environment or purified drinking water. When all types of taxes are included, it turns out that the poorest 10 percent of Canadians - those earning $13,500 a year or less - paid fully 30.7 percent of their tiny income in taxes! Meanwhile, the top 1 percent - those with incomes above $300,000 - had a slightly lighter burden, paying 30.5 percent of their enormous income in taxes. By declining to protest the concentration of wealth, progressives have conceded important ground. At the centre of their case should be a strong moral argument about the illegitimacy of a small number of people gaining control over too large a share of society's resources, and with it, undue control over society. It's interesting to note that the names of civil servants earning more that $100,000 are published each year in Ontario, and that the list inevitably leads to much hostile media commentary about overpaid public servants. Yet there is no equivalent attempt to publicly embarrass individuals who use exotic tax schemes to avoid paying income taxes, often reducing their tax bill to near zero. On the contrary, the secrecy of tax returns is treated as a sacrosanct, for no clear reason. In Finland, by contrast, tax returns are public, allowing the citizenry to know who has, and who hasn't, contributed to the community's upkeep. Subject Headings
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