Taxing Billionaires: A problem-solution mismatch

With the likes of Bezos, Branson and Musk competing for space domination, a popular narrative has been making headlines that heavier taxes should be imposed on these extremely wealthy individuals for the sheer amount of money they possess given that the average individual is suffering from this pandemic, whilst the 1 % are able to stroke their tiny egos by attempting to commercialize space travel, which is an unnecessary luxury at this perilous age.

But does taxing them actually create the intended solution of distributing wealth back to society? It is a given that billionaires exist by exploiting the working class to create massive wealth for themselves, so it is only logical to assume that by imposing heavier taxes on them will cause their wealth to be redistributed back to the working class. There is however a logical gap in this argument.

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The gap in the argument above is that we are working on the assumption that governments are able to use the taxed wealth in order to increase the amount of resources placed in public amenities such as healthcare, transport and education which benefits the working class. However, from mere observation we can deduce that this will not likely be the case. Governments often work with hundreds of billions and/or trillions in their budget, yet we do not find spending being prioritized towards helpful amenities anyway. Often resources are placed into less beneficial areas such as defense and in worst-case scenarios, resources are siphoned out by corrupt governments for the benefit of a few individuals.

Herein lies the conundrum, who better to manage resources: an individual or the government? Perhaps in a perfect government, the responsibility of managing resources can be placed on them for the most efficient solution. We do not however live in an idealistic world and giving governments additional resources is not likely to make a difference unless there is a systemic change. Even if billionaires were to be taxed heavier, it would merely generate a few additional billions for the government to squander away, these additional billions can be considered pocket change when comparing to the actual amount a government budget consists of. Take Bill Gates for example, due to his sheer wealth he was able to effectively provide humanitarian aid to underdeveloped countries which a normal government would have failed to do due to either bureaucracy or diplomacy.

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Furthermore, a government that fails to prioritize amenities would have likely only increased the number of missiles it possesses in its arsenal (using the defense analogy) when given additional resources. Let us also not forget that governments are often elected by pandering to the population and giving any government additional resources merely incentivizes them to allocate resources to ensure they are re-elected rather than using the additional resources for the betterment of the country.

Billionaires however have the ability to use their unholy levels of wealth to at least push the limits of human innovation as there is an incentive for them to generate more wealth. The commercialization of space travel is a prime example of this, they invest billions in creating a suitable and sustainable method for space travel that can be accessed by your average joe when the time comes, with the incentive that they are able to monopolize the market by being the leaders in the industry. This incentive to monopolize justifies the amount of investment now hoping for a greater return in the future which is essentially a root concept to all businesses anyways. Although it may seem like a luxury now, one day every living person might be able to venture into space, and in the best-case scenario the human race is likely able to access interplanetary travel by the end of the century. This cycle of innovation can only be achieved by individuals hoarding massive wealth not bound by the chains of bureaucracy that generally limits what a government is able to accomplish with the same amount of resource.

Photo by SpaceX on Unsplash

Therefore, even if the government manages to enact a policy of taxing the wealthy, it is unlikely that it will achieve its intended results while risking the current benefits billionaires bring to the table. If taxing is not a solution, what then can be done to address the wealth gap? The only sensible solution to the wealth gap is for public policy to better address working solutions. It is important for governments to enact policies that ensure a company’s profits are fairly distributed to its employees rather than its shareholders, this can be done by increasing minimum wage requirements, regulating working hours and forcing companies to take responsibility of employees’ welfare. The argument against this premise is that companies will simply increase prices to ensure profits are not affected and whatever price hike will only hurt the working class at the end. This is simply not true, although companies may have a discretionary ability to increase prices, the market will always balance itself out. Companies will still be forced to compete with each other, and unless they adapt, there will always be newer competition who are willing to offer cheaper alternatives.

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It is therefore our job as citizens to channel our energy into demanding for targeted systemic change within the working sector to directly empower the working class rather than continuously participating in this class war with the wealthy which will not likely bring any positive change even if the war is won.

Kage is a content writer under Headliner by Newswav, a programme where content creators get to tell their unique stories through articles and at the same time monetize their content within the Newswav app.
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Author: Kage

Hoping to entertain someone with my thoughts.