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The Redistribution Of Wealth

“There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means as De Tocqueville describes it, ‘a new form of servitude.”
Friedrich Hayek

 

Canada is a nation that believes in equality and it has proven it by devoting decades to a bizarre concept of redistribution of wealth that borders on insanity. Through various transfer payments from the federal government, both national unity and fair distribution of wealth are meant to be improved across all provinces. The problem is that it hasn’t worked.

One of the largest recipients of transfer payments is the province of Quebec. This year it will receive just over $7 billion in equalization payments plus an additional $10 billion in transfers for healthcare and other social programs. This represents 25% of Quebec’s annual budget but despite this injection of federal money, the province still has a budget deficit. Over and above the transfer payments, the federal government also covers the cost of Old Age Security and Employment Insurance.

Despite this, there is still a significant resentment in Quebec directed towards the federal government specifically and the rest of Canada in general. It’s clear that wealth redistribution has purchased neither cooperative federalism nor fiscal responsibility in la belle province.

It isn’t merely Quebec, however. The Maritimes benefits from the Canadian idea of redistributing wealth and the uneven application of social programs. In the Maritimes, EI is almost a second job for some and is seen as necessary to allow people to continue in seasonal occupations that cannot sustain them independently over an entire year.

Nationally, the idea of transfer payments on the scale applied in Canada simply hasn’t worked. It has penalized successful provinces while rewarding poor economic management in others. It is a solution that only politicians, looking to get elected, could develop.

Now there are demands for wealth redistribution between economic classes. The wealthy are seen as the enemy because they have made scads of money while those with less see their circumstance as the fault of those with money. There are demands that government do something to redistribute wealth even though it was governments who through complex and misguided tax policies that actually helped to create this mess in the first place.

In the end, imposed wealth redistribution is simply unworkable.

It is unworkable because most people, governments included, do not understand the root causes of uneven distribution of wealth and in too many cases, seek to peanlize success and reward lack of achievement and mediocrity.

In the end it creates a climate of resentment and entitlement which only further divides us and which contributes to an overall decline in productivity and economic prosperity for everyone.

I had a very good discussion the other night with a young man on Twitter who was very sincere and earnest in his desire to see the wealthy pay their ‘fair’ share. I asked him what he considered their fair share but he didn’t have an answer for it. When I suggested it might be more fair if everyone except the working poor paid the same percentage of their income in taxes without deductions or tax credits, he rejected that idea.

I had used the example of a person earning $40,000 taxed at 20% who would pay $8.000 in income tax while someone earning $400,000 would pay $80,000. He told me it wasn’t enough. I asked him why and he said because the person making $400,000 could afford to pay more and therefore they should. I asked him why and he didn’t really have an answer other than he thought it was unfair that he had less.

And that is the real idea behind wealth redistribution. It isn’t about everyone paying their fair share, it’s about penalizing those who have much. It’s envy and social greed not a quest for fair taxation for all.

When I pointed out that unions pay no taxes on membership dues or investment income but still have significant influence over government policy, the young man had no answer for that but clearly didn’t see that as unfair. I’m sure the unions don’t either.

The simple reality is that government does not create wealth any more than it creates jobs or economic stability. Government interferes with those things to our disadvantage. What government should be doing is ensuring that everyone pays an equal percentage of their income in taxes and then spends no more than the tax revenue it collects except in exceptional and emergency circumstances.Attempting to redistribute wealth is a fool’s errand. Why should a surgeon, for example, pay a higher percentage of their income than someone working at Walmart? If they both pay the same percentage of their income, the surgeon will pay significantly more in terms of real cash than the Walmart employee but each will have contributed equally, their fair share to government and its needs.

It seems incongruous to me that so many who criticize government for its inefficiency and stupidity also call on government to manage the redistribution of wealth. In Canada, more than $100 billion is redistributed by the federal government and all that has achieved is resentment, expensive bureaucratic complexity and bad economic behaviour at the provincial level.

As the song says, “he steals from the poor and gives to the rich…..stupid bitch.” Some will tell you that government has done that for years at the expense of every day citizens. There is some truth to that but the solution doesn’t lay in doing a 180 and taking from the rich to give to the less well off.

The solution is to insure that everyone pays their fair share and that means everyone gives exactly the same percentage of their income without exception.


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© 2013 Maggie’s Bear

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  • http://www.blogger.com/profile/01205187684027341520 Kathy Russell

    “…seek to penalize success and reward lack of achievement and mediocrity”

    Bear, you disappoint me with this phrase. This is a simplistic, some may say elitist view of the economic disparity that occurs in First World societies. To say that the rich are rich because they are smart and ambitious and that the poor are poor because they are stupid and lazy is fuel to the fire of resentment.

    Perhaps your view is blurred by wearing Quebec goggles. You are right they receive the largest share of tax payer money that comprises the federal transfer payment. That the province still has a budget deficit does not surprise me as Quebec supports more social programs than any other province in Canada. I’m pretty sure they are the only province that has a provincially funded day care system. Their welfare system financially rewards recipients for giving birth to more future Seperatists.

    Having lived in Ontario, Alberta, BC and now Saskatchewan, I have had the opportunity to live in communities with very healthy resource industries. These industries afford a very substantial wage to even the most uneducated person as long as they have a strong back and can follow direction. These industries also lead to high costs of living in these communities. Where the elderly, living on meager pensions, immigrants who speak very little English, or those that are physically unable to work labour positions are left to take minimum wage positions and then become part of the growing demographic known as the “working poor”. The working poor are those poor bastards that work 2 to 3 jobs just to be able to survive. They are not without ambition or drive.

    On the flip side I have seen immense wealth be accumulated in these very same communities, by merely knowing and hitching yourself to the right people. These people were no smarter than the village idiot and had no more ambition than a zoo bear (no offense meant), yet they earn upwards of $500,000/yr being consultants to oil & gas companies.

    Unions aren’t paying their fair share, well neither are the churches. Churches have been subsidized for long enough. Considering that the average church is spending 0.7% of their income on charitable work and secular organizations such as the Red Cross are donating 92%. I would say that churches should have their tax free charitable status taken away until they can provide at least 50% of their income to the poor. The lost corporate revenue from religion is estimated at 35 BILLION annually. That is a lot of transfer payments.

    You are correct that the tax structure in the country is long in need of an overhaul, but to say that it is structured to penalize those that have more is an unfair assessment. It was structured that way to make sure that everyone had something. Remember that you are not living in Capitalist America. Canada is a Socialist country. As Socialists we share. Just like our mothers taught us to.

    • http://www.blogger.com/profile/16123459288721211812 Bear

      With all due respect, Canada is not a socialist country and most of us are not socialists. We are a capitalist country with universal healthcare and a social safety net. We are a country where too many pay lip service to the idea of socialism while standing in line to cash in their entitlements at the expense of others.

      Almost 45% of Canadians eligible to pay taxes pay none and that is not merely the wealthy. It is a significant portion of the middle class and the working poor. Unions pay no taxes on their membership dues nor on the investment income they generate from those dues. Charities, churches, foundations, NGOs and wide range of others pay little to no income tax. Under those circumstances, identifying one group, the wealthy, as the ones not paying their fair share makes a mockery of the word fair.

      In Ontario, now that the government is introducing a surtax on the wealthy, it is turning its attention to teachers and doctors to make sure they too pay their ‘fair’ share. At some point, it becomes absurd because nobody is paying their fair share. Some pay too much, some not enough and too many nothing at all.

      And that’s the problem with wealth redistribution, eventually you have to broaden the net because you’ve run out of wealthy people to rob.

      I can’t speak for your parents but mine taught me the value of taking responsibility for my own life and standing on my own two feet. They taught me the value of hard work and the opportunity for success and security that comes with it. They practiced social responsibility and taught my sisters and I the same values. I don’t need others taking money I’ve earned because they think they have a better idea of where it should go than I do.

      My views are not narrowed by living in Quebec as you suggest. I too have lived in five provinces and on two continents as well. I have been highly successful and I have been so broke I lost everything I had and was virtually homeless.

      I now live a very comfortable life. It wasn’t given to me, I earned it and to be very blunt, I resent anyone feeling that they have a right to help themselves to part of what I struggled to earn for myself simply because they have decided it isn’t fair that I have more than they do.

      There is no pride, no self-respect and no prosperity in living off of others. There is only an unwarranted sense of entitlement, resentment and mediocrity. You cannot overcome poverty by attacking the wealthy and you cannot raise some up by tearing down others or simply giving them handouts.

      This ridiculous concept has guaranteed that the poor will remain poor because our social programs given them a pittance rather than providing opportunity to raise themselves up out of poverty.

      Those programs as they are currently constituted to satisfy the consciences of those who think they have a monopoly on the moral high road but it isn’t my idea of a prosperous Canada.

      In the end, wealth redistribution is not about fairness, it is about one class demanding a share of the success of another and then using it for their own purposes rather than to advance the prosperity of the nation for all. It is just as much a form of greed as anything of those who are wealthy.

  • Alain

    I agree. All this does is to reward bad fiscal management and Quebec is a prime example although not the only one.

  • http://www.blogger.com/profile/11711761782996989725 robins111

    Well said..

  • http://www.blogger.com/profile/15143060401785633787 Monica

    the trick is to make recipients understand that and it’s against their state-created self-interest to give anything up or change … another good article my friend … instructive to those willing to hear … : )