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.”
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.
© 2013 Maggie’s Bear
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