More Thoughts On Forcing The Rich To Pay “Their Fair Share”

27 Oct

As mentioned previously, the quality of our decisions is largely dependent upon their underlying assumptions (see “Why Can’t We All Just Get Along“). If our assumptions are wrong, then any subsequent analysis will very likely be incorrect. This post examines assumptions about wealth, and suggests how popular notions based on incorrect assumptions can yield grossly incorrect conclusions.

A lot of folks today (based on sensational news reporting of the Occupy Wall Street “movement”) seem to think that it is morally wrong and unjust for some of our fellow citizens to have more income (or more wealth) than we average folks do. So let’s apply some engineering thinking and see just how upset we should be at the rich, and whether or not we should make them our slaves. You can do your own analysis, but here are some things for the Wall Street Occupiers to consider:

1. Do you understand the difference between income and wealth? Income is the flow of money to an individual based on their work (or from investments, which flow from prior work effort, or perhaps due to inheritance or luck). Income does not stay resident in a rich person’s home (assuming they don’t burn their money or stuff it under a mattress), it largely flows through them to other folks who provide goods and services. This is why average folks like to be located near wealthier folks; so they can be closer to the flow of money.

Income, if not squandered, can also accumulate through savings and investment in wealth (real estate, money in the bank, autos, jewelry, etc.). Wealth can also be inherited, or obtained by luck (Wow! I won the lottery!), but wealth is much more likely to be obtained by many years of sacrifice and hard work.

Okay, so if you want life to be “fair,” what would be a fair way of taking the extra wealth or income from those folks who have more than you or me? How do you account for the effort and risks they have applied to their lives? What if they were just lucky? (If you won the lottery, would you like the government to redistribute it to everyone else who was not as lucky as you?) If you have a student loan, should wealthy folks who paid for their loans also pay for yours?

2. Do you understand that rich and poor people, for the majority of cases, are not stuck in those positions? Rich people frequently lose their wealth through bad business decisions or bad luck, while poor people frequently obtain great wealth due to hard work or luck. The important point is that “rich” and “poor” are typically not static; they change dramatically with time. Someone rich (or poor ) today is often poor (or rich) tomorrow. So how do you define “rich”? Is it someone who today has more than you or me, or should we take into consideration how long they’ve had their wealth? After all, we should be careful to be completely fair before we make someone our slave.

3. With regard to forcibly taking money from the rich to give to ourselves (via the federal government), how do we justify this? As described previously (“Why PIzzanomics Is Immoral“), government services are no different than any other service. But if we decide that rich people should pay more than you and me, then why shouldn’t they always pay more? When a wealthy person hires a plumber, shouldn’t they pay two or three or more times as much for having their leak fixed? But if so, who should determine the added amount, and how much should it be?

The decision to make someone our slave should be carefully considered, because — at least for now — they aren’t completely our slave, because they can leave. And (although the government doesn’t publicize it) this is happening: millions of Americans are leaving, fed up with being slaves, and they’re taking their money, talent, and job-creating abilities with them.

So who do we get to make our slaves, once they have all gone?

-Ed Walker


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8 responses to “More Thoughts On Forcing The Rich To Pay “Their Fair Share”

  1. Justin Philcox

    October 28, 2011 at 1:20 am

    Interesting perspective…but who said anything about slaves? As for your analysis, what do you think of these statistics?:
    The 2008 World Bank Development Indicators reveal that “almost half the world—over three billion people—live on less than $2.50 a day.” This is a startling figure— but what really pushes it over the edge is that, while these more than three billion people live with so little, the world’s top 0.13 percent (8.3 million people) own 25 percent of the world’s financial assets; in 2004 the total wealth of this top 0.13 percent “rose by 8.2 percent to $30.8 trillion.” While more than half of the world is living on barely enough to feed themselves, it appears that the ultra-rich just keep getting richer.
    Some people are taking more of the pie than they require; and it is to the detriment of the masses. This is a fundamental flaw in capitalism itself…like in engineering when the tower or babble is built with structural flaws, eventually, it collapses.

    • N. E. Walker

      October 28, 2011 at 2:19 pm

      Thanks for your comments.
      I use the term “slave” as a reminder of what’s called the “tyranny of the majority.” If the majority of us average-income folks can pass laws that force the rich (via IRS threat of fines/imprisonment) to give their money to us, then we have made the rich our slaves.
      I understand your compassionate nature in quoting the statistics, but there are a few things to consider:
      1. Money flows. It doesn’t matter if someone has a lot more money. Unless they burn it or bury it in their back yard, anyone can get in the flow.
      2. The rich do accumulate wealth. This does not stop anyone else from obtaining wealth, provided that such wealth is obtained without corruption, price-fixing, or monopolistic practices. This may be the problem you are addressing (not trying to speak for you; just guessing), in that today we do have a lot of corruption and “crony capitalism.” The corrupt accumulation of wealth is a problem in that a person’s rewards are no longer determined fairly by the market, but instead are determined by bribes or other corruption.
      3. “Taking more off the pie than they require”: This is an appealing but false logical fallacy, because the economy is not a fixed piece of pie. If you’re interested, please see my earlier posts, “The Economy Is Not A Pizza Pie,” Parts 1 and 2.
      4. Economic history demonstrates, in my opinion, that capitalism — when implemented without corruption — is the most effective means of improving the economic well-being, as well as liberty, of the masses, including the poorest of the poor.
      5. If we follow the redistribution logic of showing concern for those who make $2.5 a day, then this would require that anyone in the U.S. making substantially over $2.5 a day (which would include the poor, because of welfare, unemployment, and other benefits) to redistribute their income to those much more poor folks overseas. I do not hear such clamor from the Occupy Wall Street crowd. Instead, it’s more like, “Make the rich pay for our student loans.”

  2. Collin

    November 18, 2011 at 1:11 am

    150 years ago, talent was necessary to invent things. But today, we have all the inventions we need — perhaps too many. But inventions alone won’t get the world through today’s crises. We need brainstorming from people who are savvy but perspicuous, focused but open-minded. Only the middle class can provide these voices.

    The problem with rich Americans is not so much themselves, as their shareholders in media and the psych arts. Americans are being persuaded not only to learn but to teach each other the lies that support the corporations of the rich. If the rich are leaving because of taxes, good; let’s tax them even more.

    • N. E. Walker

      November 18, 2011 at 4:19 pm

      Thanks for the comments. I agree that we have a very serious problem with corruption in our country, but you do leave me puzzled with some of your specifics.

      Let’s take a look at your first statement from an ET perspective, and see if it can be disproved, using analysis by contradiction. In other words, if we can find any substantial contradictions to your assertion, then it is likely that the assertion is not well-founded.

      IF “we have all the inventions we need — perhaps too many”

      THEN we do not need: a cure for cancer, faster PCs, safer automobiles, a cheap and safe form of nuclear energy, or even an anti-gravity motorbike.

      You have made several other assertions that can likewise be challenged. I’m not saying that you’re wrong, but to convince someone who uses Engineering Thinking to agree with you requires that you present the empirical/historical facts and supporting logic or analysis to back up your assertions. If you would like to reply with some added support for your comments, please do. However, I would like to point out that, in my opinion, your animosity towards “the rich” is not well founded (please see “The Economy Is Not A Pizza Pie,” parts 1 and 2, under the Money tab).

      • Collin

        November 21, 2011 at 4:56 am

        Good point. There are different kinds of inventions.

        A faster PC and an anti-gravity motorbike could perhaps be invented by a lone genius with his own private stash of equipment. These would be jobs for the rich.

        A cure for cancer would require a massively parallel search with thousands of people all doing slight variations on each step at the same time. The people coordinating this effort would need to be skilled at management, but would also have to be committed to scientific accuracy, which would prevent them from properly using wealth-building strategies.

        The other three inventions would require an informal diverse community to debate the inevitable human-factor issues. This would be a theory-Z organization which would have little patience with the speech style of rich people.

        So that’s two out of six for the rich, and the two that are least important on the large scale.

        The problem with your argument against pizzanomics is that it’s not a case of the poor coveting the rich. It’s a case of private workers, both rich and poor, coveting the goods and services provided by public workers.

        Roughly speaking, every dollar going through an income transaction should have an equal probability of becoming tax. Calling it “spreading the wealth” was a poor choice of words; it would better be called spreading the civilian expense (which is dual to the municipal revenue).

      • N. E. Walker

        November 21, 2011 at 9:14 pm

        Thanks for the follow-up.

        Some more proofs by contradiction:

        IF high-tech inventions are jobs for the rich,
        THEN NASA would have to lay off all of those un-rich engineers that are required to put spacecraft into orbit. (Engineers are responsible for numerous inventions during the course of large-scale high technology programs.)

        IF a cure for cancer requires thousands of people,
        THEN why did many major inventions through history (vaccines, communications by radio wave, laser, etc. etc.) only require one or a handful of people?

        Also, a challenge: How is it known that private workers covet the goods and services provided by public workers? (Also, if you’re going to challenge the post on Pizzanomics, it is considered appropriate to present a statement-by-statement review and analysis of the post.)

        Again, I’m not saying you’re wrong; that’s not the point of this blog. I am saying that you have presented a lot of wide-ranging ideas without any underlying foundation.

        You have interesting and unconventional thoughts, but — as mentioned earlier — to convince someone who uses ET that your ideas are correct would require that you provide the empirical/historical data and logic/analysis that support your ideas. But what you have done is state some thoughts without such support, which makes it hard for people who may not share your views to see things the way you do.

        If you wish to expand on your ideas, I would recommend first that you provide some definitions. For example, how do you define “rich”? Is this a person or a corporation? How much money = rich? Is that money income per year, or total assets, or a combination? Since rich people often become poor, and the poor often become rich, how long does one have to be rich before you would say they are truly rich? What about someone who invents something and makes a lot of money from their idea, are they rich? What about someone who wins the lottery? How about an athlete who’s paid a lot of money for their physical talent, are they rich? How about a movie star? I mention all this as an example of how a definition of a word is not nearly as simple as one might think.

        Next, I would provide a simple proof in this format:
        1. Your Assertion
        2. Any assumptions you make
        3. Historical or other empirical data that support your assertion
        4. Any logic or other analysis that supports your position

        If you do all that, and do it thoroughly and diligently without any significant errors, then you may win some converts. That’s the ET way. It’s not necessarily easy, but it is effective.

  3. Loren

    May 2, 2012 at 9:06 pm

    Great views from both sides but, Collin brought up two great points that are not being addressed. Fair Taxes; How do Corporations make millions and pay zero or near zero for taxes? These loop holes seem to of been left in the system for no other reason than to be used by the corrupt. Case in point; I worked for a Non-Profit Hospital which made an 85 million dollar profit the last year I worked there. What do you think they paid for taxes being a Non-Profit Organization? A lot of people received a huge bonus but, nobody at my level for sure just Management on up. In fact we were told the Hospital could only give us “up to a 3% raise because times are tough”, FOR WHO? And again, he did bring up the fact of Big Business taking their Business out of the country; can we not tax them in a manner so as not to be able to take advantage of “cheap labor”? After all, are things cheaper today than they were before all big business jumped the border? I would say no, so where are all these profits going to? Is this how the “Rich become Richer” “Big Business becomes Bigger”? Why can we not have Equal taxation to all no matter Rich, Poor, Average, Lucky or Unlucky on a straight percentage? And for you Students, pay for your own bills you created, this would be called a responsibility, something you may of not been exposed to at home.

    • engineeringthinking

      May 2, 2012 at 10:29 pm


      Always good to hear from someone who has a direct and personal experience to share. You bring up several relevant and significant points. I will try to provide my views on each briefly below:

      Fair taxes: complicated because (a) corporations (this is a bit oversimplified but I believe it to be reasonably accurate) don’t really pay taxes; they simply pass on the cost to you and me. If they can’t pass on the tax because of competition, they go out of business, or they move their business to wherever they can get the best deal, which is often overseas. Our government, in my view, over the last many years due to its excessive business regulations has made it more necessary for US businesses to relocate in order to survive. (b) this does not mean that the businesses are not corrupt. Some corporations may be, some may not; I think you have to look at each on a case-by-case basis. A good rule of thumb, imo, based on human nature, is to to be suspicious of concentrations of power. These concentrations (primarily the fed govt, but also large corporations and large unions) have the ability to purchase favors from congress in return for campaign contributions to buy votes. The federal govt used to protect us, at least in some small way, from this corruption, but now the fed govt appears to be in bed with whomever provides the $, be it large corps or large unions. This is a serious issue that needs to be corrected by informed voters.

      In your specific case (non-profit hospital): unfortunately this does not seem untypical. We now have a culture where those few in a position of power abuse their power by rewarding themselves and minimizing the contributions of the average worker. This tends to get worse in situations like we have now with a weak economy: they take advantage of your reduced bargaining power. The solution (short term) (and I know this is often impractical) is to look for a better employer, and also by exposing these people (company name, managers’ names, etc.) in letters to the editor, blogs, etc. Long term: work to elect representatives that will help grow the economy. When times get better, particularly in the health care industry, the shoe will be on the other foot. You will be able to easily move into a better job with another company, because of fierce competition for your services. Also, don’t forget that you may have an option now (I don’t know your specifics) by contracting out your services. It’s a great option if you have the ability to travel.

      Equal Taxation: If taxation is truly fair, it would be based on you paying the govt for what you specifically get from the govt. But the govt learned a long time ago (i.e. the 16th amendment which allowed the federal income tax, the first time that our country allowed one group of people to be slaves (metaphorically speaking) to another group). Right now the govt plays this game of trying to tax those who have (without regard to how they obtained their $) and promising those $ to those who have less (without regard to why they have less.) This is a corrupt game that has been going on for ages. It can only be stopped by education and by votes. I suggest that the average person look at govt like they would look at McDonald’s or Target: they are there to serve you, not the other way around. Call (better than email) your representative and let them know (civilly) what you expect; vote accordingly.



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