A Way to Soak the Rich

by Jeffrey Tucker
May. 29, 2012

You might have noticed that lots of people are really down on the so-called 1%. It drives many people, especially politicians, absolutely bonkers that there are lots of people out there sitting on millions, billions. Populists imagine that these people do nothing but hoard and count and let out menacing laughs about the advantages they have over others.

Therefore, the activists are proposing schemes to part this crowd from their money by force using government policy. It's a brutal approach that involves a heavy use of state coercion against people. If you believe in peace, as many activists claim, that's not so great. Violence begets violence, so it is never a solution.

The other problem with taxation is that the money is transferred to the state itself — the same institution that suppresses free speech, jails people for smoking pot and breaks up demonstrations against the 1%. It doesn't help anyone to transfer the cash from wingtips to jackboots.

Surely, there has to be a better way to go about getting money out of the hands of the rich and into the hands of the middle class and the poor. Is there a more peaceful, yet lethal, way to accomplish the same end?

I have the perfect solution. It came to be me the other day as I was walking along an urban street and saw a Rolls-Royce Phantom, parked right there where any normal car would park. These ridiculously ostentatious cars might be amazing, but they run about $320,000.

Incredible! Why would anyone buy this? Whoever owns the thing could have spent a tiny fraction on a used normal car that goes from here to there (like mine), but instead, and for reasons no one can really explain, this person decided to fork over seven years of income for an average worker — all for one car.

The point is that this person parted with his money. And where did it end up? It went to the people who sold the car, built the car, shipped the car and made everything in the car, all the way down to the workers in the rubber plant who made the tires and those in the steel plant who made the material for the fancy grill.

That money went from the rich guy to everyone else, and no one had to threaten him with jail in order to make that happen. Those who received the money didn't have to lobby, tax or force anyone. The guy gave it up voluntarily! It seems to me that we are onto something here.

The rich are an interesting group. They like to define themselves with symbols of what the rest of us consider crazy luxury. If there aren't things for them to squander their money on, they might just hoard it all, bury it in some tax haven or lock it away in obscure trust funds.

Thorstein Veblen had it backwards. People who resent the wealth of the super elite shouldn't be condemning conspicuous consumption. They should be encouraging more of it. The answer is to have a society with a vast proliferation of hugely expensive things on which the rich can spend their money. This is the path to voluntary expropriation and effective redistribution of wealth, from them to the rest of us, from the 1% to the 99%.

Consider the first-class plane ticket. On some flights, these tickets nearly break the bank. On international flights on short notice, a ticket like this can cost $15,000. And what do you get? You get a flight attendant who thinks you are great, free drinks and extra room for the legs. And for this, you give thousands upon thousands of dollars from your bank account to the bank accounts of pilots, flight attendants, baggage handlers, ticket takers, assembly line workers, gas pumpers and everyone else involved in making these flights happen.

It's the same with expensive hotels. To me, they are just places to crash until I get to where I'm going. But there is a whole class of hotels out there designed to give you an entire lifestyle for the time you are there. There are spas, saunas, pools, workout rooms, several layers of restaurants, bars everywhere, libraries, plus golf, hiking, dance halls and more bling that you could use in a year. They can cost thousands of dollars per night.

I don't get it, but lots of the 1% are all about these places. All to the good! Their money is siphoned off from their person straight to the hands of waitresses, pool cleaners, doormen, maid service people, cooks, groundskeepers, repair workers, bricklayers and every other kind of worker and peasant you can possibly imagine.

We need ever more of this. Look at the yachting World Cup. It's crazy expensive to be involved at every level. The yachts can be $5 million and up. Just to get going can run in the millions in addition. These things would totally break the bank of a lifetime for any normal person. But the rich do it and voluntarily transfer their wealth straight to lessers in all walks of life. Especially when you consider the media attention and the hoopla, there are hundreds of thousands of people who gain the benefit of their extravagance.

What's especially nice is that their products, adopted by the rich, eventually become available for everyone else, so long as the market economy is working as it should. A cellphone in the 1980s was the ultimate luxury good. Today, they are available to all the world's poor. Same with computers, of course. I carry more computer power in my pocket than was available to all the richest and the most-powerful people in the world combined two decades ago.

The rich are the early adopters. What was luxury then becomes the new normal for the rest of us today. The feed runs from the exclusive, high-priced shops that you have to have an appointment to enter and then straight to Wal-Mart a few years later. They bite the bullet so that we don't have to. In this way, they are society's benefactors.

If we want to soak the rich, we need ever more opportunities for them to blow millions and billions on things you and I would never think of buying. We need more luxury, more conspicuous consumption, more over-the-top and outrageous things and services that tempt them to part with their money.

But of course, if this is true, we also need producers to make these things to sell to the rich. That means that we should not punish investment and capital accumulation, and we certainly shouldn't impose tax penalties when investments targeted to the rich pay off. Capital gains taxes need to be zero, and the same with income taxes and other consumption taxes. Anything that discourages the building and selling of luxury needs to be repealed, provided we want to empty the pockets of the well-to-do.

Also, we need to cut out this growing ethos that the rich should give all their money away to far-flung charities. Whom does that really benefit? Sometimes it is hard to know, but certainly nonprofit organizations that may or may not be doing what they say they are doing. A far better path is to encourage the rich to get as rich as possible and spend like crazy for things that benefit the rest of us.

They can't take it with them. The commercial marketplace is the best and most-peaceful way to make sure that wealth is distributed to the whole world.
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Jeffrey Tucker, publisher and executive editor of Laissez-Faire Books, is author of Bourbon for Breakfast: Living Outside the Statist Quo and It's a Jetsons World. You can write him directly here.