May 19, 2011

An' Unto the Issue Room Ye Shall Recycle

Hankering on “They Deserve to Keep it All”, never mind crumbling schools and University funding, is a eulogy for the Zuckerbergs and the Pages just gone too far.
We like to hold in very high esteem the people who work around creating or exploiting new Technologies to produce something we can all use and enrich our lives with. And it is, of course, a Good thing. But sometimes appreciation can go ridiculously far.
We are appalled with any talk of any changes to the tax code that would make a Mark Zuckerberg and a Larry Page pay more in taxes. “It will kill their creativity. And desire to produce more such things.”
Of course, if you take away 90% of one’s income in taxes, no one wants to create anything. It does not mean, if one is paying an effective tax rate of 20% on an income or wealth generation of say, 1 billion dollars, raising that to 30% will make him not feel any thrill in doing similar work anymore.
But the apparently stronger argument seems to be, “These guys DESERVE to keep their money – ALL of It. So If we have to increase taxes, then NOT for them. They created this money/wealth, and should not be taxed a penny more.”
This Deserve (read: “Especially Deserve”) thing needs to be challenged. As long as money was legally made, you deserved it, as much as another that earned it another legal way. Nobody can really establish how much of it was due to talent, intelligence, hard work and pure luck (“being at right place at the right time”).  But let’s even make a distinction for a moment for creation of something like a Google or Facebook, and dig further:
If we look closely, the market Valuation/Quantification of what these guys “Especially Deserve” is HUGELY a product of what the Gov is doing. The zillion dollar internet company valuations occur in times of super low interest rates and fresh money creation, forced into place by Government, oftentimes to tide over a deep recession. We all pay a heavy price for this in terms of disappearing returns from holding our essential rainy day and old age savings in safe places, even accepting negative Real Returns, OR the face the potential of losing it all in riskier places. The numerical value of their valuation, and thereby, what their founders and stock-option holding employees cash out of these companies, has come at the cost of normal people.
“NO NO, we want to encourage people to do certain type of things over another. THEREFORE, the differential taxation even for equal income and wealth-encash.”  In that case, put in temporary, specific, measurable, controlled giveaways /“spending through the tax code”, rather than keeping generic, no limit (Read: STUPID) giveaways on Capital Gains and similar incomes.
In a fiat currency economy (and this writer is no supporter of the Gold currency that makes wars more necessary than any “nation building”), money is but a means of individual achievement AND the medium through which people engage in activities that net improve the median joy of living, such that also the next generation is able to get equal opportunity to educate, train and offer themselves for society’s leadership spots. The cheap money that the Fed sends out around is like the bowling shoes that a bowling alley provides to play the game (and then return) - THAT results in these funky valuations and cash ‘urns’. Hankering on “They Deserve to Keep it All”, never mind crumbling schools and University funding, is a eulogy and reward just gone too far.
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