Wednesday, June 20, 2012

The 12 Year Life Expectancy of the "Tax the Rich" Plan

Some quick back of napkin economics here fellow junior, deputy, official, aspiring, or otherwise economists!

So I was on another hike, enjoying the decline, like I do, and got to kicking around a couple questions about wealth.  Specifically,

"How long could "the poor" live off of "the rich" if we finally decided just to confiscate and redistribute the wealth like so many of our democrat and socialist friends would like?"

First understand a couple statistics and facts.

One, there is an estimated $62 trillion of wealth in the US currently.

Two, the "rich" defined as the top 20% own 85% of it, so $52.7 trillion.

Three, of the $3.6 trillion federal budget, $2.2 trillion or 60% of that is spent on wealth transfers.

Four, the states spend roughly the same amount as the feds and have roughly the same percentage going to wealth redistribution (again, this is "back of napkin" economics, not "break out the Cray super computer and run complex models that will fail anyway" economics).  So add another $2.2 trillion for a total of wealth transfers of $4.4 trillion.

Now, if we decided to "stick it to the rich" and "solve everybody's problems" and confiscated all $52.7 trillion of those hated rich people and divide it by the $4.4 trillion in resources the "poor" consumes, that wealth transfer will last them a whopping:

12 years.

Now I'm being INCREDIBLY optimistic because I'm ignoring a couple things.

First, this assumes you can just confiscate the wealth of rich people without it having a direct impact on the market value of that wealth.  If you decided that 80% of the wealth was to be communal, the stock market would tank, immediately driving the wealth that could be confiscated well below $52.7 trillion.

Second, this also assumes the economy would even continue to function so the parasitic classes could spend their stolen-gains on said goods and services.  With 80% of the wealth taken out, I doubt grocery store owners, energy producers, engineers, doctors, and all the people that produce the actual STUFF that gives your $52.7 trillion in cash value would bother showing up for work.  So this essentially ignores the fact that the grocery stores and car dealerships would be empty and very optimistically assumes the dollar would still be accepted as a medium of exchange.

Third, it also assumes the "rich" sit idly by and don't ship their money offshore.  That all those lawyers and accountants are on vacation at the same time so as the legislation slowly moves through congress, rich people are completely unaware of the handgrab coming their way.

Of course, real economists such as you, me, our lieutenants and agents in the field know the economy would collapse immediately, but I still like to argue with the mental handicap of an envious and lazy liberal who deems themselves entitled to other people's money.  It proves, even with their rosy assumptions about how the real world works, that their ideology is impossible.

Enjoy the 12 years!


FSK said...

In practice "Tax the rich!" winds up implemented as "Tax the successful small business owner!"

For example, Warren Buffet lobbies for high estate taxes. When a small business owner dies, he must sell due to estate tax. The buyer is usually Warren Buffet!

Taxes make it hard for successful small business owners to bootstrap and grow and compete with insiders.

CBMTTek said...

I see something missing in your analysis there cappy.

The dems believe the "rich" will continue to work as hard as ever, continue to invest their money as vigerously as they always have, and continue to purchase as many items as they do.

Their wealth will (according to NP, BO, BF, HR, etc...) will always be there to tap into.

You numerical analysis is pretty much spot on, as well as your list of "unanticiapted" side effects. What is missing is that magical pixie dust that Dems include on everyone of their spend then tax plans. The unshakable faith that those paying the taxes could not possibly be smaart enough to recognize what is happening and stop working for the benefit of those that do not work.

PunkyMD said...
This comment has been removed by the author.
Aurini said...


I've tried explaining that to liberals a dozen different ways; "LOL, regulation doesn't benefit big corporations!" They spend 12 years learning the Narrative from corporate sponsored, lobbyist run, and government implemented schools, and they think that the 'radicalness' their teachers taught them is anti-establishment.

PunkyMD said...

Nice summary of the mathematics of taxing the rich AKA taxing small business or robbing the so called rich! May I link? Enjoying the decline!

Strong Man said...

Have you looked at the economy of Zimbabwe lately?

They aggressively redistributed wealth" from the white rich and gave it to the black poor at gunpoint.

It's been a disaster. Of every kind.

In fact--if you were interested, that could make an interesting post if you dug into it more.