the rich don’t have enough money
The time has come, think many on the right, for a flat tax. In the
United States Steve Forbes, and in Canada, Stockwell Day, have proposed it. We
seem no longer to hear of it in the United States since the demise of Steve Forbes’
presidential try several years ago. However, we begin to hear more of it in Canada as
Stockwell Day has won the leadership of the Canadian Alliance Party, and will,
probably, be a major contender for Prime Minister in the general election expected
sometime in the next year.
On the surface, any proposal to give us back more of our own money seems
unassailable. Who can argue with what everybody knows is a good thing? Except
the ungrateful, the envious, and of course, those liberals.
It is time for a more profound analysis of the flat tax one that goes
beyond accepted dogma, and delves into the foundations of an unprecedented attack on
the social fabric.
the poor have too much money
The flat tax is poised against a progressive tax, or at least, the
remnants of a progressive tax--the idea that those most able to pay more, should; those
less able to pay, should pay less. This based upon the idea, now disparaged in many
quarters, that the wealthy owe more to society than the poor.
Across North America, the progressivity of the tax system has flattened out in recent
years, making it more regressive. Politically, it has given form to the idea that, somehow,
the rich don’t have enough money.
The converse idea is that, somehow, the poor have too much money: In the
flattening out of the Canadian tax system in recent years, the bottom tax bracket, which
was about 13%, was raised to 17% when the upper brackets were lowered to the present
rate. Maybe the idea was that the increase in tax on those at the lower end would
compensate for the loss of tax revenue from those at the top--morally, if not actually. (Not
to mention the loss of tax revenues from the lowering of corporate income taxes. But
that is a discussion for another writeup.)
The belief that someone who is making $100,000 only owes society 100 times more
than someone making $1,000 is ill-founded.
I will discuss the ill-founding of the flat tax in the areas of:
- participation in the society
- obligations to the society
- contributions to the society
- effects upon the social fabric
Participation in the Society
In any discussion of the tax structure, there must be an understanding of the
participation of the members of the society in that society. It is a
Before the industrial revolution, and the contributing agrarian revolution, it was
possible for those without money to almost fully participate in society. Of course, what we
think of as society did not yet exist. Most people lived in rural areas, their
existences tied to the land, to farming, probably subsistence farming; their lives were
barter--money was not a factor.
With the enclosure of the commons--that constituted the agrarian revolution--and
the movement to large concentratons of people--cities--money becomes the
requirement for participation: not only participation, but simple existence.
Even those on the right recognize this in the acceptance of welfare, however
It goes without saying--almost--that those on upper end of the income structure
participate most fully in the cultural, recreational, political, civic and of course,
economic activities of the society. Those on the lower end do not.
Under the idea of participation, I also include income received by all members of
society. This may be considered a novel idea, but less so upon reflection.
Any thorough examination of history will show that individuals, families, and
corporations, that have done exceptionally well, have done so by using what the society
provides--and where society isn’t favorable, they use their influence to change it.
when society doesn’t go their way, the rich make it go their
Corruption isn’t new, and isn’t possible without participation in the society. Most
often, the changing of society to favour the rich isn’t considered corruption. Such
activities are hidden and ignored, or described as something else, and then
lauded. Gustavus Myers, in History of the Great American
Fortunes (last copyright in 1936), presents the classic discussion of this for the
United States. A similar work in Canada, upon the Bronfman family, behind
Seagram--and rum-runners to the United States during Prohibition--Ken Thompson of
The Globe and Mail, Conrad Black, Bombardier, and others, has yet to be written.
While the, so-called, new economy may change the way money is
made, the foundations of all the above fortunes were in the country of their birth, and
affected by the laws, and social structures of those countries. And they have
changed the laws and social structures of those countries. The Canadian fortunes
that have moved into the new economy, were based upon the old, and the fortunes
Obligations to Society
It is not fashionable to speak of one’s obligations to society. Rather, as in
Margaret Thatcher’s famous dictum, “there is only the family,” society is no
longer believed to exist. Or as in the more famous English statement of self-satisfaction
I’m alright, Jack!.
The foundation of anyone’s life is one’s health. And the foundation of one’s fortune in
the new economy, at least, is education. In Canada, both of these grow from the social
investment in medicare, and public education--from primary, through secondary to
The problems in the public health system in Canada have not prevented the healthy
growth of at least one generation of industrialists. Nor have any problems in the public
education system prevented the accumulation of knowledge and skills by this same
The government of Ralph Klein in Alberta--in which Stockwell Day was a senior
minister--may very well be the one that forces American private health care providers
upon all of Canada, and the health care so beloved by Americans--of all incomes: Under
free trade, all provinces will be required to admit private health care providers, and
lower their systems to the American model. As they will be forced to do in the educational
system when Mike Harris, in Ontario, admits private universities.
And it will be public money.
It can be argued the problems cited to justify these actions are caused by the
cuts in spending required by the tax cuts the rich clamor for. It can also be argued the rich
are trying to shirk their obligation for what they have received from society--from
Canadian society, at least.
One can extend this argument to the attempt to remove all services from the public
sector. Tragedies arise that the rich, particularly the very
few that are very rich, will be able to escape. The rest of us will not.
Contributions to Society
It may be argued the rich make many contributions to society.
Their fundamental contribution, it may be argued, is their wealth. Their wealth creates
wealth for everyone else. It is the engine that makes the economy go. Their individual
energy, intelligence, and risk-taking, makes everything else work.
Kevin Phillips in The Politics of Rich and Poor, points out that
during the Ronald Reagan years, the creation of vast wealth for some, created vast
misery for many. (See also What's a Million?)
The trend to privatization itself begs the question of the risk-taking, and
innovativeness of the private sector; if it was, why were the privatized actiivities in the
public sector in the first place? They are good enough for the private sector now that
the risk has been taken, why not before?
It can also be argued that much innovation comes not form the private sector, but
the public sector. Anti-cancer drugs, like cis-platen (which my mother took
during her chemotherapy for lung-cancer), was discovered by the American National
Institutes of Health, and turned completely over to the private sector. (In recent
months, Bill Clinton has initiated action to require a reasonable royality to be payed to
the American government. If a private entity had discovered this drug, and others like it,
such payment, probably substantial, would be made, to recoup the initial
investment. But how would that profit the private sector?)
the poor spend, the rich save
It is argued above that ending the punishment of progressive taxes would free the rich
to spend more, allowing governments to collect more from consumption taxes, like the
GST. However, there is serious question how much more the truly wealthy would
consume. How much more food? How much many more clothes? How much more
It can be argued much more of the rich’s money goes into what is not
consumed. And what is actually consumed, is presented, by tax lawyers, and
accountants, as, capital, investment, or business expenses, as are the
costs of these lawyers, and accountants themselves. Anyone who has been close to a
business, knows this.
And the rich save more than the poor. Their income is always more than their
expenses. If the poor can be told to live within their means, so can the rich. But what good
are savings to the immediate needs of society? The poor spend everything they receive
immediately. It has been argued that the velocity of the circulation of money in the
economy is more important, dollar per dollar, than its amount--particularly when spent on
the basic of food, clothes, housing, transportation, not on foreign investments or luxury
where does the money the rich have actually come
The poor can never hold on to their money. On one hand, this is criticised as a failure
of character--but on the other, isn’t this the ideal of our society? To
The tax-deductible donations of the rich to causes they have major say in determining
are tax-deductible are often cited as contributions.
It is even reputable to argue there should be no encouragement for charitable
contributions, that the church, or volunteer organizations can do it. Or best of all, that
individuals will do this one their own--”a thousand points of lights.”
”a thousand points of light”
So, welfare becomes a cottage-industry for the rich. They will determine who is
deserving, and who is undeserving. The very reason reason for the creation
of the welfare state in Canada was that this private, and religious relief system didn’t
work. Are we condemned to repeat history so some people can buy another sports car,
or a vacation home in the Alps?
Even volunteer organizations have been sorely tried by cuts in public spending--they
are unable to maintain the infrastructure necessary to channel the impulses of those, not
married, or otherwise connected to wealth, and who are unable to make a career of charity
It’s not fair, declare the wealthy. It is forced redistribution of wealth. They have
done it all by themselves. And in a democracy, their contribution should be no more than
But I argue the rich have received much more from society than the poor. The very
skewing of the entire social fabric towards the rich is proof of my assertion. I argue the
apparant collapse of our society around us is the shirking of the responsibility of the rich
for the society to which they owe so much. And as they abandon society, it will rot.
Effects on the Social Fabric
society is crumbling around us
We all see this. We must find a cause. We must blame someone--it is no longer
fashionable to blame any thing. No longer do we even speak of the obligation of
corporations towards the welfare of the society in which they grew and became wealthy
and powerful. Some of these very corportions are the entities that report the state of our
society to us.
And so, we now argue that society’s rot is caused by character flaws in the
undeserving poor, and the solution is to free the ones with money from the rot by
giving them more of their own money. O, but we will, as a matter of individual initiative,
help those few deserving poor.
In any battle between the wealthy and the poor, the poor will always lose. They
But so will the rest of us!
First it was the suburbs. Then it was the exurbs--those towns and villages outside
of the population centers. This creates urban sprawl. Now, there are gated
The homeless are increasing. Many feel they can protect families from this rot. but we
exist upon an escalator that is moving down. As public services are cut to fuel more tax
cuts, fewer and fewer of us will survive. this is the American model:
We deliberately close and tear down affordable accomodations, and built no more.
We harshly police those who are forced to be on the street, and are surprised and angry
when they do not react kindly.
It is reputable to argue they are homeless by choice. Or, when pressed, that they are
homeless because of some earlier decision--and so further, and further back to. .
the social contract has been abrogated
The social contract binding society together is grounded in empathy: the ability to
understand, on a basic level, what, and how others feel towards the fundamental facts of
their lives as they live them. The foundation of the Golden Rule, if you will. This has
In Canada, the thread holding the social fabric together has been the idea of
universality. The belief all members of society, rich and poor, French and English,
native-born, foreign-born--all members of the vertical mosaic--must share equally in the
society for it to exist, let alone prosper. We gave concrete expression to this belief in the
comprehensiveness of thesocial safety net: medicare, public education
unemployment insurance, the entire canopy of the public sector and its services.
This is not just pie in the sky. Few believe intelligence, talent, skill, ability to
innovate, etc, are limited to those families with inherited money. Most believe that
depriving society of well-educated, healthy persons whose families who are not wealthy,
will deprive the society of the gifts those people bring--and that society relies upon to
the flat tax accelerates the rending of the social
It may be possible to escape the civil unrest that is coming by living in gated
communities. It may be possible to contain much of the unrest with the technologies of
surveillance that increasingly surround us--ever expanding the surveillance society we
already live in. This civil unrest is, and will be, the justification for further curtaillments of
our civil rights, and human rights.
But as old and new infectious diseases establish themselves in those denied
participation in society, all of us will be at risk. Bacteria know no gates!
We are all part of the weave of the fabric that is society, no matter what our income.
The issue is not how much more can we let the rich take from our society, but how
much can we make them give back.