AM I upset that I barely have US$50 in my bank account at times and Bill Gates has US$50 billion in his? That's billion with a b. That's 5 and then 10 zeroes behind it. Yes of course I do feel the injustice of economic imbalances at times, but I do not agree with those who are decrying that the government should tax the rich heavily so that "equity" is restored.
Equity, which means fairness, and equality are two different. Making the world more equitable could mean making it less equal. Making the world more equal does not necessarily mean it is more equitable.
I agree with the fundamental principles of progressive taxation, whereby the heaviest tax burden should fall upon the fattest bank accounts. Those who make more money out of society should give more back in taxes, which in theory, should go towards the betterment of society as a whole.
However, I cannot help but disagree with those who call for taxes so heavy that it will bring the rich down to the level of the masses. The argument is simple. Why should they own multiple houses and cars when we need double income to support our mortgage?
When I say the argument is simple, it's a euphemism for hollow. More often than not, the superrich do society a lot of good. They work hard, just like everyone else, but are gifted with some level of brilliance to do something extraordinary - which explains their wealth. Bill Gates and Steve Jobs revolutionized information technology. Warren Buffet has the right eye for the right stocks. In Singapore, UOB's Wee Cho Yaw built an empire out of his father's bank.
While we can call them evil capitalists who exploit the poor proletariat (i.e. us), there is no denying that they have made a positive contribution to society. As a whole, we have moved forward because of them. We need people like these to continually have their sparks of brilliance to propel society forward so that we can all enjoy a higher standard of living.
To ensure they have the incentive to produce, we need to let them make money - and keep most of it. So tax them, and tax them more because they earn more, but don't overdo it. After all, these people make the biggest contribution to society. Never kill the hen that lays golden eggs.
*Acknowledgment: This post is the result of a discussion with founder and president of uJ*designs, Mr Elisha Ong Yu Jie.
Saturday, December 6, 2008
Monday, December 1, 2008
Exercise Caution With Stimulus Packages
IN THE wake of the worldwide financial crisis that has led to a global recession, governments have decided it is necessary (or perhaps fashionable) to announce fiscal stimulus packages. The world's biggest economies, i.e., the United States, Europe, Japan and China, have all announced their own packages. While the details may differ, the essentials of packages remain. Government spending is increased and taxes are cut.
While it is every government's responsibility to soften the blow of the meltdown, I strongly urge that they use fiscal packages with caution. Governments need to pay for their spending. In an ideal world, government funding would come from tax collections. Governments collect a surplus in good years and spend it during the bad years.
We live in a world that is far from ideal. The United States and Europe have consistently run budget deficients - even in the boom years. In the absence of sufficient tax collections, governments have resorted to borrowing. As it stands, the United States owes more than US$10.6 trillion in debt.
Whether personal or governmental, debt is always reduced by one of two ways. They are either written off (usually due to bankruptcy), or paid off with future income. Hence, borrowing out of a recession is actually eating into a country's future income. Every dollar borrowed will have to be repaid, with interest, in future. As it stands, the United States government is already borrowing to repay past debts. This recession will take the country further into the red.
While fiscal expansion would do the countries good, caution should be exercised when working them out. Governments need to take a broader perspective and remember that debt will eat into the next generation's income and wealth.
While it is every government's responsibility to soften the blow of the meltdown, I strongly urge that they use fiscal packages with caution. Governments need to pay for their spending. In an ideal world, government funding would come from tax collections. Governments collect a surplus in good years and spend it during the bad years.
We live in a world that is far from ideal. The United States and Europe have consistently run budget deficients - even in the boom years. In the absence of sufficient tax collections, governments have resorted to borrowing. As it stands, the United States owes more than US$10.6 trillion in debt.
Whether personal or governmental, debt is always reduced by one of two ways. They are either written off (usually due to bankruptcy), or paid off with future income. Hence, borrowing out of a recession is actually eating into a country's future income. Every dollar borrowed will have to be repaid, with interest, in future. As it stands, the United States government is already borrowing to repay past debts. This recession will take the country further into the red.
While fiscal expansion would do the countries good, caution should be exercised when working them out. Governments need to take a broader perspective and remember that debt will eat into the next generation's income and wealth.
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