Redistribution of Wealth

Redistribution of wealth. A myth or a worthwhile aim?

How Britain leaving the EU could benefit the poor (if no socialist government).

Socialist activists and politicians are fond of saying they wish to “redistribute wealth.”

Which sounds good if you are poor, but in practice this has never actually eliminated poverty. In totalitarian states that control news, they may have suppressed awareness of the poverty, they may have disguised it, but it has always stayed. Russia during the Stalin eras had starvation, China during the cultural revolution had starvation, and starvation is the ultimate manifestation of poverty. In both these cases, as in Cambodia and many others, the redistribution of wealth still left millions to die in poverty.

Taking away from the rich by raising taxes simply results to lower numbers of rich to tax. So then they tax those who previously had been in the middle income brackets, and so these people have less money to spend, the economy stagnates and everyone is less wealthy, not the rich who have left the country, but all the others, they get less wealthy. The only people who end up befitting from a socialist redistribution of wealth, are the politicians, the party officials and the bureaucrats who get to micromanage every part of everyone's life.

It is worth the effort to consider what happens when you raise the tax on higher earnings. This was tried in Britain, which at one time had a 90% tax rate for upper incomes. Those who can simply go and live abroad and pay their tax there. Those who have the financial knowledge and can afford skilled accountants change the way they are paid to ensure they do not part with most of their income. If the tax payable is greater than the cost of clever accountants, the accountants get the job. Keeping tax at a reasonable level means people pay tax not accountant fees, they may complain, but if it is cheaper to pay the tax than to pay people who help avoid paying, then they will pay the tax. Remember, avoiding tax is quite legitimate; it is evading tax that is illegal.

So can redistribution of wealth ever be achieved? Maybe, if we reduce the cost of government by introducing commercial levels of efficiency in the administration, and if the economy is run in a way that encourages growth, encourages profitability and encourages enterprise. Then the total wealth increases, more people are working, more tax is collected. Then that increase the income to those at the bottom of the income levels, those on state pensions, those on benefits. This extra money they get will be spent, unlike giving money to those who already have all the material aspects they wish for. This spending increases the wealth in circulation and increases the incomes of shops and suppliers; this means more employment and so more tax revenue. The cost of government has to be reduced first or the additional tax income will get used up in paying ever more bureaucracy and never get to those who will spend it and increase the money in circulation. Less government means more cash to help those in need, which in turn means more money circulating in the wider economy. Leaving the EU is a huge opportunity to reduce government interference in every aspect of life; it is a wonderful chance to reduce the cost of government

Stalin is reported to have said the people who cast votes do not change things, but the people who count the votes do. There is a similar thought about redistribution of wealth. If you have a socialist government, they tend to entrust the actual carrying out of their grand ideas to the administration. Any administration will always ensure they have control, that their growth is certain, that the financial needs of every greater numbers of administrators is met first. So it is not the people with the idea of redistributing wealth who matter, it is those who share it out who really matter.