Tax the Knickers Off Your Grandchildren
As of this writing, Bill
Gates' estimated net worth is $24 billion. On the conservative assumption that
he's earning 3 percent after taxes and inflation, his investment income is
about $2 million a day.
It's difficult for one to
even imagine what it would be like to have that kind of pure income. But it
won't be as difficult for your grandchildren. If U.S. per capita income manages
to grow in real terms at a plausible 2 percent per year, then in just 400
years, the average American family of four will enjoy a daily income of $2
million. And those are not some future, ravaged-by-inflation dollars--I'm
measuring everything in the dollars of 1997.
More remarkably, if the
United States could achieve the growth rates that have been reported by South
Korea in the past couple of decades, it would take only about 100 years until
the average family's income approaches $2 million per day. If the United States
grows like South Korea, your children's grandchildren can live like Bill
Gates--unless they rise above mediocrity and live even better.
So each time the Sierra Club
impedes economic development to preserve some specimen of natural beauty, it is
asking people who live like you and me (the relatively poor) to sacrifice for
the enjoyment of future generations that will live like Bill Gates.
Taking from the poor and
giving to the rich is the opposite of income redistribution as it is usually
practiced. If we were consistent, we'd insist that those wealthy future
generations owed us something, not the other way around. If some moral
principle allows the tax collector to confiscate 40 percent of Gates' income,
that same moral principle should allow the unemployed lumberjacks of Oregon to
confiscate your rich grandchildren's view of the giant redwoods.
(I am
accepting, for the sake of argument, the Sierra Club's presumption that it can
accurately foresee what our descendants will value. But it's worth mentioning a
separate reason to be skeptical of the conservationist agenda: For all we know,
those descendants might prefer inheriting the proceeds of economic development
to inheriting the redwoods.)
The conservationists are not alone in
their pathological concern for future generations. The same impulse has
launched an epidemic of hysteria over federal deficits. The national debt is to
the '90s what the nuclear freeze was to the '80s: It's the one issue you don't
really have to understand before you can start feeling morally superior to your
neighbors. From that point of view, it's even better than the nuclear
freeze--not only does your expression of deep concern put you on the moral high
ground, but you actually get to stand on that ground and prescribe suffering
for everybody else.
Thus we have the Concord
Coalition types, who are always whining that the national debt forces them to
live well at their grandchildren's expense. I have news for them: Nobody
can force you to live well at your grandchildren's expense. If you think your
lifestyle is too extravagant, spend less and bequeath the savings to your
grandchildren.
The arithmetic works. If the
government cuts your taxes by $1,000 and sticks your grandchildren with the
bill--say $2,000 with accumulated interest--you don't have to spend the $1,000.
You can put it in the bank, where it will grow to $2,000 by the time your
grandchildren withdraw it to pay their taxes.
While it makes no sense to
worry that you are living well at your grandchildren's expense, you
might legitimately worry that someone else is living well at your
grandchildren's expense. Maybe your neighbor applies his $1,000 tax cut to buy
a car made of steel that could otherwise have been a girder in a factory that
might have employed your grandchildren. Economists disagree about how plausible
that story is, but we all agree that if you're out to protect your
grandchildren from the national debt, it's basically the only story you have to
worry about.
If you are worried about that
story, it means one of two things. Either 1) you believe that your neighbor has
no right to live well at your grandchildren's expense or 2) you believe
that your neighbor has that right, but you'd prefer to prevent him from
exercising it. In Case 2, I assume you have sufficiently little interest in
moral niceties that you wouldn't be reading a column like this one in the first
place. That leaves Case 1. But if you believe that your neighbor has no right
to live well at the expense of your fabulously wealthy grandchildren, you must
also believe that your neighbor has no right to live well at the expense of
Bill Gates. In other words, if you're unhappy about the national debt, you
should be doubly unhappy about the progressive income tax.
The popular philosophy of
income redistribution requires us to transfer income from the few high
earners of today, while the popular philosophies of conservation and "fiscal
responsibility" require us to transfer income to the many high earners
of tomorrow. Those who embrace all these philosophies at once--Bill Clinton
comes to mind--have about them at least a mild air of intellectual
schizophrenia.
(For a
more technical analysis of what we owe to future generations, click .)
