Recently, the proposal of Alexandria Ocasio-Cortez, a Democratic congressman in New York, to levy a 70% tax rate on the rich who earn more than $10 million a year has aroused public concern and concerns among elite financiers at the Davos Forum.
Their fears are not unreasonable. Although Trump, the current US president, advocates tax cuts, Cortizs proposal has the support of 50% of voters, even 45% of Republicans.
Its crazy that some people are more afraid of marginal tax rates, regardless of the fact that 40% of Americans struggle to meet at least one basic need, such as food and rent, Curtis said.
Krugman, the Nobel Prize winner in economics, also wrote an article in support of Cortiz. Policies to make the rich poorer affect only a few people and hardly affect their life satisfaction because they can still buy whatever they want, Krugman said.
This view seems reasonable, but in fact, if the rich tax is implemented, it will lead to economic disaster.
Curtis and Krugman only saw successful entrepreneurs, but did not see many less successful entrepreneurs, entrepreneurs who failed to start their own businesses, went bankrupt and incurred hundreds of millions of debts.
Why do the people with the highest IQ prefer to be doctors, scientists, lawyers, etc., rather than entrepreneurs? Because the risks of these professions are very low, while the risks of entrepreneurs are very high.
Because of the high risk of entrepreneurs, it is reasonable for some successful entrepreneurs to get risk compensation - because risk also has a price.
If the U.S. does implement a 70% tax on the wealthy, as recommended by Cortiz and Krugman, it would be a severe blow to entrepreneurship by drastically reducing market risk compensation.
Its not as Krugman thought, its just as simple as slightly reducing the consumption of the rich. It signals to potential entrepreneurs that compensation for entrepreneurs is not enough to make up for your risk, so go the other way. When entrepreneurship is suppressed, American peoples lives will only get worse.
Krugman himself said, Why not tax them at a 100% tax rate? The answer is that this will disrupt their motivation to continue any work that will enable them to earn huge sums of wealth, thereby damaging the economy. Krugman might consider how far from a tax rate of 70% to a tax rate of 100% to suppress entrepreneursmotivation.
In fact, most of the assets of entrepreneurs are used to continue production and operation, continue to serve consumers and bring income to employees. A 70% tax on the rich will inevitably result in more resources being concentrated in the hands of the U.S. government and allocated by the government according to non-market rules, which will result in inefficient waste of resources.
As for Curtiss claim that 40% of Americans struggle for food and rent, this problem should be solved, and the solution is to reduce taxes more and promote marketization.
Before Chinas reform and opening up, at least 80% of the people struggled for food, clothing and warmth. Under this pressure, China carried out a successful market-oriented reform, rewarded entrepreneurship and successfully solved the problem of food and clothing.
The United States does not levy the rich tax. On the contrary, the rich tax such as progressive income tax and inheritance tax in the United States is quite high. After Reagan and before Trump, the U.S. had a tendency to raise taxes, but the result was an increase in the number of people struggling for food and rent. Therefore, the United States should try its best to remove the shackles imposed on the market by former President Barack Obama and others. Walking along the old road of rich tax will only make the problem worse.
Source: Author of New Beijing News: Editor in charge of Deng Xinhua: Shi Jianlei_NBJ11331