Thursday, April 07, 2016

How about a tax on genetic inheritance?

Ever since Professor Thomas Piketty wrote his bestseller, 'Capital in the Twenty-First Century', there has been a flood of articles on inequality. The trouble is that pundits use the word 'inequality' when they mean 'poverty'. But they are not the same. After all, a man earning $1 million a year cannot compare with Bill Gates, but is not going to resort to " violence and instability ". An article seeks to make a case for reducing inequality, apparently because it results in economic growth. It gives the usual figures about the effects of poverty on development of children and lauds the socialist policies of Latin America because,"...progressive policies were at the heart of the economic expansion itself: a new generation of better-educated workers entered the labour force, earning higher salaries and reaping the dividends of social spending." If socialist spending was responsible for higher growth should it not be blamed for the recession in Brazil and the collapse of the Venezuelan economy, with rising poverty? How do you make everyone economically equal? One way would be to make every beggar a billionaire. But how? Everyone is born, not only in different circumstances, but with different talents and abilities. There is only one Narayan Murthy or one Sundar Pichai, because they are exceptional. So the only way to make everyone equally rich would be to print lots of notes and distribute them equally. That will result in a collapse in the value of the currency, with resulting hyperinflation, and a collapse of the economy. The other way is to reduce the wealth of the rich by taxing them heavily. Communism was a highly idealistic system, where all assets belonged to the state which rewarded citizens according to need, not ability, and created a classless society. It turned out to be a highly brutal system, giving rise to Josef Stalin, Mao Zedong and Brother Number One, Pol Pot, among others. People hate being restricted. Even in Stalin's Soviet Union people smuggled Western music into the country, etched on X Ray plates. The Panama Papers show how the wealthy avoid paying taxes by hiding them in tax havens. The Chinese are transferring large sums of money overseas because they are worried about the falling value of the yuan. Finally, many countries in the world levy an inheritance tax in the belief that inheritance creates unfair inequality because it is a windfall gain for beneficiaries, who have not done anything to earn it. So should Mr Mukesh Ambani have been forced to pay crippling taxes when he inherited his father's business? In which case what about Ms Ashwarya Rai? She is rich because of her great beauty.  Beauty cannot be acquired, it is in the genes inherited from parents. So should there be an inheritance tax on genes? And if on Ms Rai, what about geniuses like Einstein or CV Raman? Forcing equality on human beings does not work. Focus on eliminating poverty instead. Honestly.

No comments: