Higher taxes disincentivises wealth and job creation

The argument

Proponents of this position argue that wealth and employment are not evenly generated across a population but produced disproportionately by a few, and that tax policy should be judged by its effect on those people. The first claim concerns the source of growth. On this account the vast majority of wealth and job creation arises through the ingenuity of a minority of individuals, who then recycle their wealth by re-investing it into the wider economy. The emphasis on reinvestment matters to the argument: the wealth in question is not described as removed from circulation but as returned to it, funding the ventures and the hiring from which employment follows. Money left with these individuals is therefore represented as capital at work rather than as a private hoard. The second claim concerns what higher taxation does to that process. A higher tax on the wealthiest reduces the return on the activity and so disincentivises the behaviour the economy depends on — leaving less to reinvest and less reason to undertake the risk of doing so. Proponents add that such a tax is often seen as punishing success, which bears on motivation as much as on arithmetic: a system that treats achievement as an occasion for additional levy discourages the effort that produced it. The third is comparative. Proponents observe that it is no surprise that some of the most productive economies in the world, with the highest levels of job creation, also maintain lower levels of personal and corporate taxation. The correlation is offered as confirmation that the mechanism operates in practice and not only in theory. Because higher taxes disincentivise the wealth and job creation that everyone benefits from, proponents conclude the wealthy should not have to pay more tax.

Premises

Counter-arguments

The current tax system in most Western capitalist societies creates economic polarisation dividing society between those with economic means and those without. A system that taxes the poor and rich at a similar rate leaves those on lower income with less money available to meet the growing price of essential goods, including housing, transport, and food. Higher rates of tax on the wealthy as opposed to the poor serves as a check on this and preserves the critical middle classes, ensuring that there is room for social mobility.

Rejecting the premises

[Rejecting P1] The wealthy do not help the economy by reinvesting. The only way they can significantly help is by paying more towards public services.