Why are people who want to control the money they earn dubbed greedy while people who want to control the money others have earned dubbed humanitarians? "Stingy Stones Avoid Tax on £240m Fortune" reads the headline of a story in the Daily Mail that claims Mick Jagger, Keith Richards, and Charlie Watts have paid just £4 million in taxes since 1986. That's £4 million more than most pay. Will the Daily Mail next run a story on three average Joes who have paid £3.9 million or so less in taxes over that same period?

Most people shelter their money from petty robbers in their pockets or at banks. But bigger robbers call for more elaborate methods. That's where tax shelters come in. No smart person would leave there money unsheltered around robbers.

In a world with freedom of movement, successful individuals will leave nations that punish success and move to nations that allow the successful to keep their rewards. There's nothing greedy about doing that. There's something stupid about not doing that. Stereotypes aside, many rock stars are not stupid. George Harrison famously complained of onerous, 94 percent tax rates in Harold Wilson's Great Britain. Pink Floyd became UK tax refugees in the late 1970s. The Stones, of course, didn't just figure out the benefits of sheltering their money twenty years ago, as someone reading this Daily Mail story might mistakenly think. In 1971, the Stones moved to the French Riviera and became tax refugees. Their famous exile produced a more famous exile--Exile on Main Street, the group's best album.

Rather than shame the Stones into unsheltering their money in the United Kingdom, the Daily Mail's article should shame the United Kingdom into creating a tax climate in which the successful would feel comfortable leaving their money unsheltered. We know that it won't.

As we know them, taxes stink. They bloat the government and lead to all sorts of spending that no right thinking person ever could or should approve of.

Believe me, I am no communist, BUT I am inclined to think that high marginal tax rates (and we're talking for the far right end of the tail, the top 1% or so) are not the demon they might seem. Granted, in an ideal world, i.e. one in which financial success is achieved through truly competitive, meritocratic, noncorrupt means and methods, high marginal tax rates are the bane extrordinaire. Such a world is the fantastic model which the traditional Chicago School works from, a world in which markets reign with necessary and swift justice, so government must keep its hands off everything. In theory, these principles work very nicely.

In the real world, though, it seems that high marignal tax rates might serve an important and indeed essential role. This is because, in practice, financial success is too easily attained by criminals and idiots (read: monopolilists and other corporate scandaleers), not the meritorious. Any system cannot be countenanced if it encourages, rewards, or otherwise provides unfair advantage to these pernicious types--for it will necessarily work to the disadvantage of the economy generally and the rest of us specifically.

I am confused Buzz,

How does high marginal tax rates discourage criminals and idiots?

Good post Dan.

Yes, it's a thorny issue. Usually, there's no deterring criminals or idiots, so that's not the main point. The main point is to dimish the extent to which the rest of the economy is ripped off by their actions. Moreover, so long as the rates apply to only very, very high levels of income (top 1%, or higher), they do not necessarily cripple "secular" growth, the rising tide that lifts all boats.

Buzz:

If I thought that taxing the top 1% of the population in a massive way, and using that money to create a cradle to grave welfare state, and I believed that a welfare state WORKED, I would completely agree with doing it.

But if you simply look at the argument from effect instead of from intention, government social programs just flatly don't work. So there isn't much point implementing them no matter how practical the taxation is. The market does a better job nine and a half times out of ten.

I don't disagree, Ben-T. Government social programs are a disaster, and I wouldn't ever (and didn't) advocate sending tax monies their way. I'll admit that you bring up a related issue, but it is also different one, I think, and perhaps really tangential.

If you want to talk about where the funds from such taxation would or should go: I think we can make a strong argument that there are legitimate (and extremely expensive) areas for government spending, national defense being the clearest case I can think of.

Anybody who thinks paying more taxes is a good idea is either a Birkenstock Liberal weenie or a very stupid person. Trusting the government to successfully use or distribute funds is foolish and even wealthy philanthropic types avoid paying taxes as much as possible in lieu of giving their money away to concerns of their own choosing.

Up until this year U2 didn't pay any taxes because of Ireland's artist exemption law.

asdf,

Who said anthing about trusting the government, etc.? Noodle on this: High marginal tax rates don't *necessarily* mean more money for the government to waste. This might blow your mind, but it's true! Consider what it would be like if we all got some serious tax breaks on, say, the first $3 million we earned each year, in tandem with much higher rates for everything in excess of $3 million. If the code were organized properly, it wouldn't necessarily be the case that more taxes were being paid...

Buzz,

Let me get this straight: You want to tax the top 1% of earners more, so to slap the criminals among them on the hand, even though you've conceded there is basically no detering them and there is no other benefit to the rest of us for doing so?

If the effect on these high income criminals would be negligible, at best, why punish the rest of the top earners who are law- and ethics-abiding in the process, and also, by extension, the people who work for them, the stock holders, and those who buy their products and services?

It seems to me your corrective scheme through the tax system is a fool's errand. If there really is a problem, your way is a profoundly inefficient and, even, unjust way of remedying it.

Sincerely,
--Eric

Eric,

Thanks for your thoughts. I can respect your position as you articulate it, but I fear I've not made my point clearly. First, let's be clear about what we're talking about: a high marginal tax rate--let's say something like 95% of anything over $3 million annually. (I'm pretty sure everyone I can think of could get by more than just fine on $3 million a year--does anyone know of someone who couldn't?)

Now, imposing such a tax would surely amount to more than just a mere "slap on the hand" for any illegitimates; moreover, I don't think there would be "no other benefit to the rest of us." Indeed, I think potential for benefit to to the rest of us is quite evident.

As for the efficiency and justice of the matter--these are debatable, and such a debate would require an attention to details that this medium doesn't really afford. I would begin, though, by reflecting on my parenthetical comment above (in addressing the justice of the matter), as well as on the fact that this sort of a system has, at least to my mind, something akin to the appealing simplicity of a flat tax system (in addressing the efficiency question). I'll have to leave it at that for now, though.

Buzz,

we also have observed in the past that we get higher tax revenues when we have lower tax rates.

So why not slash the taxes, increase the rates, fund the military, and everybody is happy?

A number of good points made and implied...Let's be right up front. I think a good case can be made that it is precisely the excess capital left in the pockets of the rich that puts the rest of us to work through their spending,investing and donating. I am also still looking around to find examples of where Govt' solutions are not worse than the problems they are trying to solve...plus Government spending, social or otherwise, IS THE WORST OF ALL SPENDING!!

Add the the above....Because it is always someone else's money!