The free will of individuals and free enterprises have created too much wealth that landed in the pockets of very few people. Wealth is too concentrated in a few. The Re-Distribution of Wealth will take us to a better place. So they say.
Recently, I have heard of people on Medium advocating the re-distribution of American wealth to resolve the deep divisions in our nation. One person also suggested that a re-distribution of wealth with Russia will cause Putin and maybe Russians, in general, not to be enemies of the West.
Instead of arguing if re-distribution will or will not resolve the deep division of the nation, I’d like to ask the readers to visualize its success or its aftermath after we have completed a re-distribution of wealth exercise.
First, a re-distribution of wealth can only happen if US Congress, US President, and US Supreme Court agree that it is constitutional. I strongly doubt that. But let us go with it to see the aftermath of re-distribution.
Here is the scenario:
Legislation or a set of legislations has passed that all Americans’ assets over $5,000,000 (this number can be changed to a higher number, but the effect will be the same) must be taxed 100%.
The new revenue from this 100% tax will create a fund. Let us call that fund the National Wealth Fund. All US citizens will get an equal distribution from this National Wealth Fund. The citizens have a choice of getting a one-time lump sum distribution or a 20-year distribution. For those who choose the 20-year distribution, the total amount will be more than the one-time lump sum due to the effect of the compound interest rate.
The new Asset or Wealth Tax will be effective on January 01, 2024. The National Wealth Fund will be fully funded by June 30th, 2024.
On July 4th, 2024, the nation will celebrate the most significant achievement in its history. For the first time, it has achieved Financial Equality for all Americans. All poverty has been wiped out. There are no poor people. There are no homeless people. A dream of many Americans has finally arrived. Drum roll, please!
People like Bill Gates, Elon Musk, Warren Buffet, Jamie Dimon, Jeff Bezos, Michael Bloomberg, Mark Zuckerberg, Larry Ellison, Larry Page, and many others who were once the wealthiest in the US are now the same as everyone else. Everyone will have the same amount of wealth starting in July 2024. If Joe Nobody has $500,000 in assets, Bill Gates and Warren Buffet will have $500,000 in assets.
Ten years or twenty years after the Great Re-Distribution Event of 21st-century America, in the year 2034 or 2044, what will we see in America?
In those 10 or 20 years, the once poor people have happily spent their assets. They went on trips to faraway destinations. They bought themselves nice shoes, bags, jewelry, and cars. They bought themselves big houses in neighborhoods that once shunned them. They live lives that they could only dream about before June 2024. Happy Days indeed.
After 10 or 20 years, those people who were poor before 2024 have a lot less money than they did right after the Great Re-Distribution. They had newfound wealth through the Great Re-Distribition. But they didn’t have the skill, experience, or know-how to make a living that could sustain their newfound lifestyle. The Great Re-Distribution did not come with instructions on acquiring a skill or investing the money to produce profits or income to maintain their now better lives.
Unfortunately, work ethics do not change for the better after a person has newfound wealth through no work of himself.
After 10 or 20 years of luxury living, many have re-joined the poor class. Many have re-joined the homeless camps all over the country. Once closed, the homeless shelters have all been re-opened, and the waitlist is miles deep. Soup kitchens, once closed, have all been re-opened.
What about those once wealthiest people of America? Many of them have died off after 10 to 20 years. They don’t have any assets left for their families either.
What about newly minted billionaires? Well, no freshly minted billionaires or millionaires since the Great Re-Distribution. People have adopted a new attitude since the Great Re-Distribution. They wait for others to take risks, innovate, and invest in new technology and business. Why do the work and take the risk? Let others do it and build their assets up. Then everyone will take their fair share from the National Wealth Fund when the next Great Re-Distribution comes.
Risk-takers, entrepreneurs, and innovators are all sitting back and choosing to do nothing. They don’t see the point. If they take all the risk, do all the work to innovate, to invest in building new businesses, they won’t be able to enjoy or keep the financial rewards. It is all work for nothing. Why bother?
Twenty years after the Great Re-Distribution, America joined the league of the world's poorest country. The once most innovative economy, with the highest number of billionaires and millionaires and the world’s highest GDP, has joined the third world.
Same people. Same Americans. Different economic systems. Different incentives. Different behaviors. If you want different behaviors, change the incentives. We learned the universal truth about humans when we were young parents.
So, my friends, my example of the Great Re-Distribution may be an exaggeration. You may be right. But it will change the incentive no matter how you scale the re-distribution, up or down. Once wealth is re-distributed, it will remove the motivation for the innovative, hard-working, and those with the skill to produce new values that generate wealth. Our world will grow much slower because of the reduction in value creation. Our quality of life will be lowered because of the decrease in innovations.
When people are rewarded for not taking risks and not having to sweat, why would people take a chance, acquire hard-to-learn skills, or build a business?
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