How to Tax the Rich

Subject: How to Tax the Rich Thu Feb 03, 2011 12:55 am

How to Tax the Rich
Try giving them perks and privileges (an extra vote?) in return, says 'Dilbert' creator Scott Adams.
The president was too polite to mention it during his State of the Union
speech on Tuesday, but here's a quick summary of the problem: The U.S.
is broke. The hole is too big to plug with cost cutting or economic
growth alone. Rich people have money. No one else does. Rich people have
enough clout to block higher taxes on themselves, and they will.

Likely outcome: Your next home will be the box that your laser printer came in. I hope that you kept it.

Whenever I feel as if I'm on a path toward certain doom, which happens
every time I pay attention to the news, I like to imagine that some
lonely genius will come up with a clever solution to save the world.
Imagination is a wonderful thing. I don't have much control over the big
realities, such as the economy, but I'm an expert at programming my own
delusions.

I make no apology for that. A well-crafted delusion can be a delicious
guilty pleasure. And best of all, it's totally free. As a public
service, today I will teach you how to wrap yourself in a warm blanket
of imagined solutions for the government's fiscal dilemma.

To begin, assume that as the fiscal meltdown becomes more perilous,
everyone will become more flexible and perhaps a bit more open-minded.
That seems reasonable enough. A good crisis has a way of changing
people. Now imagine that the world needs just one great idea to put
things back on the right track. Great ideas have often changed history.
It's not hard to imagine it can happen again.

Try to imagine that the idea that saves the country is an entirely
new one. It's too much of a stretch to imagine that a stale idea would
suddenly become acceptable. In fact, that's the dividing line between
imagination and insanity. Only crazy people imagine that bad ideas can
suddenly become good if you keep trying them. So let's assume that our
imagined solution is a brand new idea. That feels less crazy and more
optimistic. Another advantage is that no one has an entrenched view
about an idea that has never been heard.

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Scott Adams

For
those of you with healthy egos—and that would be every reader of The
Wall Street Journal—you can make this fantasy extra delicious by
imagining that you are the person who comes up with the idea that saves
the world. I'll show you how to imagine that. I think you'll be
surprised at how easy it is.

I spent some time working in the television industry, and I learned a
technique that writers use. It's called "the bad version." When you
feel that a plot solution exists, but you can't yet imagine it, you
describe instead a bad version that has no purpose other than
stimulating the other writers to imagine a better version.
For example, if your character is stuck on an island,
the bad version of his escape might involve monkeys crafting a
helicopter out of palm fronds and coconuts. That story idea is obviously
bad, but it might stimulate you to think in terms of other engineering
solutions, or other monkey-related solutions. The first step in thinking
of an idea that will work is to stop fixating on ideas that won't. The
bad version of an idea moves your mind to a new vantage point.

With that technique in mind, I will describe some bad versions of how
society might go about the job of convincing the rich to accept higher
taxes on themselves. But first I need to address the illusion of
fairness.

We like to think that fairness is an objective condition. If you and a
friend simultaneously find a dollar on the street, fairness suggests
that you split it. But what if your friend is a billionaire and you are
starving? Is it still fair to split the dollar? And what if you and your
friend noticed the dollar at the same time but your friend was quicker
to pick it up? Does that count for anything?
In reality, fairness is not so much about the actual distribution of
loot as it is about the psychology of how you feel about it. That's
important to understand because the rich won't give up their cash unless
they feel they are getting something in return. And so far, saving the
country doesn't seem to be enough of a payoff.

If we accept that the rich can be taxed at a different rate than
everyone else, we can also imagine that there could be other differences
in how the rich are taxed. That's the part we can tinker with, and
that's where the bad version comes in. In a minute, I'll float some bad
ideas about how the rich can feel good while the rest of society is
rifling through their pockets.

I can think of five benefits that the country could offer to the rich in
return for higher taxes: time, gratitude, incentives, shared pain and
power.

Time. It's useful to keep in mind how the rich are different. When you
are poor, you are willing to trade your time to earn money. When you are
rich, you trade your money to get more time. For example, the rich hire
people to clean their homes, and they don't waste time shopping for
bargains. In business school I learned that when people have different
preferences, you can usually find a way to engineer a deal.

Suppose we change the tax code so that in return for higher taxes on the
rich, we figure out a way to give the rich some form of extra time. The
bad version is that anyone who pays taxes at a rate above some set
amount gets to use the car pool lane without a passenger. Or perhaps the
rich are allowed to park in handicapped-only spaces.

Ridiculous, you cry! Remember, this is the bad version. And if the rich
are only a tiny percentage of the population, they would have almost no
impact on the traffic in car pool lanes or the availability of parking
spaces for the handicapped. You wouldn't even notice the difference.

You could imagine a host of ways the government could trade time for
money. Suppose all government agencies had a mandate to handle the
affairs of the rich before everyone else. You wouldn't even notice that
your wait at the Department of Motor Vehicles was 2% longer.

As a bonus, what happens to the economy when the people who are most
skilled at making money suddenly have extra time? My bet is that they
stimulate the economy by spending more or by earning more.

Gratitude. Imagine that the government arranges to provide genuine
person-to-person gratitude to the rich in exchange for higher tax rates.
Suppose (bad idea alert) the government makes it a condition that
anyone applying for social services has to write a personal thank-you
note to a nearby rich person who, according to a central database,
hasn't lately received one. Gratitude goes a long way. It's easy to hate
the generic overspending of the government. It's harder to begrudge
medical care to someone who thanks you personally. It's a bad idea, I
know. Don't judge it. Just let it nudge your imagination to someplace
better.

Incentives. Another approach, also a bad idea, might be to treat the
rich more like venture capitalists than sources of free money. Suppose
the tax code is redesigned so that the rich only pay taxes to fund
social services, such as health care and social security. This gives the
rich an incentive to find ways to reduce the need for those services,
which would in turn keep their taxes under control. Perhaps you'd see an
explosion of private investment in technologies that make it less
expensive to provide health care. You might see rapid advances in
bringing down the cost of housing for seniors.

Meanwhile, the middle class would be in charge of funding the military.
That feels right. The country generally doesn't go to war unless the
middle-class majority is on board.

Shared Pain. Happiness is a relative thing. That's how humans are wired.
And we're just screwed up enough to feel comfort when our pain is
shared. So how can we make the overtaxed rich feel as if the rest of
society is feeling a little extra pain?

I doubt that the rich will agree to higher taxes until some serious
budget cutting is happening at the same time. That makes the sacrifice
seem shared. The rich will feel unfairly singled out unless everyone is
taking a hit. And budget cuts make the government seem better managed.
That matters.

The bad idea here is to change the
debate from arguing about which programs and how much to cut, and
instead to do what the private sector has been doing for decades: Pull a
random yet round number out of your ear, let's say a 10% cut, just for
argument's sake, and apply it across the board. No exceptions.
Everything from the military to welfare to federal pensions to
government salaries would take the same hit. Managers in the private
sector have been handling budget cuts this way for years. They know that
their subordinates are all professional liars, so there is no reliable
information for making cuts in a more reasoned way. They also know that
any project can get by with 10% less money if there is no alternative.

Power. Everyone loves power. I'm
guessing that the rich like it more than most people, on average.
Another bad idea is to give the rich two votes apiece in any election.
That's double the power of other citizens. But don't worry that it will
distort election results. There aren't that many rich people, and they
are somewhat divided in their opinions, just like the rest of the world.
And realistically, is the candidate who gets 51% of the vote always
better than the one who gets only 49%? That's a risk I'll take.

I think I've given you enough bad ideas
to prime your imagination. Now it's your turn. If you think that
solving the nation's fiscal problems is the job of elected officials,
you have to ask yourself how that's working so far. The solution, if it
exists, won't be anything that looks like normal business. The rich have
the money, and they aren't going to give it up for nothing. I know
because I am one, and yes, we do hold meetings.

The way our political system is
designed, politicians are not free to float bad ideas. Doing so is a
sure way to lose an election. Politicians aren't even free to support
good ideas if they are too far from the norm. But as citizens, we're
free to speculate all we want. And if some new and better idea gains
popularity at the grassroots level, our elected leaders would then be
able to embrace it. In other words, it's literally your job to fix the
budget problem because your government isn't equipped to handle it. The
ideas I've mentioned here are bad by design. But if a few million people
start brainstorming their own ideas for solving the debt problem,
someone might come up with a winner. And if that idea gains popular
support on the Internet, it frees politicians to consider it. I have no
problem imagining that something along those lines can happen, and the
thought feels delightful.

—Mr. Adams is the creator of "Dilbert."

Infernal Revenue: Unusual Taxes in History

Taxation has been around since at least 3000 B.C., when Egyptian pharaohs taxed many items. Getty Images

Taxation has been around since at least
3000 B.C., when Egyptian pharaohs taxed many items, including grain,
imported goods, livestock and beer.

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Citizens had to pay a tax on cooking oil, and tax collectors searched homes for used oil. Getty Images.

Citizens
also had to pay a tax on cooking oil, and tax collectors (known as
scribes) searched homes for used oil, trying to make sure that everyone
was using new cooking oil—and thus paying the tax.

As part of his drive to modernize
Russia—and to spur Russian men to look more like clean-shaven European
men—Peter the Great introduced a beard tax in 1705.

One of the grievances that fueled the French Revolution of 1789 was the salt tax.Getty Images

Any man
who wanted to wear a beard, with the exception of priests and peasants,
had to pay a tax of as much as 900 rubles. He then had to wear a special
medallion around his neck as proof of payment.

One of the grievances that fueled the French Revolution of 1789 was the salt tax, also called the gabelle.

The tax varied by region, and in some
areas, residents also had to buy a minimum amount of salt. The result:
lots of smuggling and unrest. In India, the British salt tax became a
focus of Mahatma Gandhi's nonviolent protest against English rule.

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The window tax was enacted in England in 1696 after the short-lived hearth tax on fireplaces. Masterfile

Enacted
in England in 1696 after the short-lived hearth tax on fireplaces, the
window tax was based on the number of windows in a house. (That made
assessments easier, since windows, unlike hearths, could be counted from
the outside.)

Many chose to block some of their windows to pay a lower fee. The tax was eventually repealed in 1851, on public health grounds.

Following similar laws in other
states, Tennessee passed the "crack tax" in 2005, which mandated that
drug dealers pay taxes anonymously on illegal substances.

If a dealer was caught without proof of
payment, the state collected taxes, with penalties. Around 3,000 people
were eligible for refunds after the law was struck down in 2009; a
revised law soon followed.

In Alabama, computer solitaire has one
advantage: Anyone buying a deck of playing cards there must pay a
10-cent tax. (And retailers must obtain a "playing card privilege
license.")

Other states and cities have their own
special charges. Maine has a blueberry tax, New York City taxes sliced
(but not whole) bagels, and Minnesota has a fu

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