Why Socialism Makes the Rich Richer
With the historic passing of Obamacare in the U.S., much hype is being made by it's proponents that it will help fix the widening gap between rich and poor.

Unfortunately, this isn't what will happen. A quick example will show why government taxes, which is what Obamacare really is, make the poor poorer and the rich richer.

Caterpillar has announced they will take a 100 Million dollar hit from the extra taxes due to Obamacare, as will other farm machinery construction firms. This extra cost will be passed on to the consumers, that is, the farmers. So now the farmers are paying more, so their extra costs will be passed on to the people who buy the food, milk, leather and so on. So, essentially, everyone's expenses will go up.

If you have millions and millions of dollars you can cope with the expenses. You can still buy everything you need, and have money left over to invest. Investments that make you more money.

If you don't have lots of money, then these extra costs significantly reduce your ability to invest.

So a big effect of the new taxes is to reduce the pool of people who have spare money to invest. In essence, leading the lower end of the income spectrum even further away from being more than just workers.

With the reduced pool of people with spare money to invest and less money to invest, the average return on investments made will increase. Leaving the rich, who still have the capital to invest, with higher returns for their money.

The rich get richer.
- posted by Alan Grey @ Friday, March 26, 2010