Luck, Richness, and Tax

Whenever I say or hear motivational speakers (Mario Teguh? Hell, Donald Trump?) emphasizing hard work and effort as the way to be rich I can help but ponder, is it so? Turns out this rationale is also oftenly spewed by conservatives whenever they want to oppose taxation; how taxation "punishes" and disincentifies those who exerts more efforts than others. Few things come in my mind. Is it really true that I can get rich as long as I work harder and those who are poor basically just don't work hard enough? I don't think so.

Hard work, effort, will, discipline, initiative, persistance, drive, etc. are good virtues - and remain so, but they aren't that independent of brute luck. How? It began even since our conceptions. We are lucky enough to be born with good talents and without defect genes. We are lucky enough to be born to "able" parents: those who can afford giving us good nutritions ever since we were babies, those who can afford giving us decent homes, those who can afford giving us educations, those who care so much to our development, etc., etc. We then grew up as educated and healthy persons with sound mind. It is simply because of good luck that we weren't born in North Korea or Ethiopia, where some kids trapped in endless cycles of poverty; poor parents that can't afford to give us education, nutritions. We might end up as malnourished and uneducated kids. In the end, we can't afford having decent jobs to improve our lives and our families' lives. Not to mention if such conditions made worse by endemic diseases or war.



But let's say you say that that's the end of our luck, that after graduation, what shape us to be rich lawyers, businessmen, stock traders, or motivational speakers (!) is purely (or mostly) because of our dilligence and persistence. But that's not so true either. Why? Because we live in the world that has market system that happens to reward what we do, our jobs, very well. Disproportionately well*. The important variable for richness, however, does not seem to be our dilligence or hard work, but profession. If we’re in a high-value profession, hard work can do us a lot of good. If we’re not, it may not do you much good at all however hard we are working everyday. We're lucky that we were born in a time and place where the hard work we're good at (say, stock speculation or legal knowledge) are valued over the hard work that other people are good at (say, carpenting or repairing air conditioner.) That's the difference between the hard work of a stock trader and the hard work of the person who repair the AC in IDX tower.

So "anyone can get rich** if only they work harder" is not just untrue, it's also insulting. We can't have a society where everyone is a lawyer or a stock trader. We can't have a society where we have to pay 100 million rupiah to every good and hardworking military personnel, policeman, nurse, firefighter, schoolteacher, carpenter, electrician and all of the other professions that civilization needs to survive (and that rich people need in order to stay rich.) These military personnel, policeman, nurse, firefighter, schoolteacher, carpenter, electrician may work 100 TIMES HARDER than you every day; some of them even risk their lives everyday while you sit comfortably in your office, yet, they will never make as much money as you businessman make. So be grateful.

And that's where tax comes in. As what John Rawls said***, to compensate people those who are disadvantaged from this brute luck, we tax the riches to give adequate basic scheme for the worst off and reduce inequality, so that we can imagine that even though we end up being so poor, social arrangement permits and guarantees us to basic scheme like security, education, and healthcare. This is by no means punishing those who are working hard and being rich, this means that something needs to be done and those who are above average have the capabilty to do so. The analogy will be like asking tall person to pick a book in the top shelf: this isn't a punishment for her being tall, but since no other person is tall enough to get it, then she has to get the book. Those who are rich tend to be able to pay not only more rupiah but also a larger share of their income without suffering. Thus those rich folks who refuse to pay higher tax is just egoistic and immoral. We can't do everything by ourselves. Our houses and schools were built by other people. Our cars were made by other people, run by gasoline drilled and processed by other people, driven in roads made by other people. And so on.

Say you can do all of that, and refuse to pay tax, but what if there's bad person is trying to take your wealth? What would you do? Your security measure won't fend them off -- suppose they have more weapons. What will you do, call the cops? That is, other people, who will risk their lives while being paid with still tax money, who will try these bad guys in a court funded by tax money, under laws passed by legislators paid with tax money? Accept that, you can't live alone by yourselves. Caring for other persons - by paying tax, is one of the requirements to be a moral person.

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Post Scriptum

*) For instance, the ratio of CEOs' pay to average workers in United States are 475:1, and it takes 14,000 years for average Sri Lankan workers to earn Nike CEO's annual pay. This discrepancies is so huge, despite both CEOs and workers are equally important for companies' operation.

**) Simple logic dictates that "anyone can get rich" is true on individual level - but not on collective level (i.e. "everyone can get rich.") Why? Resources are limited. Money supply is limited as well. Suppose population of Indonesia is 1,000 person, and there is 100 million rupiah of money supply. Let's say parameter of richness is by having 1 million rupiah, there will never be more than 100 person that is rich (but then 900 others have no money at all, not to mention if several people have more than 1 million rupiah - even more people will have no money.) Printing more money so that each person has at least 1 million rupiah won't work either. Why? As you print more money, money supply is increasing and inflation occurs, and the value of money drops. 1 million rupiah after printing more money will always be less than the value of 1 million rupiah before printing money.

***) Ironically, Rawls seemed to against progressive tax, despite his difference principle must require progressive tax and transfer scheme. I also prefer Amartya Sen's capability approach to Rawls' in this matter.