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State of Mankind - How much do you know?

(44) High Taxation(2)

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Tocqueville believed that social welfare exacerbated conflicts between rich and poor. Having part of their wealth forcibly confiscated, the wealthy would come to resent the class of welfare recipients. Tocqueville said that the poor, too, would continue to feel discontent since they would take their economic relief for granted: “One class still views the world with fear and loathing while the other regards its misfortune with despair and envy.” [9]

Bloated welfare also becomes a point of jealousy and political conflict that communism uses to destroy people’s moral and social harmony. This has been observed in the Greek economic crisis: Rather than a conflict between rich and poor, the struggle was to be had between the middle and upper classes. Among the latter, tax evasion has become a “national sport,” according to Greek officials cited by The Economist. [10]At the same time, so as to not upset its constituents, the Greek government has relied on taking loans to offset diminishing tax revenue and maintain the same level of welfare found in other European countries.

In the aftermath of the economic crisis, the Greek government attempted to cut back on social welfare, only to meet with staunch resistance from the general population. The people set their sights on the wealthy and demanded even higher taxes be levied on them, creating a headache for the government that has yet to be resolved.

The welfare system erodes the traditional work ethic and makes people feel entitled to that which they did not earn. As industriousness is punished, the entire economy suffers.

In 2010, a practical study by Martin Halla, Mario Lackner, and Friedrich G. Schneider produced data showing that social welfare disincentivizes hard work in the long term. And such a result will not be shown until a long period of time later. The three economists concluded that the dynamics of the welfare state are inimical to the health of a nation’s economic base. [11]

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