Frank is interested in this phenomenon because very successful people are in the highest socio-economic sphere, and their beliefs about their own success can have huge political and economic consequences. “When people think they did it all themselves, that seems to kindle a fierce determination to hang on to every nickel that comes their way,” Frank explains. “That often translates into the belief that taxation is theft. That’s not a sensible view for anyone to hold if they really think about it. If you didn’t have taxes, there wouldn’t be a government.”
“There are many people who are smart and work hard and don’t succeed on a big scale, because luck is random,” says Frank, “and this is what people don’t see. …Every career has a thousand steps, and most of them are small and depend on the steps that came before.”
Without government there would be no army to defend the country, no roads or infrastructures to get goods to market, and no public schooling to train workers, among other things. These are all necessary for the individual success of entrepreneurs, Frank says, so giving these same entrepreneurs tax cuts hurts the public sector, and that isn’t good for anyone.
The rich don’t realize that everyone in their tax bracket would equally share the effect of higher taxes, resulting in zero impact for them, according to Frank. Those in the highest income bracket have long since purchased everything they need. What are left are the things they want—things that are scarce, such as a sweeping lake view or an elite sports car.
“These are the things you have to outbid others for,” he says. “There’s not enough of them to go around. If everyone in the upper income bracket had their taxes raised, then they may have less money and the highest bidder may not be able to bid as high as before, but neither can anyone else. It’s relative purchasing power that determines who wins those bidding wars.
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