As a former small business person, I would like to briefly comment on Umair’s term “Capital Skimming.” There is a big difference between being a business owner and an employee. The owner has taken a lot of risk (like 4 out 5 businesses fail in five years) and work longer hours to make their business work. So if a business eventually pays its owner $150,000 a year, and its employees get, say, $40,000 a year, I would say the owner deserves that premium of income. If this kind of premium is considered as capital skimming, thus implying severe clawbacks, I would say fewer people are going to start and/ or grow businesses. The economy suffers.

Having said that, the owner should pay his taxes, the rates of which are usually known before the owner starts his business. If the rates are too high, then the owner should just stay as an employee. If the tax rules say your marginal tax rate is 50%, just pay it — and be happy that you are living in a civil society that allows you to own and benefit from a profitable business. And don’t start setting up shell companies and offshore accounts.

Wealthier people not paying their taxes has a historical outcome. I have written about the year 1848. When the economic disparity gets too large, expect a lot of civil unrest. The moralities of wealth won’t matter if enough citizens believe the system is rigged against them.