/ 26 January 2021

Competition for campaign contributions results in the rich paying too little tax

Read Cyril Ramaphosa's address at the Siyanqoba rally at Ellis Park stadium.
Regardless of how the 2024 elections end, the ruling party must undergo radical political transformation to survive (Reuters/Siphiwe Sibeko)

In response to  “No-one should be as rich as Elon Musk”, Mail&Guardian 20 January

In his article, Andile Zulu argues, inter alia, that ‘’billionaires are a hazardous symptom of the injustice of private property’’.

The reason the gap between rich and poor continues to widen is that political parties   routinely spend huge amounts of money on getting elected and, in order to obtain campaign contributions, have to provide the rich with policies that are more attractive to them than the policies offered by other political parties. This competition for campaign contributions is at its most intense in America (where the average senator spends a whopping $9.3-million on getting elected) and has resulted in a maximum tax rate of 37% for individuals, which only applies to individuals earning more than $518 000 (R7.85-million per year). This is a pittance when one considers that in South Africa, the maximum tax rate for individuals is 45% and applies to anyone earning more than R1.5-million per year!  Clearly, Elon Musk, who is worth an estimated $195-billion (and has most of his wealth tucked away in stock options that do not get taxed until the shares are sold), could be paying a lot more tax.    

Consequently, if communism is to be prevented from gaining popularity in developing nations such as South Africa, capitalism has to start delivering on its promises. It cannot keep expecting  poor and uneducated people to realise that communism is almost certain to make matters worse/compound our problems (because of a failure to provide workers — and farmers in particular — with an adequate incentive to produce more than they need for their own consumption). 

Hardly a day goes by without one of our local newspapers publishing a letter or article that rails against capitalism or private property.

Fortunately, President Ramaphosa recently signed the Political Party Funding Act into law, which forces political parties to disclose the names of persons making donations to them.This is a step in the right direction and is likely to make it more difficult for donors to pressurise politicians into doing their bidding.

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.