Why do the Super Rich Evade Taxes?

“How much money is enough money for me?” At some point in our lives, all of us have tried to answer this question. Many of us have also often wondered how one person could be satisfied with a million dollars while another with a billion dollars could still want more.

A while ago, I read a newspaper article that raised the interesting question that is the title of my blog for today. This is a question that got me thinking. This is a question that needs to be answered, especially in the present times, when inequality of income and wealth has risen to a worrisome level.

So why do the rich evade taxes? Why do some people keep amassing much more wealth than they will need for their entire lives? Why doesn’t the marginal utility of additional millions of dollars diminish for most of the ultra rich?

The law of diminishing marginal utility says that utility (or satisfaction derived) from consumption reduces with every additional unit consumed. Yet, some of the super rich continue to evade taxes and amass more and more, seemingly defying this law.

While products are ‘consumed’ money is not ‘consumed’ in the same manner. So is this exception because of the apparent difference between consumption of products and accumulation of money?

Or is there another reason why the law of diminishing marginal utility does not apply to money in the hands of some ultra rich? Are we applying rules of normal consumption to abnormal conditions?

The real answer lies in the distinction between consumption and addiction. For an addict the rule of diminishing marginal utility does not apply. In fact the more the addict consumes the more marginal utility he derives. Experience shows that this may go on and on till the addict reaches the extent of self-destruction.

What exactly is addiction and why does marginal utility increase for an addict?

Addiction may be defined as a state in which a person allows a certain habit, substance use or a preference, to become stronger than the person’s basic instinct of survival and self-preservation. Either the addict chooses not to, or is unable to, stop himself / herself.

There could be many reasons why the addict allows this to happen or why he or she cannot stop when there is time. As a result, the indulgence in the habit, substance use or preference grows out of control.

What happens to an addict? The addict gets a high from his or her addiction, taking the addict away from reality and, mostly, also imparting a feeling of invincibility. This is why the addict does not see the oncoming destruction. The high experienced by an addict increases with increase in consumption, thereby defying the law of diminishing marginal utility.

Are the ultra rich that evade taxes addicted to money? It would seem quite probable. That would explain why they keep getting increasing marginal utility from additional wealth.

An addict can never have enough. The addict will hoard, as much as possible, of the substance that he / she is addicted to, irrespective of actual need or consumption.

So the super rich who continue to evade taxes are in fact addicted to money, whether they realize it or not. They need to identify this and work on rehabilitating themselves if they wish to keep growing and reach their highest possible selves.

As is the case for other addictions, so is it for addiction to money. Addiction to money leads to a habit of hoarding money much beyond one’s actual need. People who get addicted to money cannot stop and can never have enough money. Their billions will never give them the satisfaction that non-addicts might find in a million.