The Wealth Taxation Myth

Beyond the Cusp ^ | December 17. 2010 | B. Saunders

[bsaunders]

We keep hearing the argument that we have to tax the rich. We hear how the rich have all this wealth and that because of their great amounts of wealth; they can afford to pay more taxes. But here is the problem; we tax income, not wealth. Here is an example that will hopefully clarify the situation. We have two families. The first family has five million dollars in savings accounts in numerous banks earning two per cent interest and no other income. This gives them an income of one hundred thousand dollars a year. Living on their family estate and owning their vehicles leaves them with a healthy amount of disposable income simply from the interest even after taxes. The other family both parents work making a combined income of two hundred and fifty thousand dollars a year. They have a mortgage and car payments due every month. Obviously, they will pay more income tax than the first family and will also have to pay FICA and other salary related taxes that the first family escapes by living off interest on savings. The question then is which family is the wealthy family and are we taxing the truly rich and wealthy family or are we taxing the more productive family.

When the tired old class warfare chant is made about taxing the wealthy because they have all the money, the wealth, it is a false claim because we tax income, not wealth. Our tax system places the burden on those who earn money, not those who already have money. Think about this next time you hear the cry of tax the rich and realize that it is a call to tax the hard working, not the wealthy.

Beyond the Cusp

[bsaunders]

Thanks for reading. This came to me while listening to a pair of "talking heads" on radio. They both constantly talked about taxing the rich and taxing the wealthy but based each on income, which is untrue and another deception. They do not want to tax wealth, they want to tax productivity.

[Oberon]

Personally, I think it’s a better idea to tax consumption.

[mrreaganaut]

IBTZ

[Tempest]

OMG this story is so sad I almost want to cry... Poor little rich people, life is so unfair.

[paulycy]

The world is full of wealth bigots.

[piytar]

The real purpose of high income taxes is to keep the middle class from moving up. That’s why the wealthy are all for it.

I’ve been talking about this for years, in fact since the days of GW’s “tax cuts for the rich.” The demscums’ line on this is all a lie, marxist class warfare propaganda.

Sadly, our NEA dumbed down population has far too many people who are too economically illiterate to understand your point.

[calex59]

If you really think that higher earners should be taxed at a higher rate, you need to be on DU, not FR. Those “poor little rich folks” as you call them, keep the jobs flowing and the economy running. Without them none of us would have jobs.

[BenKenobi]

Well I think they should tax consumption. Does that mean I’m one of the evil folks who should return to DU? ;)

[stocksthatgoup]

Wealth = Net Worth
Income = Net Work

[paulycy]

Wealth = Net Worth
Income = Net Work

That's good!

[ExTxMarine]

Poor little rich people, life is so unfair.
Are you saying that we SHOULD raise the taxes on the rich? On what basis do you propose this?

Here is a nice continuation of this post. The patriarch of the family that has 5 million dollars in the bank dies. But, because he passes away, they have to give $1,750,000.00 to the government - directly out of the bank - no "big" problem!

Now, the matriarch of the "working" rich passes away. They have a nice house, a few nice cars, a couple of rental properties and when added all together, they have over 5 millions dollars in valuables. Now this "working" rich family must SELL off enough of their assets to give Uncle Sam $1,750,000.00 due to the tax code - is that fair?

Your tag says, "Christian before conservative." Maybe you should remember the 10th Commandment and not covet "any thing that is thy neighbour’s."

These tax laws usually get both Democrat AND Republican POLITICIAN support because most of these guys are ALREADY rich! Which means they are in the first group which doesn't typically get hurt nearly as much as someone who is working to get into that group - they know this! But conservatives know that the "working" rich are adding to the GDP! They are growing the American Economy! They understand the old Reagan philosophy, "A rising tide lifts all boats." Conservatives want these "working" rich to keep working, to grow and hire and make business for everyone to enjoy the "tax" fruits of their labor and drive. If you over-tax this group, they will stop expanding and growing and the tax becomes punitive in nature (this is one of the reasons companies are leaving America - our corporate tax rates are OUTRAGEOUS).

[The Great RJ]

Hauser's Law shows that regardless of the highest marginal tax rate, total tax revenues stays at about 19% of GDP. This held true when the rich were being soaked in the 1950s with marginal tax rates of 90%+ as well as after the rate reductions with JFK, Reagan and Bush.

[ExTxMarine]

Well I think they should tax consumption. Does that mean I’m one of the evil folks who should return to DU? ;)

No, you fit in quite well here at FR, but ONLY if you also agree that with the creation of a consumption tax, we ELIMINATE the income tax! You can NOT have them both!

[BenKenobi]

Of course. I think that income taxes are horribly regressive because they penalize people for working and saving. The money that goes to income tax could be used for other things that would generate productive enterprises. Instead it’s a dead loss to the economy.

[silverleaf]

First of all, I doubt that anyone smart enough to have amassed $5 million and needing to live on the interest, leaves it in the bank at 2% interest. It’s liberal demagogery that implies the rich stick their money in mattresses and keep it out of the economy.

Second- an income of $100,000 does not provide a luxurious lifestyle for someone living on “the family estate” and paying all their own bills.

Get real. Property taxes alone would be tens of thousands of dollars- thats why so many rich democrats like Rangel, Pete Stark, Tom Daschle, falsely claim homestead exemption and skate on property taxes on their mansions in DC and Maryland

[RatRipper]

Capital has to be aggregated to be invested and made productive in assets that produce. Econ 101 tells you that captial is one of the factors of production in a capitalistic society as ours. When you attack wealth and try to confiscate it, through abusive or punative income taxes or estate taxes, you are attacking capitalism at its heart. That, along with Fascist-style control of products produced by business activity through onerous regulation, is what these leftist/progressive/socialist/Marxist/CommieRat Democrats in the White House and Congress have been trying to do to us. . . attack our capitalistic society at its very heart.

[ExTxMarine]

Instead it’s a dead loss to the economy.
You and I, sir, agree completely!

By taking money directly out of my pocket, Uncle Sam kills a part of the initiative in people to spend the money that Uncle Sam lets us keep.

If they taxed consumption only, then everyone would get hit equally - yes EQUALLY.

You see, those of us who are NOT rich will spend our money on things we can afford, and we will buy the Ford Fiestas and shop at H-E-B for our groceries and pay taxes based on those items. Where as those that ARE rich will spend their money on diamonds and caviar and Mercedes' and they will be taxed far MORE than us non-rich, because they will be buying the nicer, more expensive items. Best part, as the middle class moves up, their taxes would increase because they would start buying better items and therefore, it would generate MORE tax revenue! THAT would the most "fair" tax policy that we could implement!

[ExTxMarine]

THAT would be the most "fair" tax policy that we could implement! Fixed it!

[MEGoody]

I notice your tag line says "Christian before conservative." Me too.

I'd like to point out that the bible indicates we are not to treat the rich better than the poor, nor the poor better than the rich. Applying that principle to the tax rates, that means the rate should be the same for all (i.e. 15% or whatever). The rich would naturally pay more, because they have more money, yet everyone would be treated the same.

[Defiant]

How did that law hold up under Stalin?