Posted on 11/09/2012 12:41:08 PM PST by chrisser
Hey all.
I'm not much of a writer, but this little essay has been brewing in my brain since the election, and I finally wrote it down just to get my mind off it.
It's a first draft, perhaps an only draft. I don't really have any plans for it, but I thought some might be interested. Criticism, whether factual, grammatical, stylistic or other are welcomed. It's a little long.
Right now, it's just some personal therapy I'm sharing with my FRiends...
The dirty little secret of American politics.
Suppose you had a million dollars in assets. Would you be rich?
Maybe yes, maybe no. Much depends on where you live and in what form those assets are – home, stocks, bonds, business, etc.
But I suspect if you had $100 million dollars in assets, you’d consider yourself wealthy, and so would everyone else.
We all want to be wealthy, or wealthier, but why? Perhaps it’s best to think about wealth in terms of how you would live your daily life.
Would you go to work? Probably not. Unless you were a drug addict, an enthusiastic Ferrari collector, or a gambler, you could likely live a comfortable, some would even say opulent, life on $100 million and still have plenty of cash when you died. But why is that? I suggest that wealth after a certain point, whether it be $10 million, $50 million or $100 million – wealth that is thousands of times what the average person has, buys you a lot of power.
Now, “power” has a lot of negative connotations, but it doesn’t have to. Wealth gives you the power to get all those little things done that most of us have to do ourselves.
Wealthy people, by and large, don’t cut their grass. They don’t go house hunting. They don’t pour over all their receipts at tax time. They don’t go grocery shopping, or take the car to the mechanic, or plan their vacation online. They have people – lots of people, that do all those things for them. The wealthy don’t buy new cars because the old one’s about to die, they likely hire someone to go out and get them a new car because they’re bored with the old.
So, there you are with your $100 million, enjoying the good life. You’re wealthy and you know it. Life is good.
But what if everyone also had $100 million dollars? Would you still be wealthy? Do you think your multi-millionaire neighbor is going to cut your grass for you? What could you possibly pay him that would make him bother? Could you find anyone who would cut your grass? Probably not.
What I’m trying to illustrate is wealth is more than just the sum of your assets. Wealth is also about having more than everyone else. The more people who have less, the more wealth you have.
Conspicuous from this discussion so far is income.
For most of us non-wealthy people, our income is a good part of what we see as our wealth. It gives us just a little bit of that power to choose a few areas in our lives when we can have someone else do the dirty work. Maybe it’s maintaining the car, cleaning the carpets, or even making coffee. For the average person, a good many times you can afford these daily luxuries because the person you’re paying for the good or service makes less than you. But that isn’t always the case.
But there’s a big difference between income and wealth. If your income stops and you don’t have wealth, you’re poor. If you’re wealthy, then income means far less, and if it stops, you may not even care, or may not even have any income in the first place.
There’s another, very important difference between income and wealth. Income, by and large, is the only path to wealth for most people who are not wealthy.
So, again, let’s assume you’re wealthy. You probably want to stay that way, wouldn’t you? Wouldn’t anyone?
Holding onto your assets just isn’t going to do the trick in the long run. You either have to increase your assets faster than the millions of poorer people trying to get wealthy, or you have to keep the less wealthy from elevating themselves to your level, because nobody’s wealthy if everyone is wealthy.
Enter the progressive income tax.
You may have thought this was a nifty way to fund the government. After all, the poor pay less and “the rich” pay more, right? But do they? Do “they rich” really pay?
Keep in mind that wealth and income are two very different things. We don't tax wealth. Not a bit. We only tax income. For the wealthy, income is optional as long as they remain wealthy enough above everyone else that their wealth is meaningful. But, for the non-wealthy, income is virtually the only path to wealth as well as the only way to survive.
If you take a look at the tax code, you’ll find there’s a lot of gravy in there. If you’re low on the income scale, there are plenty of deductions, credits, etc. to help. As you get higher and higher up the scale, those benefits drop off right up until you’re close to making six figures. After that, each dollar you make gets taxed higher and higher, with fewer and fewer deductions. This continues up to about $400k per year, and, after that, the same rate applies no matter how much you earn in income.
Do you think that’s a coincidence? For most of us (and this does vary by area and cost of living), making $100k/year would be around the point that we could start accumulating some serious wealth, and that’s just when the tax bite gets larger.
Think of it as a hurdle.
When you’re on the low end of the income scale, the hurdles to getting a little more income aren’t that high. If you’re making $10k per year, and you get an opportunity to make $15k, that’s probably a big deal. You might eat a little better, maybe get a nicer car or fix the one you have, but it’s unlikely you’re going to have any wealth at the end of the year.
The higher up you go in the income scale, the bigger those hurdles get to actually accumulating any wealth. Right at the point where most responsible people could start putting together a nice little nest egg, the tax burden starts to really take out a big bite. “Taxing the rich”, is how this is usually defended.
But what it really does, is prevent the non wealthy from becoming wealthy.
Sure, some people will make it past those hurdles, either through luck, skill or determination, or some combination. But not many can, and not many do, and with the upper tax bracket taking more than 1/3 of every additional dollar you make, it’s a long, difficult road going from sort-of wealthy this year, to being really wealthy for life, assuming you can keep that high income stream flowing.
But this doesn’t only apply to people. “Corporations aren’t people” is becoming an all too familiar mantra for some people. But his is not true for businesses in general, especially on the small end of the scale. By and large businesses are people. Many businesses are sole proprietorships, or small partnerships. In these cases, the business and the person are the same for income tax purposes.
Businesses, like people, have the same hurdles to wealth. But there’s an additional wrinkle.
Small businesses – the sole propietorships, partnerships, and even small corporations – employ most of us. They are where new jobs, good jobs, come from. When the economy grows, when times are good, it’s because these people are prospering. They want more wealth, just as we all do, and you get more wealth by selling more products or services, which means buying more equipment, and hiring more workers.
I’ve worked for small businesses and large corporations. If you’ve done the same, you probably notice a major difference between the two. Small businesses are agile. They have to be. They run lean, they react quickly to changes. They can explode if they can exploit a niche, or they can go under if they miss an opportunity. They may start the year with one employee and end it with 100, or just as easily go the other way. They get a lot out of their employees, but they also readily pay employees who add significant value.
Big businesses – not so much. Their size makes them difficult to control. Even the most innovative have a difficult time changing to suit the needs of their customers. Growth is slow, incremental, and often by acquisition rather than innovation. They seek large, homogenous customer bases, and generally are interested in preserving their position, rather than expanding into new areas. Oftentimes, a couple of major businesses will come to dominate a market. This can last for decades. They’ll jostle over a few percentage points of growth, back and forth, but as long as nobody upsets the apple cart, they’ll be happily complacent just doing business as usual. These types of companies tend to employ a lot of people, but they rarely employ a lot more people.
Large business and the very wealthy have a lot in common. The easiest way to preserve their position – either market domination or wealth domination, is not to get more market share or more wealth, but to prevent their competition from joining their club.
And the progressive income tax does their job for them.
What does all that have to do with American politics?
Well, there was a lot of rhetoric spouted this last election about “the rich” You might even think one party was only interested in making the rich richer, while the other was out to force “the rich” to “pay their fair share”. And I would say you're right and wrong at the same time.
What if I told you that the wealthy – the really wealthy, and especially the “old money”, overwhelmingly supported party A over party B.
Do you think party A would be the party of the rich, or party B?
What if I told you that the wealthy – the really wealthy - make up more members of party A that get elected to office than party B by a large margin?
Do you think party A would be the party of the rich, or party B?
What if I told you party A wants to make those income tax hurdles even larger, preventing more people with income from ever becoming wealthy, so the rest of us are forever struggling, while party B wants to lower those hurdles, to make it easier to become wealthy, or at least those trying to hire more of thus on their way up the ladder to wealth?
Do you think party A would be the party of the rich, or party B?
What if I told you that the members of party A who aren’t wealthy going into elective office, mysteriously seem to always leave office a member of the wealthy class? Would that make you a little suspicious of their intentions?
Do you remember the Occupy movement? Party A was a big proponent.
Then a funny thing happened. At first, the Occupiers were raging against the high earners, and everything was just fine and dandy.
Then a couple of the smarter ones started suggesting that the real solution was to go after wealth – to start confiscating assets rather than income.
*Poof*! The Occupy movement suddenly disappeared, along with all support for it from Party A.
Party A’s been in power a long long time. Nationally, over the last 75 years, they’ve held the Senate 28 out of 41 sessions, and the House 31 out of 41. They’ve had majorities in both houses at the same time 27 times (9 times for Party B).
Both parties have held the Presidency about the same amount, but one party, Party A has held it while also holding both houses of Congress for 17 sessions, ensuring near complete control of the government and the laws that all of us must follow, while that has only happened five times in 75 years for Party B.
So which party not only created the system we have now, where wealth is concentrated on the very wealthy, but also is working hard to keep that system in place?
Party A. The Democrat Party. The party you may have just helped stay in power.
And that’s the dirty little secret of American Politics.
It's not really about comparing, that will lead to disappointment every time.
Lean into the Lord, He will provide.
Income tax applies to income not wealth. Truly wealthy people know how not to have income, while still living well and accumulating assets.
Income - and the income tax — are for the little people.
Thanks for the comments.
Just to be clear, I have nothing against the wealthy, per se. I believe some are using the political process to the detriment of their countrymen, but if that’s the case, the solution is to raise everyone else up, not cut them down.
It certainly isn’t to pretend to cut them down while actually making them more powerful.
Excellent essay. Too bad it will be lost on the jackasses who routinely pull the lever for Party A because it requires critical thinking skills.
I had a few good years, but my tax bills (Federal, State, property taxes, sales taxes on goods, DMV registration) came to half my income.
We were trying to save, but when you 50 cents on the dollar to the Government, it makes things hard.
I have the feeling that this tyranny will only end when there is bloodshed, like in the 18th Century.
I like your essay!
True. The majority of true millionaires and billionaires support and vote for the Democrat party. Yet, my inlaws keep telling me “The Republicans are the party of the rich!”
A very astute essay.
What many of us overlook is that wealth is often built over generations, as the children build upon what is inherited from the parents’ efforts.
There’s nothing ingenious about this; it’s no “hidden secret”. But most people have bought into the “we’re spending our kids’ inheritance” idea being marketed these days. It’s what I like to call “the reverse-mortgage mentality”, and it’s transferring a lot of seed-wealth from erstwhile heirs to the already-wealthy.
Excellent Essay. I have a couple old friends who lean to the “Left”.
I would love to have them read your essay but I afraid their so busy
pulling oars down in the hull of Party A’s Ship of State that they
wouldn’t begin to understand your point.
Thanks for the post.
Along this same line, in some states only income is used to determine qualifications for food stamps. So mega-millionaire with no income but assets in metals, dividendless stocks, investment property operating at break-even or less, and other non-dollar assets such as art, cars, land, and collectables, could still qualify.
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