Saturday, October 2, 2010

Obama Won't 'Give' Money to the 'Rich'

This is kind of a continuation of Sept 12th article, as it follows the same theme. On Sept 20th, referring to keeping the current tax rates the same for everybody, Obama came out and said, "We can’t give $700 billion dollars away to America’s wealthiest people." Obama's main campaign platform throughout his entire presidency has been to bash anyone who has been ambitious and successful, because it is apparently unfair if someone works 60 hours a week, started a company, or went to college for 6-8 years and gets paid accordingly.

Obama is so pompous with that statement, because we are talking about these earners' own money. Nobody is giving them anything if they are the ones that earned it! Hey, guess what, I gave $10,000 to Obama today because I didn't go over to the White House and steal it from him! Am I generous or what? Obama is so disconnected from the concept of capitalism that it is truly frightening.

Who are generally the people who want to raise taxes on the 'rich?' Generally it is people who won't be affected by the impact of a tax increase. Let me explain. So, as I have discussed in a previous post, there are two elements to 'richness:' stock and flow. Your income is what gives you the potential to become rich if you do the right things with it. Your current asset base is what makes you rich. If you make $100k a year and spend every dime of it each year and have no assets, you are not rich! If you have a salary of $100,000 and have $50 billion in assets like Warren Buffet does, then you are rich!

So in Obama's taxing-the-rich snare, anyone with a salary over $200k is labeled rich because taxes are applied to income earned that year. The money for anyone who has millions of dollars already stowed away is not affected. It is clear why someone who is not rich and will never make more than $40k a year would want to raise taxes on high-income earners. Obviously, jealousy, envy and a lack of ever being affected play a role here. But it may not be so clear why a lot of rich people want to raise taxes. A lot of people think that many politicians, actors, and super-rich billionaires (like Warren Buffett) are altruistic for wanting to raise taxes on their own income levels.

But then there's the truth: There are two obvious reasons for why someone who already has a large asset base would want to raise taxes on high-income earners. (1) The first is that it would be harder for other people to attain their level of wealth. This makes them comparatively richer because there will be less people joining the club and less dollars fighting for their luxury goods like summer homes in the Hamptons. (2) Since the money they already have that is stowed away is not affected, what do they care? They already have enough money to live off comfortably for the rest of their lives.

If these people were so altruistic, they would be giving most of their money away that they already have while they were still alive. But instead they generally wait until they are dead before a pledge actually becomes a check.


Sal said...

I would also like to mention that that $700 is spread over ten years. So, $70 billion a year is what we are taking about here while the deficit is 1,500 billion a YEAR. For perspective, the food stamp program costs $60 billion a year.

Sal said...

Actually the food stamp program is $66 billion a year according to Businessweek Nov22-Nov28, 2010 p.15