Both the rich-defenders and the rich-haters are right in their own way, given what they’re focused on.
This was previously published on New Plateaus.
Are you mad at rich people? Do you respect them? The class warfare debate is as alive as ever, and an article in the New York Times stirred the coals with this piece. It says that France’s new Socialist President, François Hollande, is eyeing a 75% income tax for French citizens who make over $1.25M a year.
This is music to some folks’ ears, but to others the music sounds more like the theme to Jaws. It’s a matter of perspective, dependent on how you see the rich. Indeed, there are different ways to get to “the top”, and herein lies the disconnect in reactions to this news.
And this disconnect is very polarized today.
Tough economic times (caused in large part by some rich people) has the less-wealthy eyeing the more fortunate with scorn and jealously. The scorn for the rich’s irresponsible actions; the jealousy because as families scratch for food money, rich folk can wonder which color their new Mercedes should be.
And in a time when the rich and the poor are also being more polarized, it’s no surprise, then, that all the rich get categorized as the enemy: the 1%. But while some rich get to be so at the expense of the middle and lower classes, and while they do leverage their governments to create the rules in their favor, this doesn’t define the majority of millionaires out there.
For most rich people, their wealth is an indication of how hard they work, what they do with their money, and the resultant growth they generate to the economy and job market. A salesman gets a 10% commission and sells a ton of product; an inventor creates a device that makes life better for others; a business owner expands and can now offer jobs to more workers. These folks are the lifeblood of an economy. And as they increase the size of the pie, they should be rewarded, and we should be thankful for them because our eight-hour work day in an air-conditioned office, enough extra money to by iPads, and the resources to provide education and a social safety net wouldn’t be there without them. Laborers make the economy go, but these rich are responsible for seeing it elevate from the agricultural to the industrial to the electronic.
A protester wouldn’t have the luxury of spare time and extra money to take off of work and buy the paper and markers needed to make and hold up his sign:
To take this thinking further (and what may sound crazy in these economically trying days), it would actually benefit a country to tax these rich folks less. Let these doers, these job creators, these wise investors, keep more money because they’re doing a wonderful job with it—certainly a more efficient job than government has the removed capability to be.
But people who don’t like the rich either don’t understand this or only focus on those rich folks who get rich at the expense of others. It’s understandable people conflate the two, but know there’s a big difference between a Goldman Sachs exec, and say, John Mackey, the founder of Whole Foods. And the irony is that while taking your frustrations out on the rich, you’re going to harm all the rich, and this will include taking away resources from those who use them best for all. It’s cutting your own nose to spite to your face.
Mackey (left) has created thousands of jobs. Lloyd Blankfein (right), CEO of Goldman Sachs, played a big role in the financial crisis then got billions in bail out money.
The idea is to grasp this difference.
Our inability to do so allows this sloppy idea that it’s simply the rich vs. the poor. The bourgeoisie vs. proletariat. It’s simplistic and inaccurate when both the poor and rich work together as they do so often. It’s incomplete to see the rich as all Goldman Sachs types; similarly, it’s incomplete to exclude them when considering the upper class. Both the rich-defenders and the rich-haters are right in their own way, given what they’re focused on. We can broaden our perspectives to include both truths.
When doing so, we see that our common concern is in eliminating the ability for the “bad” rich folks from fleecing the poorer. Eliminate the enabling laws, prosecute those who steal, use the power of organized labor to stand up to abusive bosses, and have sensible regulations for working conditions. In other words, stop doing what’s been done so much in U.S. history: using government to help allow the bad rich to thrive.
About Brandon Ferdig
This article is full of nonsense, most prominently the idea that the rich should be taxed less and that they may withhold their resources if they’re taxed at a higher rate.
This is simply not supported by any practical evidence at all, despite having been tried again and again. It’s the idea behind so-called Trickle-Down Economics, which have been proven again and again to fail to increase tax bases and prosperity. While some proponents point to the Laffer Curve, the practical influence of the Laffer Curve wouldn’t take effect until the effective tax rate was over 70 percent, more than twice the current effective tax rate on average, and almost five times the effective tax rate Romney paid.
I do agree with Mr. Ferdig on one point — I do believe that the majority of rich people in this country earned their wealth through hard work, but I’d also point out that there’s been a tremendous amount of hard work from other people — both government and labor — to earn that money too, and a healthy amount of luck. But on the whole, I don’t think that rich people are evil, or inherently or actively focused on exploiting people that work for them. However, the current rules under which we govern our society are broken, and rich people undoubtably benefit from the passive profit of society.
There are a number of fixes — VAT with a healthy, progressive rebate based on income; an increase in the number of income brackets taxed (lumping in people who make $250,000 with those who make $1 million or $1 billion is absurd), and an increased public redistribution that will ultimately benefit not just those who are currently rich, but also those working hard right now to become rich. There’s nothing wrong inherently with being rich or wanting to be rich, but the place of public policy is to represent the interests of the public, not the interests of rich individuals. For that, they have articles like this one.
They won’t withhold their resources if taxed higher, Josh. They’ll have less resources.
Wouldn’t higher taxes just cut to the chase then?
Fair enough, sorry if you feel like I misrepresented your point. However, there’s a fair amount of misconception there: First is that you’re measuring the amount of money against the amount of money that the rich might have without taxation (which alone is dubious) and then concluding that because they have more, they’ll invest more, which isn’t really empirically supported — especially against the money multiplier effects of public investment, which you discounted out of hand. While you may have meant to make a more nuanced case, you really just restated the principles of Trickle-Down Economics, which quite bluntly do not work and have not worked no matter how many times they’ve been tried.
Yeah, I know I walked out on a limb by saying that. I admit I didn’t make these claims citing research; I simply used the idea that a person who earns a million/yr is taxed a lot. And then recognized that the rich who grow their wealth (how they got rich) is because they indeed do invest their money wisely, growing the pie for all.
Try not to let that block the main point, though, which I think you gathered: that as a measure of how much they’ve contributed to the economy, we should thank the rich. That is, those who’ve earned it as a result of such efforts.
Why don’t we thank them for real by incentivizing our tax code?
In 1953, under that commie Eisenhower, the top marginal rate was 92(!) percent. That rate was then lowered by intelligently providing deductions for activities that improved the economy as a whole. (should also be mentioned that higher taxes on net profits in and of themselves increase investment because the government can’t tax a new plant or fleet of vehicles, or research and development, or an expanded workforce)
COMMUNIST SOCIALIST ANARCHIST NAZI FASCIST GARBAGE! WHY DON’T YOU GO CHOKE ON A BAG OF ORGANIC WHOLE-GRAIN GLUTEN-FREE VEGAN ARSENIC YOU RED!?!?
“Tax the rich” is not about punishing the wealthy. It’s about recognizing that they are more capable of paying into and have benefited more from the government than anyone else, and therefore should pay a higher percentage. (read: SLIGHTLY more than what Mitten’s best friend would have them at http://www.rollcall.com/news/Ryan-Tax-Plan-Would-Slash-Romney-Tax-Rate-to-1-Percent-216837-1.html?pos=hbtxt ) Given the deficit that the right-wing supposedly cares about, this seems like a no-brainer.
Also, nobody, literally nobody, actually pays the numbers regularly cited in France. They do what chuck says — reward behaviors that help the economy with tax cuts. But you won’t hear that from the right-wing talking points. (Not that the Democrats are much better, of course. But a broken political system is what happens when you fail to invest in public education.)
Recommend P. J. O’Rourke’s book of the same name.
Presume a doctor makes $100k a quarter. First three quarters, his total taxes are, say, $80k. Leaves him $220k which allows him to limp along. Fourth quarter, tax rate is 60%. So for the year, he does $400k worth of work, keeping $260k.
Or, he can take the fourth quarter off altogether and have his $220k and a three months’ vacation. At some point, he’s going to be having this discussion with himself.
Of course, if he decides to take it easy, it will be one day a week all year, plus a couple of extra weeks’ vacation.
So society loses about a quarter of his doctoring. And, because the envy-mongers wanted this rich son-of-a-bitch taxed really hard, the state doesnt get anything on his last quarter of work. If the tax rates had been really, really generous to the hated rich, taxing him at, say 35%, he might have worked and the state would have gotten an additonal $35k, instead of nothing.
People with money have choices and at some point each individual who faces this choice is going to decide whether it’s worth it to keep going. Younger people aren’t likely to grok the idea that, as one ages, working becomes…work. The want-to remains, the can drops off and the have-to is already gone–because this guy’s already got money.
There are so many problems with that hypothetical that I’m at a bit of a loss as to where to start:
1) The tax rate’s artificially inflated given that income bracket.
2) From economic data, we know that the rate where this actually starts to happen with any population effects (that is, when a higher tax rate actually discourages more work in favor of vacation) is around 70 percent. The effective rate, not the marginal one.
3) The effective tax rates for the rich are generally around 35 percent (or lower).
4) This hypothetical doesn’t scale — you’d have to have no other doctors in order for that demand to not get reabsorbed.
5) Portraying people who think higher taxes are good public policy as “envy-mongers” is something you do when you don’t have a coherent argument.
So, in short: Your example’s nonsense, your tone is obnoxious and relying on a wash-out from the National Lampoon for economic advice is a poor substitute for critical thought and actual data.
Josh. Among other things, I used to work in a field where I knew doctors. For starters.
Second, the idea was not to make a specific example based on economic data. I picked 60% just for fun, and to make the point that at some marginal rate, everybody is going to have that discussion with himself. I used the i$110k/quarter to make the mental math easier for anybody who was interested.
We have a finite number of doctors. Losing one–they die or retire every year–more won’t make a difference, but, in accordance with the laws of physics–no body can be in two places at the same time–his doctoring is no longer available. Period. Lose one more, no big deal. It is silly to pretend I thought losing one doctor was the issue here. You didn’t really think that, did you?
One of the networks was interviewing Dennis Kucinich on the tax question and got him to acknowledge that higher taxes might hurt the recovery. But they failed to edit the thing properly and his comment that, even so, failing to tax the wealthy was a bad idea for fairness’ sake was aired. Either Kucinich is an envious little twerp, or he thinks he has a useful sub-cohort of envious little twerps in his voting base.
‘nother nonsensical point you made; effective tax rates for the rich are 35%. Right. So? Point is whether raising them is a good idea?
Now, suppose you did raise them. And suppose we did have a net increase in revenue. How much, actually, is there to be gained? Two weeks’ fed expenditures?
To do something obviously pointless in terms of revenue means the motivation must be something else.
As to numbers, everybody who has a choice is going to make a different decision based on the numbers, the actual enjoyment of the work, health, family matters, unaccomplished other goals. Adding one more factor–higher marginal tax rates–is going to, cannot not–affect some decisions to reduce productive work.
While it is not a matter of taxation, people with extraordinarily good pensions, such as government workers, will find themselves going to work for chump change compared to staying home and getting their pension. So they retire. It’s a decision on work vs. a reduced income. I used to have an uncle who worked for the FHA and who retired when he figured he was working for about $5 per day. I think he was exaggerating, but not much. Work vs. not work, price is reduced income. Decision.
But, as I say, even if the rich are taken out and shot and all their goods confiscated, the revenue to the state would be meaningless, unless they sold tickets to the executions.
True, but a more progressive approach to taxation combined with other reforms–increased social spending, national healthcare, ending unnecessary and expensive wars, re-instituting oversight and regulation over business, especially in the financial sector–WOULD make a huge difference. We know this because it’s worked in the past.
The only way to reduce income inequality and have a thriving, growing middle class–a country where everyone shares equally in growth–is to regulate business, support the poor, and yes, tax the rich. It works. The rich don’t like admitting that, but it’s true.
It would go a long way toward leveling the playing field if the tax loopholes were closed up. The rich are always in a better position to hide income from higher tax levels. The tax rules that govern investment profits, which a large number of people use as income, is taxed a a far lower rate than regular income. If you’re making a living off of your investments, IT’S INCOME and should be taxed as such. That’s why the Ryan plan is so absurd with it’s “simpler” tax structure. With the highest tax rate lowered to 25% and the rules surrounding investments unchanged who’s going to benefit?
It’s not so much being rich thats the problem,but how you made/make your money.If you can do it in such a way as to not hurt anyone else(even make their lives better) that’s fine by me.I find I’m having trouble making a small amount of money (I get called a “Capitalist,Breadhead and all that even if I just want to earn a couple of hundred quid.)I’m a mechanic,it doesn’t cost me much to enjoy my life.