Wednesday, July 15, 2009

The Pipedream of Taxing the Rich

The Democrats in Congress are ready for action on healthcare:
"House Democrats on Tuesday unveiled sweeping health-care legislation that would hit all but the smallest businesses with a penalty equal to 8% of payroll if they fail to provide health insurance to workers. The House bill, which also would impose new taxes on the wealthy estimated to bring in more than $544 billion over a decade, came as lawmakers in the Senate raced against a self-imposed deadline of this week to introduce a bill in time for action this summer."
The article doesn't mention the other proposal to charge a surtax of 5.4% on anybody making one million annually. That's in addition to their regular federal and state income tax, which at those marginal levels, are also going to rise to around 40%. So, if you're a millionaire this really sucks.

I suppose that among Democrats the easy stereotype of a millionaire is the fatcat guy on the Monopoly board game. Or maybe, Richie Rich or Gordon Gekko. Who knows? The reality is that most of your millionaires are fairly normal people. Books like "the millionaire mind" are intended to encourage others to gain wealth over their lifetime. They show that your average, stereotype millionaire is someone who earned it starting a business and has certain personal character traits such as thrift, consistency, and commitment to their business. They are generally pretty admirable traits. They are often church members. In addition, these people are not the ones wearing suits around downtown throughout the week. They are folks who have multi-employee plumbing, home repair, a retail business and many have businesses that you wouldn't have heard of or even think of because a lot of them are specialty, niche types of businesses that they did well in. These are America's sugar daddies.

It is estimated that in the current environment anywhere from 40% to 60% of Americans do not pay any federal income taxes at all. This is not a representative government when all people don't have some "skin in the game" and pay at least something for the bigger government services they receive. A country can't prosper when fewer and fewer of the rich pay for everybody else. Right now upper income Americans earning over $250K annually pay the vast majority of federal taxes. This is unsustainable. It makes those who don't pay taxes, yet receive disproportionate benefits, wards of the state.

Taxing these small businesses is a surefire way to kill an economic recovery. These people will respond to higher operating costs by way of a surtax and/or payroll tax by laying off workers or raising prices to end customers. Neither is a good option in a competitive market.

I really don't understand Obama's policies. It would behoove anybody with access to the man to please give him an education on how an economy works. More importantly somebody needs to whisper that we will never have a heaven on earth. History is paved with tales of dreamers whose dreams were shattered against the reality of human nature within a sinful world.

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