I’ve written on this topic several times, but I guess I need to write it so I sound less Republican. The Democrats always want to tax the rich at a higher rate and it makes some sense, the rich need their status quo and their assets protected against theft from the poor. So part of the cost is justified in increased police protection (Now you know why the police will show up in Beverly Hills in 5 minutes whereas in Watts maybe the next day---after the sun comes up).
But when we examine the playing field with a magnifying glass, things look a tad different. To the average person, a rich person is someone who doesn’t have to work for a living. The rich people Congress is pointing too, are wage earners, who work for a living. For the most part its dual income households or movie stars, sports players, book writers (we are not talking millions of people). When you delve into the realms of business, and professionals like doctors, these people can cut their own paychecks down to size. Then they pack the rest into their LLC or their retirement fund. Everyone tries to avoid paying taxes, it isn’t a rich thing, some people are just better at it than others. On a historical note, higher tax rates don't necessarily lead to increased revenue. See chart below.
The fundamental difference between Democrats and Republicans, on taxing the rich, is that the Republicans know the futility of it and the Democrats exploit the “tax the rich” ploy to raise votes from those who are disenfranchised from wealth (too poor to afford a pot to piss in).
The real bothersome thing about the call to "Tax the rich," is the enormous amount of money spent yearly servicing the interest on the national debt. That money could have been put to better use if we didn’t have the debt. So is taxing the rich an answer to our government’s tax revenue problems? Or is the interest on the national debt a problem that Congress thinks will go away? Why not spend down the debt? Of course, the truth is, Congress has never seriously contemplated paying off the debt, just make payments.
The Republicans and the Democrats are fighting it out on the Hill. But in the meantime, the Federal Reserve is printing dollars to conveniently pay the bills when tax receipts fall short. Inflation is not meant to be a tax on the rich, but it taxes anyone with a long term savings plan. So with the funny money printing, who is the government taxing? Answer: anyone with money in the bank. What is the current rate of taxation (inflation)? Answer: 10 to 14 percent. How many years before you lose 90 percent of the buying power of your savings? Answer: 6 to 8 years (or less at current printing rates).
So let’s see, a money market IRA is paying .03 percent interest and a 5 year renewable is paying 1.3%. A silver fox with 250K in an IRA and getting ready to retire is losing about 25K to 35K per year, just to inflation. Current interest rates are set by government intervention. If we were to take that 250K and assume an 8 percent return, then the retiree is foregoing about 20k in interest income per year courtesy of Uncle Sam (They're going to save the poor underwater home owners with low interest rates). So those silver foxes that saved their hard earned dollars are losing about 50k in purchasing power on a 250k nest egg every year. This isn’t really a loss, it is a tax, and the neat thing is that the government doesn’t have to collect it. It’s the new government plan to save our financial system better known as SOS (Screw Our Seniors). And for seniors who complain, there is the FOAD option. This government confiscation of our savings through inflation, is invisible to our youth. The young, see a bunch of old people barely making ends meet, and think to themselves, ”They didn’t save enough for retirement.”
Reality is a Case of Corona, a full tank of gas, a pack of smokes and a large pizza. Total cost $100. If your 85 years old, put it on your Master Card. Bernanke and Geithner have your card covered, just ask B of A. Tip: avoid the green bananas and buy the grandkids anything and everything they desire.
Copyright 2012 by Jim Brubaker