Since When Are The Rich Responsible For Paying More?

November 28, 2012

Blog

****This post is going to be a little different from my usual postings. I wouldn’t even call this a post because it’s going to be more of rant. I cannot guarantee that there will be any educational value in what follows and if I offend anyone in the process I do not apologize because these are my opinions and beliefs!****

Let me first make it crystal clear that I am not “rich.” My wife and I do not make more than $250,000 a year however, we are smart enough to understand that this “idea” is a VERY slippery slope and is growing exponentially in America. The lack of recognition for hard work and absolute destruction of the capitalism in America will be our downfall, mark my words.

I am sure by now you have heard about “The Fiscal Cliff.” If not in short they are tax breaks that are set to expire on Dec 31, 2012. Here is a quick summary break down of the tax increases that are going to take place.

Compliments of Fidelity.com

There is a basic principle that everyone needs to understand, “Smart” money goes where it is treated best, plain and simple. By taxing individuals or businesses at higher rates there comes a point where they start looking to relocate their money or business. It is basic economics (Austrian).

There is one FUNDAMENTAL thing that people don’t consider when they support the idea of “Taxing the Rich.” And here it is….. The “rich” are rich for a reason. Yes we all know of that one friend or distant cousin who had a windfall inheritance but for the most part people who are rich EARN IT!

Think about it for a second, as a blogger and investor I work hard. Extremely freaking hard to be blunt. I have a full time job, am a father, and a husband so blogging and investing are done on what little time I have left in the day! As a blogger I am a:

  • Writer
  • Website Designer
  • Marketer
  • Publicist
  • Customer Service Rep
  • The list goes on

And guess what?! As of now, I don’t make a single penny. I do this for absolutely free and it’s exhausting, meanwhile my peers go home flip on the tv to watch their shows that were DVR’ed the night before or go out and enjoy a nice dinner with their family. Make no mistake there is nothing wrong with doing that, that is their choice and this is mine. But don’t penalize me for attempting to be productive and potentially produce extra income on the side. Don’t call me an overnight success after years and YEARS of long nights and a couple days/weeks of self doubt. This is the truth about the struggles of small business owners that is RARELY publicized!

I mean C’MON!!!

Building a business/brand is hard work! Being an employee is EASY!

I am being dead serious right now and 100% sincere. Can somebody please help me understand the logic behind expecting the rich to pay more than everyone else?

  • What are the benefits to our economy?
  • How does it encourage entrepreneurs?
  • How does it spur growth?

I maybe preaching to the choir, if so then it looks as if I’m in good company. If that’s the case forward this to a friend or family member who you know has an opinion different than ours. I honestly want to hear what they have to say.

One idea that I welcome with open arms is a flat tax rate. I know it will never happen but at least it would be “fair.” Technically the more money you make the more you pay in taxes but there won’t be individuals who pay absolutely nothing!

Do you think we should have a flat tax rate?

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23 Responses to “Since When Are The Rich Responsible For Paying More?”

  1. JC @ PassiveIncomePursuit Says:

    I totally agree. Taxing the rich so they pay their “fair share” is not the solution. I’d like to see how it would play out if you took all the money from the rich and gave it to the poor and saw where the wealth was after 20 years. My bet is that the wealth would work it’s way back to the rich because they have a drive and focus to be able to start businesses and know how to keep their money. The majority of those that you gave the money too would end up right back in the same spot because they either lack the drive to create something or the knowledge of money management. It’s a very simple equation that boils down to Income < Expenses. This is one reason that something like 45% of lottery winners end up bankrupt within 5 years. Although I have to admit that I do have a few dogs in the race for tonight's Powerball drawing and will be proving the bankrupt lottery winner statistic wrong if I happen to be so lucky.

    Reply

    • Marvin Says:

      Ha! I really like your example of giving all the wealth to the poor and seeing it work its way back into the hands of the wealthy over time. It’s the absolute truth, heck look at how many professional athletes go broke after making millions upon millions! Quick story for you, Allen Iverson the once infamous point guard from Georgetown who went to Philadelphia 76ers said he hated traveling with bags so every time he traveled somewhere he would take a taxi to the nearest mall and buy a whole new wardrobe. When he was done in that city he would leave all the clothes in the hotel room. This is what happens when you give money to the poor or to the financially illiterate.

      Reply

      • Martin Says:

        And have you heard about an athlete (I forgot his name) who spent 10k on lottery tickets (Powerball) and called an investment?

        I couldn’t believe my ears…

        Reply

    • JC @ PassiveIncomePursuit Says:

      OOOps, stupid fingers didn’t type write. That was supposed to be Income > Expenses. I think I meant to put expenses first but typed it differently than I was thinking about it. That’s what I get for not proofreading.

      I hadn’t heard that about Allen Iverson before but the sad part is that it’s totally believable and doesn’t surprise me one bit. What’s even more amazing is at that level you don’t even have to carry your bags around someone else will do it.

      Reply

  2. FI Fighter Says:

    This was an enjoyable post, or rant as you liked to call it. And I agree. If the poor knew exactly what to do with the money, and put it to good use, then I wouldn’t care about having to pay more taxes at all. But like the example you provided with athletes, results can prove to be disastrous when you give money to people who don’t understand the consequence of expenses > income.

    In my own experience, I have friends who drive nice cars, have the latest smartphone + dataplan, premium cable, etc. In some instances, they make far less than me, and barely have anything in savings. They literally just scrape by month to month. And these are college educated people! If these folks don’t have the slightest clue on how to manage money…

    Reply

    • Marvin Says:

      I agree with you completely. People in general wouldn’t mind paying taxes if they knew they were going to good use. But 9 times out of 10 they aren’t. The majority of my friends make the same amount of money as me or less and it drives me up the wall to see what they spend their money on. I had to learn the hard way to just keep my mouth shut. So now whenever my friends text me a photo of that new car or the “McMansion” they bought I just give them a smile and say that’s nice. They are my friends and I love them but I just want to slap them up side the head sometimes ;-)

      Reply

    • Martin Says:

      @ FI Fighter, just look at the lottery winners and tell how many of them retained their fortune. I can guarantee you that many of them are poor again or bankrupted.

      A friend of mine once told me “All money will go where they belong to at the end.” So if you steal them, you will most likely lose them anyway and they will move where they belong to.

      Reply

  3. Martin Says:

    Well, it’s easy. Just look what’s happening in France these days or in Britain. In Britain they increased tax for rich to 50% and recently in France they increased taxes for rich to 70%. The result? In Britain 50% drop in tax revenue and rich are leaving the country. In France? They still do not have results, but what you can see already is rich French applying for Belgian citizenship to avoid taxing in France.

    But you do not explain this to all those illiterates on welfare receiving food stamps and money from the Government. They do not think. They do not ask questions where the money comes from. Why would they even ask when they get it for free!? I totally hate leftists who are promising these people free money from my pocket.

    I am like you, working hard, overtimes, taking second job, saving a lot, learning about investing and trading (stocks and options) and blogging. After three years I started seeing some attention to my blog and increasing traffic. Before that it was all desperation. Many times I stopped because I was so frustrated, but then you rise again and move on. And although I am not rich either, I do whatever I know, I can and I am capable of to become rich. And I do not want anybody else making decisions on my behalf who would receive my money as a welfare or food stamps.

    So take my money to pay for schools, roads, police, army and stuff like that, but don’t waste it on those who do not deserve it and do not touch the rest of my money at all!

    Reply

  4. Martin Says:

    And I also forgot to mention in my list above that I am also supporting and providing to my family (two kids).

    Reply

  5. Rich@Money Wise Pastor Says:

    Yep, I’m with you too. It saddens me to see how many Americans have become dependent upon the government and how ignorant many are to what made America great economically and how this is slowly being eroded.

    I like the concept of the flat tax – especially the simplicity of it. But it would put millions of CPA’s and IRS agents out of work and bring an end to Turbo Tax, H&R Block, etc. ;)

    Reply

    • Marvin Says:

      CPAs, Tax Attorneys, and IRS agents would be out of work IMMEDIATELY!!! It would almost be comical imagine if someone could do their taxes in under 15 minutes every year.

      Reply

  6. Lena @ Taxes and Stuff Says:

    I think you are preaching to the choir, based on the comments so far. I posed the question “What Tax Rate Do You Think is Fair?” on my blog a few weeks ago (linked), and I’ve found 11-15% to be the most common answer so far.

    Taxing the rich more absolutely discourages entrepreneurship. The main problem in our country, as I see it, is that people aren’t willing to live within their means. Everyone wants a certain standard of living whether or not they have earned it.

    For instance, my former babysitter scoffed at the idea at renting an apartment instead of a house because she didn’t want to be connected to her neighbors. Yet, she didn’t want to work very hard (wouldn’t follow instructions, work any extra hours, etc). I think she ended up renting a larger place than she should have based on her income and is going to apply for food stamps. :/

    Then I know another individual who makes a lifestyle out of living off the government, yet she has an iPhone, drives a nice car, and I never see her without a Starbucks cup in her hand.

    It can really get to me at times.

    Reply

    • Marvin Says:

      It’s sad how laziness is being rewarded these days. As for the tax rate I would be willing to say as high as 10%. There is a saying I have heard, “If God is good with 10% then surely the government would be happy with 20%!” One of these days I will do some deep diving research and see what our tax revenue would be if we charged a flat tax for individuals businesses. Hmmm I think I just got an idea for a new blog post ;-)

      Reply

  7. Nigel Says:

    It’s my understanding that there are many very wealthy Americans who pay far less in taxes than I (at a percentage of course) and that is the problem I think needs to be addressed.

    When I’m paying well over 20% of my yearly income in taxes (state and local included) and many of the wealthiest are paying less than 15%. Makes no sense. That’s what I think of when ppl say they want the wealthiest to pay their “fair share.”

    Reply

    • Martin Says:

      Nigel, it is a myth used by leftists to show people how unfair these rich guys are. And it is a lie! They only pay 15% if their income is from dividends for example. And you and millions of Americans pay the exact same rate if the income is from the same source. If their income is from business then they pay even more than you and you can bet on it.

      An now explain me what’s fair on the system when you do nothing your whole life and at retirement your income will be from SS and a few dividends so you will pay 15% on those dividends and me who is saving the whole life, working hard to make extra money, start business and in retirement my dividend taxable income will exceed 250k and I will be forced to pay 43% on it. Where is that “fair shareness” here? Explain it to me because I do not see it here.

      If you envy those who inherited millions, then I want to assure you those millions were already taxed by the ancestors. If you envy those who got rich by investing, try it yourself and explain me how easy it was to get rich by investing and I will gladly shout at you to pay your fair share. If you envy those who made money via their business such as Bill Gates, try it yourself. Gates started in garage with his friend in 80s and built a big corporation. I bet he paid all his taxes.

      I live in area heavily visited by rich people. These people could build their 20 million worth residences here and deduct it from their taxes. Are you mad at them that they could deduct those residences? Well before you start shouting as other leftists say “nobody should live like that” as opposite to conservatives who say “Everybody should have an opportunity to live like that.” that this is not fair, let me tell you that those residences gave job to hundreds of local people – architects, engineers, builders, maintenance services and huge local County taxes financing our schools, roads and area development. So I prefer them be here and invest and deduct it from their taxes, because they put their money to work here. If you take that ability from rich people, they will stop investing and move elsewhere and we all become poor (in Europe they have a saying that you will “end up with bare butt”).

      If you want it, fine move to Europe but do not try to change this country into lazy takers. America was always a nation of makers, see where all the patents and inventions came from. If you make this nation poor by spreading the wealth, this country will be doomed.

      And believe me. I have a first hand experience with Communism and Socialism.

      Reply

    • Marvin Says:

      I can’t believe I missed this comment and I genuinely apologize. I think you need to educate yourself and I do not mean that in a derogatory way. From reading your post Nigel it seems as if you are unfamiliar with Austrian Economics. I would encourage you to visit to the Ludwig Von Mises Institute and spend a minimum of 40 hours educating yourself then come back and revisit this post.

      Additionally for a real world example I would challenge you to start a blog or eBay business. In doing so you will learn and start to understand how difficult it is to create and sell a product/brand. Furthermore you will get a taste of all the time, expenses, and administrative red tape go into building a business.

      Once you have done this I guarantee you will have a different outlook on the situation. Please report back here after you have done so I’m very curious to what you will find and experience. Good luck! =)

      Reply

  8. Nigel Says:

    and this, and this, and more this. Sure many rich people work hard…but do they work THAT much more hard? To justify this sort of an increasing divide?

    Reply

  9. JayCeezy Says:

    Martin, I have enjoyed your post and came to your blog through FinancialSamurai.com. Also enjoyed all the comments, which seem to be (for the most part) from those interested in keeping expenses>income, and investing without being penalized for success.

    I take your question at face value. The answer is: Those who succeed in a free market economy and democratic(ish) government benefit from the system, and they should pay to keep that system going. I believe one should understand the other side’s arguments and also be able to make those arguments, in order to oppose them. Otherwise, the emotional response (i.e. “I’m successful and work hard and shouldn’t pay for slackers!”) convinces no one and doesn’t move anything forward.

    Your point about working at your blog for free, after a day at work at your day job, also deserves addressing. If the market determines you should make money, you will make money. But if you are just another guy working a day job, blogging at night, with nothing original or compelling to say, you won’t get hits or traffic and the market is telling you what your selling is not worth paying for. Like Webvan, or Compuserv, or Braniff airlines, or DeLorean Motors, or PanAm, Schwinn, Woolworth, Enron, WorldCom, Tower Records, etc.

    Wish you well with your endeavor. Western society has reached a tipping point where 47% of households pay no Federal income tax, yet their vote counts as much as yours or mine. Act accordingly. Cheers.

    Reply

    • Marvin Says:

      Jay

      Thanks for stopping by! I’m glad you enjoyed the article. I like your suggestion of understanding the other side’s arguments in order to oppose them. Hope to see you around the blogosphere more often.

      Reply

  10. Sam Says:

    Marvin,

    Well said. How about a Thank You card once in a while instead of attacking the rich?

    It is annoying when bloggers tell me I’m lucky for my traffic. I ask them why not write 1,500-3,000 word posts 3 times a week for 3 years as well? Silence.

    Sam

    Reply

    • Marvin Says:

      Couldn’t have said it better myself! The hardwork and sacrifices “the rich” endure are almost NEVER taken into consideration when trying to raid their wallets.

      Reply

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