Income Inequality Arguments Are Bogus And Dangerous

Not long ago, President Obama instituted a tried and true gambit to garner political favor- he began to attack affluent Americas. As expected, our leader’s rhetoric gained traction with liberal members of Congress and progressives throughout the country. Income inequality is now the mantra of many people who have less than the “1%” in the United States. But some astute economists and social scientists believe this strategy is misguided and dangerous.

 

There are some basic questions that one should ask before adopting the president’s perspective. Do the affluent actively prevent the other 99% from improving their standard of living? No. Does incrementally higher compensation of the 1% come out of the pockets of the 99%? No. Does the income inequality argument foster class warfare? Yes.

 

What specifically is the objective of those who demonize the wealthiest among us? The obvious goal is to increase taxes on the 1% and distribute it to the 99% (via welfare and/or tax relief). Considering that the marginal federal tax rate is almost 40% for the wealthiest Americans, and they pay about 50% when state and local taxes are factored in, is it shocking that some people believe the wealthy are already paying their fair share?

 

One of the classic arguments against high compensation is “These people [the 1%] earn too much money. It’s selfish and un-American to want more.” Since when is there a limit on the amount of wealth a person may accumulate? I always thought that the free market decides the value of a worker. Now, philosophers and local government representatives have become compensation experts. The moral argument is another canard. I ask, do the scriptures say a person’s compensation be limited? And what about our laws?

 

Throughout history, aristocracies stole money from the lower classes. In France, the greedy upper class ultimately got what they deserved- revolution and execution because they were thieves. In Russia, the same story played out. The czars and the czarinas absconded property and money from their subjects. Once again, a revolution resulted, and now there are no more czars and czarinas.

 

The political implications of singling out an innocent group because they have a different skin color, a different God or even if they earn a high salary are inappropriate. Rallying the majority against a minority who is not breaking the law for political advantage is a dangerous precedent as we have seen in any number of situations throughout time.

 

There will be some who object to the position I have taken. But, consider that the vast majority of billionaires and millionaires in this country earned their money by working diligently. True, some inherited their fortune, and some broke the law (hopefully they will all be prosecuted). But, the vast number of affluent people in this country wake up every morning, go to work, try to be creative and think of new ways to earn money legally.

 

Notwithstanding this, some affluent people have advantages in the race for financial success. (Note: I totally understand and support those who have aspirations aside from the accumulation of money.) Children of wealthy parents usually do not pay for college. Parents may be alumni, increasing the probability that their offspring will be accepted to the most prestigious schools. And the list goes on.

 

But, the most important advantage of affluent children is that their parents emphasize the importance of education, good values and the ability to support one’s self. It is a given that these children will go to college and graduate, for the most part. Considering that a huge amount of money is available for scholarships and grants, the financial burden on middle and lower class children in not overly burdensome as we have recently learned (See my essay “The Real Cost of Education” published by Softball Politics).

 

Progressives have attacked affluence mercilessly over the past decade or so, as if every person with a high net worth is a felon. Of course, the economic crisis and the greed that fueled the recession did not help the reputation of the wealthy. They were targeted even more aggressively, as if every investment banker packaged and sold “crappy” mortgages. And, every financial person is a Bernie Madoff in-training.

 

The fact is that the group being persecuted pays the lion’s share of taxes. Every new dollar of ordinary income that they earn, results in 50 cents of new revenue for federal, state and local authorities. Every dollar of long-term gains is taxed at 20%. The 99% should hope that rich people earn more because the U.S. Treasury will collect more that can be used for entitlements and other benefits that accrue to the 99%.

 

The best outcome is for all economic groups to rise in unison. This has not been the case in recent years, but it should be the objective, rather than mass redistribution of wealth. In the first, everyone earns their keep. In the second, more people will become wards of the state.

 

 

 

 

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