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1. Sherline: Putting "The Rich" In Perspective

By Harris R. Sherline September 15, 2010 6:58 AM









We hear a lot about "the wealthy" or "the rich," but rarely what these words actually mean. Of course, there's the usual standard of income, which Obama has made the central theme of his policies by stipulating that the dividing line is $200,000 of annual income for a single person, or $250,000 for a married couple. Apparently, those whose income exceeds these numbers are presumed to be "rich" or "wealthy."



In his September 10th press conference, president Obama repeatedly stressed the point that the wealthy should not receive any tax cuts, saying that the Republicans "...want to spend an additional $700 billion to give an average of $100,000 to millionaires," adding, "Why hold the middle class hostage in order to do something that most economists don't think make sense?..." He further stated that the Republicans are too eager to give tax cuts to rich people.



OK, I get it. Obama doesn't want the "rich" to benefit from any tax cuts that might be included in his effort to further "stimulate" the economy and encourage businesses to hire more workers.



However, that doesn't really tell us much. For one thing, the meaning of "rich" or "wealthy" is in the eye of the beholder.



A little research goes a long way in attempting to cut through Obama's usual smoke and mirrors. For example, a June 2009 Wall Street Journal article pointed out that the millionaire population in the U.S. declined about 16.67%, from 3.0 million in 2007 to 2.5 million in 2008.



Two-and-a-half million sounds like a lot of people, but viewed another way, it's only a tiny fraction (0.008%) of the nation's total population of 300 million, which is really not nearly as big a number as it may seem.



Just who are these 2.5 million millionaires that are so rich that they should not benefit from any of the tax cuts that the president proposes? And, how does he plan to accomplish his goal of getting small businesses to add more employees to their payrolls without allowing their owners to participate in tax cuts?



A 1997 Washington Post article by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D., offered a "Portrait of a Millionaire," which provided some interesting information about the lifestyles of millionaires. The characteristics that they generally have in common include (among others):



On average, the total annual realized income of millionaires is less than 7 percent of their wealth, that is, they live on less than 7 percent of their wealth.



Most, 97%, are homeowners and about half have occupied the same home for more than 20 years."



About 80% are first-generation affluent. In other words, they've earned it.



In general, they live well below their means. They wear inexpensive suits and drive American-made cars. Only a small percentage drive the current-model-year automobile and they almost never lease their cars.



Overall, they save at least 15% of their earned income.



As a group, they are fairly well educated. Only about 20% are not college graduates, and many have earned advanced degrees.



They are hard workers. About two-thirds work between forty-five and fifty-five hours per week.



They are careful investors and generally invest nearly 20% of their annual household income.



So, if these are the "wealthy" Obama says should not benefit from any tax cuts that may be forthcoming, who should? It certainly cannot be the almost 50% of American workers who do not pay any income tax at all?



Finally, it's worth noting, I think, that Obama is himself a millionaire four or five times over. However, he didn't make it by living the lifestyle described by Drs. Stanley and Danko, he made it the new way - by writing a couple of books about himself and knowing the right people.



So, who is Obama to talk about the "rich" not getting any benefit from tax cuts? Can we assume that he will not claim any of the tax cuts he himself might otherwise be entitled to receive?



In his generally lackluster press conference, the president made the point a number of times that the "rich" would not benefit from any of the Bush tax cuts that may continue to be available, but failed to demonstrate that he (Obama) understands just what sort of policies will actually encourage the people who operate businesses to risk hiring more workers, which are inducements that are stable and can be relied upon over the long term. Temporary tax cuts, such as accelerated depreciation, immediate one-year write-offs of research and development costs, and short-term reductions in capital gains taxes, will not incentivize business owners and managers to absorb the long-term costs of hiring more people and keeping them on their payrolls.



If Obama persists in pursuing his economic policies without properly understanding how businesses and the people who run them actually function, he might just as well fuggedaboutit, they won't work.



---



Read more of Harris Sherline's commentaries on his blog at www.opinionfest.com



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24 Comments




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Liberty4310
September 15, 2010 9:30 AM
Reply



Thank you for trying to put the rich in perspective. The problem is, we still have no real definition of what constitutes the rich and wealthy other than what the liar-in-chief has given us, and he is wrong. Maybe $250,000 would have been a lot when most people made under $10k per year, but it really is just on the high side of middle income these days. I would define rich and wealthy as those having at least $1 million. Maybe about $5 million is the best number. In the meantime, we need to leave the small business operators alone.







Matt
September 15, 2010 9:50 AM
Reply



Good article, but we need to stop referring to "tax cuts". Nobody, rich or middle class, is getting a tax cut. The tax cuts happened on Pres. Bush's watch. What we are talking about now are tax increases.

As a Conservative, I would like us to get away from the argument of whether different groups "deserve" tax cuts/increases anyway. If we're really interested in equal treatment under the law, then we should be espousing getting rid of the progressive tax system altogether.







Marcia
September 15, 2010 9:58 AM
Reply



You consider "rich" a person making $250K nowadays?! What about all the deductions, like the already overly increased health insurance, malpractice insurance, billing services, professional dues, etc. etc. How much does that leave you with? Answer: At the same level of those who are not getting a tax "cut!"







FlaJim
September 15, 2010 10:08 AM
Reply



Sherline obviously flunked math. 2.5-million out of at population of 300-million is 8%, not 0.008%.



Regardless, taxing different levels of income differently makes no more sense than charging different prices in a store to different people based on their income or net worth.



Matt, above, is quite right in noting that it was Bush who gets credit for cutting taxes. These would be increases, plain and simple. I've read elsewhere that the boy in the White House wants any extension of the current tax rates to be named after him. Surprise, surprise. He's not narcissistic at all, is he?



The other thing that needs to be addressed in the Alternative Minimum Tax that punishes those who invest in tax free municipal band and those who give heavily to charity. The Dems enacted this back in the 70s to play on class envy. Originally, it applied to perhaps 150 families but it isn't indexed and now applies to several million, most of whom are simply being punished for managing their financial affairs effectively.







oldcuz
September 15, 2010 10:09 AM
Reply



Boy does this Bozo, Obama know just exactly which buttons to punch to keep inciting the class warfare that they thrive on. Has anyone lately heard anything about welfare recipients hiring any one?







AreYouCrazy?
September 15, 2010 10:35 AM
Reply



Um, can anyone on this site do simple math? How is 2.5 million .008% of 300 million.



Please check your work and try again.







JDZ
September 15, 2010 10:43 AM
Reply



In one of my blog comments yesterday I presented a typical example of who most of the so-called "rich" that make over $250K are really about, and in my case it was the white collar workers where both the husband and wife are working to provide for their family. And when you wade through the taxes that they pay, the sacrifices/education/etc and sweat equity they put in to be eligible to make over $100K per year, and actually analyze who these people really are, the above article by Sherline captures most of these people.



These are people/families that I would categorize as in the upper middle class of our society and are mainstream Americans. Most of them went to college to improve their chances of getting a good job and worked hard to get the "wealth" and standard of living they have, and they are far from the real wealthy in our country (like corporate executives, pro athletes, movie stars, sitting Presidents, and the Warren Buffetts of our time).



President Obama and the liberal pundits that keep using this "tax on the wealthy" as a talking point are showing that they either do not understand the demographics of this country, or do not care as long as it is politically an advantage for them to push this segment of our population into the "wealthy" class.



This is a mistake because the American public is starting to see through this form of "class" warfare politics and is not going to stand for it.



The only fair tax policy is a flat tax that everyone who earns income has to pay regardless of income level. This means every one will have skin in the game and will pay more attention to how our governments spend taxpayer money.







83ragtop50
September 15, 2010 10:49 AM
Reply



FlaJim - Me thinks that 2.5 million out of 300 million is actually 0.8% (or, as a fraction 0.008333..). But I agree with you, the so-called progressive tax system that we currently struggle under rewards underachievers and punishes success. A concept that BHO appears to cherish. A flat tax would be better, but I assume that the politicians would screw that up as well by making exceptions like "earned" income credits. My loaf of bread (income tax) should be the same as everyone elses. In a perfect scenario it would be a flat amount in dollars, not a percentage. We all benefit more or less equally. Why shouldn't we pay exactly the same amount in absolute dollars?!







Michael
September 15, 2010 11:00 AM
Reply



First of all, 2.5 million is 0.8% of 300 million.



I live the way Mr. Sherline describes, except that my newer car is a Lexus. To repeat a point I made yesterday, this whole argument about the 250 & up taxes is bogus.



My wife and I make about 400 per year, and we invest in municipal bonds. Thus, we were under the Alternative Minimum Tax before the Bush tax cuts and also after the Bush tax cuts. Because of the AMT, our taxes did not go down at all as the result of the Bush tax cuts.



If the Bush tax cuts go away, we will still be under the AMT, so our taxes will not go up.



I think a lot of "rich" people must be in this situation. Maybe Mr. Boehner knows this, which is why he is not making a big argument.



Mr. Sherline, maybe you can check this out and see if this is a common situation.







Jim
September 15, 2010 11:21 AM
Reply



For you math wizards who challenge the percentage used in this article, think about this. 1% of 300 million would be 3 million. Obviously, 2.5 million is less than 1%. . . . not 8%.



A flat tax is the only realistic plan that would be fair to all (except CPA's who depend on the complicated tax code to make the majority of their income). A consumption tax would be better than what we have, but would descriminate against those of us who must travel and spend considerable time and capital in order to earn our living.



Many would envy a W-2 for $100K - $150K most years, but what they wouldn't realize is that when our taxes are filed, that gross earnings number is reduced by 20 - 33% due to business related travel.



Like most people today, we struggle with debt, rising expenses, and a customer base that is paralyzed by fear of what our government will dream up next to punish business. I don't think anyone in the current administration is qualified to run a hands on business of their own. They may (because of connections and assumed intelligence) run a bank, the Fed, brokerage houses, etc, but they wouldn't have a clue how to start a business and make it successful.







Liberty4310
September 15, 2010 11:47 AM
Reply



Ok, let's settle this math thing (whice is really a distraction) for once and for all. 2.5 million is 0.83% of 300 million. Now let's drop this.



Some of you prefer the flat tax. That would be better than the so called "progressive" tax which is really regressive, if you think about it. But it would leave the 16th amendement and the IRS in place and would be subject to abuse by future Congresses and Administrations. Also, it would fail to collect taxes from the super rich who already have their money and aren't counting on income.



A better solution would be the fair tax. That would dump the 16th amendment and the IRS and create a much leaner body to administer the tax system. The only "taxpayers" they would have to deal with are businesses engaged in retail trade. Specifically, it would consist of a national sales tax administered in a similar manner to a state sales tax. All consumers would pay the same rate, but the so called rich and the truly rich would pay proportionately more because their purchase amounts are higher. For instance, if someone buys a luxury vehicle, he would pay more in absolute dollars than someone buying an economy car. If he buys aircraft, boats, and other luxury items, he would pay taxes that the rest of the people don't pay. Bottom line, everyone would pay a fair share of tax.



Here's how it would work. Retailers would calculate an add on at the end of a sale. Depending on their total sales volume, they would file simple one page returns monthly, quarterly or annually. On these returns, they would show total sales, taxable sales, non-taxable sales (some categories of necessities such as food, medical care, and maybe housing would be exempt), and amount of tax due. It could also include a discount for early payment and a penalty for late payment. The business would simply fill out this form and transmit it with payment to the federal agency. The federal agency, in turn, would be dealing with about one third as many taxpayers as the IRS and all on one page forms vs. the up to 40 pages required for some income taxpayers. This is exactly how we handle our state sales taxes. My bookeeping software tracks and calculates all of the required information. It is hassle free.







army
September 15, 2010 11:53 AM
Reply



Now lets put what "dingleberry" in chief wants to do to what HE terms "the wealthy" and see how fair this really is:



Even if you have a person that makes 1 million dollars a year - He is wanting to raise the taxes to right at 40% - That is $400,000.00 leaving the person with only $600,000.00 that he worked his tail off for.



Why should that person have to pay the idiots in office for the horrible issues they have caused? Is this not as bad as those bums from AIG that drove their company bankrupt and then BONUSED themselves 100's of millions of dollars for doing so?? When is the last time you were heavily rewarded at work for being the BIGGEST failure in the office, much less on the planet???



This is absurd!!



Now break it down further: a person making 200k having to give up 40% of their income - A whopping $80,000.00 to the IDIOTS in Washington. leaving them with only $120k after taxes! Not including state and local taxes!



WHY, WHY, WHY!!!! That person EARNED IT! The politicians did not!! Why are we paying for their stupidity??!!!



If this idiocy does not just piss you off, then I am not sure what does.



VOTE!!! VOTE!!! VOTE!!! Get them OUT!!!! November!!!







mavsguy842
September 15, 2010 11:57 AM
Reply



It seems that Mr. Sherline is confusing millionaires with those making over $200k/year. The Democrats' proposal is to not extend tax cuts to those earning $200k/year+. Their plan is NOT to not extend tax cuts to those with a net worth over a million dollars.



We're not talking about a net-worth or wealth tax, we're talking about income taxes. Millionaires who live on $70k/year are most certainly going to see their income tax rate stay the same, not increase.



Even our mildly progressive income tax structure incentivizes people to earn more money regardless of income level. I just checked the PDF with 2009 income tax tables and 2009 income tax calculation formulas on the IRS website so I could provide hard facts. The most that earning one penny more and moving into a higher tax bracket can cost you is $13.99 (PLUS one penny to move into the next bracket, and MINUS $14.00 in extra taxes paid for being in the next bracket). The argument that a progressive income tax encourages people to earn less money in order to pay less taxes is false.







mavsguy842 replied to comment from Liberty4310
September 15, 2010 12:06 PM
Reply



"Some of you prefer the flat tax. That would be better than the so called "progressive" tax which is really regressive, if you think about it."



Progressive and regressive are economic terms. Sales taxes are regressive because as incomes decrease the percentage of income paid in sales tax increases. An income tax where the percentage paid increases as income increases is progressive. A progressive income tax is not regressive.







American to the end
September 15, 2010 12:11 PM
Reply



Good article but I think the real point should be why does any one person have to pay more than another. If you make $1 you should pay 10cents. If you make $100,000, you pay $1,000. No exclusions or deductions. This is the only real FAIR tax. Otherwise not all people are paying for the benefits they receive. The rich should not be taxed more than the poor. That is not equality. Poor people require police, fire and highways just like everyone else. If it never costs them anything, they have no desire to be part of any improvement. That breeds generations of leeches like we have now.







Chuck
September 15, 2010 12:30 PM
Reply



Obama and his merry band of Marxists have delivered on their promise of "Transparency." It's very clear to me who he is and what "they" represent. When "they" level the playing field with their wealth redistribution schemes, then only the government will be the arbiter of who can be "rich" and who can't.



It's easy for "career" politicians to point fingers and play god with other peoples money but I doubt seriously they have any plan to include themselves in their wealth limiting, one size fits all, economic plan. Congress has proven over and over they won't play by the same rules they impose on the rest of us.



The current Tax Code is a corrupt joke and there isn't a millionaire in Congress (either party) willing to change it. A FLAT Tax is by far the fairest way to fund the government but since the government isn't in the fairness business, it would take a complete "house" cleaning to ever scrap that special interset friendly, POS, 85,000 page, Tax Code.



Yesterdays primary results were very telling and I think both parties were shocked and chagrinned. It marks the first time I have ever had "HOPE" for real "CHANGE" in Washington. Till now I thought most normal Americans were politically asleep and could care less about the "business as usual" corruption of BOTH parties. The Repubs reaction to O'Donnels victory, clearly shows how threatened they are by party outsiders who might upset the status quo / gravy train.



This is relevant here because an "establishment" upheaval in Washington may finally put an end to the ridiculous argument of who should pay more Taxes. Maybe we'll see a new generation of "America first" politicians who'll usher in an era of fiscal responsibility and opportunity for ALL "Americans" and not just those the government deems worthy.







Jane T
September 15, 2010 12:56 PM
Reply



I agree, the rich should not be taxed more than the poor. What about businesses? I never got a job from a poor slob, that's for sure! How does taxing businesses increase employment opportunties? All that will do is increase layoffs! How stupid is this administration? They are right about one thing, that is that they are very "transparent". Smart Americans can see right through them & know exactly what they are doing.. bunch of morons!! If the "wealthy" are taxed and taxed, where is their incentive to work harder, do better and for companies to hire more people thus decreasing unemployment? All of that money will be taken away from them anyway! November is out only chance .... VOTE THEM OUT!!!!!!







AreYouCrazy?
September 15, 2010 1:11 PM
Reply



American to the End - why should you have to pay 10% in taxes if you make $1 and only 1% if you make $100,000? Talk about typical rich conservative ideology!







EmployerJoe
September 15, 2010 2:23 PM
Reply



I am an employer of 300 persons. I make just over 250K per year, drive a 2007 Ford Truck, have Ph.D. degree, live in 225K house for past 15 years and was the fist in my family to make over 50K. I will have to employ less if taxes go up. However, I already have to employ less due to not knowing what Obamacare is going to do to me. We have several reasons under BHO to stop hiring. Under what has passed and what is coming I will employ less and all my "rich employer" friends say the same. Trust me, BHO policies are no fix and it is not what the employers need as he preaches. We don't need your money to create jobs, we only need our money and Gov't stop "helping" us. The economy will get better only after the spending stops, the entitlements get cut, the bad laws get repealed and the lazy get to work. That is the fix and no head scratching is needed on that. You can't fix a bad piano note without consulting a musician and you can't fix the economy without consulting job creators.



PS. 8% or 0.008%, we get the point either way.







Liberty4310
September 15, 2010 2:54 PM
Reply



mavsguy842, as I indicated, properly set up, the Fair Tax would exempt specific categories of essential expenses. Most lower income people do not buy expensive or luxury items. They spend most of their hard earned money on essentials. People with a higher amount of disposable income often spend it on more expensive, nice to have items. This tax would not be regressive at all. Spend a little, pay a little, spend a lot, pay a lot. Any system where some people pay a higher rate than others is REGRESSIVE!







EmployerJoe
September 15, 2010 3:05 PM
Reply



Once again from an employer's point of view Liberty is so very right. Fair Tax would put more money into the hands of ALL in the most fair way. Everyone wants to tax the rich until they become the rich and live the unfairness. Even if they tried it just in select states or cities you would see their economies boom. Common sence says you should never punish the productive but yet that is exactly what we do in America. If you are pro-labor, pro business, liberal or conservative you have no argument against this way of taxation once you educate yourself about it.







Charlie Ehler
September 15, 2010 3:20 PM
Reply



For those that are ranting about the percentage of rich people in the U.S., the formula is 2,500,000/300,000,000*100 or .833 percent. Make note of where the decimal point is. that means that one person in one hundred and twenty is a millionaire. Too bad that million Dollars is worth about 2.5 cents per Dollar in 1960 dollars and fodder for another rant on another day.



The rate of wealth in the U.S isn't far out of line for most free societies. Unfortunately it is more telling that the number shrank by 16 percent in only one year. Where did all that wealth go? I'll bet it was the result of the housing bubble that burst and the recession in a one-two punch.



Since it was the government's meddling in the housing market that is to blame how about taking action by not voting to re-elect the clown that represents you, especially if he voted for any of the foolishness that involved the housing market/TARP/Government bailouts/union stimulus.



As for the idea that everyone should pay the same tax rate regardless of income, I believe it is past time to try it, if only to reduce the income tax law to one paragraph, cut the overhead of filing taxes AND get rid of 90 percent of the IRS all at once. I think a side benefit is that everyone would have a stake in what goes on in government and would then take more interest in what the locally elected congress critter is up to.



For businesses, the tax code would be slightly more complicated, basically to define what doesn't qualify as an expense and how to depreciate capital investments.



It should be evident though that the Democrats want you to believe that the problems in the world are created by the rich and wealthy and thus taking their money is fair and just, when all they are trying to do is take your money and give it to someone else to get their vote. Republicans know this and that's why they are against such things.



Amazing; as long as there's grass we'll have snakes.



Charlie Ehler







Charlie
September 15, 2010 3:38 PM
Reply



I have NEVER earned more than $35,000 per year.

My wife, when she worked outside the home, much less.

We lived below our means and invested for our future and are now retired.



The proposed tax hike on the "rich" by the Obamacrats will extract an additional $2,000.00 from our income.



Change? You BETCHA!

Remember in November.

Charlie







Jota_
September 15, 2010 6:01 PM
Reply





Least any one forget, or perhaps never knew, the current fiscal policies of the US Government will result in economic collapse. It is a mathematical certainty and taking every dime of those making a million or more will not prevent it.



The fiscal problems of this government are not the result of not taking enough blood but blood letting without restraint.



Where is the surplus for Social Security?



Spent!



And they were not satisfied with this excess but continue to spend even more



http://en.wikipedia.org/wiki/File:GAO_Slide.png

This graph is very clear, cut entitlement programs, or the whole ship will go down.



However, it is wrong on one thing, there is not twenty years before it goes below the water line. IT IS NOW!





http://en.wikipedia.org/wiki/Federal_budget_(United_States)



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