THE RICH, THE POOR, AND THE REFORMERS

Civilization as we know it probably began in the Middle East and probably in Mesopotamia or Egypt. These societies were agrarian with each family farming for itself – essentially a subsistence life. However, very quickly these societies divided into farmers and craftsmen and not long after that came military and governors. Of course the governments and the military were consumers not producers so the society had to support them in the form of taxes. Naturally as the society continued to evolve it began to stratify into classes with the military and officials becoming the upper class, the nobility, and the rich. The point of this obvious historical review is to point out that mankind has always been divided into the rich and the poor and that wealth has never been equally distributed. In fact the very idea of equality much less egalitarianism is a relatively modern concept.

Nevertheless this idea that business, businessmen, and capitalists are evil and that the primary purpose of government is to distribute the wealth of society equally. The underlying principle seems to be that the capitalist has no right to the profits because those profits are earned by the workers he employs, therefore, the revenues generated by the business rightfully belong to the workers. Because these capitalists are reluctant to return the profits to the workers who earned them it is the responsibility of government to seize those profits and redistribute them to the workers. The fact that this has never worked in practice is ignored by these social activists who generally have never actually had to earn a profit or been accountable for the results of their decisions. Currently we see this philosophy being employed by Hugo Chavez in Venezuela. He has seized the assets of foreign investors, fixed prices, over employed people, and then blames the US and others for the failure of his policies. The standard of living is declining, goods are disappearing, and while prices are fixed the items are only available on the black market. This result was first observed under the Emperor Diocletian. Lessons from history don’t seem to be learned by social activists.

Of course the most famous of these social reformers was Lenin, who corrected the abuses of the aristocracy by slaughtering all who disagreed with him, seizing all methods of production, confiscating all revenues in the name of the state, and eliminating private property. Theoretically this was supposed to take the revenues generated by the workers and return the wealth to the workers equitably. Of course as George Orwell observed in his famous satire “Animal Farm” some animals are more equal than others. In practice the wealth was not distributed equally but along selective party lines and the result was the stratification of society into the rich and the poor – a fact either ignored or denied by the social activists who even today believe Marx was right and Lenin failed to implement Communism correctly. Hugo Chavez seems to be one of those who think Lenin was wrong and Marxism is right. His failures to make Marxism work he attributes to interference by the US.

But these are the obvious actions of these social reformers whose failures are highly visible. However, there are social activists among us today who still believe in the tenets of Marxism but don’t use such inflammatory names; instead they call for social reforms through legislation. This began with the infamous book “Silent Spring” by Rachel Carson. This book was later determined to be a hoax but the damage was done, industries ruined, and DDT was banned. Of course the damage to public health was ignored in favor of the animals which were alleged to be endangered by DDT. This was followed up by various other efforts at social reform and perhaps the most famous was the ban on smoking. Any empirical ties between smoking and cancer remain statistical even though the incidence of lung cancer has remained steady even as the number of smokers declines. But these were just warm-ups for the social reformers because they really are after business and the rich. These are their real targets because they truly believe that the rich have no right to what they earn as long as there are people living in poverty.

They are attacking capitalism as evil and as allowing the wealth to be concentrated into fewer and fewer hands. They believe that the profits earned by a corporation should be shared with the workers through profit sharing and not distributed to the shareholders – who of course capitalized the business to start with. The idea that it was the capitalists who created and grew the business is ignored. The workers wouldn’t have jobs and there would be no revenues much less profits to share without the capitalists who funded the enterprise initially. These social reformers rarely have actually run a business or have held positions where they were required to earn a profit. Instead, they are opposed to layoffs as a cost cutting measure because in their eyes that is immoral. For them the socialist ideal of employment over efficiency and profit is what should drive industry, not return on investment.

These are the people who are horrified at the “obscene” profits being generated by the oil companies. What is being ignored is the difference between gross revenues and net profits, but this subtlety is ignored in their drive for wealth distribution which is and always has been their objective. This is the whole purpose of the graduated income tax – it is a legislated method to strip the wealth from those who earn it and redistribute it in the form of handouts to those who did not. These are the people who feel that there is something morally wrong with some people being rich while others are poor. They never make the connection between decisions, lifestyle, responsibility and wealth. Those who work hard and make responsible decisions prosper and those who do not suffer the consequences of their bad decisions and efforts to redistribute the wealth to the poor has historically only resulted in increasing the number of poor and lowering the quality of life for everyone. The reality is there are poor and there are rich and there has always been this dichotomy and every effort to form an egalitarian society has failed.

Surprisingly Rich

Imagine my astonishment today when I found out precisely who the politicians mean when they say we need to tax the rich. I have always wondered precisely who these rich people are they need to be more heavily taxed. Well I nearly fainted when I found out that virtually everyone I know is “rich” in the eyes of the government. It seems the Federal Reserve Board is very diligent in tracking the financial wealth of Americans – apparently excluding all of the illegal immigrants. According to the Federal Government 40% of Americans are poverty stricken (family income of $25,000) with another 30% falling into the middle class with a median family income of $65,000. What is astonishing is that the remaining 20% are “rich” with the top 10% showing a family median income of $170,000. This means a husband and wife each earning $85,000 are rich, which I’m sure would come as a total shock to them. Looking at this from another perspective if you take average salaries a husband and wife team of a teacher and a policeman their combined incomes would place them in the top 75% or upper middleclass. In fact any family whose median income is in six figures, they are in the top income bracket targeted by the politicians who are always trolling for votes on the basis that the “rich need to pay their fair share”.

Income Level Percentile Median Family Income
Rich 90% - 100% $170,000
Upper Middle Class 80% -- 89.9% $99,000
Middle Class 60% -- 79.9% $65,000
Lower Middle Class 40% -- 59.9% $40,000
Poverty 20% -- 39.9% $24,000
Level II Poverty Less than 20% $10,000

So after looking at these numbers it is easy to see why the politicians are so vague about precisely whom they mean when they are on their annual electoral crusade to “tax the rich”.

But as we all know what you bring in goes out pretty much as fast as it comes in and the real test is how much can you keep after the government takes as much as they can because after all the rich should pay more because they make more – I think this is the precise position of the American Democratic Party and the Socialist Parties of various European countries. So does making over $100,000 a year make you rich? The reality is that very few people in these upper income levels feel rich or even consider themselves rich.

Of course income really doesn’t mean much in defining where you stand overall. The better measure would be net worth, that is the total sum of a family’s assets minus all outstanding liabilities. When viewed from this perspective it seems that the national median net worth of the average American Family is $86,000 and this includes all assets like home equity, jewelry, savings, autos, collections, furnishings, etc.


Income Level Percentile Median Family Income
Rich 90% - 100% $833,000
Upper Middle Class 80% -- 89.9% $263,000
Middle Class 60% -- 79.9% $141,500
Lower Middle Class 40% -- 59.9% $62,500
Poverty 20% -- 39.9% $37,200
Level II Poverty Less than 20% $7900

At first glance it would appear that the top 10% (approximately 30 million people) have more substantially more money than the remaining 70% of the population. But included in that top ten percent are Bill Gates, Donald Trump, Warren Buffet, all of those professional athletes, and most assuredly all of those actors in Hollywood who command multi-million dollar salaries while crusading for the poor and demanding that the rich should pay their fair share. Of course at these multi-million dollar income levels, taxes are for the “little people” because batteries of accountants and lawyers insure that little to no tax is paid. These tax loopholes are carefully protected by judicious political contributions (to both parties) while the recipients beat the drum for higher taxes on the rich.

If you would believe what you see on television there is a whole segment of society living the high life in retirement communities. You see them every night as they dance the night away on their Caribbean vacations, where they jog, they fish, they bike, and in general live a great life in retirement because they are rich. Well I think if you would talk to most seniors you would quickly discover that few – very few – can live like these advertisements. In fact even those people in these median income brackets can not afford to live lavishly. Suppose the entire income tax structure were abolished and instead a flat tax was installed with no deductions whatsoever. Everyone and all businesses would simply pay a flat tax on their gross incomes. Do you think the people in the very top brackets, those who support the various politicians would ever allow this to happen? Can you imagine a George Soros, or George Clooney, or MicorSoft paying a flat percentage of their gross incomes to the government? Not a chance! These people want to tax the rich – not themselves. It is important that all of us rich people keep this in perspective when we go to vote for those candidates who think the rich should pay their fair share – that my friend is YOU and you clearly aren’t paying your way. Think about that!!

Undefined Politics

It is truly amazing how politicians throw around words without ever being challenged to define or explain. Instead the media simply goes along and reports what was said, the population accepts what was said without questioning, and nothing ever seems to change because these same people with the same squishy positions keep getting elected by a people who are either too dumb or too lazy to question what is being said.

In recent days the stock market has reached record highs, retail businesses are reporting solid profits, the unemployment is at the lowest point it has been in years, the trade deficit is declining and the economy in general is humming along. Ordinarily this would be a reason for the politicians to gloat and attempt to take credit, but instead we find the liberal establishment shaking their heads in despair as they attempt to put a negative spin on what would ordinarily be signs for cheering.

It seems that among all of this good news the politicians have discovered that instead of cheering over the low unemployment they are concerned about how the “working poor” are not sharing in this general prosperity. But the unasked question is “who precisely are the working poor?” In fact who are the “poor”working or not. These terms are never defined with any precision even when pushed, which is rare. The poverty line in the US is $20,000 for a family of 4 and with this measure the people living in poverty in the US is approximately 37 million. But of course poverty is a relative term and who precisely is included in this figure? The reality is that people in poverty rarely stay there instead they cycle in and out of poverty. But the point is who is “poor?” Again the reality is that in any given year approximately 12% of the population would be regarded as “poor” but then these people are rarely permanently poor but are only poor for a period of time and then move on up the economic ladder. It is also worth noting that these figures include people under 18 years so the number of adults living in poverty or being poor is substantially smaller and even so – none of this defines or explains “the working poor”. After all poor people are not necessarily impoverished and these figures include people under 25 which mean students who rarely work full time, but work at minimum wage.

Furthermore, no profile is ever offered regarding the poor or the working poor. What is there age? How much education do they have? Have they been arrested? How many smoke marijuana or take other drugs? How many of these poor people abuse alcohol? What is the employment record of the average poor person? How many families are in this category and how many in that family are working? Obviously answers to these questions would be very revealing and could easily make the politician claiming that there is a problem and that the minimum wage must be raised look foolish. Any family who cannot find and keep a job paying more than minimum wage has much greater problems that must be addressed if the poverty issue is to be addressed with any hope of success. Still, the politicians cry about the working poor and no one seems to want to look very close at this problem.

So the working poor is a relative term that is very controversial and rarely defined by the politicians who bandy it about. But if the term ‘poor” is not well defined and understood what about “rich”. The liberal establishment is constantly calling for the government to “tax the rich” but they never really define precisely who is rich. The call is always to raise the taxes on the “rich” but in practice the tax changes impact everyone so in effect the "rich" are the employed.

What about “racism”? We have politicians and wannabe politicians like Jesse Jackson, Al Sharpton, and Julian Bond who accuse anyone with whom they disagree of being “racist” when in fact they seem to be the most racist of all. If race is considered and weighted in terms of blacks – that is good and not racist in their eyes. They justify this on the basis of “leveling the playing field”. However, that level playing field never seems to include competition or merit. If the only thing considered is qualifications and performance that is viewed as racist. Hence affirmative action which is nothing other that racism against whites is viewed as good. Therefore, it an effort to garner the black vote politicians extol the value of affirmative action and spout rhetoric in favor of stamping out racism, when in fact racism has been on the wane for some time.

What is considered racism today is largely an example of class-ism. Turn on any TV channel in any city and you will see black faces reading the news. These are people who got their jobs on the basis of ability – not through affirmative action. What sets them apart from those blacks who are perpetual victims of racism? Perhaps the distinguishing factors are education, speaking proper English, and dressing appropriately. We hear complaints from blacks about racism every time they get into trouble with the law. Perhaps if they obeyed the law they wouldn’t have difficulty with the police. Yet, all of the black leaders maintain their power and influence by perpetuating the idea of racism. So when it comes to politicians a little critical thinking is in order but this must be done at the individual level because the media, academia, and the politicians cannot gather the courage to tell the truth or to be precise.