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Sunday Ponderance

Did you even stop to think about why the concern is with the “Top 1%?” Why not the top 3%? Or perhaps the top tenth of one-percent? Maybe it’s harder to write up signs that say, “We are the 97.5%?” Has anyone ever provided a justification as to why, if you are in the top 1%, but not the top 3% you happen to be evil and greedy? What about the person who is in the top 1.005%? Since his annual income is only $25 lower than the folks in the top 1%, is he somehow morally superior? And if the answer is no then why? Is there a magic oracle that I can consult that will tell me whether a person is truly evil and greedy based on their income? And is there a magic oracle I can consult to tell me whether any particular person in the top 1% is in fact a decent human being?

Many of the parents who send their kids to the school I send my kids to appear to be in the top 1%. By all accounts they go to church every Sunday, volunteer an enormous amount in the community and at our school and church, donate a really generous amount to our church and community and from what I can observe all earn their income in very productive and honest ways (even if some are lawyers!). And once my wife gets her nursing degree and starts working, my family will start making its way toward the 1% (but unfortunately still not be anywhere near it). When my wife starts working in August, does that suddenly launch is into the ranks of the greedy exploited class? If so, why? And should we simply turn down the income and work for free? These and many more questions pass through my feeble, greedy, tool-of-the-corporate-class brain as I think about the world on this fine Sunday morning.

2 Responses to “Sunday Ponderance”

  1. Harry says:

    I saw John Kerry on TV today. For the benefit of Wintercow’s student readers, he is a senator from Massachusetts on the Super Committee. He boiled it all down concisely: he wants George Bush’s reduction of the top marginal income tax rate to expire, so it goes back up to what congress passed under Clinton. I can understand why he is sore, but things could be worse: bet he and Theresa got rid of their extra Kerry-Edwards bumper stickers. The subject is the river of money that will flow from a couple that makes over $250,000 a year, which is slightly more than a couple of Blue State high school teachers make.

    The top one percent of what? Or the top 0.99%? Adjusted Gross Income? The people whose AGI is over a million a year, or fifteen million? Senator Kerry zeroes in on the folks who make $250,001.

    This attitude is the same as the Breznev Doctrine: what we have, we keep, as in the same share of territory, regardless of its value. So it was important to keep, like East Germany, Poland, and Estonia. If you need more cash, take more. This worked for Leonid Breznev.

    Unless we get World War III next week, it will probably work for the Kerrys, too. Things have to get pretty bad when you have all that ketchup money.

  2. Harry says:

    Near the top of the hated list is the hedge fund manager, who typically gets his or her compensation as a share of the capital gains of the fund, as opposed to charging a fee based on the market value of the fund’s assets like a mutual fund, or an investment advisor would. Because such income is capital gains, it is taxed at a lower rate than ordinary income, which is why they structure it that way.

    Not that I want to argue for the present tax treatment of capital gains. Let us say that Reagan lowered the rates on capital gains, as did the Clinton/Gingrich administration, as did the Bush administration, each time causing people to sell capital assets and realize capital gains. Part of the result was unexpected (to the CBO) rivers of money flowing to the government.

    Because hedge fund managers make incomes that are out of proportion to the perceived effort they have made, demagogues argue we should can the system and start taxing capital gains the old-fashioned way, like at fifty percent for rich guys.

    I have known a lot of their rich guys, like middle-management employees of IBM who had accumulated a few thousand shares, and held on to it until they died because their tax basis was $2 per share, and a million dollars of it was all capital gains, a large portion of which could be attributable to inflation. One always had to ask, “Can I put the proceeds, after taxes, in a better situation?”

    This is the rational question to answer, whether you are a Rockefeller or an IBM salesman.

    Our lawgivers have long favored the homeowner, and not just with the leveraged homeowner, with the home interest deduction, but also the unleveraged homeowner who sells his/her house at what would be a huge capital gain (most of it due to inflation), provided one reinvests the proceeds in the next house.
    Similarly, I believe if you own a rental property, you avoid the capital gain if you invest in “like property” e.g. an apartment building. This is a special allowance bestowed from the Ways and Means Committee to the real estate brokers, and everyone in the construction industry. I hate to kick people while they are down, but if you sell 100 shares of BP at a gain and buy a like amount of Anardako Petroleum, how should that be treated as a non-like exchange, and how come does the tax man get a piece of the action?

    Do any of these clowns realize the damage they do to wealth?

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