Buffet Tax for Millionaires

PREFACE: Mark Twain wrote The Prince and the Pauper, a story about two people living each other's lives for a brief, but informative, time. Twain's purpose was to illustrate the social injustices that existed then -- and, we could argue, are occurring now. As Twain concluded, "It may have happened, it may not have happened, but it could have happened."
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President Obama has often said that he wants “millionaires” to pay their fair share in taxes, and I agree with that statement; however, his prior interpretation is that a “millionaire” is anyone who earns $250,000, which is, as most of us know, a quarter of a million dollars, a far cry from being classed with the real millionaires. This week, Obama is going to explain his take on what is being called the “Buffet Tax,” based on a speech Warren Buffet, a multi-millionaire, recently made that urges Congress to tax America’s highest earners at the highest rate. Due to loop holes in the tax codes, those who make money in the financial markets pay tax at 15%, while workers who earn money working on the job may pay as high as 33% in taxes on $50k in earned annual income.

That is patently unfair, a disparity that penalizes the working class while rewarding the investment class. Obama’s perception, however, that a family income of $250,000 equates to a millionaire’s income is equally unfair because the wage-earner loses 33% of that income immediately to taxes – and the rest of that annual income pays for the mortgage, car payment, utilities, food, child care, and discretionary spending. The millionaire, on the other hand, can roll over the gains on investments to build more income that is then used as collateral for more investments with even bigger tax write-offs. The endless circle for the wage earner is taxes, taxes, and more taxes, while the endless circle for the investor is profit, profit, and more profit.

Go after the millionaires and give those who have not achieved that benchmark tax relief and you’ll have my support.

I over-heard two young people talking the other day, one of whom was using Obamath to explain how “the Republicans are hoarding all their money, while Democrats are being forced to spend to save the economy.” He clarified that if more Republicans would spend their income, it would create more jobs and get us out of the recession. I wanted to jump in and offer that this is much more a personal issue than it is a political party issue, but there is no conversation with anyone who has such a sophomoric view of world economics.

My generation may be the last to believe in saving for a rainy day, of planning for the future, of not living beyond one’s means, and that scares me. Successive generations are much more inclined to borrow to the limits of their income to enjoy a lifestyle that used to take at least a decade past one’s last educational milestone to achieve and was limited to what the job the person qualifies for pays in salary.

Younger generations began the trend of wanting to live beyond what one is prepared to earn, which has led to high school graduates wanting to live like CEO’s. Yes, we all know that no one can actually live well while earning a minimum wage, but the person who wants out of that rut must be educated beyond high school, have a special skill/talent that is market-worthy, or work multiple jobs. The alternative, living on credit, cannot sustain anyone over the long-run, as our economy has recently experienced.

Willingness to live on credit leads to buying-up, spending more money to get “what I want,” rather than living within one’s budget and buying what one can afford. The willingness to spend more and save less artificially inflates the cost of items and services, which results in all of us paying a higher price for an item that really is not worth what it costs. Those pesky “Republicans,” the ones who are hoarding their money, often decide to make-do with what they have, rather than paying far too much for an item with an inflated price, while younger generations have learned to just charge it.

Visit Costco, Sam’s Club, and other club stores and you’ll see the older demographic shopping there (using the current political logic, probably all Republicans), buying in bulk to save money. On the other hand, go to the mall and watch the parade of the ages 20-40 demographic (Democrats?) going from pricey store to pricier store, purchasing far beyond their means to pay for the goods and services available there (and, I guess, saving all of us from economic failure). I hear it all the time from young people that they go the mall to shop because they will not wear what is sold at the big box stores: it’s too cheap. I used to think that meant an item, such as a garment, was not made well, but I’ve learned that bragging about how much one spends on an item has its own cache. Designer jeans make a bigger impact than Levi’s if one’s goal in wearing the jeans is to impress others, not to get the best value for the money.

Inflation causes all of us to require more income to meet the same basic living limits that the generation before us achieved, and inflation comes when individuals artificially inflate the value of themselves, their job performance, and their product. The old saying is to charge whatever the marketplace will pay, but that only applies to some careers. Teachers have traditionally been under-valued, while more “valuable” individuals, such as actors, professional athletes, singers, real estate agents, and other public persons, have inflated their value; thus, teachers at the top of their profession seldom earn $100,000 annually, but a professional athlete can command multiple millions of dollars per season to suit up, show up, and play their game, a star actor can demand multiple millions per film, a star singer can earn multiple millions per concert, and a real estate agent can make a killing with just one sale.

You may argue with me until the cows come home, but in my world view, there is NO athlete, NO movie star, NO singer/rapper, NO real estate agent, NO reality star who is actually "worth" multiple millions of dollars. Medical personnel, fire fighters, law enforcement officers, and educators are another story: they hold the future for their clients in their hands, so pay them whatever it takes to save a life, protect lives and property, and/or prepare generations for future success.

I’ll listen to President Obama’s speech, primed to hear the specifics of his plan, as well as his current definition of the target demographic, millionaires, but I’ll admit that my expectations are pretty darned low for his actual performance. Based on past public presentations of his ideals, he will demand change we can believe in without providing any specifics for how to get the job done. He will demand that we tax the millionaires using Warren Buffet as his expert witness, then target individuals who earn a quarter of a million dollars because that has been his hue and cry since taking office.

He’ll want everyone to pay their fair share, but his interpretation of “everyone” is spelled R-E-P-U-B-L-I-C-A-N-S.