Archive » September 23, 2010
IT'S JUST MY OPINION
By Harris R. Sherline, Contributing Writer
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 Barack 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 Sept. 10 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 makes 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 percent, 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 percent) 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 who 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 percent, are homeowners and about half have occupied the same home for more than 20 years.”
About 80 percent 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 percent of their earned income. As a group, they are fairly well educated. Only about 20 percent are not college graduates, and many have earned advanced degrees.
They are hard workers. About two-thirds work between 45 and 55 hours per week.
They are careful investors and generally invest nearly 20 percent 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 percent 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 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.
© 2010 Harris R. Sherline, All Rights Reserved