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Straight Talk

By James Hettinger
Senior Advisor, Battle Creek Unlimited
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Having finally settled the issue of extending the Bush era tax cuts, the rhetoric about tax cuts “for the rich” has ramped up even though we say we are going to be “more civil” in our public discourse.

Class warfare is divisive in nature and it is intended to be. People, who are down and out, having lost their jobs, experienced reduced income levels, or seen their benefit packages evaporate, make good tinder for the class warfare fire. Especially when they see Wall Street bailed out, spineless corporate governance, and fat bonuses for corporate executives who have all but ruined their companies.

In Japan, corporate misfeasance is considered disgraceful and would only earn the shamed executive a possible date with an ancient ritual involving a very sharp knife, not a golden parachute.

The truly frightening thing about taxing the rich is that much of the rhetoric originates with the rich. When the richest and the third richest U.S. senators advocate taxing the rich, you have to wonder what they know that the rest of us do not.

When Warren Buffet argues for a stronger capital gains tax, you have to wonder how he will evade it. After all, as we have been lectured, isn’t that what rich people do?

The rich today are markedly different than the rich of the early 20th century. The rich of the early 20th century derived about 20 percent of their income from work. The rest was inherited wealth. Today’s rich, by contrast, derive about 60 percent of their income from work, not inherited wealth. Today’s rich are more likely to be self-made, not those “who won the lottery of life” as a popular ex-president likes to say.

The Obama administration thinks if you earn over $250,000 a year, you are rich. Try telling that to a family of four, financing two children’s college educations, while both parents are working. Try accepting that definition from a bunch of people who do not have a clue how much a gallon of milk costs.

So what happens when government decides to go after the rich? Such policies inculcate some of the most creative and bold-faced evasions we could ever imagine.

The richest U.S. senator berthed his new 75-foot yacht in a neighboring state where taxes are lower. Since such a scenario is beyond the wildest dreams of most of us, we can only wonder why an advocate for taxing the rich would not practice what he preaches.

The state of Oregon decided to “sock it to” the rich in 2010. Ten thousand people were taxed right out of Oregon toward, presumably, friendlier environs like Texas. Did taxing the rich expand Oregon’s tax base? How did that work out for Oregon?

The more predominant self-made millionaires of today, extra sensitive about the wealth they amassed through hard work and innovation, have developed a new form of evading governmental designs on wealth confiscation. They establish and capitalize a charitable foundation, thus, denying government’s powers of confiscatory taxation.

So, if Senator John Kerry, Warren Buffet and other incredibly wealthy Americans advocate taxation of the rich, but at the same time, implement a range of tax evasive behaviors, where will the tax burden fall?

Since the poor pay no taxes, the burden falls upon America’s diminishing middle class. This shameful trend continues despite all the rhetoric about preserving the American middle class. If the middle class is as important as the politicians tell us it is, then stop the enabling and the lying.

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