The American Dilemma and How We Can Fix It

Once upon a time my father received a notice that his tax return was being audited.  At the time he was a salesman and travelled the country extensively being on the road for forty or more weeks per year.  All of this was done by automobile – and one of the deductions which he correctly took was for expenses related to these trips.  Fortunately, my father was also a meticulous record keeper as well as being scrupulously honest.

Notwithstanding that he felt that unless he had made a mathematical error, which he thought was unlikely, he was confident that his return would survive anyone’s scrutiny, he was still nervous when he arrived at the IRS”s office for his audit.  But several hours later the auditor agreed that my father’s return had been honestly and accurately prepared and issued a “no change” determination.

But the next year he got another such audit demand and one the following year.  As was the case with his first experience these two audits resulted in the auditors’ accepting the original returns as filed.  But other than experiencing a nervous stomach and perhaps a little heart burn, my father learned and taught me a valuable lesson which Chief Justice John Marshall stated in writing a majority opinion in a tax case, “The power to tax is the power to destroy”.

There are several threats to achieving financial independence and even wealth.  They are inflation; lack of financial knowledge; bad management; and most importantly, taxes.  With the exception of taxes, the other three can be handled.  There are assets that increase in value even if inflation becomes rampant; a person can educate himself on how to invest his savings; if a manager who has been hired by an investor is not meeting expectations he or she can be replaced.  But no individual can control the amount of taxes that government extracts from his earnings.  That is a matter of policy and law, enacted by the Congress and signed by the President.

The left’s theory – or at least their major talking points – are that income inequality makes it impossible for people to compete on a level playing field and that in particular, women and minorities are disenfranchised from the same level of opportunity that, for example, white males, (and whites in general) enjoy.  Hence they push for a higher minimum Federal hourly wage – as though a person who has no financial knowledge will somehow break into the middle class and realize the American dream by earning a couple of extra dollars an hour.  People do not get wealthy or break the shackles of poverty by making ten, twelve or even fifteen dollars an hour.  People get wealthy because they have a unique talent or because they start their own business which grows and prospers – or, for the lucky few – because they inherited their money.

But one of the lessons that my father taught me is that, “It isn’t what you make – it’s what you keep” that determines a person’s financial situation.  No matter how much you make if you spend more than that amount, the conclusion will be financial disaster.  Just look at the Federal government’s balance sheet if you doubt that.  Or look at Curtis James Jackson III (better known as 50 Cent) who made several hundred million dollars and just declared bankruptcy.

But the left persists in making these arguments that we need to level the playing field so that everyone has equal opportunity to succeed and if they really believed in the hogwash with which they bombard us, it seems only logical that rather than a fifteen dollar per hour minimum wage we should simply decree it to be one hundred or one thousand dollars per hour.  Now that would have an impact.

So why stop at fifteen bucks when a higher number would be better?  The answer is that everyone realizes that having the skill set to be a burger flipper is simply not worth that amount of money in a free and open job marketplace.  And the reason that being a burger flipper makes the current minimum wage is that there are a lot of potential burger flippers out there who will take that job and do it in an equally competent manner as the present employee should he or she decide that his employer is engaged in “oppressing him”.

My first summer job was working for a company that wholesaled shirts.  I earned two dollars fifty cents per hour and worked a forty hour week.  Of my gross income I had to commit one dollar fifty cents for carfare to get to the job and get home.  And even then, Social Security and Federal and New York state taxes were deducted from my check.  (The City of New York had not yet implemented their own additional income tax on its residents).

Since I took my lunches to work with me, (provided courtesy of my parents) I was able to save most of my check for my college tuition.  And when I realized that it was only a three mile walk one way, I started getting up extra early to walk to my job rather than spend the fifteen cents on the subway.  Once a week on Wednesday I would, rather than bring lunch, treat myself to a slice of cheese pizza at the cost of fifty cents (sixty if I really splurged and ordered pepperoni on it).  I admit to feeling a little bit of guilt about indulging in the luxury of that hot and bubbly slice of pie – but, darn it was good.

The theory that those on the left (and those like Ms. Clinton who appear to be on the left to attract primary voters to her cause) espouse is that we can have the money to institute their social programs by merely getting it from those who have either a special talent or ability, have started a small business which might have grown and prospered or those who were fortunate enough to inherit their substantial wealth.

If we lived in a country in which the government, not the citizen, runs programs and determines who should have so much but not more than that, even confiscating all the accumulated wealth of those who have it in their possession currently and redistributing it to those who would like to have it, would “even the playing field” for a second – and then the same inequities would once again start reappearing.

Whether we like it or not, some people are more motivated, more talented, more intelligent and more creative than others.  And like the classic cream rising to the top, those whose wealth had been appropriated by the government would start over and within a short time would again become wealthy whereas those who had been the recipients of their former wealth would again sink back into poverty.

Well, that’s the scenario with a one time confiscation of the assets of the wealthy.  But even proposing that would take more brass than the left has in their admitted operational playbook.  So the reasonable way for them to proceed is to raise taxes on the rich – as a matter of “equity”.  After all, were it not for the government and the tears and sweat of the miserable masses, these people could never have achieved their success.  We all remember Obama’s famous, “You didn’t build that speech”.

According to the economic theories of the left, trickle down economics doesn’t work nor does it improve anyone’s life except for those doing the trickling.  And more importantly, their firm belief is that just because the wealthy worked hard, been creative and took responsibility for their financial future, they have an obligation to those in society who sat back, got fired from a multitude of jobs for performance and who believe the way to wealth is sitting home collecting unemployment while watching the soaps and eating potato chips, taking only a break from this in order to get out with fellow economic failures and picket outside the business du jour demanding a higher minimum wage.

Now it’s an interesting phenomenon that while conservatives believe that lowering taxes increases the number of businesses that are created and because of this may actually result in higher amounts of taxes collected because of higher GDP, they have an interesting ally in the State of New York – headed by Governor Andrew Cuomo (D) who comes from the left’s own tradition.

There is an ad being run by the state of New York which begins, “New York is changing the way we’re doing business by lowering corporate and individual tax rates.”:  The ad goes on to say that manufacturers who relocate to the state will receive a ten year exemption from paying any income taxes.  If I didn’t know better this sounds remarkably like a plan that could have been authored by President Reagan’s economic adviser, Arthur Laffer.

But if the conservatives in this country need further validation of their economic policies, perhaps the strongest example may come from the Commonwealth of Puerto Rico which is asking that Congress pass a law granting them the same ability to file bankruptcy as Detroit, another Democrat controlled stronghold.  Otherwise they warn us that there will most certainly be default on the debt obligations the commonwealth has issued.  But while waiting for Congress to act on this desperate request, the Governor has, among other proposals, found an interesting way to combat Puerto Rico’s insolvency.  He has proposed lowering the minimum wage for hourly workers on the island.

Talk about mixed (and confusing) messages.  No wonder we’ll be at $20 Trillion in “official” debt by the time Obama leaves office.  Well, he promised “Hope and Change” in his drive that landed him in the White House.  And by the time he leaves office, we may all hope that he’ll leave us with some change – even if it’s small change.

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Comments on: "THE TRUTH ABOUT “INCOME INEQUALITY”" (2)

  1. I think our Western Socialist oriented governments could learn a great deal from your Father. My Father also taught me to keep meticulous records and it does tend to keep you out of most trouble financially. I spent 7 of my initial years of employment working for a CPA firm and there watched IRS personnel shed some of our clients into bankruptcy. There is reason to fear the IRS even if you are innocent.

  2. “There is reason to fear the IRS even if you are innocent.”

    I don’t know if you have been following our Imperious Revenue Service but there is little doubt that they have denied exemptions to conservative groups as a political expedient for the current administration. That is truly frightening because it suggests that anyone who disagrees with those in power is very likely to become a victim. That is not democracy. That’s North Korea.

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