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Not Enough Money? Just Get More from “the Rich”

rapid city journalOver the past year, Rapid City’s country club rebuilt its 50-year-old club house. An article in the Rapid City Journal on the opening of the new building elicited several online comments, including these:
• “And for [those] who built this obscene monstrosity right in the middle of a recession for the rest of us, shame on you for flaunting your riches.”
• “Can you say ‘Lower Class Stay Away?'”

Several others did point out that the country club provides local jobs and its new construction, funded by its members, cost others nothing in taxes. As one person put it, “It is not immoral or illegal to have disposable income.”

Maybe it isn’t illegal to have extra money, but increasing numbers of people seem to consider it immoral. This small exchange over a country club is a microcosm of a growing class warfare unfolding in America. Sadly, it seems it is no longer a good thing to be viewed as “rich” (which according to some polls is anyone worth over $500,000).

Certainly, it is a normal human trait to have some envy and resentment of those who have more than we do. I believe, however, that an undercurrent of deeper resentment against the rich is spreading in this country. One example is this response I received online to one of my columns: “I wish I had never saved into a 401K, I should have just spent everything when I was making it. Rich people in america are financially raping everyone else.(sic)”

For many people, the frustration and fear created by the recession has focused on highly-paid managers of failed financial companies and high-profile swindlers like Bernie Madoff. Instead of being seen as “one-off” unethical operators, these newsmakers seem to have become stand-ins for “the rich” in general.

Successful people are less likely to be viewed as hardworking entrepreneurshard work who create jobs and opportunities for others. Instead, in a throwback to the 1930’s, a growing number of Americans and their elected officials are blaming the rich for the economic crisis and determined to penalize them by raising their taxes.

One example of this was a survey conducted for the Associated Press by Stanford University and the Robert Wood Johnson Foundation on funding for health care reform. The only funding methods supported by a majority of those polled were those that increased income taxes on the wealthy.

With such public support, it’s no wonder the health care bill passed by the U. S. House of Representatives is a plan to be funded by a 5.4% income tax surcharge on those making more than $500,000 a year. Some in Congress are also considering an additional tax on the rich to fund the Afghanistan war.

It’s as if the country is acting on a money script of, “There will always be enough money—just get it from the rich.”

Sooner or later, however, if the seemingly bottomless pool of “the rich” is taxed more and more heavily, it will dry up. Margaret Thatcher once said, “The problem with socialism is that eventually you run out of other people’s money to spend.” The result will make the recent financial crisis look like the good old days. We will see consumers spending even less, businesses cutting back, and more employees unable to find jobs.

will work for moneyI am extremely concerned that this increased resentment of “the rich” is coming just at the time we need to be supporting small businesses in order to preserve jobs and create new ones. If we over-burden those businesses instead, the result will be fewer opportunities for average Americans to prosper and build wealth of their own.

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5 Responses to Not Enough Money? Just Get More from “the Rich”

  1. Bob Bolen December 7, 2009 at 11:32 am #

    When the taxing authorities or administration make “rich” out to be an ugly trait, the populous will chime in. If they encourage entrepreneurship, saving and investing, this will become a desirable trait. Margaret Thatcher is right. Hello…..

  2. Rich Colman December 8, 2009 at 6:57 am #

    Rick:

    We are following old themes here! If you check your history, during the panic after the Golden Age ended in 1890s the rich were vilified. We saw the same thing happen in the 1910s when another panic (read recession) occurred and the public demanded action. In the 1930s the reaction was so bad that Andrew Mellon (secretary of the Treasury under Harding through Hoover) was prosecuted for committing a crime under Roosevelt which he was exonerated after he died. Even with the prosecution going on, Andrew Mellon gave his art collection (which is the foundation of the National Gallery in DC) to the US. I guess he did not hold a grudge. So we are watching a repeat of history and we will probably repeat this again!

  3. Jerry December 8, 2009 at 12:29 pm #

    Rick, your recent article is VERY poignant. We all must feel the pain in the growing disparities between class wealth. The solutions are entangled with competitive political wills that equally divide our union. The issue is gut wrenching.

    The middle class, the backbone of our country, is in trouble, and if they lose the dream of bootstraps from which my wife and I are a product of the 50’s/60’s, power shifts and national priorities “change” in a democratic society to favor the majority (electorate) of have-nots.

    In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80%. In terms of financial wealth (total net worth minus the value of one’s home), the top 20% of people owned 93% leaving only 7% for the bottom 80%: (economist Edward N. Wolff at New York University (2009)).

    Popular opinion and current national leadership says tax income-wealth (defined as annual income of $250K). If taxing the income is not sufficient, it is logical that the next step would likely tax the asset-wealth. Is there sufficient wealth accumulation to even dare divide the Eggs equally, or do we kill the Golden Goose. At what point does taxing the rich eventually drain the nation’s pool of wealth and ingenuity and result in a common class of poverty in a decrepit economy and unsecured nation?

    There is great fear throughout the country for our nation’s future of which I share, and all we seem to do is demonize the messenger. America has been called to arms before to test our will and sacrifice “by the people, of the people, for the people”. We can do it again and again…..JUST WHAT IS FAIR?…Jerry

  4. think and grow rich pdf December 2, 2010 at 1:02 pm #

    Since we are writing about Fee-only Financial Planner Rick Kahler’s View of the New War on the Rich | Financial Awakenings, Now, let’s move onto people that make $500,000 a year. No, not billionaires. Maybe, not even millionaires yet. But, could you live on $500,000 a year? Of course you could.

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