Observations on life

What has luck got to do with it? Millionaires should give us more of their winnings

The following is an excerpt from an opinion piece on Bloomberg.com April 13,2012

A Guide to the Class Warfare of Presidential Politics Lucky, Not Evil Thirty percent is a perfectly reasonable tax rate on incomes over a million — even if the recipients are sainted small businessfolk. Whether 30 percent constitutes class warfare depends on the rhetoric that goes with it. People who make more than a million a year are not evil. They’re just lucky. Obama’s rhetoric has largely avoided cheap shots that imply otherwise.

“Just lucky?”

If I win the lottery for an equivalent of a million dollars a year, I’m lucky . If a rich relative leaves me a million dollars in his will, I’m lucky.

If I start a business and make a lot of money, get a good education and a good job and make a lot of money, if I invent something truly innovative and make a million dollars I am not lucky I am rewarded for the effort and sacrifice that any of the above take to achieve.

Extreme success may be accompanied by an absence of misfortune, but so may failure or mediocre success.

The essence of the fallacy surrounding our current debate over “fair share” to be paid by the 1% is that they are classified as lucky as if the day after they graduated high school they started earning $1,000,000 or even $250,000 a year.

This is a big political game that assumes the bulk of American voters are losers with an axe to grind against the more successful among us. If pitting the wealthy against everyone else had any serious impact on the deficit because the wealthy really didn’t pay their fair share, that would be one thing, but that is not even true. The truth is that the only reason high income earners pay a lower percentage in taxes is because the bulk of their income is in dividends and capital gains and taxed at 15% as is the case for every American, that and because they contribute generously to charity.

In the year 2000, families earning $20,000 or less gave an average of about $450 to charity, while families earning more than $100,000 gave away an average of a bit more than $3,000. The top 10 percent of households in income are responsible for at least a quarter of all the money contributed to charity, and households with total wealth exceeding $1 million give about half of all charitable donations. The American rich are generous, on average (interestingly, lower income people tend to give a greater percentage of their income to charity. This is thought to mostly be because of strong religious affiliations promoting giving). It is also true that lower income Americans spend a greater percentage of their income on lottery tickets than do the wealthy.

There is a great deal of unfairness though. Take for example the widow on a fixed income who can’t afford to stay in her family home of forty years because of high property taxes caused by irresponsible spending at state and local levels. Or how about the lucky gal who wins a big lottery, pays 35% in federal taxes dies the next year and her children get to pay another 35% in estate taxes. What about all the special benefits, tax breaks, and discounts for seniors based on income, but ignoring net worth or total assets? Is it “fair” that struggling young couples have their payroll taxes increased (and they will) to pay for the benefits for the boomers who in all too many cases did not plan for their own futures? Fair is fair.

So what say ye? Do you think that high income people should pay more in taxes? Do you think they are not paying their fair share? How do you define wealthy?

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5 replies »

  1. IF it’s true? C’mon. Charities that the rich donate to are part of their lifestyles…colleges, the Arts, etc. I know they are free to donate where they wish. Sure would like to see with the local food banks, he says smiling. AIG got bailed out and their CEO Hank Greenberg got $250m in 2008. Just beautiful.

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    • Does it matter what they donate to? Gates donates to improve health around the world. In his day Andrew Carnegie built 1600 libraries. Perhaps if they were used more people would be better equipped for today’s jobs.

      Donation data come from IRS records.

      AIG and the banks have paid back their bailout money with interest or are in the process of doing so. According to the Treasury Department the government is going to make money on the deal (questionable).

      The largest remaining probable losses are the two government agencies Fannie Mae and Freddy Mac, both protected by members of Congress when their problems were well known in advance.

      Dick

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  2. That four letter “F” word (fair) is the oxygen that class warfare demagogues can’t exist without.
    The question is who gets to decide what’s fair or not? Who gets to decide what a person’s value to society is? Have we identified our philosopher kings and given them authority over us or will we permit usurpers?

    Now add in the “luck” factor as something which is unfair. Five hundred years ago, Niccolo Machiavelli wrote in “The Prince “that success requires among other things, good fortune. To the best of my knowledge, this has not been proven false.

    Does any rational person believe that there is a way to legislate good fortune in such a way that there will be universal equality? The human brain is programmed to search for absolutes and has difficulty processing probabilities which is all that reality affords us.

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      • If that’s true, the real question is why. Why can’t the Americans who want to move up the economic latter?

        I’m not a friend of bailouts, but it could have been worse if AIG failed and they are paying back the funds.

        Richard D Quinn Editor

        Visit these blogs:

        Quinnscommentary.com

        Health Insurance Illuminated http://blog.horizonblue.com/

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