With all of the news surrounding taxing the rich, I started to think, who cares? I mean, you didn’t hear this type of fuss when we jacked up the tax on cigarettes. My research says roughly 20% of Americans smoke cigarettes. Those people pay a tax that almost doubles the costs of their habit. Where is the outrage there? Instead we hear that the rich should not be taxed. After all, they earned their money, they are the job creators right?
I started to wonder, are there that many people who make $250,000 or more that would be impacted by this tax the rich plan? From the research I have done, roughly 3% of Americans are fortunate enough to achieve that level. So why do average Americans care?
I can only come up to two conclusions. The first is that because we all yearn to reach the rich threshold, we do not want to face being taxed at a higher rate. So I went out to determine what it means to be rich. A recent Gallup poll says Americans think they are rich at $150,000. On top of that, a recent study at Princeton concluded, people only need to make $75,000 to be happy. So why do we care about those unhappy folks at $250,000 and above?
According to the Bureau of Labor and Statistics, the average American made $44,410 in 2010. For the sake of argument, let’s double that to $88,820. Keep in mind, we are now above the happy threshold. Now, since many household are duel income earners, let’s double the double again to $167,640. So now we consider ourselves rich, are near the individual earner happy zone and still have not reached the top 3%. Life is good. Besides, let’s be realistic, how many will really reach the $250,000 level?
The second factor I have to consider is that someone has planted in our heads that rich people create jobs. Really, Paris Hilton is creating jobs? I am not counting her entourage. Some rich people may be business owners, but they are not necessarily jobs creators, businesses create jobs. There is a difference. If you really want to create jobs, do not give tax breaks to the rich; give hiring vouchers to businesses. According to CNN, taxpayers paid $185 billion to cover the unemployed in 2011. That comes out to $10,500 per unemployed person. What if the government gave businesses that money for each person they hired this year? That would reduce the cost of employing another person, raise additional income tax money from their salary (which would off-set the voucher) and add 96% of the income back into the economy. (Our current savings rate is 4%). The rich didn’t create this happening, a voucher type program did. Now if the rich paid 1%-2% more in taxes, this voucher would be almost be paid and reduce the tax burden on everyone, except the $250,000 plus earners.
I do not believe $250,000 is that much in earnings. Someday I actually hope to reach this level and I do not want to have my taxes go up. Let’s put the floor at $500,000. After all, what do I care?