Class Warfare Heats Up

by Jon Dulin · 5 comments

Class WarfareWith President Obama continuing to call for those making over $250,000 to pay their fair share of taxes, class warfare is heating up just in time for the election. The issue I have with singling out a specific group is that we are all in this together.

Yes, the rich are paying a lower tax rate now than they were 30 years ago. But they are still paying all of the taxes they are supposed to. I’m in the 25% tax bracket. After taking into account deductions and credits last year I paid 10% in tax. Am I a bad guy for not paying my fair share? I didn’t do anything wrong. I took advantage of all of the deductions I could. Many others end up paying zero in taxes but have taxable income. Are they bad people?

Class Warfare Heats Up

Politicians and the media are making it sound like the 1% are swimming in their vaults of money like Scrooge McDuck. I haven’t seen any new vaults being built up recently, nor have I heard of any money swimming related injuries either. This group still pays taxes. I guess just not as enough as some people would like.

There has always been inequality when it comes to income. Throughout history you had the King and Queen with all of the money. Everyone else were peasants. At least now a greater percentage of the population has wealth and the rest have the opportunity for creating wealth. Back then, if you weren’t born into royalty, you were unable to move up in class.

Lack of Opportunity?

I think that last sentence is where the issue really lies. Even today, many do not feel that they have the opportunity to create wealth. But they do. They just don’t want to make the sacrifices in order to attain it. Unless you are born into wealth, you have to find a way to make it. Bill Gates didn’t become rich overnight. It took him years to build his company. It took him many hours of hard work to get Microsoft to where it is today.

But we only see Bill Gates now. Current athletes can be seen the same way. We see them play football on Sunday. What a job that is! Practice a few days a week and play a game on Sunday. What a life! But we don’t see them during the off-season when they are in the gym eight hours a day, or how they gave up their entire summers while growing up to go to football camps to get better. Most of us can’t even get to the gym for an hour per day on a regular basis. Imagine if your job depended on it. They study film and learn new plays. It isn’t as glamorous as we make it out to be. It’s hard work.

The answer isn’t taxing those that work hard and earn a higher salary more. It isn’t taking that money and giving to the poor so that they can better themselves. Sadly they won’t use the money to better themselves. They will simply buy an iPhone or a new car, something that will saddle them with monthly payments for years. It’s not their fault, they don’t know any better.

Ending Class Warfare

The answer is revising the tax code so that everyone does pay their fair share. Take away the loopholes and the complexity around the current tax code. You shouldn’t be punished for making more than then next person, and the next person shouldn’t be rewarded for working less hard that the next person. Everyone has to pay their fair share.

Here are some of my ideas:

  • The rich don’t need the ability to deduct the interest from their mortgages on their taxes.
  • Charity is a good thing and we should continue to allow this deduction regardless of income.

If the goal is get people out of poverty, then we should be encouraging them to do so. The current system does the opposite: it encourages them to remain in poverty. We should give incentives that encourage people to work more. One idea is to provide free education classes on personal finance. Once they complete the courses, they get a certificate that they show to their employer who will then give them a raise. This way, they learn about how to handle their finances and get a raise to hopefully start an emergency fund.

Maybe at the time of completion of these courses, they open an IRA account and get a bonus of $500 to start them off. There could also more continuing education courses as well that get more complex. As these classes are completed, they could receive additional bonuses to their IRA account.

I know my ideas are out there, just like they are with my idea to create jobs and increase worker pay. But I think we need to start thinking outside the box. Throw everything on the table and go from there. After all, what we have now really isn’t working anymore.

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{ 5 comments… read them below or add one }

Sean @ One Smart Dollar October 10, 2012 at 9:04 am

While sometimes I hate to admit it, I am right there with you. A lot of my income is dividends from investments and from my company profits. Are we doing anything wrong? Not even close. We are following that tax laws that have been laid out.

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John S @ Frugal Rules October 10, 2012 at 11:23 am

Great thoughts. I would agree that the tax code does need revised and some big things might have to go by the wayside to make it more fair and work for everyone and the government.
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My Money Design October 10, 2012 at 7:58 pm

Well laid out. I personally like the idea of education classes on personal finance. I think if more people had access to these types of resources, they actually have a chance of getting out of the hole.
My Money Design recently posted..Maxing Out Your 401k Matching – Don’t You Dare Leave Money on the Table!My Profile

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moneysma October 11, 2012 at 12:39 pm

Many people could have been saved if that had learned about personal finance. But we’re only focused on test scores right now so personal finance gets pushed to the back burner.

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Eric October 21, 2012 at 3:10 pm

Thanks fo sharing your thoughts. I definitely agree with much of what you say, but I also feel the need to address some of your points.

Yes, many people perceive the 1% as greedy, wealthy, corporate villains. It’s not fair to think this way, but it’s also unfair to stereotype the working class. When you state, “The answer isn’t taxing those that work hard and earned a higher salary more. It isn’t taking that money and giving to the poor so that they can better themselves. Sadly they won’t use the money to better themselves. They will simply buy an iPhone or a new car, something that will saddle them with monthly payments for years. It’s not their fault, they don’t know any better.” – This generalization invokes images of lazy “welfare queens” who don’t work but freeload off of the government. Yes, those frauds exist, but just like we can’t generalize all of the 1% as evil villains, we can’t paint all of those in poverty as lazy freeloaders.

In fact, many of those in poverty do work hard, long hours in low-paying jobs. Many hold multiple part time jobs just to stay afloat. If you were to increase taxes by 1% on low-income, and even middle-income workers, the difference could be felt. Increase the taxes by 5% on multi-millionaires, and they’re still multi-millionaires. This is why I agree with the idea of increasing taxes on the super wealthy.

“You shouldn’t be punished for making more than then next person, and the next person shouldn’t be rewarded for working less hard that the next person.” Is it really a punishment to pay more in taxes if you are still extremely wealthy after paying more taxes? And again, you’re making the assumption that those with less money don’t work as hard. While the wealthy did work hard to get where they are, investing large sums of money allows them to build *exponentially* more wealth without even working. In a way, the rich get rewarded just for being rich, while the poor have to struggle just to maintain their low level of income. Is that fair?

“At least now a greater percentage of the population has wealth and the rest have the opportunity for creating wealth. Back then, if you weren’t born into royalty, you were unable to move up in class. I think that last sentence is where the issue really lies. Even today, many do not feel that they have the opportunity to create wealth. But they do. They just don’t want to make the sacrifices in order to attain it. Unless you are born into wealth, you have to find a way to make it.” I generally agree with this, but I do think there is unequal opportunity. I agree that if you work hard, you will succeed–or, at least, reach *some* level of success–but I disagree with the notion that people are poor because they don’t want to work for wealth.

Setting aside any government issues, I think one of the biggest inequities between the upper and working classes is *resources*. Take, for example, someone born into wealth. Even if he doesn’t inherit a single penny from his parents, from birth, he is surrounded by successful people. He has smart, business-oriented parents, putting him on the same path to success. He probably lives in a wealthy neighborhood, with successful neighbors and a fantastic school district. He can afford to go to college. He is surrounded by mentors who can give him business advice. He has connections to get internships and job interviews. Even if he doesn’t take a penny from his parents, he’s already on the path to success.

A person who is born into poverty does not have those resources. It’s easy to say “just work harder.” Well, he often starts working hard as a teenager at a part-time job to help support the family. He’s not surrounded by wealthy, successful neighbors to help guide him. Maybe he goes to college, but instead of focusing on his studies or getting valuable experience from unpaid internships, he takes part time jobs to help pay for college, and he still graduates with student loan debt. He doesn’t have the same connections that a wealthy person does to get a leg up.

For an adult in poverty, it’s easy to say “just work harder. Start your own business. You’re not doing enough.” If they haven’t had business mentors growing up, how will they know anything about doing so? When their time and energy is consumed by low-paying jobs, how do they have the time to go to the library? When they’re struggling to put food on the table, how can they afford to go back to school?

While this is an extreme end of the spectrum, I wanted to illustrate that the difference between the rich and the poor isn’t just money and “wanting” to be successful. It’s resources, it’s education, it’s time and energy, it’s environment, mentors, school districts, connections, networks, neighborhood. So it’s extremely unfair to generalize that the poor are not working hard enough and not smart with money (if they don’t have much money in the first place, how can they possibly save and invest their way to wealth?). When you’re in poverty, it’s EXTREMELY hard to get out of it. Not impossible, but it’s unfair to say “they just don’t want to make the sacrifices” to attain wealth. They make lots of sacrifices just to get by. And while it’s unfair to generalize the 1% as greedy villains, I think it is fair to say that taxing them a little more won’t make much difference in their bottom line.

I absolutely agree with you about giving those in poverty the resources to get out of poverty. It’s no easy task, but better educational resources and worker training programs are definitely part of the equation.

Sorry for the extremely long comment, but I hope this leads to good discussion!

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