Tax Cuts for the Wealthy

I have grown tired of the various shibboleths regarding the extended tax cuts and the Republican platform for limiting the taxes that people pay. People need to understand that the wealthiest Americans and the taxes they pay are sgnificant. In fact, the sliding tax rates guarantee that the wealthy pay more in taxes, individually, than the middle class people. The annoyance that I have concerns what has become the general consensus and popular opinion that the Right is motivated by indifference to the plight of lower income people. In fact, the stance that I take is that taxes need to be lower for everyone, including the wealthy.

I happen to fit into that middle class category, so I will pick a nice round number to illustrate my point. For the illustration of the wealthy example, I will pick a similarly round number, though excessivly high in fact, to make the picture clear, I hope.

If I start with a gross income of $100,000, and I usually have 20% discretionary income, then the increased tax burden hits that $20,000 directly. That disretionary income may go toward investments, college funds or costs for children, or large purchases such as cars and vacations. In short, I will spend less on some things than I would normally.

For a very wealthy person who faces a higher increase in tax burden, the cost cutting will not likely influence his personal spending habit. Instead, the cost cutting that must take place will involve finacnial investments, property purchases, or in the cases of self-employed business owners, capital expenditures or business expansions.

Let's say the the income for the very wealthy is $1,000,000. The discretionary income for this person is likely in the area of $400,000. Consequently, the personal effect of the tax increase on daily life is negligible. Instead, the response of the wealthy person will likely take plaace in the investment arena. Using the oft-mentioned 4.9% increase, which I will round off to 5%, we are talking about 5% of $400,000 or $20,000. The point is that the tax infringement will change the wealthy man's spending habits a bit, but the larger suppression will take place in the area of personal finance that affect the larger economy. When these larger sums of money are invested in money markets, stocks, bonds, and other areas, the effect is enormous, especially when people realize just how many millionaires there are out there.

In the case of the middle class effect, a higher volume or population means that a tax increase will suppress consumer spending. In the case of the increase for the wealthy, the effect will be a suppression of available money for business expansion. However, if no one is buying, then the businessman will have no impetus to expand anyway. Decreased expansion and investment in new business opportunities means the jobless rates will remain stagnant.

Republicans want less government and lower taxes. Of course, such is not a prescription for guaranteed success. The principle is that individual people, unburdened by taxes that suppress their ability to choose, will do things that benefit everybody. The Right believes that the concept extends to businesses and everybody else, regardless of income.

In summation, tax cuts for the wealthy MAY result in outcomes that effect everyone positively, the same way that tax cuts for everyone else has the potential to effect everyone else positively. The tax burden on the weatlhy is already higher, and has been for a long time. Why, during an economic crisis, would the government want to risk suppressing the expansion of and investment in businees?