Saturday, February 28, 2009

The Soak the Rich Myth

I once worked for a very wealthy man. He was the kind of guy who would make the interns, who were already working for free, take the company car over to his house to clean his swimming pool. He was the kind of guy who once had an employee load a bale of hay into the back of his brand new pick-up truck, drove around town showing off his new truck, only to have the employee unload the truck upon his return. He had no other use for the hay bale. He was the kind of guy who, after downgrading the employee retirement plan, bought a prize steer for $25,000 and invited his friends over for a bar-b-cue. As grandma might have said, he was a piece of work.

He bought a new Cadillac every year. He owned at least three homes that I knew of; his house on the hill in the swankiest neighborhood, a well appointed "cabin" in the mountains, and a home in Hawaii. Every December he would leave for Hawaii and not return until the spring thaw in March, while those of us who were gainfully employed kept his income stream going through the sub-zero Colorado winters. Needless to say, there was a little grumbling among the employees from time to time.

One of the nice things about working the night shift is that if you hustle through the first seven hours, you can put your feet up for the eighth. On a January night, a few of us were sitting, listening to the wind howl, watching the snow "fall" from left to right, wondering if our cars were going to start, when we began grumbling. After a while, one guy who had been sitting quietly looking out the window, said to no-one in particular, "Ya' know, if I had his money, I'd be in Hawaii right now too." Good point.

What brought this memory back this morning was an article in Pajamas Media by Jennifer Rubin, about the latest tax plan.
A taxpayer in the 35% bracket gives a gift to United Way of $10,000. Under the current rules he can reduce his tax bill by $3500. Under the Obama plan he can only reduce his tax bill by $2800. In the Obama scheme, then, that United Way contribution now costs the taxpayer $700 more. The obvious result: give less to United Way so the higher tax bill can be paid. To be blunt, the government is discouraging charitable giving. It is hard to think of any worse tax policy or any one more harmful to the needy.

If there is one thing that I can say with absolute certainty, it's that we all want more than we have. Everybody has dreams. If I only had $1,000 I'd get this; $5,000 I'd get that; $50,000, and I'd definitely buy one of those. Well, what if you did? What if you lived a lifestyle that allowed for Christmas in Hawaii, springtime in the Rockies, and five figure checks to a variety of charities? Where would you cut? Would you tell the wife she’ll have to do her Christmas shopping in sub-zero weather, or shave a little off the donations? You could take those $10,000 checks down to $9,000 and still make it to Hawaii. $9,000 is still a lot of money. You could tell yourself that you're still being generous, and you'd be right. Just a little bit less here and there, and you won’t have to tell your friends that instead of prized-steer ribs, this year you’ll be serving mutton. Be honest with yourself. Which would you choose? Really?


Bob said...

I think it goes to show that money doesn't buy happiness. Some of the most poverty stricken are rich in many other ways -- family, friends, work, and so on.

Anonymous said...

I would point out that the $700 that will not go to charitable giving, according to your scenario, would be more than replaced by Pell grants for those poor kids who if they go to college become taxpayers and unemployment benefits extended for another year and public transportation so they can get to a green job in a local solar plant or windmill installer.

Ann Onn said...

But did your former employer actually donate to charities? Somehow it seems that would be out of character for him.

Local So-and-so said...

Hi Bob. Yes, wealth comes in many forms. I’d bet I was the happier one back then. I had youth, among other circumstances.

Anon: The rich don’t give up anything, they just subtract it from what they were already giving away. Places like the Red Cross have a 97/3 donation to administration ratio. That is, 97% of money donated goes to those who are in need while 3% goes to administration costs. There are hundreds of private charities over 80%. No government program even comes close. Many don’t even make it to 50%.

Hi Ann. I think his wife liked the arts. Other than that, I couldn't say

Orrin said...

Excellent post.

One more thing to think about - if that boss hadn't been an ambitious, hard-nosed, driven guy, none of you would have complained about the job - because the jobs wouldn't exist in the first place. It's not just charitable giving - it's the extra capital that justifies risking business expansion and with it, the creation of private sector jobs which contribute to the economy instead of public ones which are a net drain.

Would it that Obama ONLY planned on taking $1,000 extra per year from wealthy people!

Local So-and-so said...

I don't see how he's going to create 3 million jobs, unless it's 3 million government jobs.

Orrin said...

No, no - he's going to "create OR SAVE" 3 million jobs. Which means when the United States only has 3 million jobs TOTAL after our little experiment with radical leftism, Obama can take credit for there not being ZERO jobs.