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America, get realistic and tax the rich

Felix Salmon, blogger for Portfolio.com

TEXT OF COMMENTARY

Felix Salmon: In England, if you are born rich and privileged, you'll probably stay that way forever. And if you are born poor, you'll probably stay that way, too.

Tess Vigeland: Commentator and Reuters blogger Felix Salmon.

Salmon: Americans, by contrast, believe in the American Dream, the idea that anybody can become rich or become president. The two countries have income taxes which reflect the differences: The U.K. has a progressive income tax which reaches 50 percent on incomes more than 150,000 pounds. That's roughly the same as the $250,000 in the U.S., where the tax will be less than than 40 percent even if the Bush tax cuts expire.

Part of the reason is tied up in American aspirations, which were tweaked in a recent New Yorker cartoon. Two guys are in a bar, the first says to the second: "As a potential lottery winner, I totally support tax cuts for the wealthy."

Potential wealth. That's why Americans don't like high taxes on the rich, and that's the difference between the U.S. and the U.K.

The U.S. is a fundamentally aspirational society, where financiers like Donald Trump have an enormous and genuine popular following, mostly just because they're rich. Yes, we have wealthy families and celebrities and entrepreneurs and real estate moguls in the U.K. But Brits tend to react to seven-figure incomes with disgust rather than with awe or respect. And they're not under any delusion that they will be wealthy one day.

And in that respect, the Brits are much more realistic than Americans. For all that the American Dream is woven into this country's culture, there's actually less social mobility here than in most of Europe. If you're born poor, you're much more likely to make it rich in a country like Sweden or even Canada than you are in the U.S.

Countries that provide good resources for poorer families and have cheap or free university education are much more likely than America to see people working their way up the ladder. Americans oppose tax cuts because they think that even if they're not rich today, they might be tomorrow. But they're wrong about that. The American Dream is just a dream -- it is not based on reality.

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One simply cannot read the chapter on Caesar in The Principles of Fighting by Robert Sweet, cannot read about the late Roman "republic," without thinking about the United States today. In the late Roman republic, as in the U.S. today, a small group of men -- the "optimates" -- were fabulously wealthy and cared nothing for either society as a whole or the long term. The optimates felt everything belonged to them, and nothing to others. No matter how much they had, they wanted still more. The Roman republic was said to be a democracy, but even Cicero conceded that it was in truth a plutocracy, that the mass of Romans were told they lived in a democracy simply to flatter their conceits. How greatly the Republicans remind me of the optimates! Indeed, they are the American optimates...

It is important to ask, "How do the wealthy obtain their wealth". Excluding inheriting it, most corporate wealth is gleaned by having people who work for minimum wage or near it.
Extremes of poverty and wealth is the current design of capitalism.
It doesn't have to be so lopsided.

Real Profit Sharing Will Stimulate Economic Recovery

The National Bureau of Economic Research has defined the components of a healthy
economic recovery. They are:
1.Increased personal income
2.Increased employment
3.Increased industrial production
4.Increased business sales volume
5.Increased Gross Domestic Product statistics for 2 or more consecutive months.

What one economic strategy can accomplish all five of these at once?
Real profit sharing. Not profit sharing in its present puny form. If we want rapid results, there must be a generous cash-back, frequent, predetermined percentage of profits, shared with workers. And what would incentivize private interests to participate? A tax credit. Allow businesses a tax credit for their profit-sharing, up to 15-20% of net profits. A contingent tax cut, in essence.

1.Profitsharing would rapidly raise household incomes, causing increased supply and demand.
2.An increase in supply and demand precedes job creation.
3.Higher pay (linked to profits) incentivizes job seekers, and hard work.
- A motivated workforce increases industrial productivity.
4.Increased supply and demand also leads to increased sales volume.
5.A profitsharing tax credit is a built-in stimulus, which creates a sustained healthy GDP.
6.Additionally if this is practiced world-wide, it could revitalize the global economy as well, and perhaps restore our nation to a position of moral and economic leadership,
by demonstrating a more egalitarian model of free enterprise.

All of the above, of course, leads to a wider tax revenue base, and greater tax revenues.
More jobs, more people working, higher incomes lead to more paycheck with-holdings. It would therefore replenish the Medicare and social security coffers as well. It leads to a leaner government, that is more citizen and business friendly.

The profitsharing tax credit makes it easier for the unemployed “on-the-street” to attain financial stability. It helps families pay for mortgages and health care. It helps prevent the extremes of poverty and wealth by natural design.
Most importantly, it is politically neutral. It is the missing link of conservative supply-side economics and the missing link of liberal economic democracy. It dovetails liberal and conservative ideals. It is two opposite turning gears doing work for the betterment of the people.
Why not try it in one state first, like NC, and if it works, expand the program.
The profit-sharing tax credit can change the world. “Without vision, the people perish.”
Feedback welcome here at profitsharinguprising.
Please forward this to friends, family, and your representatives.

Want to tax the rich; it's on my website' It is Called "The Net Worth System" and It will change the way all taxes are collected in this country and the World. The problem is the RICH have to initiate the New System and that is unlikely. Hawk

I strongly disagree with Mr. Salmon regarding mobility in America. I was born a poor black child in the South. I'm still black (and proud) but no longer poor and pretty middle class and if things work out I may wind up upper middle class by the time I retire. Sadly I have a sibling who is working class poor, but I have no doubt her children, my nieces will make their way into the middle class. Yes, we're not likely to become fab wealthy, but we're not doomed to stay poor. I believe in the American Dream, in pursuing happiness.

It has recently come to light that here in CA big companies pay much lower tax rates than small companies because they have lobbyists and give big campaign donations to politicians who vote them tax breaks.
Well, the same it true of the "big rich." They do the same thing so they pay a much lower percentage of their income in taxes.
Unfortunately, the middle class and poor lack political clout so they pay the price. Literally.

"In America, people aplaud the person for having done somethign right with their life to be able to even afford such things."
It was recently reported, on Marketplace perhaps, that the 400 or so wealthiest people in the USA pay on average $40,000 in taxes a year thanks to their unique ability to take advantage of tax breaks and opportunities unavailable to those of us struggling to make $250,000/year and actually keep it. Personally, I cannot find it in my heart to applaud that. It is essentially an additional tax on those of us who work hard to earn far less and yet support such necessities as infrastructure needs through mandatory and ofen unfair tax contributions (think 'alternative minimum tax' for one example). It is time we had a fair tax system with the same rules and opportunities for all. Fair taxes are an essential component of a civilized and forward-thinking society. The wealthiest need to make their fair contribution too.

The author is not talking about the fortunate, comfortably wealthy. He is talking about the absurdly rich. The one's who wield corporations and make millions and billions in bonuses and dividends. The ones who can (and do) topple entire economies.

The rich use more of the tax-supported commons: The courts to negotiate all their lawsuits and contracts, the freeways that enable interstate commerce, the very infrastructure they used to procure their wealth, and the very political/legislative system that is supposed to serve the citizenry. The police force to protect all "their" wealth. The military that protects their "right" to plunder sovereign nations. The ecological ruin that is left in their path.
It is well documented, and if you don't think its true, you’re either one of them (not likely,) or brainwashed by the media, which they own (Highly likely.)
Taxing the absurdly wealthy is neither “hating on” nor "stealing from" (such a silly and naive choice of words from one of the young republicans/future W Bush’s). It is keeping a functioning, balanced society that is more likely to flourish as a whole, and less likely to produce uneducated sociopaths who are willing to advocate for someone who would just as soon light them on fire as shake their hand if the advocate happened to come between them and a buck.

There was a time in our recent past when the typical American loathed inherited privelege, and it was reflected in our culture. The "death tax" is a vestige of that. We don't want royal families in America.
To the young republican who thinks he speaks for all of us:
Child, you must be out of your mind. However, if you are SURE you don't like taxes, don't want to be taxed, and don't like your filthy rich demi-gods to be taxed, please move to Liberia, and take the Kardashians, Chaney, Madoff, and Halliburton with you.

I have nothing against the really wealthy, but it just makes sense to have them pay higher taxes because they have more disposable income. Also, it is in their interest to support the military and infrastructure of the society in which they were so successful.
In addition, without the negative feedback of taxes, obtaining wealth becomes a runaway system. The rich get more power with money in order to influence laws in their favor so they get even more power and money, and so on. The ultimate end is a plutocracy where the rich rule the nation. We are near that state right now.

I'd like to know where in Europe Kyle Blank has lived and worked, as his specificity is lacking. We tend to think we Americans are more clever than the rest of the planet and therefore will always get ahead faster -- but it isn't until we work overseas that we realize, for example, we pay more for worse cell-phone service than anyone in Europe (or Asia).

The article is incorrect in two areas: 1) On why most Americans don't like to tax the wealthy too much, yes, the potential that they themselves may one day be wealthy is part of it for some, but also, it's just a general feeling that you do not hate on those who have made it, who have acquired great wealth. You do not seek to steal money that isn't yours. 2) European society is not more mobile. As the article says, if you are born wealthy in Europe, it's a lot easier to stay wealthy. And if you are born poor, it's a lot easier to remain poor. Europeans do not have "free" anything (not healthcare or education). It is paid for with very high taxes, and because of how they tax and regulate their economies, it is far more difficult to move up the ladder in European society than in American society. It is difficult to build a company/business. Also, having everything "free" actually disincentivizes hard work effort, because no one sees any value in hard work. You work hard, you get taxed out the wazoo (in order to pay for all the freebies your poorer friends who don't work hard get). In Europe, seeing a rich get to enjoy things like luxury cars and so forth that the middle-income earners and poor do not get, incites jealousy and rage. In America, people aplaud the person for having done somethign right with their life to be able to even afford such things.

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