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Is it Time to Leave the Rich Alone?

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This is a Devil's Advocate post.

Because of the Occupy Movement, people are focused on the rich, or the 1% as they are now known. CNN reported that in order to get in to the exclusive 1% you have to make a minimum of $343,927 each year.

I figured it would be much higher and I thought of the article that appeared in my hometown newspaper that told the story of a city bus driver who was making $98,000. There are truck drivers and rig operators in North Dakota who are transporting oil for salaries starting at $100,000 with an almost endless amount of overtime and apparently those jobs are still plentiful. They can’t find enough workers to fill these jobs! Some of these sometimes called “roughnecks” are almost half way to the 1% club after bonuses.

Did you know that the 1% earned 17% of the nation’s income and paid 37% of all income tax in the United States, according to CNN? CNBC, in a recent on air report, said that in reality only 3% of the 1% club is actually in the financial industry, by the way.

According to Wall Street journalist Robert Frank, who released a new book, “High Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble, and Bust”, rich people spend a lot of money and by spending large sums they keep a sizable amount of people in business.

Yacht and airplane builders, people who are building the 1%’s vacation homes, high end retailers like Tiffany, high end restaurants and caterers, and country clubs and those are just the direct effects. There are a whole host of companies that see indirect positive impact from the spending habits of the rich as well. If that’s true, it seems to at least in part refute the idea that rich are taking a lot and giving very little. If you’re looking for some interesting reading, pick up Frank’s book.

Still, I don’t think many are denying that the rich have a disproportionate amount of the nation’s wealth. The top quintile of income earners hold 80% of the nation’s wealth yet receive tax breaks that others do not. Billionaire investor Warren Buffett paid only 17% of his income in taxes while the middle class paid an average of 20.4% according to the CBO report issued in June of 2010 of demographics back to 2007.

I’m definitely on the side of Warren Buffett who believes that the rich should pay their fair share but I’m not as sympathetic to those people who believe that wealth should be evenly spread. I appreciate the idea that it should be more evenly spread but I don’t believe that capitalism is all about fairness. According to some macroeconomic theories, there is a reason for the income gaps and most don’t have much to do with what the protesters believe.

First, there is less demand for unskilled labor as more of those jobs go to other countries or become computerized. Next, the wealthy have the ability to invest in wealth producing products like real estate, stocks and bonds, and derivative products and yes, it’s true that a cut in the income tax for the wealthy had an effect as well. Is it realistic or reasonable to ask the rich to not take advantage of legal means of cutting their taxes? How many middle class households voluntarily give up tax deductions that they are legally entitled to?

Let me get to the point:  Maybe this controversy is best solved by meeting in the middle. There’s a lot of talk about the income gap but very little about the fact that wealth is built over time by doing the right things with our money and America, as a whole, is a country full of not bad, but awful household money managers. I feel comfortable in my belief that every household in America could cut expenses somehow or could have made better decisions in their past that would allow them to be in a better financial position today.

The millionaire next door is the millionaire who saved and invested all of their life and retired with seven figures. Maybe the rich can pay more taxes but the rest of us can get radical with how we spend and save. I’m not saying it will solve the problem but let’s be honest. We wouldn’t much care how the top 1% lived if unemployment were lower and wages higher. We’re a little tired of this economy and that’s ok.

Maybe it’s time to not worry so much about the rich and go after the people we have the power to change: Ourselves and our own financial habits. Call me too idealistic but I still believe that America is a place where anybody can be anything that want to be. Dave Ramsey believes that we just don’t get radical enough with how we take control of our finances and I completely agree.

How about we meet in the middle. The rich can pay more taxes but we can do a better job of managing our own money. I don’t know about you but I’ve had a much easier time changing me than trying to change others.

What do you think?

{ 20 comments, please add your thoughts now! }

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20 Responses to “Is it Time to Leave the Rich Alone?”

  1. tom says:

    Thoughtful post. I wouldn’t consider it a devil’s advocate post either.

    I find it interesting that private jets get a lot of heat, but, as you correctly point out, private jet makers are saying WTF? The jets are designed, built and sold by the 99%.

    Bottom line, take care of yourself as no one, including the government cares about you.

  2. eric says:

    You tell them, Tim! :)

    This doesn’t seem like a Devil’s Advocate post that much though…maybe because I am in agreement.

  3. freeby50 says:

    Sorry to be nitpicky …

    Bus drivers and truck drivers do not typically make $100,000. Thats extremely rare and almost always going to reflect a lot of overtime. You can always find rare exceptions to the rule for any profession where someone gets paid a particularly high wage but that doesn’t mean much of anything. Sometimes it just means the person in question worked a boat load of overtime. The article states “the highest paid [bus] driver worked 893 hours for $27,997 in overtime pay”

    Also, you say that “truck drivers and rig operators in North Dakota who are transporting oil for salaries starting at $100,000 with an almost endless amount of overtime”

    Their wages do not START at $100,000.

    The article says truck drivers “can earn” $80,000 with ample overtime and oil rig workers “can earn an average of $100,000″.

    From BLS.gov data theres only around 10,000 truck drivers in the entire state of North Dakota and 90% of them earn less than $60,000 a year.

  4. Wealth V Annual Income says:

    Your Mistaking Wealth with Income.

    Taxes on Wealth are the estate tax, which is lower than ever.

    The current tax policy debate going on now is over INCOME (annual income).

    The 99% did better under the Regan Rates for the highest annual income earners (3% higher than now)

    • freeby50 says:

      To add to that point, regarding : “1% earned 17% of the nation’s income and paid 37% of all income tax in the United States”

      The top 1% owns around 35-40% of the nations wealth.

  5. Shirley says:

    I agree wholeheartedly with this article. Each of us has the choice of working to make our lives what we want them to be or sitting back and complaining about the ‘unfairness of it all’. Positive attitude is vital, should be nurtured, and can be self attained.

    When things are out of our control through no fault of our own and we need a hand, it’s up to us to step forward and ask for that hand and then make sure that problem doesn’t arise again. I feel that each person who receives that hand is morally obligated to pay it forward when and if they can.

    Idealistic? Yes, I probably am, but I’ve been there and I know it can be done.

  6. Nick says:

    I think you have completely missed what OWS is all about. It is not about the 1% of the people who control most of the wealth in the country. It is that 1% then pay the lobbyists to pass bills/regulations that are favorable to them. Case in point the “Capital Gains Tax”. Could you with a straight face really say that doesn’t exclusively favor the rich? I guess not! What about the mess that Wall Street made while they paid Congress to look the other way? Why haven’t we made any progress in bringing these banks to justice? No one is above the law, and it really seems if you are in the top 1% you can get away with anything…that is what OWS is all about. I care less about how much wealth they make!

    • tom says:

      So what you’re saying is the problem is with Congress and not the wealthy.

      The wealthy are out to make money. 99.9% of the wealthy do it within the rules and laws that govern their industry, .1% do not.

      Government makes the rules and laws.

      If you want to change the rules and laws, you have to change government.

      • Demi says:

        I could not have said it any better, Tom. Until we ALL play by the very same rules…things will never be fair (if that word even exists anymore) and this nation will never re-fluorish back to even 1/10 of where we were. Counting on the rich Republicans to ‘save’ this nation when they are busy worrying about how much money they make and as cheaply as they can…will never work. Allowing a huge influx of illegal aliens in this nation as the Democrats are eyeing…again…major damage will result to anyone who is not protected by a union. If the government wants followers…they need to lead. Not put themselves in a separate class as they have constructed for themselves. Get rid of the government health care and pension plans…join Blue Cross and Blue Shield and invest your guaranteed retirement pension money in the same Wall Street owned invest vehicles as the public does…and then Mr. Elected Official we can talk.

    • debbie says:

      Thank you! i cant believe you are the only one who is addressing the real issues.

  7. cubiclegeoff says:

    I think inequality throughout our society is a problem. I don’t think true wealth redistribution is a good thing, but I do think that many people bear the costs and don’t see the benefits in most situations. Executives that get millions in bonuses while their company lays off the workers that do the majority of the work that makes those millions is a problem. We have an connected society where one person or group of people can not really become wealthy or succeed without the efforts of a larger portion of society that does not necessarily see the benefits of that gain,

    I also think opportunity is far skewed to the few. There is plenty of information out there about the limited opportunity in our society due to how schools are funded, how health care is provided, access to nutritious food, etc. Sure people can break beyond this limitations, but far fewer than we would like to believe.

  8. money says:

    Billionaires got rich by creating great companies like Apple, Google, Facebook, Walmart etc which help millions of people get great products and services and they provide millions of jobs to Americans

    • cubiclegeoff says:

      They didn’t do it on their own or without help from the government or others that have not been given their share.

  9. Demi says:

    Overall…IMHO…there are so many problems to be dealt with at so many levels…it will take years before any of the issues are brought up, discussed, addressed, and fixed by any Congress…not just this one. First of all…our elected officials have absolutely nothing to lose by doing…nothing as they have been doing. Without term limits and with a guaranteed health care system and pension…why should they hurry? They win if re-elected or not re-elected. Does any one know a starving past elected official? Also the lobby ‘bonuses’ and re-election ‘donations’ they receive. A real joke. Those who think we, voters, are the gate keepers when it comes to Congress are kidding themselves. Congress has created themselves into an untouchable position. First things first is a Constitutional Convention to address the root of all evils: our elected officials and the process. Clearly they no longer answer to the people there are suppose to represent. This country is based on classes of people anymore…those that have and want it all, those that have and are trying to work with what they have, those that have not, and those that have not and want it all. Part of our nations problem is its people. Part of the nations problem is the processes. To make matters worse we are dealing with a major loss to our nations manufacturing ability by allowing major manufacturers to move overseas where OSHA and the DEP simply do not exist. This nation can not compete on an uneven scale. Until those that decide can feel our pain…things will never change. People are losing their homes. Our elected officials, many of them, have 2 to 6 homes. On an elected officials salary?…a public servant…one who is suppose to serve his fellow man for X number of years and move on out and back to his job when he is done. Our Constitution has been trashed. Worse yet, our judicial system has allowed it. So many problems it makes some people just want to stick their head in the sand and live their OWN little lives outside of all the hassles of dealing with such enormous problems. Of all the problem I perceive with this nation…it starts in Congress. That is where things need to be fixed.

  10. Lisa says:

    $100k is not “halfway” to $343k.

    From your numbers, $98,000 adjusted gross income (AGI) puts your “bus driver” in the top 25% of earners. (From: http://www.kiplinger.com/tools/income_rank/index.php#ixzz1do0ksrQO ) So he already is in the top 25%, which is statistically more than “halfway” to the top 5%, but is he likely to actually ever make it into the top 5%?

    There are about 15 million households who make more than your “oil rig driver” in all of the US. Your example “roughneck” makes more than 100 million households in all of the US. Given the dropoff, his likelihood of moving into the class that contains only an elite 2 million households does not look good. It’s pretty much not going to happen.
    http://pubdb3.census.gov/macro/032007/hhinc/new06_000.htm

  11. Demi says:

    Furthermore…if the 1% want the support of the OWS members…for which I do belong for my OWN reasons…invest in this nation…create jobs…risk your money…as we all did once upon a time. That way we ALL had a common goal to build a strong nation so we ALL could enjoy the rewards. As I sit back and see major companies investing overseas for large returns and paying little back to the US Government…it tells me the nature of their investment: pressure by stock holders for as huge as a return as they can get. The investment in this nation is gone because our profitability is gone…gone overseas for $2 a hour producing huge returns. If I had a million shares invested in Wall Street I probably would feel the very same way. But this little thing called loyalty to my nation and my fellow American keeps getting in the way for me. As long as I can pay my bills and have a roof over my head, that is about all I can ask for. This little thing called ‘greed’ has a very tight grip on a nation where even if you work hard…you part with your earnings to those who have absolutely nothing to do with how hard you worked for it.

  12. cdiver says:

    we are all our very own business and employ someone to certain degree. why not become more efficient, more productive, more valuable and continue to employ more people

  13. Velcapitan says:

    How did the government help Microsoft or Johnson and Johnson or Coca Cola or Intel?

    I really think that American’s misplace a lot of their anger. Corporations are in the business of making money off of their own products, business models, and management. Our government has spent a lot of time protecting their own interests instead of being committed to policy and regulation that is in the best interest of their employers (citizens) and also corporations.

    To think that our government who tends to destroy or impair everything it touches is responsible for the success of entrepreneurs and corporations is ridiculous. They are far more responsible for their failure due to taxes and regulations.

    The negative attitudes towards wealthy people is confusing to me as well. A lot of these people are job creators. Many of them saved and invested for many years to become millionaires. I think that American’s have become so caught up in easy credit and consumerism that we have forgotten basic common sense money management.

    People in Asia seem to get it. In some places people save 30-35% of their income and their cost of living is much higher than ours. Sure saving would hurt growth in our consumerist economy, but when the bubble bursts I think American’s see that no one has your best interest in mind other than you.

  14. Anna says:

    I think our current system allows politicians to easily play one side of the American public against the other. This keeps Americans divided and lets special interests run free.

    I would like something more fare as far as how taxes are governed.

    For example, I pay my mortgage out of my earned income. Why should someone paying their mortgage out of unearned income pay a lower percent?

    Another example, I pay tax on 100% of my income for things like social security. To many wealthier individuals, the $106k cap is nothing.

    That said, I am an entrepreneur. I think the tax on business profits is ridiculous and way too high. Sure, I can pass it through as income and through defined benefits plans, thus ensuring I have no or minimal profit and save on taxes that way. But I should be able to enjoy my business profit (and pay my mortgage from it) without paying a 35% rate (federal of course – the state also takes its share).

    There should be a more equal system where everyone will pay a share and not feel like they are getting screwed while someone else gets a free ride.

    Unfortunately, it will probably never happen because it is in the politician’s best interest to pit the rich versus the poor. Otherwise, we might actually start paying attention to what that politician is doing.


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