Tag Archives: Taxes

What’s fair? Capitalism or Socialism?

Nobody with a pulse can deny that there’s been an ongoing, heated argument in politics and pop-culture that pits “the rich” against “the poor,” the flames of which have been fanned by the Occupy Wall Street (OWS) movement. OWS supporters would have you believe that they’re fighting for the rights of the worker class against the perceived abuses of the “elite.” “Class warfare” it’s being called in some circles. Really? Is it really wealth envy that’s driving this argument? Or is it really a coming tipping point in a centuries-old philosophical discussion regarding the merits of Capitalism vs. Socialism?

Which is fair? Socialism or Capitalism?

There are elements of our society (the “99%”, the OWS crowd, and our current President among them) who would have you believe it’s Socialism.

They would have you believe that in a world where any one person (or group) has the skills, creativity, and bravery to do something extraordinary, that it’s somehow immoral for them to be able to profit from it. And if they should find a way to profit from it, then it’s the government’s duty to force them to “share” that profit with those who possess neither the skills, creativity, nor gumption to attempt anything even remotely exceptional with their lives. That just their mere existence qualifies them as a recipient of the spoils of someone else’s exceptionalism. In other words, they are entitled to impose on someone else’s time, skills, and resources without ever having done anything to earn it.

In the world of Socialism, where’s the motivation for the talented to make such an effort? If I know that any extra effort on my part will only benefit someone else, why should I make that effort? Sure I care about people and will go out of my way to help them – IF I feel that they’re deserving of my efforts. But I’m not gonna go out & build a multimillion dollar business for someone else.

In fact, statistics prove that employees tend to do only as much work as is required to keep them from being fired. (For proof, just google “how much effort employees,” “shirking,” and “propensity to withhold effort.”) Unless there’s some personal incentive in it for them, they’ll not expend the extra effort (talent) to accomplish better results for their employer.

Therefore, I would argue that Capitalism is a better (fairer) plan.

When a risk-taker is sufficiently motivated by unlimited rewards (even acknowledging that the risk of great loss exists), they’ll expend their time, effort, talent, skills, and creativity to accomplish what has (up to that time) been deemed impossible.

Those vast rewards are realized when the market place determines that Mr. Risk Taker has created something of value and is willing to pay him for it. Of course certain economic conditions will determine exactly how valuable it is, and therefore, how much the general population is willing to pay for it.

How is this fairer for everyone else, you ask?

First, it’s fair that they receive sufficient value for the money spent on Mr. Risk Taker’s goods or services.

Second, it’s especially fair if Mr. Risk Taker is unable to fulfill all the duties required to meet market demand and is forced to hire others to help.


Mr. Risk Taker if forced to hire workers

Under Capitalism, we love and value our “worker bees.” Somebody’s gotta drive the trucks, run and/or maintain the machines, sweep the floors, type the letters, keep the financial books in order, tend the landscaping, plant & harvest the produce, take our blood pressure, tend to our ailments and healing, etc. The employer who not only provides value to the public, but provides sufficient reward to his valuable worker bees, will have some loyal and hard-working employees.

People would rather have jobs than welfare. So those who are rewarded with good jobs have higher self-esteem knowing they’re providing for themselves (and their families). Especially if they have employers who show appreciation through good pay and other intrinsic rewards. In this way, Capitalism is valuing and honoring the population at large: Mr. Working Man.

Lastly, it’s fair because, as Margaret Thatcher said, “The problem with Socialism, is that eventually you run out of other people’s money.” “Social programs” are paid for via taxes. If more and more people are “benefiting” from these social programs, then fewer and fewer are paying for them. Why is it deemed more moralistic to demean large portions of the population by forcing them to be recipients of “social” help than it to give them a job in which they can take pride for being a productive citizen?

In summary, it’s Capitalism that provides:

  • the incentive to the risk taker,
  • the free market that determines whether that risk taker thrives or fails,
  • the free market that determines that the employers who value and honor their employees will not only thrive but reap greater rewards,
  • pride of productivity and self-worth for the working man,
  • and revenues to pay for the necessary operations of government, and the existential operations of social programs for those with true needs.

What happens when one is considered “fortunate”?

By now everyone’s familiar with the gist of Obama’s plan to address this nations deficit and dire financial circumstances: by raising the taxes on those who are “fortunate.” For the purposes of this post, though, I’m going to set aside the fact that our problem isn’t a revenue issue but a spending issue, and focus solely on the word “fortunate.”

At what point is one considered “fortunate” – financially speaking? Monopoly ManWell, Obama has, in the past used the $250 thousand annual salary as this magical beginning point.

You’ve probably heard numbers thrown around lately giving certain statistics regarding which “fortunate” members of our society pay how much of the total federal revenues received from income taxes. There’s a very good report by The Tax Foundation which uses actual IRS data. It’s pretty easy reading and you can see the numbers for yourself. Here are some points to take note of:

  • In 2008, “the top-earning 5 percent of taxpayers… earned 34.7 percent of the nation’s adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.”
  • “Overall, these data on high-income tax returns appear to confirm that the recent recession…”, like most recessions, “occurred for the same reason, a sharp decline in income at the high end.”
  • The top 25% of income earners had a sum total AGI (Adjusted Gross Income) of approx $5,678,179 Million (yes, that’s over 5 Trillion) and were taxed at an average of 15.68%, thus paying $890,614 MILLION in taxes. (That would be over $890 Billion dollars. )
  • “… taxpayers with an AGI of $159,619 or more in 2008 constituted the nation’s top 5 percent of income earners. To break into the top 1 percent, a tax return had to have an AGI of $380,354 or more”
  • The top 1% of income earners paid 23.27% of their AGI in taxes. (That would be $88,508.38 out of the $380k quoted above.) Top 5% paid 20.7% of AGI in taxes. (That would be $33,041.13 out of the $159,619 quoted above.)  The top 5-10% paid 12.44%. Top 10-25% paid 9.29%.

Could you imagine having a small business and working your butt off at least 18 hours per day, “24/7/365″ as they say, and having an AGI of  $159 thousand dollars and having to turn around & give $33 thousand to Uncle Sam? OR doing very well, having an AGI of $380 thousand and having to give away $88 thousand of it?!?!?

Did you know that if you win the lottery or report your gambling earnings, the Federal Government will take 40% of those winnings as taxes on “unearned income”? Based on the stats above, the folks who work their butts off to earn that money may as well have been gambling or playing the lottery instead of working hard to make a buck. AND hire employees for good paying jobs. Which would you rather do?

Let’s look at it like this. Most people believe they could live comfortably if they were earning $50,000 annually during their retirement. In order to be earning that much money in interest and dividends – remember you’re not working so you don’t have an “income” – you’d have to have ONE MILLION DOLLARS invested and earning 5% interest (which you just about can’t find any more). Want to be earning $75,000 annually so you could travel and live a life of relative luxury? Then you better have $1.5 Million in those investments earning 5%.

And guess what? You’re still gonna have to pay taxes on that “income” too.

Does any of this sound very “fortunate” to you? And Obama wants to make it worse!