Friday, May 19, 2017

Tax cuts for the wealthy? Busting The Myth

You hear a lot from democrats about how unfair it is to give tax cuts for the wealthy.  One thing that is interesting about this is that most wealthy people do not even pay taxes. You have men like Bill Gates and Warren Buffet chiming that they don't think tax cuts for the wealthy do anything to stimulate an economy. Yet they don't pay taxes, so they don't care if taxes stay high.

Isn't that interesting? And this entire premise that tax cuts are for the wealthy is poppycock to begin with, considering you cannot tax wealth.

Let's use Buffet and Gates as our examples. They do not have jobs, per se. They have their money invested in various places, such as the stock market. That's where they make their money. They do not receive pay checks. In this way, they do not make income. Therefore, they do not pay taxes.

What they do is they collect capital gains. They are affected by the capital gains tax. But they are in no way affected by the income tax.

So, you see, the wealthy, like Buffet and Gates, got wealthy because they made good investments. They did not get wealthy because they were paid a huge salary or wage. So, you can raise the income tax to 90% on the top income bracket -- which is where it was before the John F. Kennedy and Ronald Reagan tax cuts --, and it will have no effect on the truly wealthy.

So, given our economics 101 lesson here, you can see clearly that there is no such thing as tax cuts for the wealthy. Wealth cannot be taxed. They might make some income, but the majority of it is accumulated wealth which cannot be taxed.

So, people that are wealthy, like the Kennedy's, like Warren Buffet, like Bill Gates, they champion for higher taxes, or at the very least don't argue against them, because they don't have to pay taxes anyway. They believe in social justice, where you solve problems by spending other people's money, not their own.

Interestingly, say Donald Trump gets his tax cuts through Congress. It won't be a tax cut for the wealthy. It won't even be a tax cut. What it will be is a tax rate cut. Anyone who pays taxes will see a cut. We discussed how tax cuts increase revenue to the government, they do not decrease revenues in my last post.

If Trump cut taxes, it would not be on the wealthy, unless you consider the 48% of people in this country who actually pay taxes to be wealthy (and, by the way, that's not even possible).

Further Reading: