Home > Obama, Politics, The USA > Taxes: Making the Rich Richer

Taxes: Making the Rich Richer


Here’s something counter-intuitive that’s worth thinking about: Taxes make the rich richer and the middle class poor, and the poor into serfs. Unlike in the free-market – when the rich get richer in this manner it does not help anyone but themselves because it can not directly impact anyone but themselves and the government.

Here’s how it works:

Free Market

Rich people and poor people invest in the stock market, or businesses, or whatever. They have an idea of what they will make and they get to keep all of it. Even a small amount invested can create a decent return, so whether it’s some huge corp investing millions or grandma investing $100, they all make something that goes directly into their pockets minus inflation and fees.

Example for Grandma:

$100 investment + 10% return ($10) – Inflation (2.63% or $2.63) – Service fee $7 = $10 – $9.63 = $0.37.

Grandma didn’t make much, but she did make something. Repeated enough times and with increasing initial investment, grandma could end up with a nice bankroll.

With taxes

Rich people and poor people look at the investment. They must take into account rate of return, income tax, capital gains tax, inflation and payment for a service to make the trade (Scottrade.com charges $7) . If a potential investor does not take all of these into account, it is entirely possible for the investor to LOSE money, even if the investment increases in value. Here’s how:

Initial investment ($100) + Investment growth (10% or $10) – Income tax (40% or $4) – Capital Gains tax (15% or $1.5) – inflation (2.63% or $2.63) – service fee (Flat $7.00) = 10 – 15.13 = $-5.13. A loss of $5.13!

Now, a rich person could invest much more than grandma, to the point that this is profitable, but grandma can not. Grandma has to hope that the rate of return is so great it overcomes all the taxes and the service fee, but it isn’t likely to do that in today’s economy. Therefore, grandma will not invest.

Conclusion:

What we end up with is a market that only the rich can play in. This means there is less chaos because there are fewer people involved. This produces the conditions for collaboration, which are the conditions for possible monopoly. The rich have incentive to make it as hard as possible for people that are not their peers to get into the market so that they can keep things this way.

Obama and many Democrats and Republicans are rich…. why do you think they want to pass more regulations, raise taxes, and generally make the market a landmine for anyone that can’t invest a large sum of money? Sure, the rich will take a bigger ding to their income in the short run, but in the long run they fix the game so they are guaranteed to keep that income coming.

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Categories: Obama, Politics, The USA
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