Wealth Gap

My conservative friend who voted for a Democrat president for the first time ever just sent me an article in BusinessWeek giving an opinion on How Bush Widened The Wealth Gap.

You have to sign up for a free membership to read it, but I’ll outline a few points below (I don’t think I can copy the entire content):

The tax cuts have boosted the aftertax incomes of the top 1% of households, with average incomes in excess of $1,000,000, by 10% — compared with a 2.3% increase for middle-income families with average incomes of $57,000 and a 1.6% increase for the bottom 20% of families, with average incomes of less than $17,000. The tax cuts for millionaires alone have reduced government revenues by $90 billion a year, more than the lost revenues from tax cuts for the 80% of families making less than $100,000.

I think the most telling quote is this:

As an intended consequence of the Bush tax cuts, the share of federal taxes paid by the bottom 80% of taxpayers has increased, while the share paid by the top 1% has dropped.

So for all those people that think Bush’s tax cuts were for the poor — think again.

When it comes to taxes, I tend to first jump to the flat tax idea. Why shouldn’t everyone just be taxed 20 cents on the dollar? Isn’t that fair?

But then I think about the fact that I make a lot more money than a McDonalds worker who is trying to improve his life. If he earns $15,000 a year and we take $3,000 — that really hurts him. But if I make $200,000 (I wish!) and we take $40,000, I’m still doing really well. It just seems “right”. As a successful person, I’m more than happy to offer up my taxed income in place of those that need their share to purchase essentials things like warm clothes and food.

The flip side of the argument is: what incentive is there to work to keep doubling your income if you don’t actually double the money you take home? For example, going from $25K to $50K might net you 30% more relative income than going from $50K to $100K. So why should I bother to do it? I’ll tell you why: because money isn’t everything. People who want to kick ass will do so even if the rewards aren’t monetary. Don’t underestimate the value of power and self-satisfaction.