Rich Enough Not To Work

McCain was mocked for saying sarcastically that, for the purposes of his income tax policy, he would define as rich as "say, $5 million a year." His greatest weakness as a candidate has been an inability to explain his positions tangibly using real world examples. Krauthammer noted this after one of the debates by commenting that he speaks "almost telegraphically" -- blurting out a sound byte or a slogan without explaining what it means to people.

Meanwhile, it appears that Obama has successfully sold voters a platter of tax increases by re-marketing them as a "tax cut for 95% of you." Of course, those who get a tax cut (including those who currently pay no income tax and will get checks) will do so as a result of tax increases on "the rich," and by allowing the Bush tax cuts to expire, which itself is a tax increase.

Who are the rich? According to Obama, any household making over $250K/year (though he has said on other occasions $200/year. In fact, Biden and New Mexico Governer Bill Richardson have mentioned $150K and $120K respectively). In 1992, I was appalled when Richard Gephardt said it was 75K/year.

Anyone who thinks a household of income of $150K per year is being rich needs to try raising a family with that income in any American city -- without a trust fund. Why they get no grief for throwing out numbers like this, I'll never understand.

No matter, the media has rarely brought the discussion down to that level of detail, and so the candidates get away with sheer cloudy vagueness on the issue, free to say as they enter office, as Bill Clinton did of his middle class tax cut pledge in 1992, "Gee, that last President left things so messed up, we're going to have to do this a little differently."

Expect it.

But I have three major problems with the whole premise of the debate:

1. Using yearly income to define rich. My definition of rich is having enough wealth so that you don't have to work any more, if you don't want to. That means assets, not just income. Using income this way punishes the many people, including salesmen, sole proprietors and others, who deal with periodic job loss, or have good years and bad years. A lot of people Bill Richardson defines as rich are 4-8 paychecks away from penury.

2. Stealing the tax base from the states. The more the federal government taxes income, the less choice states have in raising their own revenue. This really hurts high-cost-of-living states and cities, where $120K a year of household income is modest. The ideal thing, from my point of view, would be have a very low federal income tax, with states free to define their scope of government power and largesse on top of it.

3. There is a line between progressive and confiscatory taxation. Today, over 30% of taxable households pay no federal income tax. It's often quoted now that the old 80/20 rule is in full effect with respect to the income tax burden. Over the years, our income tax has already become quite progressive. If we get to the point where more than half of the population has no "skin in the game" of federal spending, what's to stop them from viewing elections as opportunities to confiscate money from "the others" to keep their government benefits going -- and expand them? At what point do the haves simply start moving their wealth or income into protected shelters, where they are neither taxed, spent, nor put to work?

Sound like Europe, or like the USA in the '70s? I hope it doesn't happen here.