Wednesday, August 20, 2008

DEFINE "RICH" Quips: Do "Book Sales of 25 Million" Beat "5 Million Dollars" of Income?

After Saturday's Presidential Forum with Rick Warren, Obama tried to jump on McCain's answer to the question "On taxes, define rich." McCain tried to define it in terms of a person's wealth, not income. He said that it "Should be defined by a home, a good job and education, and the ability to hand our children a more prosperous and safer world than we inherited." When pressed on income, he said "If you're just talking about income, how about five million." When the audience laughed, he used the words "but seriously" several times, trying to finish his point, which was that he wants to keep everyones taxes low, even "the rich," and focus on out-of-control spending.

There is a larger point here. Someone may only make the kind of money that the government taxes at the highest rate for very few years. People move up and down the income scales, and many of them sacrifice much to get there, and lose it all long before they pass away. Making over $1 million a year can make you feel rich, but if you only make that for a few years, as many million dollar earners do (sports stars, for example), you better invest your earnings wisely. The idea is to gain wealth, which is not taxed as income is. Wealth accumulation comes from saving and investing money. People should be allowed to keep as much as they can of their earned income, whether they spend or save it.

I would define "rich" as making over a million a year for more than 5 years in a row, at least in the NYC "tri-state" area. I don't know how, or why that definition could/should apply to the tax code in the first place. If one is for taxing higher incomes at a higher rate, just say that. Calling it "taxing the rich" is a misnomer, because a person making $250,000 (Obama's definition of "rich") for the first time in their life may have debts of that amount already, and just be starting to "get out of the hole," so to speak. The term "rich" would not apply to that person, in my book. It shouldn't apply in the tax code, either. That's what I thought of after McCain's answer.

The line got laughs, and to his credit, Obama prefaced his criticism of McCain with "I don't know if he was joking..." before citing the $5 mil number. Now, Obama made a joke in his answer to that question, as well. "If you've got book sales of $25 million, then you qualify...." he said, talking about the host, Rick Warren. Obama himself has a few million books sold, as well. Was he trying to say that selling only 11 million books didn't make him "rich?" Of course not.

In fact, he did mention his own book sales, and that he didn't like paying the taxes on that income ("nobody likes it"), so I guess he does consider himself "rich." He also mentioned that people who earn $250K or more are only 3 or 4 percent of "this country.". That's millions of people, regardless of how vague this "statistic" was. At a population of 300 million, there are 9-12 million people making over $250K, if you take his statistic to mean "of the total population." How large is that as a percentage of people who actually work for their income? I'm not going to look that number up, but you can bet it's higher.

McCain picked a high income (seemigly "out of the air," to my eye) for a reason, in the context of his answer. The fact that Obama jumped on it shows that he will try to ride the "bash the rich" theme as much as possible. This populism is not catching on as well as it used to, because of alternative MSM outlets. Many more people realize that increasing taxes, even on "the rich," in a weak economy is a recipie for disaster, than did in the past.

I just saw a clip from Monday, where Obama criticized the "recipie for disaster" line I borrowed in the previous paragraph, to which he responded "the disaster is already happening!"

This is not making his case for higher taxes.

The "disaster" can get alot worse, if he just looks at the historical record. Revenue has increased when taxes on "the rich" are lowered, in an economic down cycle. McCain is right, in our current economic condition, as he was wrong to oppose Bush's tax cuts after the muliple hits our economy has taken since the internet bubble burst (9/11, gas prices, health care costs, home prices, the credit crunch, etc.). In his defense, the economy did seem to keep "booming" through most of these, at least early on. Government spending must contract, or at least grow at a slower rate (which is the liberal definition of "cutting spending," by the way).

A final note: Tax revenues did grow after Clinton's tax increase, but that was because of a "boom" economy from the PC/internet revolution, not because of tax policy. Note that the "surplus" started after the GOP took control of Congress, and ended just as Bush took office. Also note that gas prices increased faster since the Dems took back control of Congress than they had under Bush's first term. One can spin this issue any way they want, but the economy is really not partisan, though it is used as a huge political issue. "Tax the rich" is just another bad idea that has become a populist slogan. In practice, it hurts much more than it helps ALL of us, especially the poor and middle classes.

CNN has a transcript linked here, and please take a look at Shelley's excellent post on the overall forum, linked here.

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