Friday, October 29, 2010

"Excess" Money: The Super-Rich Don't Need It, right?

(Update as of Nov. 4: Voters in Washington State share the view in this post. Initiative 1098 was rejected, 66-34%.)

I just heard it again on my favorite talk radio show. A caller was denouncing a wealthy guy, somebody who he thought had made "corporate millions."  He thought it was just fine that the top tax rates should go up, because, "he's got plenty left, anyway."

People like this caller--and our President--think there's some magical level of income beyond which, you've got no worries.  That number seems to be $200,000 yearly.  Here in the state of Washington, we've got a ballot proposition (1098) that would impose an income tax, the state's first ever, "only on the super-rich."  That would mean any person earning $200,000 (double that for a couple) has to pay 5% of income up to $500,000 and NINE percent on anything over that.

Heck, the people making such astronomical incomes don't need it, right?  They should "pay their fair share," shouldn't they?

Is it fair that only those who do well--who tend to use that money to hire others and buy things--should have a state income tax while everyone else has none?

Well, that won't be the issue anyway in a couple years when the state legislature "needs" to extend the existing tax to a wider base.  The tax will soon hit the "rich" making more than $100,000.  Anyone can live on that, right?  Does anyone need more than $100,000 to live comfortably in Washington State?

People who make more than $100,000 should "pay their fair share," shouldn't they?

Actually, I know some really nice houses and apartments and cars that can be paid for with an income of $50,000.  You can certainly live comfortably in Washington State on $50,000.  Earners of that amount may not be filthy, but if you ask many people, they're rich.  Why, my daughter graduated college and got a teaching job, and makes $27,000 a year.  $50,000 would be a great salary.

On the other hand, even my daughter could live perfectly well without getting new clothes or eating in restaurants, couldn't she?

Where's the cut off where people "don't need" the money they earn?  Truth is, if "excess" money ends up going to taxes, rather than paying other people (for help or luxuries or whatever), why bother working so hard?  The little secret is that really successful people have the drive to work hard (those aspiring for success do, too).  But significant taxes make them direct some of that energy to keeping what they earn.

If you're a business person who through expertise and dedication has grown your company so that finally you're seeing some success, and you're looking to expand and relocate, will it be more or less attractive to move to Washington with this new tax?  And when it's expanded down the income scale, will you be more or less likely to attract good workers?

There's a book by the founder of Zappos, Tony Hsieh, called "Delivering Happiness."  It actually topped best-seller lists.  All tourists to the Zappos headquarters in Las Vegas get one, free.  It describes Hsieh's business life, and the development of his online shoe site's "culture." The company's a happy place, all right, and looks like a fun place to work, with perks and games and live-and-let-live style. 

The part of the book that caught my attention was the point at which the expanding company deliberated where to relocate from San Francisco. They had a handful of choices, but ultimately moved to the state without an income tax.  The book said the choice of Vegas was made because "we thought it would make our existing employees happiest."  Yeah, I'd be happy too, going from a state where everybody pays some state tax, and you pay 9.3% of any income over $40,000, to a state where there's no income tax at all.

But hey, how come the Nevada super rich aren't paying their fair share?  They don't need more than $100,000 to live, especially given Las Vegas' real estate bust.  It's really cheap to live there now.  Here's the deal, though--Nevada wants to keep the businesses, like Zappos, who chose to move there.  And there's no better way to gain allegiance than to let workers keep the money they earn.  That's the real way to employee happiness--give people control over their earnings, over their lives.

States need money. But better they get it from residents' volitional decisions--like buying gas, buying liquor, even buying candy.  We in Washington have ballot issues on those too.  Fees for services make sense, too, because people can control where they go and how much of each thing they buy.

But the chutzpah of a government deciding that somebody making $190,000 isn't "super rich" but somebody earning $10,000 more is--discourages initiative and positions the most productive people--who are also the greatest resources--as undeserving, greedy and untrustworthy.

Doesn't everybody aspire to financial success?  For the hardworking and fortunate few who achieve it, should the reward be for government to take it away?


  1. So true. I will be horrified if 1098 passes...I just moved from a no income tax state. Id move back there in a second if we ever hit the threshold to pay state income taxes.
    Its like Margaret thatcher said about eventually running out of people to pay for socialism...

  2. The "progressives" who suggest or promote more taxes on the "rich" fail to think it through to it's ultimate effects. Your comments help to show that. Two other things that they fail to disclose about the so-called rich is that the rich do a lot to (a) spur the economy and (b) contribute significant amounts to community and charitable causes. The rich buy homes, furnishings, cars, vacations, travel, eat out and enjoy other luxuries that keep others employed. Many of their earnings churn back through the economy to creat jobs and increase the GDP. Likewise, I see in the news frequently here in Omaha how wealthy community leaders invest money into the arts, local charities, community projects such as parks, museums, entertainment venues, etc. I'm all for encouraging the wealthy, not penalizing them.