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Tax the Comfortable - Scott Adam's Blog

Tax the Comfortable

I’ve been hearing a lot about how fair it would be to increase taxes on the rich in the U.S. That’s justice, I’m told. Those robber CEOs, greedy bankers, and shady hedge fund managers need to “give back” a portion of their pirate booty.

Some of the super-rich are supporting this flavor of fairness. Warren Buffett wants the rich to pay a higher tax rate. Even Larry David (co-creator of Seinfeld) had a funny piece in the New York Times mocking the notion that the tax increase would be noticed by people in the hundred-million-dollar club, such as himself.

The tax-the-rich argument feels fair if you allow yourself to see the world as only two categories: the rich and the non-rich. And it helps if you let the media install Bernie Madoff as the poster boy for the rich, while perhaps you imagine Tiny Tim as your symbol for the non-rich.  But what about, let’s say, a hard-working doctor? His taxes would increase when you tax the so-called rich.  And unlike Warren Buffett and Larry David, a tax increase likely has real implications for the doctor’s family.

Before you break out the tiny violins for my hypothetical doctor, allow yourself to imagine that he’s got a mountain of college loans, his mortgage is underwater, and he’s supporting three grandparents (one on his wife’s side) who all need some form of senior care, and the doctor’s parents, and his wife’s parents, have no spare cash. The doctor’s parents might also need help in a few years. Oh, and the doctor has two kids of his own, one of whom needs some sort of special care. That’s what the real world looks like for the so-called Sandwich Generation. For this imaginary doctor, any extra tax burden takes money from four generations of his family who needs it and distributes the cash to strangers.

When the English language was hardening, I suppose the only wealth descriptors needed were rich (nobility) and poor (everyone else).  Now we don’t have a word to describe a doctor’s income range.  The nearest you can get is “upper-middle class” which is vaguely defined, according to Wikipedia, as a “comfortable income.” The limits of language can be a problem for a debate such as this.

Just for fun, suppose we introduce to the discussion of taxation a new word for our hypothetical doctor’s income range. To demonstrate the power of language, let’s call that income group suckers. It’s a loaded word, and that’s the point. Watch how the fairness argument can turn when the labels change.

Now we have three income groups:

1.       Rich (such as Larry David)

2.       Suckers (such as doctors and small business people)

3.       Majority

Now let’s look at the fairness argument using our new categories. In a democratic system, the majority is in charge.  Therefore it is fair to say that the Majority left the bank door unlocked so the Rich could loot it. Nice work, Majority. Now the Majority’s proposed solution is to take money from the Suckers income group to compensate for their own gross mismanagement of the country.

You might argue that the rich are the ones who are really in charge, even in a democratic system. That makes the story even worse. In that case, the rich plundered both the Majority and the Suckers, and now Warren Buffett and Larry David are pointing fingers at the Suckers in the hope that the Majority doesn’t decide to boil the rich for food. That’s what I would do if I were a billionaire. Just sayin’.

My own view, as a member of the Suckers group, is that if economists determine that the best way to make the country solvent is to increase my taxes, I’m willing to look at those numbers. I’m a practical guy. But I do resent being gang raped by the Rich and the Majority while they high-five each other and call it fairness. And I’d feel a little better about it if the Majority would do a better job managing things going forward.