Sunday, September 9, 2012

What the Rich Do With Their Money -- Help the Poor and All Society

Over the past year I've been kept awake by the false claim by politicians, commentators, and pundits that society's ills have been perpetuated by the rich. From my perspective it is the rich that allows American society to function and prosper.

In fact, there are many Bible verses that assail the rich for their greed; although greed is not reserved for the rich if the millions of people that play the lottery is any indication. Also, things were different thousands of years ago when the Bible was written under harsh dictatorial rule where legal acquisition of land and wealth was considered a threat to the autocrat running the locality. I can't help but wonder if the same things would be written today about the rich in America. I doubt it, as I will attempt to show shortly.

American society can be subdivided society into three segments: The Rich, the Middle, and the Poor. You can decide where the dividing lines are between those groups, but suffice it to say that the Poor include both those with low incomes and low net worth, as well as those that have no income and no net worth. For the sake of the examples that follow, my Rich category includes those that have annual revenues above $100,000 to those that have net worth in the billions.  To some, $100,000 may not seem like a lot when taxes take 40%-60% of that money. But taxes herein play a role about what the rich do with their money that helps the poor.

And yes, there will be exceptions in all this, but generally here is what the rich do with their money that helps the poor. In no particular order, but numerated for the sake of the com box.

What the Rich Do with Their Money:
  1. The rich pay more than 90% of federal and state taxes, (see footnotes for references.) The poorest of the poor actually pay no taxes and, in fact, get checks from the government. Thus it is the rich that provide for  90% of all government services including federal and state construction and maintenance, defense, politician's salaries, welfare benefits, and those checks to the poorest that pay no taxes. To the extent that the rich are motivated to spend on investment opportunities, the resulting economic activity will be taxed. To the extend that regulations inhibit the Rich's ability to expand their enterprise and expenditures, their money will not be spent, but hidden in tax shelters thus depriving government and society of tax revenue. In every historical instance, lower taxes has always increased government tax revenue. And if the goal is for government to give money to the poor, then you want the government to encourage  the rich to earn more money. If you think it works another way, look to socialism and the tyranny of business that socialism requires. During the height of the cold war compare Western (capitalist) Germany, to Easter (socialistic) Germany; or the USSR to England—full color verses drab grays and blacks.
  2. The rich business owners that employ nearly 100% of the private U.S. labor force (including the Rich, the Middle and the Poor). (Remember the public work force is paid for with the taxes from the rich.)  Within the free enterprise system of America business owners are more than willing to pay salaries or remunerate contracts commensurate with experience, skill and education.  I have been the owner of several businesses that have hired dozens, and I've been in corporate management responsible for the hiring and firing of many more. The problem in hiring workers has always been finding qualified workers or workers who are honestly willing to work. I have always been willing to pay significantly more for quality workmanship well done. But my businesses would fail with poor workmanship or workers who failed to show up. In America, workers are free to improve their experience, skills, and education and shop for a job that pays more.
  3. The rich (through direct gifts or indirectly through non-profit organizations, religious, and the government) fund 100% of all grants to benevolent organizations that service society as a whole and the poor in particular.
  4. The rich are the source of the anchor gifts the build the wings of hospitals,  museums,  educational institutions and the salaries of specialty "chairs" at universities. The names on the side of buildings at such places are oftentimes the names of the rich that provided the keystone funds to get that building made or pay professor salaries. 
  5. The rich fund scholarships for the poor and those with merit to attend school. (And remember that all government dollars come from the rich who pay taxes. )
  6. The rich hire workers and companies to build, service and maintain their large and small physical assets (homes, businesses, boats) and recreational activities. In fact, every dollar the rich spend pays someone for work to be performed... and by the way, is taxed in the process.
  7. The money that the rich deposit in their banks, or stocks and bonds is all put to use by those receiving the money (whether a business or a trader) to fund other enterprises, all which require employment and expenditures and all which eventually generate taxes. 

(1) Wall Street Journal; U.S. Government Info; Wikipedia