McCain, the Tooth Fairy, the Easter Bunny and the Midas Touch

There is a lot of hogwash on the Internet about the benefits rich people bring to society. The theory, which is akin to alchemy, posits that the rich magically turn lead into gold by some special gift only they possess; and without their talents society would wallow in eternal poverty.

midasIn a world where children are taught to write letters to Santa Claus, hunt for Easter eggs laid by a rabbit and look under their pillows for Tooth Fairy money, I suppose it is not surprising that many adults might believe such nonsense. After all, people send millions – maybe billions – of dollars to television preachers who promise to give them health, wealth and happiness in return.

If you accept the theory that the rich have special powers, then you might support John McCain’s plan for the future of America. McCain is branding Barack Obama “a Socialist” because Obama has proposed a modest increase in taxation for families making more than $250,000 a year to fund a tax break for 95 per cent of America’s taxpayers.

The Bush Administration – with support from a Republican controlled House and Senate – cut the top income tax rate to 35 percent from 39 percent. Obama would eliminate the tax break for people in the top two brackets – about 2.5 million taxpayers out of 100 million-plus. People in those top tax brackets would also see the tax rate on their capital gains rise from the current 15 percent to 20-28 percent. As I understand it, the 39 per cent rate would not affect the entire taxable income. There are six tax brackets, ranging from 10 percent up, so Obama’s proposed increase would affect just the top portion of a taxpayer’s income. If my math can be trusted, a family making more than $250,000 in taxable income would have to hand over something like $60,000 to Uncle Sam – unless, of course, they invested a chunk of their income in a tax-deferred retirement plan or tax-free bonds or debentures.

Channeling Joe the Plumber, McCain rants against the graduated income tax, telling cheering crowds that they should be allowed to keep their money and not be required to contribute to the welfare of others. He doesn’t say there should be no income tax – in fact, he proposes to tax employer-provided health benefits for the first time in U.S. history. But he seems to suggest that everyone should pay the same tax rate – unless your income is derived from stocks and bonds, when your rate would be cut to seven and a half percent.

You would think that anybody who does not make $250,000 a year might welcome Obama’s plan. But according to Gallup pollsters, that’s not necessarily so.  Americans are divided on whether government should tax the rich in order to benefit the rest of us. “It’s a complicated area to try to understand American attitudes,” said Frank Newport, editor-in-chief of the Gallup Poll. While the majority of Americans – 51 percent in a poll by Gallup this past April – said they support “heavy taxes” on the rich to redistribute wealth, the rest oppose the idea. “Most Americans hope to some day be wealthy and as a result, the idea of kind of redistributing income is not as popular as (government policies resulting in) making a bigger pie so everybody does better,” said Dennis Jacobe, chief economist for Gallup. In McCain’s world, making the rich richer would create that bigger pie. Why? Because they have the Midas Touch, I guess. He thinks they can wave their magic wand over a pile of currency and make it grow like Jack’s beanstalk.

Meanwhile, the gulf between America’s rich and poor keeps widening. “The income gap between the rich and the rest of the U.S. population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself,” then-Federal Reserve Chairman Alan Greenspan said a few years ago.

The question you might want to ask is, “Where does wealth come from?” Do you think that a stockbroker creates wealth? In a country where money represents wealth, it is the government that creates it. Only government minted money is legal currency. The government prints the money and hands it to the banks to distribute among the population, according to a multitude of complex criteria. You get your share because of rules established by the government. If you don’t believe me, try farming or manufacturing or some “productive” line of work. You will find that no matter how hard you try or how much you produce, it is government policy that will determine your success or failure.

As one of the wisest men of all time said, “The race is not to the swift nor the battle to the strong but time and chance decide all things.” Of course they didn’t have lobbyists in King Solomon’s time. Today, time, chance and lobbyists determine who gets rich.