- when taxation does not hit the real rich people but the middle class people then taxation in gerneral is not wrong but the specific way of taxation which lead to this obviously wrong result.Let me explain what I want to say with an example:Lets assume there are two twins who have been divided right after birth, lets call the one twin the "middleclass" twin and the other twin the "upperclass" twin.Lets assume they have exactly the same capabilities and talents therefore they get exactly the same kind of job and make the same kind of money, its about $50.000 a year.But the upperclass twin inherited 1 Million when he started with life. His stepfather put this money into a solid investmentfund (which is investing all over the world), which results into 5% after tax earning for the "upperclass" twin.What happens ?
When both twins are 18, the "rich" twin has already gained additional 1,4 Million summing up to 2,4 Million.When they are 40, the wealth of the rich twin has reached already 7 Million.Even if the middleclass twin would work much harder as his brother, is has absolutly no chance to reach him. His brothers wealth will growth exponentionally and no middle class child could reach him by working within an average job.
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- Tom,The answer is simple - which twin is happier??
You seem to believe that money [wealth] brings happiness and power - I would then point you to the success of marriages among the wealthy. Money does not equate to success or happiness. Keep in mind that businesses can not pay taxes as the tax becomes a cost of goods sold and is passed on to the poor and middle class in the form of higher prices for bread and milk.
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- Tom D,Thank you, you have beautifully walked into the exact problem, using your example, I will call them U and M if you don't mind, Why should the hard work of U's stepfather to work, save and make solid investments, be diminished by the lack of such by M's parent? In American society, atleast until recently, the opportunity for any to build wealth was in the hands of each individual, you could succeed or fail based on your own decisions, such is the entrepreneurial spirit that made this country great. So lets look at your example from another point of view, U and M grow to 18 with the same opportunities, the same disbursement from their parents, U chooses to go to work for a construction company while M goes to work in a factory. After 5 years M still works at the factory while U decides to open his own construction business and take a chance in a niche market. After 10 more years M still works at the factory while U is a multimillionaire because of the chance he took in that niche market. Now we all feel for M scraping by, paycheck to paycheck, I do as I am often in the same boat, but how is it in any way fair to U to take away the benefit he earned from his risk and give it to M simply because he made choices that didn't lead to as big of rewards?Such is the problem with socialist economic philosophies, and ultimately the reason why they always fail, if you are not allowed to reap the rewards of the entrepreneurial spirit, or the fruit of your labors, why do it in the first place. Without the challenge to succeed and the ability to reap the benefit of that success, people become complacent and don't make the extra effort, or look for that alternate solution to gain advantage on the competition, or for that matter do anything more than the minimum that is required to get by.
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- In my story, M did not spend every penny he earned. He then took those savings an risked them in enterprise, where he worked twice the hours and had 10x the stress. He did not quit and he did not succumb to the sirens call of "saftey".When the looters came for U's wealth, he stood by and allowed it to happen, as it cost him nothing of himself in gaining it.Now, when the looters came for M's created wealth, what do you think M did?
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- yes, may be U is taking some special risk and will do the "extra mile" then he should get also the extra benetfit, I think we totally agree here.But in my example U got 1 Million from his stepfather (like Millions rich kids do all over the world).He does not need to take a extraordinary risk, he just takes a very safe "5% after tax" investment, which ist not so hard to find.Even with this risk-avoiding strategy he will increase his wealth dramatically, just because of the mathamatics of interest-rates. Why should he take the risk to loose everything ?This pattern is not abnormal. Rich Families are not knownto invest in High-Risk investments, they just let the money work with ordinary but safe investmentsThe question is, who has worked for the additional Millions of U ? Someone did. This someone might have been squeezed by the requirements of stockmarkets, his wages might have been lowered because someone has told his boss that the stockmarket expects higher margins.
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- Tom,Here are some thoughts from history . .When there is an income tax, the just man will pay more and the unjust less on the same amount of income.
PlatoI say, the earth belongs to each of these generations during its course, fully and in its own right. The second generation receives it clear of the debts and incumbrances of the first, the third of the second, and so on. For if the first could charge it with a debt, then the earth would belong to the dead and not to the living generation. Then, no generation can contract debts greater than may be paid during the course of its own existence. - Letter to James Madison (6 September 1789) Thomas JeffersonIf we can prevent the government from wasting the labors of the people, under the pretense of taking care of them, they must become happy. - Letter to Thomas Cooper (29 November 1802) Thomas Jefferson
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- Mangus,
I have highest respect to Thomas Jefferson and of course he was right from a principal point of view.But he has lived in different times, he did not know about international financial markets, outsoucing labour, electronic stock markets which move billions within sub-seconds just by automatic computer programs etc.I think his thoughts are 100% valid for the small business, for the farmer or the craftsman running his own business.
But I am working for a huge international company, to be honest, I think the things have changed a bit since the times of plato and Jefferson.These times the individual has absolutly no chances against the powers of international markets, esspecially not the financial markets.
Even my multi-Billion-huge company where I work for is just sailing with the wind, even we can not do anything against the market, we have to follow.Its hard to call this "freedom" from my perspective...
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- The market has been the market since the beginning of commerce times. Camel caravans with spices trading in ancient China for silk. Did not the large merchant families direct the flow of goods. But there was always completion that found better routes and delivered goods faster and cheaper.The flow of money from nation to nation has not changed since the great tulip crash when tulip bulbs were valued at thousands each. So see investment money has flowed from area to area product to product since one tribe traded fur for wheat or tools of stone.I was a executive with a multi national conglomerate with over one hundred separate Corporations operating in almost every nation on earth. The company was very successful in high tech and low tech making electronic components, systems, aircraft engines, drones and even fork lifts. We even made consumer product like shower heads.However size and diversity created it's own problems and the company was purchased by a group and split up selling pieces was more valuable that the entire so they made a lot of money dividing what took 30 years to assemble and build.No size and market can not be an indicator of success or a predictor of the future. The market changes to fast to support yesterdays business model - a Lesson now visiting the Old main line hard goods manufactures. Germany will lose the machine metals industry as your energy costs are to high to compete with fully automated factories making products with super high tolerances by robot. These products will be made where there exists cheap energy, abundant raw material, and the ability to smelt metals creating the necessary alloys.There will be no more Germany knifes sold, same with even surgical grade product. The new model will be built on cost of goods manufactured allowing the capturing of a large market share. The problems facing Germany will be magnified by the high Legacy costs you all have created in your social safety network - they require very high taxes which again makes the products not competitive in the market place.
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- Tom D,You are failing to identify the point, in your examples you are ignoring the fact that someone down the line did the extra, took the risk, and made the smart choices, I am sure I dont have to tell you there are plenty of people out there that have squandered vast fortunes, and ended up a poor working stiff like the rest of us, I cant speak for Germany, but I can tell you that making money in America, (at least until recently) is not hard, the difficult part is holding onto it. In your example above there is also a additional factor that is not being taken into account, your example infer's that U sits back and cracks the whip while others work to make him money. In truth U and M exist in a codependent situation, U invest his money in the company that M works for, financing its growth, while M produces products that company sells to earn profit, remove either one from the equation and the situation breaks down, M loses his job, or U loses his investment. Another factor that you are not taking into account is the timeline point of view. In America opportunity exist for all, lets set up a simple timeline with three points, A,B, and C, and we will call it the family investment timeline. Now lets say that due to his families smart investing U is at point C on the timeline, they have worked hard, taken the early risk and now enjoy the financial clout of safe investing. Now lets look at where M is on his families timeline, M may be only at point A or B, so to reach point C, M must do what earlier generations of U's family did and make the smart investments and build wealth over time as U's family did, if M does not do that then he has no one to blame for his financial situation but himself. So where does that leave us? Now enter today's Progressive Socialist ideology, it is very now, now, now, they want it all now. The principles of work, save, invest, just take to long for today's PS, so along comes their solution, simply take it from those who already did the working, saving and investing, that way the PS doesn't have to do the work, take the risk, or be the smart investor.One thing you will discover Tom, is that the majority of Americans do not take well to the Progressive Socialist thinking of "Whaaaaaa, hes got more than I do, take it from him and give it to me".
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- thank you for your smart answer, it is a pleasure to exchange ideas with you.I absolutly understand your point and I think in principle you are right. But I think you are a bit too optimistic regarding the reality of business in the 21. Century and you have an idealized view of international markets and capitalism in general.Don't get me wrong, I am a comitted capitalist by myself, working for a strict capatalistic companny, but I am not naiv.
I know that M will never have the chance to make the 7 Millions which U could do just by investing in the international financial markets, when he has 1 Million headstart.Yes, the good question is why the father of U could do this, he might have dome something better.
Well, we in Germany tend to emphasise the individual and do not look that much on family, tripe, clan or whatever you might call this, I know this is different in other countries.We think the individual chances in the "race of life" should be somehow similar and we see the government as "referee" that this race stays fair at least within some boundaries.
So when one get a 1 Million headstart we think it is OK at least to take away some of this additional 6 Millions this person could gain just by buying an international investment fond.As I have wrote within my original post, within the circumstances of 21. Century international Financial Markets I see the capabilities of individuals like M shrinking to catch up within lifetime with U.Best RegardsTom
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- Tom D,I think I am finally understanding where you are coming from Tom, I think we are both looking at the same coin from different sides. European countries are decidedly more socialist than America is, and in a socialist type of society your conclusions do ring true, but in the United States, those opportunities to build wealth exist in ways they do not in Europe. The individual has the opportunity to build wealth because our governmental system is not nearly as socialist as they are in Europe, and that is in fact one of the things that we are fighting for is to keep that opportunity to build wealth, because as you yourself have noted, in a system of government intrusion and what we call the "nanny state", which most if not all of Europe has, the individual can not come from nothing and build wealth like they can in America.I appreciate your input Tom and hope we have the opportunity to discuss more.
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- Tom,Then by your own logic how do you explain a man like Carnegie that was poor [no inheritance] become the richest many on earth in the 1800 s? Then explain John Rockefeller another rags to riches, Steve Jobs, Bill Gates, Paul Allan, and million more over the timeline of American history.BY your logic again how do you explain how the Habsburg's not still owning Germany and the rest of the main land European industrial business For surely they were the richest and most powerful family on earth? They have not lost their wealth but many others by hard work and risk they have outgrown the ability of the rich to dominate with just money. Money does not beget more money investments are directed by intelligence and effort nurtured by constant vigilance.
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