Blaming the Rich for Not Paying "Their Fair Share"

President Obama’s re-election campaign theme is to raise taxes on investment income to 30% for individuals and to 54.5% for corporations because he blames the rich for not paying “their fair share.” But this blame is misplaced and wrong at all levels of analysis.

First, the charge is not even true. Not only do the rich pay vastly more taxes than anybody else (the top 10% earners pay 70% of the federal tax revenue), but the rich pay the same rate as everybody else. Warren Buffet’s secretary pays 15% on investment income just as Buffet does. And he pays 30% on non-investment income, while she pays a lower rate because her income is lower and our tax system is “progressive.”

Second, middle-class wage earners commonly have investment income that they don’t pay any taxes on now, because the income is accruing tax deferred in pensions, 401 Ks and IRAs.

No matter rich or poor, investment income can be taxed three times, once on corporations before they distribute the income to their investors, again on the investors when they receive it, and yet again when investors pass on inheritance.

The President’s policy is especially unfair to retired people, most of whom rely on investment income and pensions that in turn rely on investment income.

Obama is unfair to corporations because the higher tax would diminish the capital they have for growth of their business and the number of workers they support. This is particularly onerous for start-up and small businesses which typically have a compelling need for capital. Since small businesses create most jobs, higher investment income tax kills jobs, which is yet another way it is unfair to individuals.

Obama is unfair to the government and the taxpayers as a whole, because economic data show that high investment income taxes actually yield less total tax revenue. In the face of such taxes, individuals invest less and thus starve business of capital for growth, and corporations move jobs overseas. So, in trying to punish the rich, the President would end up punishing everybody.

Finally, Obama is unfair to Congress and his fellow Democrats by beating up on them for a tax policy they have supported ever since 1978. As just explained, there are good reasons why both Democrats and Republicans have supported lower tax rates for investment income. Moreover, Obama is misleading the public into thinking that if re-elected he will get investment income tax rate raised to 30%. Not even the Democratic Senate will vote for that.

In short, President Obama doesn’t really care about being “fair.” This blame-game campaign theme is a cynical ploy to get unthinking voters to vote for him.

Finding Blame for the Bad Economy

Capitalism is falling on hard times, given the sinking U.S. economy. Much of the public blames those they call greedy capitalists, who range from the criminals like Bernie Madoff to the likes of legally operating but immoral “vulture capitalists,” as the Governor of my state likes to call Mitt Romney.

Only public ignorance about capitalism can account for the growing hostility to Bain Capital and Mitt Romney. Most Americans, if they think about Adam Smith at all, probably think he is the 49er’s quarterback. Ask you friends if they know the difference between venture capital and venture equity firms. Perry and Gingrich don’t.

Public schools don’t teach much about capitalism. Teachers are government workers, after all, and many have no private-sector experience. No wonder they are liberal and Democrat. Even colleges only teach economics to a small segment of the student body, and a significant number of the professors are socialists.

Mitt’s major problem is not so much that Obama doesn’t understand capitalism, because he was raised by socialists and surrounded in adult life by liberals. Mitt’s larger problem is all those millions of Obama devotees who don’t understand capitalism either. They want government to use taxpayer money to bail out the likes of General Motors and Chrysler and to start up failed alternative energy companies like Solyndra and Range Fuels. Obama supporters think he is using government to save the country from the destruction by George Bush and are loath to blame government promotion of risky housing loans as the trigger for the economic downturn. Obama supporters rail at the seeming unfairness of capitalism where some people are rich, whom they envy and despise as a result. They want everybody to be equal, even though history and contemporary socialist governments show that socialism means everybody is equally poor — except for the ruling elites who conned their voters into thinking capitalism is bad.

When it comes to politics, mis-placed blame is the name of the game. Politicians don’t win votes by accepting responsibility. They get votes by blaming their opponent. 

Placing Blame for Family Money Problems

“If you had a better job, we wouldn’t have to live from paycheck to paycheck.”

“If you would stick to the budget, we wouldn’t have so much credit-card debt.”

“The politicians are killing the economy.”

There’s a price to pay for who you blame for family money problems. That price is the relationship. Who or what you blame can produce relationship distress. A recent survey of 632 cohabiting couples (95% were married) revealed that satisfaction with their relationship depended on where they put the burden of responsibility for family money problems during the last few years of the national financial crisis.

In couples where women blamed money problems on their partner’s debts, spending, or income, both they and their partner reported lower relationship satisfaction, unless the women also blamed the national economy. Women were twice as likely to blame their partner than were men. A similar but less marked finding also applied to men. In other words, even when individuals did blame their partner, the negative affect on the relationship was lessened if they also blamed forces outside the relationship.

The study did not emphasize the effect of blaming oneself, perhaps because this was a rare event. As I explain in my book, Blame Game, How to Win It, when things go wrong, most people find it much easier to blame someone else or some environmental situation than to accept responsibility for their own contribution to the problem.

This study was prompted by well-established research of others that had shown that poorly functioning couples tend to blame one another for other kinds of family problems. Couples living in positive relationships protect their positive views of each other by placing the blame outside the relationship.

I have to wonder what the role of blame has been in this modern era of high divorce rates. Are we less likely to take personal responsibility for family problems than we were a couple of generations back when divorce rates were much lower?

Any marriage counselor will tell you that happiness in marriage depends on nurturing, not undermining, the relationship. Blaming a partner for a problem, whether it involves money or something else, leads to maladaptive interpersonal behavior. On the other hand, viewing a partner more charitably, leads to more constructive relationship behaviors.

The national financial crisis will likely get worse until voters demand that  politicians stop running up the federal debt to the unsustainable breaking point. So, what to do? Blame yourself for not working harder or spending less. Blame your President and Congress for screwing up the economy. And nurture your family relationship.

Source:

Diamond, L. M., and Hicks, A. M. (2011).”It’s the economy, honey!” Couples’ blame attributions during the 2007-2009 economic crisis. Personal Relationships. DOI: 10.1111/j.1475-6811.2011.01380.x

See also my blog on learning and memory at http://thankyoubrain.blogspot.com