One Step Thinking Is Seldom Useful

There are few real world problems that solve with a one step answer. If you watch activists and politicians, you’d think it’s one and done. It’s laughable.

The 1% problem

In the United States, if your income exceeds $540,000, you will be among the 1% who are demonized at every turn. The top 1% of wage earners receive $540,000 or more in personal income. That collectively works out to 21% of all income. They pay 40% of all income tax.

For comparison, the bottom 95% of taxpayers, income less than $218,000 receive 63% of the income and also pay 40% of the taxes.

The problem of fair tax is a thorny one. I think when you really study it, the only accepted idea of a fair tax is a tax someone else pays. Given the profligate spending by governments, it is arguable there can be no such thing as a fair tax. Taxation to pay for corruption or incompetence cannot be considered fair.

A One Step Solution.

Permit no one to earn more than some arbitrary figure. Let’s call that $150,000 per year. That’s about the top of the 90th percentile. Would that solve the 1% problem. I hope you said no. Until everyone is at $0 income, there will be a top 1%. That’s how distributions work.

If we take away all the income from the top 1% and exile them, we would still have a top 1%. You’d have to do it again next year. So eventually zero as the threshold. That’s why addressing something as misleading as a distribution position is so misleading.

It’s just a talking point to convince the naive it’s a problem. The activists, intellectuals, and politicians have not the slightest clue what they will do at step 2 or any of the other ones after. So why bother?  It’s about  making their position better.

What to do.

When someone offers a strong opinion about fixing the problem, ask them what step 2 might be. If you know the problem is a perpetual one until all incomes are equal at zero dollars per year, you can ask them how they intend to get there.

If they don’t want to get there, then the top 1% will always exist and no doubt they will always use it to further their agenda.

The takeaway

The top 1% is a trick, don’t fall for it.

The only place the top 1% won’t exist is when everyone has no income.

“Top 1 Percent progressivism emphasizes the idea of fairness – but it’s nevertheless a politics of outrage, animated by at least a trace of envy. It’s as if ‘millionaires and billionaires’ were the principal problem facing America today.”   Cass Sunstein

Outrage and envy are a poor basis for serious decisions

How does eliminating the top 1% affect you. It likely won’t affect you at all except for the job losses. If you think it will reduce your taxes, you are living in a political fantasy.


I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email don@moneyfyi.com

 

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