Thursday, March 5, 2009

The $250,000 "Minimum Wage"

$250,000 will eventually be the new “minimum wage” (as well as the effective “maximum wage” people will limit themselves to-- if the federal government doesn’t).

The Obama administration has claimed that taxes will only increase for that 2% to 5% of the working population earning more than $250,000—increases required in the interests of “fairness.” The current 39% top tax rate is scheduled to rise to 41% under President Obama’s plan. It will likely rise above that during the next few years.

Can taxes be increased so that the government takes 40%, 50%, 75% or even 90% of a person’s property? Of course they can— and they have. Remember, the top rate was more than 70% under Carter, was at 80% under Franklin Roosevelt, and reached 90% under Eisenhower and Kennedy.

Year after year, election after election, politicians always say “the rich” and “the wealthiest” should pay “their fair share” of taxes. What is the "fair share?" Is it the present 39%, or the 70% imposed under Carter, or the 90% imposed under Roosevelt? How about 100%?

The answer depends upon whom you ask— If you ask the person paying that 50% or 90%, the answer is “Taxes are too high.” If you ask the person who is not the target or subject of the higher tax, the answer is “The rich should pay more— they aren’t paying ‘their fair share’.”

What is the purpose of taxation? It could be to pay for essential government projects (whatever “essential” means).

But, if the purpose becomes “economic equality” or another redistribution scheme, then “fairness” requires that incomes eventually become equal—from each according to his abilities to each according to his needs.

Incomes are not equal due to a number of reasons. In the end, “inequality” presupposes that “the rich make too much” or “the poor don’t make enough.”

Confiscatory taxes could equalize income—

If property is taken from the top 5% and redistributed to the benefit of the other 95% (whether by direct payments or through specialized entitlements), incomes will still be disparate unless the money taken from the 5% is enough to raise the 95% to the desired $250,000.

Raising the minimum wage could equalize income—

A law could be passed that simply requires that each “poor” person be paid the same amount as any “rich” person. Why should the minimum wage stop at $15 per hour? Why shouldn’t the minimum yearly wage be $250,000— the same amount made by a “rich” person?

Income could be equalized through a combination of both— by taxing everything over $250,000 and raising everybody else’s income up to $250,000.

An accounting period, perhaps ending on April 15th of each year, would be the date at which books would be balanced to make sure that each person earned no more than $250,000 and that each person was paid no less than $250,000.

And, suppose that somebody made a bad investment so that his income was only $200,000 on April 15th— the deficiency of $50,000 would be corrected by issuance of a government check. Incomes could remain equal at $250,000— regardless of effort, abilities, opportunity, discipline, recklessness or prudence.

Curiously, however, nobody would want to work once his or her income hit $250,000 per year— once the $250,000 ceiling is reached, the worker will take a vacation for the rest of the year (unless forced to work for free at a gulag the rest of the year). Also, there just aren’t enough people earning more than $250,000 to take from to make incomes equal for the rest of us. Perhaps the limit should be reduced to $200,000, or dropped to $150,000 or less until all our incomes can be balanced evenly.

If the economic and taxation policies proposed by President Obama are implemented, given the record deficit spending that would result, in reality the maximum wage and minimum wage should really be about $75,000—

A recent WSJ article “The 2% Illusion— Take everything they earn, and it still won't be enough” is illustrative:

IRS data for 2006 (the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%") shows that filers with adjusted gross incomes above $200,000 comprised just 7% of all returns. Yet, the "top" taxpayers paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The “richest 1%” paid some $408 billion, or 39.9% of all income tax revenues. This was at the current 39% top income tax rate.

“A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable ‘dime’ of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.”

So, even if the government took every dime over $75,000 of every living taxpayer, there wouldn’t be enough revenue to pay for the government’s existing programs and promises to people now living. Perhaps that’s why the US government borrows today and promises to pay in the future— having our future children continue to pay our bills with their energy and money.

"I will gladly pay you Tuesday for a hamburger today" -- Whimpy


  1. We are stymied. We used to worry about em taxing us more until we realized we are now making less. How will they get more out of less?

  2. HR 1586
    Can the Supreme Court stop this kind of seizure? Apparently, contracts are of no or little worth.