My Tax Philosophy

Economics/Taxes
I've often thought that the best economic/tax policy would be to give tax breaks to the poor. I've watched the difference between the poor and the rich for my entire life. I am from a relatively poor family and I have a rich uncle. It's easily observable to see that poor people spend their money, and rich people save it. So naturally I thought that it made more sense to give the breaks to the poor because they would then turn around and spend the money and it would eventually end up climbing the ladder to the offices of the über rich. They could then save the money and it would at least have one chance to go through the economy before it gets zapped for good. These thoughts now seem erroneous. Let me explain.

In America, unlike many other countries, we have a true middle class. This was the piece of the puzzle that I had neglected to fill in previously. My uncle, though on paper a millionaire, is truly better classified as upper middle class or perhaps as wealthy, but not über rich. He was always my example of a rich person. He is a saver. Most of his income bracket and age are. He doesn't diversify investments. He doesn't purchase and improve businesses. He puts his money in Jumbo CD's and sits on it. He pulls it out to travel and purchase things with cash. He buys tax certificates as a hobby. He is fairly typical of many upper middle class/lower rich bracket people. He eats and drinks what we eat and drink. He shops at Dillard's or Nordstrom. He surfs the internet and stays on top of current events. He is a very savvy businessman, but he's done taking financial risks. He has enough to be comfortable for the rest of his life and have fun seeing the world. Which, I think, is his general plan.

Think of the differences between what I just described and say Warren Buffett. The main difference is that, though he has more than enough to suffice for thousands of lifetimes, he keeps investing and developing. He continues growing businesses and investing in developing ones. He was just named Fortune's Richest Man in the World. If you look at other billionaires in America they tend to have one of two things in common: they inherited their money or they are still working. Some, like Wal-Mart's Jim Walton, have both. Jim does have a massive inheritance from his father Sam, but he works to make Wal-Mart better. He also invests loads of money into personal pet projects like Arvest Bank Group. The simple difference between the upper middle class and the filthy rich is that the filthy rich make jobs. They invest in big business (which takes big money) and create tons of jobs. The upper middle class save and maybe have small businesses which they may grow to create a few jobs.

The way I now understand it money flows up the financial ladder. The problem is that much of the money stops at the upper middle class and doesn't keep going up. Most of the über rich have their fortunes tied up in businesses. Not so with the upper middle class. Their wealth is in their homes and things, in the bank, or on the beach. It's not growing jobs. So the solution seems to be to give the tax breaks to the super rich. These will in turn invest and develop companies and make jobs. Whether high paying or not, the jobs will eventually allow employment, or second employment for the poor. This allows them a constant stream of revenue (as opposed to a one time tax return) which they in turn spend. This money then flows up toward the rich, usually bottlenecking at the upper middle class. The thing that opponents of this philosophy point out is that the super rich get richer.

This is true, but not a problem. The super rich get richer not with dollars but with the estimated value of their businesses, which grow because of the constant stream of revenue that flows back to them from people who spend the money they make at their jobs. Giving money to the poor allows them to not care about bettering their job which means their jobs don't get vacated for those below them. Don't get me wrong, I'm not saying we should give all the breaks to the rich and none to the poor. History has shown that the civilizations that ignore or repress their poor don't last. Likewise socialism has repeatedly failed all over the globe. There has to be a middle ground. Enough has to be provided to the poor to avoid revolution, but everything cannot be provided because it removes incentive to work. Without incentive to work the economy fails, period. It would be nice if people were motivated to work by greater ideals , but the truth is the motivation to work, in this world, is money. It's all about the Benjamins, baby.