The Difference Between 15% and 31% is Zero

I am not entirely sure what the deal is with Presidential candidates and their tax returns.  Apparently, there is no law on the books that requires candidates to disclose their income tax return, but since 1968, when Mitt Romney’s father ran for President and released his own records, it has become tradition.

Recently, Romney revealed that he was taxed around the 15% level.  His income comes primarily from financial investments made years ago, which keeps the bulk of his income taxed at the capital gains rate.  By contrast Newt Gingrich revealed his tax rate was 31%.

So what.

What is the big deal that Romney was taxed at a lesser rate than Gingrich?  Does this somehow affect either of the men’s ability to govern?  Does it change their politics or their electability?  

No.

So what is the big deal?  Well, the point Gingrich seems to be hinting at is that Romney’s income level, based primarily on investments, prevents him from understanding the plight of the working man.  How can someone worth over $200 million understand what it is like to worry about bills at the end of the month?  How can someone who theoretically never has to work a day in his life to earn a dime connect with the overwhelming number of Americans who are now below the poverty line?

I think Gingrich has a point.  Romney can’t.  Now, please don’t get me wrong.  I am not saying that because of Romney’s financial situation he would not be a good leader.  I am saying that Gingrich is correct.  Romney can’t understand.  Romney himself, in an effort to make light of his own income level, shoved his own foot into his mouth by saying his speaking fee income for last year wasn’t very much.  It was $374,327.62.

You know what is even funnier about Romney’s not very large speech related income?  In 2009, it only took $343,927 to be in the 1%.  I think this is where Gingrich hits the nail on the head.  Romney is so used to a lavish life, so used to money always being there, that an income that qualifies him for the 1% is regarded as “not very much.”

So, does Gingrich prove anything about being a better Presidential candidate by exposing Romney as wealthy?  Not necessarily.  Gingrich, while being taxed at twice the level as Romney, was still taxed at 31%, which also happens to be the tax rate for the top 1% of income earners in the US.  So both Gingrich and Romney are in the 1%.  The only difference is that Gingrich was taxed on earned income versus investment income, leaving him subject to a higher tax rate.  

Gingrich has since said that his goal in getting Romney to reveal his tax level is not to lambast the man, but to point out that everyone should be taxed at that rate, not just the super wealthy.  I don’t think he minded scoring political points with lower income groups though by seemingly bloodying Romney’s nose.

Gingrich himself is worth somewhere between $10-$20 million.  While only a paltry 10% of Romney’s worth, his net worth is still at the very least 100 times the net worth of the average American citizen.  While Gingrich still has to work for his money, he is still a far cry from the ability to connect to ordinary, everyday Americans.

I am sure many of you think I am trying to play the angle that the Republicans are out of touch with the common American experience.  You are right, I am.  But, I am playing this angle as well -  so are the Democrats.

The point I am trying to make is that it doesn’t matter what the finances of the President are like.  Presidents over the years have been very wealthy men.  Some were not wealthy until they left office, but most recent presidents already had accumulated wealth prior to entering office.  If Romney were elected President, he would be the 4th wealthiest man to hold the office (accounting for inflation).  Gingrich would be the 21st wealthiest.  Even the esteemed George Washington was worth over half a billion dollars.

What matters is their character, their leadership traits.  Bullying someone into releasing their tax records accomplishes nothing because it proves nothing.  The only result is that it demonstrates that the current tax code benefits those with a lot more money than you or I.  We all know these men have more money than we do - does it matter how much more?  

Instead of losing ourselves in the drama, pay attention to how the candidates act.  Review their record, not what they say.  Sure, the rhetoric can be entertaining, but half of what any politician says seems to false and the other half confusing.  Choose your candidate based on what you see in their soul.  You can just about count on them being rich.

Frank Chambers

Follow @fxcIV

Greed is Good

Greed is good.  These are the famous words spoken by Gordon Gekko, Michael Douglas’ character from the movies Wall Street, and Wall Street: Money Never Sleeps.  Gekko is a stock trader, driven by the investment game, always on the prowl for the trade that will make him more wealthy and famous.  For Gekko, greed is the driving factor.  He is owned by both his material possessions and by the opinions others have of him.  Without them, he is nothing.

For many of us, greed seems like a game only the wealthy can play.  We associate greed with only the wealthy, refraining to consider that we ourselves could be greedy.  In my last blog - Aiming Higher - I discussed the drives that push each of us.  I used myself, my wife, and a local school as  examples of people who were striving towards success.  Do we live up to the Gordon Gekko model?  Are we greedy?

First, lets analyze what greed is.  Webster defines greed as a selfish and excessive desire for more of something than is needed.  This definition seems to be extremely broad considering the way greed is bandied about today.  Typically we associate greed with money and power.  The current Wall Street protest #OccupyWallStreet is centered around the idea that the powerful and wealthy are driving down our future through their hoarding of money.  If they were less concerned with their own wealth, then the future of the country and the global economy would be much brighter than it seems to be today.

Is this true?  Milton Friedman, a conservative economist from whom Reaganomics originated, has a well known youtube video in which he discusses greed on Phil Donahue’s show. 

Friedman argues that all successful societies in the history of man have been centered around a free market economy fueled by greedy individuals.  Further, he declares that even in socialist and communist societies, greed still exists, though the market to exploit greedy drives is absent.  

I agree with Mr. Friedman.  Greed is prevalent in all societies.  The brilliance of capitalism lies in society’s ability to harness the powers of greed to better the lives of its citizens.  The United States of America would not be where it is today without the shrewd businessmen of the past who have driven our industry and economy to the peak of human wealth.

Unfortunately, after every peak there is a descent (read The Long Ride to see how this applies to life in general).  There seems to be a point in a free market economy where the have’s seem to have it all.  We are not at that point yet, but the fact that 10% of our population owns 90% of our wealth would suggest that the United States is close.  Factor in the current economic conditions, news stories highlighting CEOs earning massive bonuses while losing their companies money, and the plight of the unemployed and poor, and it is easy to see why #OccupyWallStreet has its sights set on financial district of New York City.

Back to my examples from Aiming Higher.  I freely admitted that one of my goals as a drill writer and marching arranger is to make money.  I enjoy the work and appreciate seeing the work of my mind produced and carried out in real time, as well, but I love to get the checks in the mail.  Does this make me greedy?  I don’t think it does.

I believe that the drive to be successful is separate from the drives associated with greed.  The drive towards success can be corrupted and lead towards greed, but I do not think the two are intimately intertwined.

Where is the point where they separate and consideration of individual success becomes something negative?  To me, that point lies in the choice to pursue something that serves your interest at the acknowledged destruction of others.  Enron is one of the best modern examples of corporate greed.  The drive to succeed, which in this case was evidenced by a rising stock price, was corrupted into a drive to make money.  Executives fabricated earnings reports, causing the stock price to artificially inflate.  When the scheme was discovered, the stock collapsed, leaving those who had trusted their financial welfare to Enron’s stock value crushed.

Greed lies in the purpose, the intent behind the action.  Samantha is driven towards owning a successful Mary Kay business by the opportunities it affords her as an individual and a woman, and the financial opportunities it offers our family.  If she allows those drives to corrupt her integrity to the point where she is taking advantage of other people and consciously causing others harm for her own benefit, then her drive to succeed has become greedy.

The Oak Ridge High School Band (donate here) seeks funding to offer its students the opportunity to experience something unique in the Macy’s Parade.  If the director’s somehow had their only welfare in mind when applying for, accepting, and promoting the parade, then they could be called greedy.  But, as long as their motivations take into consideration the wellbeing of others, they are not.

Greed is less of an action and more of a mind set.  Gordon Gekko’s actions pushed past the edge of a reasonable drive towards success, leading him to believe that greed is good.  While I agree with him to a point, too much greed can be a very bad thing.