The rich, Romney and the Fair Tax
The Kansas City Star
Fitzgerald: “The rich are different than you and me.” Hemingway: “Yes, they have more money.” This widely acclaimed but inaccurate quotation captures the spirit of Lewis Diuguid’s very insightful commentary in yesterday’s Kansas City Star. Diuguid quotes Philip Slater in Quest magazine who claims that “rich people are hopelessly addicted to their own wealth.”
In his 1925 short story Rich Boy Fitzgerald was not referring to the nouveau riche. He was not referring to that young movie actor, your favorite basketball star, or your neighbor who won the lottery. He was referring to the old eastern establishment rich.
The old established rich are not concerned with flashy clothes or fancy cars. Remember the Bain Capital story about Mitt Romney’s frugality. He saw that one of his employee’s had a fancy car in the parking lot and asked for a ride. While riding along Mitt mentioned something to the effect that he sure wished he could afford such a fancy car. The employee reportedly said nothing but later said he thought something like: “What do you mean? You could easily afford twenty of these cars.”
The established rich can sometimes be very frugal because they have their eyes on just one thing: other rich people and how much money they have. They are not fooled by showy glitter. They want to know your true wealth. Having money in Swiss banks and the Cayman Islands is as much about impressing their rich friends as it is in hiding their money from Uncle Sam.
To the established rich you don’t even exist if you are not at the very minimum a qualified investor, which means that you have at least a million dollars under management. Cars and expensive homes don’t count. We’re talking about stocks, bonds, collateralized debt obligations, all sorts of financial derivatives and the like.
To these rich people there are only three groups of people: (1) the poor rich who only have between one million and just under ten million dollars, (2) the middle rich who have between ten and a hundred million dollars, and (3) the rich-rich who have over one hundred million dollars. In the old days no self-respecting rich-rich would associate socially with a poor rich person. When Romney was at first reluctant to let people know how much money he had, it was not because he cared about what middle-class or poor people would think of him. He was worried that other rich-rich people would discover how “little” money he had.
The biggest joke among the rich-rich is the so-called Fair Tax which is a proposal to make taxation “fair” by replacing the income tax with a national sales tax (with a slight rebate or so-called “prebate” for the extremely poor).
Since rich people just invest any additional money they get into stocks and bonds and the like, for which there is no sales tax, the Fair Tax is just a way to get the poor and middle classes to pay the taxes so the rich can invest in what economists call their “positional wealth.” The goal is not just to have a lot of money, but to have more money than the “lesser people,” which basically means anybody with less money than you.
The rich didn’t want to be accused of shooting the poor or middle class people in the foot so they came up with the Fair Tax so the poor and middle classes could just vote to shoot themselves in the foot.
Larry’s commentaries can be found via Twitter under NDProfMarsh.