Audio Blog, 14:37
Money is simply a medium to effect change, both “good” and “bad”. It can facilitate destructive and evil acts, including fraud, scams and immoral behavior, but it also can be used in positive ways.
Politicians on both sides of the aisle often demonize the “One-Percenters”, and declare they don’t “pay their fair share” of taxes, or make sufficient contributions to society. Income disparity is a safe political argument to make, since the group represents such a small percentage of the voting bloc in any election. Moreover, history is full of examples on how to demonize any minority group. Just point the finger.
Remember the “Occupy Wall Street” movement in 2011-12? They are described on their unofficial website as a leaderless movement of people from many different backgrounds. “The one thing we all have in common is that we are the 99% that will no longer tolerate the greed and corruption of the 1%.” Clever.
But is the characterization of greed and corruption associated with the “One-Percenters” really true? Most of the times, no.
Demonizing the “One-Percenters” is a very effective and convenient method of deflecting criticism away from political gridlock, and the harsh and growing income disparity for unskilled workers due to globalization; but it is not accurate.
The reason that many Americans are struggling with stagnant wages and rising debt levels is simple, but not politically palatable:
Unskilled jobs in manufacturing, long the foundation of the middle class American Dream, are diminishing because there are a billion people in China and India, countries with modern infrastructure and available manufacturing capacity, who are as capable and willing to work for paltry wages.
The corporations understand this, and due to technological improvements in logistics, communications and transportation, they can easily outsource those jobs abroad and benefit on the bottom line profits. As profit driven companies in a capitalist system, they have a fiduciary responsibility to run the business in the interests of their shareholders. Any argument against this concept should be focused on our selection of economic systems (capitalism versus socialism), and not the people who have learned how to thrive in it.
Additionally, finger pointing politicians in first-world governments have actually enabled the loss of manufacturing capacity and income disparity by removing barriers to free trade, and providing the conditions of cheap debt via low interest rates. This type of fiscal and monetary policy stimulates consumption, instead of encouraging production, American infrastructure investment and personal savings.
Note: I believe in free trade based on the economic theory of “comparative advantage”, which basically concludes that the global economy is better if each nation focuses their resources on producing what it does best. If America is best suited to build high tech and commercial airplanes, it should focus resources accordingly. If China is best suited to producing plastic toys, it should do so.
Of course this is simply an economic theory, and not the practical application. Many people fall through the cracks in the transition to an economic system based on comparative advantage. I don’t think we should stop free trade and globalization via erecting barriers like tariffs, but I do believe that practically we need a focus on retraining our citizens into a skill based workforce via affordable community colleges, grants and apprenticeships. I have talked to executives at several manufacturing/construction industry firms, and they all mention that it is difficult to find skilled laborers like welders, electricians and carpenters.
Anyway, this post is not about the perceived greedy accumulation of excessive wealth, corruption, or the selection of our economic system. We can discuss that in future blog posts. This post is about the extraordinary impact that individual financial contributions can have on very important issues.
So let’s start with identifying who makes up these notorious “One-Percenters”. The top 1% in our (rich) country earns above $500,000 in annual income, according to the Census Bureau. Some examples include:
- A 46-year old Chief Marketing Officer and her 52-year old police officer husband.
- A husband and wife couple of 32-year old, third year associates at an investment bank after finishing graduate business school.
- A 36-year old senior project leader at a management consulting firm, and her 41-year old veteran schoolteacher husband.
- A 30-year old Google engineer with nine years of experience, and his insurance saleswoman wife.
- A single 32-year old Vice President at a private-equity investment firm, two years out of graduate business school.
- A married couple of 31-year old lawyers, in their sixth year running a family and estate planning law firm that they started after completing law school.
- A married couple of 37-year old doctors (cardiologist and anesthesiologist), five years after completing medical school and their fellowships.
- A junior partner at a large corporate law firm, and her husband who is a cyber-security consultant.
- A married couple of experienced online marketing consultants, in their early forties.
- A 21-year old rookie professional athlete, and his Registered Nurse wife.
The point is that most of the “notorious One-Percenters” are simply hard working, highly educated or skilled citizens that have earned their financial status. Most were not bequeathed an inheritance, while lounging around, eating expensive Swiss chocolate and sipping on Dom Perignon champagne at the family estate.
We also gain a broader perspective if we measure the income level as a “Global One-Percenter”. You may be surprised how low the income level is to make the cut.
According to the Global Rich List, a website that brings awareness to worldwide income disparities, an income of $32,400 a year will allow you to make the cut. So if you’re an accountant, a registered nurse or even an elementary school teacher, congratulations. The average wage for any of these careers falls well within the top 1% worldwide.
The basic charge leveled by some politicians and like-minded groups is that “One-Percenters” are “not paying their fair share”. But again, is that really true?
Although there are a small percentage of super-wealthy individuals who hire the most skilled accountants to find a way to legally reduce taxes, most “One Percenters” noted above are probably paying an exceptional amount of money in taxes.
If a person makes $500,000 in income, and pays the corresponding federal taxes of 39%, they are paying $195,000 in annual federal taxes alone. Even if they manage to use fancy accounting to legally reduce paying half of that amount, the taxes due are still close to $100,000.
There are very few “One-Percenters” who are legally eliminating all federal taxes, like Donald Trump, and he had to endure almost a billion dollar loss in order to create this NOL (Net Operating Loss) tax shield. Who would volunteer for that course?
According to the Census ACS survey, the median household income for the United States was $55,775 in 2015, the latest data available. The tax bracket for that income group is 25%, or $13,944 in taxes due.
My goal is not to diminish the taxes that any American pays, but both people receive virtually the same amount of services from the government. On an objective data basis, it is clear to any fact-based person, that the “One-Percenters” are paying far more than their fair share.
Should “One-Percenters” continue to pay more than their fair share? In my opinion, yes, and I am actually a proponent of the flat tax proposal. Keep it simple, and eliminate the accounting maneuvers.
Many generations of parents, including my own, taught a version of the well-known President John F. Kennedy quote given in a speech to the Massachusetts State Legislature, Jan. 9, 1961. The inspiration for Kennedy’s famous observation, “For of those to whom much is given, much is required” can be found in Luke 12:48: “For unto whomsoever much is given, of him shall be much required.”
However, it is only accurate and proper to recognize the “One-Percenters” financial contribution back into our society, instead of portraying this group in the negative and predatory manner so often repeated by the echo chambers.
Beyond simply paying more than their fair share of taxes, let’s examine the charitable and societal contributions of this group, starting with the “super-rich” class of billionaires.
Bill Gates changed the world with Microsoft’s revolution in the computer software industry. However, he may be remembered as much for his philanthropic achievements.
The amazing work that the Bill & Melinda Gates Foundation is doing is downright legendary. Since inception, the Foundation has made grants of over $26 billion, including $15 billion in global health alone. The annual giving of just the Global Health program of the Gates Foundation is about $800 million and approaches the scale of the United Nations World Health Organization.
Take malaria, for example. In 2000, malaria was responsible for more than a million deaths. By 2015, that number dropped to 631,000. With almost 500,000 children still dying of malaria every year, we obviously have a long way to go,” Bill Gates said in a blog post. “But cutting the death rate by more than half is a miracle. It’s one of the greatest success stories in the history of global health.”
Other areas of focus of the Gates Global Health program include HIV/AIDS, pneumonia, tuberculosis, and other infectious diseases. Additionally, they have made major contributions in education, economic development in the world’s poorest areas, women’s empowerment and awareness of global issues.
The super-rich can produce big results, but so can local efforts by your community “One-Percenters”. I mentioned in an earlier post about The Lunch Project, an organization that raises money to fund school lunches in Tanzania. It is a generous effort by concerned and caring people to do a small part in helping eradicate world hunger.
This past month, I took part in another opportunity to effect change in our local community by rallying a group of “One-Percenters”. Several military veterans at Wells Fargo met with a few local non-profits to hear their request for funding via a bank-sponsored “flash philanthropy contest” of ten selected non-profits.
One was a non-profit called Veteran Transport Services VTS, a Charlotte NC based organization that provides transportation to blind and disabled vets. VTS needed the funds to retrofit, fuel and operate their vans.
They did not win the flash philanthropy contest, although it was a very close competition of deserving organizations. However, we decided to host an informal fundraiser on their behalf.
The funding, mostly drawn from the 1% to 5% demographic in the local banking community was very positive. In less than 48 hours, we raised over $12,000 to further this vital mission in the local community.
I have found, in over 18 years in a banking environment, that wealthy people are generous and giving, although discerning and analytical. They want to ensure that their generosity is being utilized in an effective manner to truly have a positive and long-term impact on worthy causes.
Instead of demonizing the non-productive actions of a few wealthy people, politicians and communities should try to focus more on highlighting the positive contributions, thereby encouraging more of it.
The “One-Percenters” of the world have the history, capacity and desire to make a positive difference with their wealth, but the growing environment of hostility towards the group is not helpful.