Why Everyone Hates The Millionaire Tax
- Posted by Leigh Drogen
- on September 19th, 2011
Our comically clueless president, Barak Obama, recently released his plan for a “millionaire’s tax”, or what he’s calling the “Buffet tax”. Without completely tearing up the entire tax system, which should probably be done, the millionaire tax is most likely the next best solution for raising more revenue from a group of citizens quickly capturing a larger percentage of income every year here in America.
In an of itself, I really could not care less that income inequality is rising. It is a natural outcome of the ability for a single person to build a monster global business in a short amount of time without having to hire too many people. Income inequality in America is not the result of dumb laws, it is the result of technological innovation.
But our government must take measures to deal with the new reality of the fact that we are going to have a smaller middle class, and a larger extremely wealthy class that makes more money than you can ever imagine. The American ideal of “if you’re smart, work hard, and get a little lucky, you can make it” has not disappeared, in fact it is more alive than ever. The difference between today and 1950 is that fewer people are going to “make it”, but those who do are going to be far more wealthy when they do. Again, this isn’t something you can legislate away, it’s a fact of technological innovation and the decline in the price of labor.
And while president Obama seeks to do what is right in this environment, which is ask this super wealthy group to pay a bit more, the backlash is amazing to watch.
The reason why people are so vehemently opposed to the tax deals not with their political or economic dogma, or its effect on them, but something even more primal. The fact is that the majority of people often don’t support policy that helps them. Yea, crazy right, why would someone vote for a person or support a policy that negatively impacted them?
The answer lies in the word aspiration. Studies have shown that people don’t vote for policies, especially economic policies, which help them, they vote for policies which help the class above them. Why? Because people aspire not to be part of the middle class, but part of the upper class, the elite wealthy. They, for some primal reason, believe that voting for policies which help the classes above them connects them with those upper classes, and that because they aspire to rise up the ranks some day soon, they don’t want to be negatively effected by those policies.
All of this plays directly against that person’s ability to in fact attain that status, as they make it harder on themselves to move up the ranks by voting for policies which help the upper classes and not themselves. But as with everything else involving the market, people are rarely rational.
In order to pass this type of legislation, an extremely deft politician is needed, of which Obama does not fit the bill. He will fail miserably because he is possibly one of our worst politicians as a president we’ve ever had. He has no leadership skill, he is spineless, and largely useless in the role of economic policy maker. He will go down as a man with some decent ideas, and zero ability to effect them.
I believe in the end, selling policy comes down to trust. People don’t trust ideas, they trust people. It’s the same way in money management. Investors don’t give money to managers with good returns, they give money to managers they trust. People don’t vote for ideas, they vote for people and the ideas they have.
This country does not trust Obama, and why should they, he’s been a complete failure save for our foreign policy, and even there he has no spine and won’t pull us out of Afghanistan. If this country can’t trust the man, how can they trust his ideas, even when they are salient.
This country needs someone they can trust, and believe me, it ain’t any one of the Republican candidates who’s currently running. Until this country has a leader we can trust, even good policies like the millionaire’s tax will not pass, and we will do nothing about out entitlements problem. It’s the sad but honest truth.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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