Taxing The Rich Hurts The Middle Class

As one of the top 10% of earners in this country I want to let you know how taxing those that that you consider rich, will negatively impact the middle class more than it will hurt the rich.
Because it seems to have become popular to vilify the rich I want you to know what some of the rich do with their money and how it affects the middle class.

Last year, I paid hundreds of thousands of dollars in income taxes and over $600,000 in property taxes. Just the property taxes funded schools, roads, bridges, hospitals, police, fire departments, military, and other projects that benefit all of us equally.

And I do the same thing with my money that the middle class does with theirs, just more. I spend some, waste some, try to save some, invest some, and I use the rest to expand my business. Just like you, I pay bills, make house payments, buy groceries, movie tickets, go to dinner, and etc. Surpluses after taxes allow me to bring on new products, finance new ideas, make new investments, and hire new people. Expansion always requires new people creating more jobs. This surplus after taxes allows me to pay out bonuses, provide health insurance for staff, give paid vacations, and allows me as an executive to make future decisions that support the company in expanding.

And yes, hopefully this will create more financial security, which results in more purchases, new investments and more spending, which creates more jobs and more opportunities for others.

In 2007, I personally paid interest to banks on over 50,000,000 dollars in loans that amounted to over 3.5 million dollars in interest charges and fees to banks. This income then allows the banks to have more money to others so that when you want a personal loan, student loan or car loan you are able to get it. I paid property taxes in two different states and three different counties in excess of $600,000. These taxes accumulated by states and cities benefit every income class equally. We drive the same roads, have the same access to the same hospitals, and my kids will have the same teacher and sit at the same desk your kid does.

The house I chose to purchase requires me to pay over $90,000 a year in property taxes. This money goes to further support the people in the community with services we again equally share. I am not asking you to feel sorry for me, just know that you benefit from the successes of others. The financial decisions we all make create affects on all of us. My house requires me to hire others to take care of that investment which results in landscapers, pool maintenance, electricians, painters, woodworkers, maids, phone systems, computers, and plumbers, etc. Over the last twenty years I have I paid millions of dollars in salaries, bonuses and employee tax contributions because of my commitment to growth.

So when you say increase taxes on those that are already pay a majority of the taxes collected in this country understand that you will be affected also If a rich guy pays another $10,000 in taxes a year it isn't a big deal to him but will be a big deal to you if he elects to cut back one employee in order to make it up and you are the one.

My landscaper, Uriel, who I gave his first yard to maintain eight years ago now does most of the yards in my neighborhood. Bob, who cleans my pool depends on his job to take care of his family. My maid, Mercedes, who has worked for me for two years needs the full time job I offer her to send her daughter to school. Valdamir, my Russian driver who takes me to the LA airport for business trips depends on business people for his business to work. My personal assistant, Jen, who I wouldn't get rid of it we had a depression, just had a beautiful boy, Max, and wants me to do well because it makes her position even more secure. Eddie, the electrician, who is from the Philippines and charges me too much to fix electrical problems loves old big houses that have recurring electrical problems. My tech guy, Robert, who I just hired to manage my internet activities was out of work when I brought him on.

This is not a trickle down argument but basic economics, as it is impossible to penalize any one group without affecting every person in the group.

Who Pays Income Taxes?
In the year 2006 the top 10% earners paid 70.79% of all the income taxes in this country while the bottom 50% of all earners paid only 2.99%
Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

What these facts don't show you is how the wealthiest generated jobs, funded charities, and how their success funded roads, hospitals and more.

Trust me, the rich do not really care how you want to play the game as they will make up the difference regardless of the rules. They will either increase their levels of production to create more wealth, tighten up their spending or a little of both.

Vilify the rich if you choose to but a tax increase on the them will ultimately hurt the middle class more than it will hurt them!

Grant Cardone, Author and CEO

Comments

[therealredstateblues]

It was the wealthy class that have devalued our homes, our savings and retirements with their risky financial "innovations" (read gimmicks)

stagnated our wages with and influx of low cost labor

outsourced our jobs

and they did not expect to see a backlash when they stuck us with the tab for the 12 year long party?

[twofish]

Early in his meteoric career, Joe (Sam) the (unlicensed) Plumber commented that he might make $250,000 someday and he wouldn't want his taxes raised. This from a tax chisler lucky to make $35-40 thousand a year. But the attitude is why natural Democrats end up voting Republican: I might be rich someday, and I wouldn't want to pay taxes or anything.

But the rich who have made out like bandits for the last 8 years (like bandits? they were bandits) are those making 10 times this, and more. They need to come back down to earth where we all live. They live here, too, of course, but $100 million or so can put a lot of marble flooring and Ferragamo shoes between you and the ground.

Most businesses don't pay out their surplus to their workers. They outsource their jobs to some 3rd world country and pay themselves hefty bonuses. Or invest in new industry -- in China.

As for Mr. Cardone, I had the world's tiniest violin here to play a sad tune on, but I dropped it on the carpet and can't find it. I did, however, find 3 contact lenses, a couple of dead fleas, and several Barbie doll shoes, all of which are larger.

[gentlewomanfarmer]

Here's how this works. First and foremost, tax policy is not the tail wagging the dog. Tax policy has never - repeat,. never - influenced any of my business clients in deciding whether to do a deal, and I suspect it does not influence Mr. Cardone or his advisors. It at most guides the structure of the deal itself.

And so it goes with jobs. Deciding to create a job (or not) based on tax policy is a false choice. The decision to create a job is based on a myriad of factors, most important of which is whether the business opportunity itself is profitable. The tax consequences are measured in fractions of a dollar, not dollars.

Not very impressive for a motivational speaker, Mr. Cardone.

[Voltaire21]

Sure those go into deciding to creating a job, but you cannot create a job if you do not have the resources, thats like writing someone a check from an empty bank account...

[tdpubs]

I think it's really a matter of perspective. Let's look at taxes the way we look at our investments. You pay property tax to fund your city and state. I pay less than you but I also make a lot less than you. Taxes are the cost of living expenses in our nation.

Let's all pay the same percent of our income regardless of origin. If we gamble to obtain our income or sweat to get it every week we should be paying the same percent. Dividends or paychecks I don't care; let's start there. If I'm paying 15% and everyone else pays 15%, then that would go along way to level the burden.

As a business owner, I want to see everyone make more money. If the cost of doing business goes up, we adjust our service, prices or means of production. If we have to give a little more to get this country back to a level of effectiveness for all, so be it. As citizens, we must pay attention to our investments to ensure that it is working in all our best interest.

[Samalabear]

Totally disagree with this post. Read your history. The greatest expansion of the middle class occurred after 1945 through the 60s when the rich were taxed as high rates. In the 10 years before the Great Depression the rich were being taxed much as they are now, productivity was high, but wages were stagnant and wage disparity was much as it is today. And that's all I really want to say on this subject right now. My heart does not bleed for you. Ask people like Alex Baldwin, Ben Affleck, Jon Stewart and many, many other wealthy people and they will tell you that they feel they should be paying more. Warren Buffett said the wealthy are not paying nearly enough that they should. And, I'm sorry, but someone who is able to own 12 houses, as the McCains do, are definitely not paying enough taxes.

And those people you hire? Give me a break. I'm sure they'd rather work in real jobs with a future, rather than be slave labor to someone like you. Sadly, those jobs are woefully lacking. I was speaking to the owner of a local restaurant a few months ago and her opinion of Long Island is that there are two classes of people here -- the rich and those that serve them.

[Voltaire21]

Because all movie stars know how it feels to work extremely hard for 12 months out of the year.... and as for McCain's 12 houses (granted that is too many houses) you are basically saying that you want to deny businesses like microsoft and intel the right to spend money on creating jobs. Or from even putting that money into the bank where YOU will get a higher interest rate and a lower loan rate.

[mad tn dem]

one issue that's been on my mind is NAFTA..I am from a small town in tenn..from a large family (granpa had 22 kids was 70 when my father was born)..growing up surrounded by family is something that cannot be replaced, and is crucial to forming the relationships needed as adults. This area is not very educated, my father had an 8th grade education, but was wounded in WWII, and worked every day of his life. we had lots of industry in this town, beaunit fibers was huge, a box factory, lots of garment industries, folks had the opportunity to make a decent wage and provide for their family..no longer. industries closed..which in turn caused most of the local businesses to close..what we have is walmart...and llots of restaurants...that's the choice for jobs...the industries went overseas...it absolutely destroyed the extended family unit..we have a generation of cousins that do not know each other really, and only meet maybe once a year on a holiday..they have no annecdotal memories of growing up together to connect them...my town is mostly ailing seniors..patiently waiting for the next visit from their son or daughter that had to move away after graduation to find a job in another city/state, or even country..cause ain't none here...it is sickening to watch small towns continue to become ghost towns..I am so hopeful now..that we may be able to resurrect them...

[WmC]

A quote from the late John Kenneth Galbraith is appropriate here:

"The modern conservative is engaged in one of man"s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

[vikingv]

Be careful of what appears to be simple logic, the kind Milton Friedman used, because it does not work in real life. That is the problem. I can make the same logical argument from the other perspective and it has actually proven itself to work many times historically. The fact is, if consumers do not consume, investors have nothing to invest in. That is the fact of a bear market.

There are two types of markets, bull and bear. In a true bear market, investors do not invest unless there are obvious signs of consumption. This is a true bear market. We could give investors zero tax rates and not one factory will expand in this climate. We need consumption and that requires tax relief for the vast majority of consumers. The Rich will need to pay the bills for government while we jump start the economy or else we all go down with the ship.

That is the fact. That is the workable option we have at the moment.

[encomiast]

I appreciate your candor, Grant. Taxing The Rich Hurts The Middle Class: this may be true, but it doesn't convince me that taxing the middle class doesn't hurt the middle class more. We have had a quite a few years with which to test your claim and the result has been a stagnant middle class and an ever increasing disparity of wealth. The argument is simple: giving a lot of people who are living paycheck to paycheck a little extra money will stimulate spending much more quickly than giving a few people a lot of extra money. Consider what happens if you start with $100K and either give it all to one person or give 1000 people $100 dollars each. In which scenario does more of that original $100K end up back in the economy? What you seem to be failing to understand is that a little tax break to most people goes directly to food, housing, and other staples. I can't argue that your personal economic activity is worthwhile and benefits others (and if you are ever looking for a photographer, I'll get in line for a little trickle down), but I can argue that giving more people smaller breaks is quicker and will in the end help you more than a tax break to you helps us.

[feo]

Bush tax cuts were supposed to spread the wealth by creating jobs. Nothing of the sort happened. Higher marginal tax rates have never been shown to have any impact on job creation. The whole thing is a Reaganesque myth.

[Patco4ever]

Mr. Cardone, one of the things that you apparently cannot comprehend is that when those of us making less than $75,000 per year receive a reduced tax bill, we then pay our mortgage or our car payment (you probably have none) or buy clothes for our kids. You will never have to worry about not having enough money to feed your family.

Give me a break.

[Rule Of Law]

Well, as usual, the wealthy are not at all shy about trying to protect what they got!

[alansky]

Even if the author pays his fair share, his premise is pure hokum. The bottom line is that the rich want to get richer and really don't care what happens to the 90% who struggle day in and day out just to make ends meet.

Once in a great while, a rich person who genuinely cares about "giving back" shows up. But you know... Giving back isn't a mystery. To do it, all you have to do is give some of your money to worthy causes dedicated to reducing the suffering of others. There's no need to lobby for lower taxes in order to "benefit the middle class." What a bunch of baloney!

[Voltaire21]

"The bottom line is that the rich want to get richer" and the poor don't? You cannot sit there and tell me that you are not trying to get richer, because that is baloney. And great providing the middle class with handouts is exactly what we need, people need to gain money in jobs that create wealth, getting a handout is not being productive for middle class.

[Gary50]

Mr Cardone, Congratualions on achieving the American dream by becoming rich. Neither I nor most liberals vilify the rich, in fact I and most others would like to join you. Yes we all hate paying taxes and since you make so much money and own so much property you pay a lot. This is as it should be. You can clearly afford paying taxes at a higher rate. Progressive taxation is a good thing. The problem is many very high income people pay taxes at a LOWER rate than middle class people. Warren Bufett says he pays a lower rate than his sectetaries. He makes billions they make tens of thousands. This is clearly obscene. Bush's tax cuts exacerbated the problem. The extra three percent Obama plans to raise your taxes is not going to bankrupt you or your peers. Earned income should not be taxed at a (much) higher rate than unearned income. I would be more impressed with your blog if you had addressed the unfainess of the system against the middle class rather than trying to elicit sympathy for the very well to do.

[Grant Cardone - Huffpost Blogger]

While I agree with much of what you have stated I don't agree that tax cuts or incentives create problems. it is proven that tax incentives promote activity in the market place. What has created the problem is rewarding people that are incompetent, unethical and who choose to destroy companies and agreements made. Our country is having problems not because of taxes either way but because the economies were fabricated and not real in the first place. Selling homes, cars and televisions to people that shouldn't be involved in buying homes, cars and televisions. Giving credit to people that don't deserve credit and paying executives that are no better than pedophiles and allowing them to stay in the marketplace. And on both sides of the aisle letting politicians that haven't a clue about how to run anything run the country.

[malisams]

"Selling homes, cars and televisions to people that shouldn't be involved in buying homes, cars and televisions. Giving credit to people that don't deserve credit..."

Whoa.

Who are these people, and why are they so undeserving? By what criteria are you judging their worthiness? It seems to smack of the philosophy that the rich work hard and deserve it, and the poor simply haven't worked hard enough.

People should never be punished or denied opportunities because they're poor. The poor will continue to be poor so long as there are no measures in place to even out the playing field and present equal opportunities. They cannot pick themselves up by their own bootstraps. Trickle-down economic theories haven't, aren't, and won't work so long as there is an ever-widening disparity of wealth AND no plan to lift people out of poverty and into a sustainable standard of living.

As grateful as your house staff likely are for your business and the income it generates, I bet they are still struggling, and just 1-2 bills or unexpected expenses away from serious trouble feeding their families. You clearly have no idea, or have forgotten, what it's like to live paycheck to paycheck, and with the realization that your livelihood relies on the nice rich man across town wanting his yard to look tidy, or his kitchen to sparkle. It's honest, respectable work, but you're deluding yourself if you think that they are thrilled to be where they are.

[GregJL]

I don't hate paying taxes. i figure it's putting my fair share toward the things we can't accomplish alone.

[PATina]

Here's the problem I have w/ your business scenario. I seriously doubt that you are paying your employees simply because you get a tax savings. Aren't you paying your employees because the work they do brings in revenue?? If your revenues go down (even if your taxes go down) because people can't afford to purchase your goods or service... would you still continue to pay labor costs (provide bonus, health insurance, vacations) for employees you no longer need? If your revenues go down significantly... wouldn't that affect your profit (disposable income) which could cause you to lay off your gardener, pool boy and maid... even if you paid less taxes??

Anyway... what really refutes your argument is that during the time that CEO's have made mega salaries... the number of people living under the poverty level has increased.. and the middle class has decreased. If your argument were true... It would be the middle class that grew... and there would be less people in poverty.

[Grant Cardone - Huffpost Blogger]

You are confusing me with someone else as I am not some high paid executive that runs a company into the ground. I run small businesses and I hire people to work with me not for me every time I make another investment into another business. I need people to grow my businesses and the more money I have left over after taxes the more I am able to grow businesses. So many people think that if they had money they would just take vacations for the rest of their lives and that is not what the working CEO of small businesses does.

[ChangeRequired]

I'm confused. If you reinvest your revenue in your business, that comes out before taxes are paid.

[PATina]

Let me try this again...

My point is... you would not reinvest money into your business(es) unless you determined that it would increase your revenues and therefore your profits. If your customer base shrinks because people can no longer afford your products... your revenues/profits go down... unless you cut costs (lay off employees) Even w/ a tax cut... it would be really stupid to reinvest in that business or create another one unless you knew you'd get a return on that investment (increased revenues). In other words... giving a tax cut to businesses won't help the economy if the majority of the people can't afford to purchase the goods and services the businesses provide.

A capitalist system can only work effectively if the majority of its citizens have capital. If we continue on the path that we are going... more and more money to fewer and fewer people... as we've seen... our economy crumbles. it's time to put more money into the hands of more people. People will spend... business will flourish... the rich will still profit.