Jet Owners, Ogres, and Other Millionaire Myths

Money-Guy 07-08-2011

It is difficult, as you can imagine, to be a small business owner who feels like, at least lately, I am walking around with a target on my back.

If I had to say that President Obama’s news conference last week had an overall theme, it would be that  our nearly $15 trillion budget deficit can be reduced if we simply go after the big, bad, jet-setting millionaires and billionaires.

As much as I try to stay impartial to the political environment, I was pretty disappointed in the tone of that speech.  Here we are with record debt and, instead of coming together to find a solution, we’re still throwing mud at each other.

On Wednesday, the President stated, “The tax cuts I’m proposing we get rid of are tax breaks for millionaires and billionaires, tax breaks for oil companies and hedge fund managers and corporate jet owners…Before we ask our seniors to pay more for health care, before we cut our children’s education, before we sacrifice our commitment to the research and innovation that will help create more jobs in the economy, I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up that tax break that no other business enjoys.”

On Thursday, The Washington Post Fact Checker rated Obama’s speech with Two Pinocchio’s.  This means that there were significant omissions and/or exaggerations and some factual error may be involved.  For starters, we need to cut 2 to 4 trillion dollars in the next 10 years.  However, the supposed jet tax break would only cover $3 billion.  Under this plan, we would still have 99.9% to go after 10 years!  Essentially, this change would be like dropping a penny in an ocean.

Furthermore, while the idea is to target “millionaires and billionaires”, the fine print of the current proposal would actually affect couples making more than $250,000, 61% of which is generated from salary and wages.

One research piece that we pulled shows that raising the highest tax rate of 35% to 42% would only generate $43.5 billion of the $1,665 billion annual deficit.  Raising it to 100% wouldn’t even cover the gap.  We would bring in an additional $404.8 billion but still be $1,260 billion in the hole for the year.  This article also points out that the American economy is driven by consumer spending which represents nearly 70% of overall economic activity.  The top 5% of wage earners account for 37% of all consumer spending and pay 58.7% of all income tax revenue.  We are increasing the taxes on the very people that we need for an economic recovery.

One of my favorite books,The Millionaire Next Door: Surprising Secrets of America’s Wealthy, by Dr. Thomas Stanley takes a real, factual look at who the millionaires are in this country.  Contrary to popular belief, the majority of millionaires are not the professional athletes, rock stars, and heiresses that make the headlines.  They are actually first generation, hard-working Americans who believe in slow and steady accumulation.  His research shows that millionaires typically reach 7 figures in their late 50s, consistently clip coupons, and live in homes valued at less than $400,000.

Dr. Stanley lists Seven Factors of a Millionaire:

• They live well below their means.
• They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
• They believe that financial independence is more important than displaying high social status.
• Their parents did not provide economic outpatient care.
• Their adult children are economically self-sufficient.
• They are proficient in targeting market opportunities.
• They chose the right occupation.

As we go through the show, we share some other data relating to the proposed tax increases circulating in Washington right now. We also explore some of Dr. Stanley’s blog topics and how, without introducing any sort of partisanship, he clearly explains that the solutions our leaders are suggesting may actually serve to worsen our current economic situation. As always, we love to hear your thoughts and opinions on these type of topic so please feel free to share below and on our Facebook page.

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