If money buys happiness, why are the rich grumpy? Not rich enough!

Interesting column today by Paul Krugman, the Nobel Prize winning economist at the NYTimes who argues that the rich today seem to be more than a little grumpy.

This is really nothing new … there have been jokes, based on reality, for decades about the rich avoiding paying taxes through trusts, off-shore accounts and so on. But Krugman says something I’ve always wondered about myself: That the staunchest defenders of the rich’s ability to avoid taxes, or to not have their taxes raised more than taxes on us schmoes, are among the poorest in the nation. In a way this is arguing against their own self-interest since taxing the rich more would ease their own tax burden. Higher tax rates on the rich might make higher education more affordable, just on example — instead of having to go into debt to the rich for the rest of your life to pay for college.

A progressive tax has been part of the nation for almost as long as the nation has been around. When the nation was founded wealthy landowners paid property tax, while poor renters didn’t pay anything, since they didn’t own land. And when the property tax was instituted it hit the rich the hardest, the thinking being that they benefit more, in proportion, from the nation than the poor do.

Not to mention, they can afford it better. The poor pay all they earn to stay alive, the rich have a lot more surplus income.

Yeah yeah, I hear you: Taking a person’s money based on the need of others is socialism. But we’ve been taking each other’s money for the benefit of all for hundreds of thousands of years. We settled that argument when we decided to have governments. All we’re debating now is the details.

We have a real-time example of this in Gov. Gary Herbert’s problems with campaign donations. He is being accused of possibly granting favors in the form of highway projects in exchange for campaign donations.

I highly doubt that he is, but the bruhaha again illustrates what I’ve been saying for years: The doners don’t need to buy Gary’s favors, they already have them. The donations are to make sure he stays in office. He’s the choice of the monied crowd, and they’re happy to wield their money to make sure he stays the choice of everyone. Herbert wants to be liked by the rich, so he’ll keep doing what he’s doing and if that happens to coincide with the desires of a lot of construction companies, well, what a coincidence!

Top of Utah had a real nice example of that in the $16 million in federal funds that Sen. Bob Bennett sponsored to build the Trappers Loop Connector Road for Earl Holding. Holding didn’t need the feds to build his road — he could have financed it out of his pocket change. But Sen. Bob got it for him anyway — not in exchange for campaign donations or political favors, but simply because they’re both rich guys, members of the rich guy club, conversant in the secret signs and symbols of same (or should that be $ymbol$?). Rich guys take care of each other.

An after-thought: I hear that we should not tax the rich at a higher rate because the poor dears are the most productive people in society and why should we punish them for being productive? But ask yourself: Does a corporate director who earns 400 times what one of his line workers makes really produce for society 400 times what that guy on the line does? Are his services really so indispensable? His output really so massive? Is that guy really doing a 10-times better job of running his company than the guy who ran it 40 years ago when the boss only made 40 times what a line worker does?

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8 Responses to If money buys happiness, why are the rich grumpy? Not rich enough!

  1. Owain says:

    \But ask yourself: Does a corporate director who earns 400 times what one of his line workers makes really produce for society 400 times what that guy on the line does?\

    An unanswerable question, really, but in many cases, I think the answer is probably yes. He is providing a service for society more than the guy on the line in that he is helping to provide employment for all those line workers, plus hopefully providing a return on investment for the companies share holders. They are the ones paying his salary after all, and if they want to pay that, who are you to object?

    On a minor side note, \But we’ve been taking each other’s money for the benefit of all for hundreds of thousands of years.\ Well, if you want to count beating each other over the head with a club and stealing stuff for all but maybe 6,000-8000 years or so of that time, OK then, but otherwise, I don’t think civilization or taxation has been around for hundreds of thousands of years

  2. Bob Becker says:

    Charlie:

    You wrote: A progressive tax has been part of the nation for almost as long as the nation has been around. When the nation was founded wealthy landowners paid property tax, while poor renters didn’t pay anything, since they didn’t own land. And when the property tax was instituted it hit the rich the hardest, the thinking being that they benefit more, in proportion, from the nation than the poor do.”

    Well, to some extent true, but not entirely. First, it was not always true that people who farmed on leased land did not pay the land taxes.. Prior to the Revolution, some great landowners [and revolutionaries] paid nearly no land taxes at all, because they included in leases for those small farmers who rented land from them, that the renter would be responsible for any land taxes on the land they leased. Thus the wealthiest colonists in places like NY could, through their influence on the colonial legislatures [generally filled with men much like themselves] shift the tax burden to the poorer sort. They did the same by levying significant poll taxes [an equal tax per "poll" meaning person, the same for the wealthiest planter as the poorest hardscrabble farmer]. And in many colonies where great landowners dominated, land taxes were a flat rate per acre [not ad valorem], which meant a manor lord in the Hudson Valley paid the same per acre for valuable arable land abutting the Hudson River that a frontier farmer paid for hardscrabble land deep in the forest with no way to transport what he grew to a city market on the coast, and a South Carolina indigo planter paid the same per acre rate for rich bottom land along the coast as an inland farmer paid for poor pine-barren land in the backcountry. Sometimes, in NY again, undeveloped land didn’t pay any land taxes at all, so the manor lords of the Hudson Valley could hold huge tracts tax free while they rose in value, and then sell or lease them, so that they paid in effect no taxes at all on those lands in the end. Cushy deal. and they made fortunes from it But as you note, the rich take care of their own.

    And second, while it is true that many rebelling colonists looked on the Revolution as a way to change the tax laws of the 13 former colonies to make them, for the first time, adhere to the “ability to pay” principle, the reforms they wanted were not intended to bring about “progressive taxation” in modern terms [i.e. that the wealthy should pay higher tax rates than the less well off.] . What they fought for were taxes under which everyone, rich or poor, would pay an equal proportion of their wealth or income in taxes. [Think "flat tax."] At the time, achieving just that much was considered a huge and controversial reform, and by many, a dangerously radical one. [Previously, the wealthy had paid a much lower proportion of their wealth or income in taxes than did the poor and midling sort.] The drive to reform the tax laws in that way appeared in every colony, without exception, once Independence was declared, and framed up a good deal of legislative battles, party divisions and election contests during the Revolutionary and post-Revolutionary years.

    In places like New York, for example, when popularly elected governments were established following independence, they began to tax the lands of the great manor lords by value for the first time. And oh how they howled! Robert Livingston, a supporter of Independence and a great manor lord of the Hudson Valley, complained that popularly chosen tax assessors were laying taxes on his estates [virtually untaxed before Independence] that were “OH MONSTROUS!” His mother, Margaret Beekman Livingston, whined that she had now to deal with popularly elected assessors and collectors who showed damn little respect for the fact that she was both a Beekman and a Livingston, and she asked god regularly to deliver her from “the persecutions of the lower class” and specifically from tax assessors they elected. She was far from alone.

  3. Mark Shenefelt says:

    @Bob, thanks for the enjoyable history lesson.

    In politics and taxation, nothing ever really changes.

  4. Neal Humphrey says:

    I moved to Utah from Marin County, California, which, if it’s not the most wealthy county in entire USA a particular year, will always be in the top three. One of my parishioners had five Oscar Awards. He was unpretentious and kept his statuettes on an unfinished pine shelf in his home sound studio.

    But in the main, Marin County is a materialistic, unhappy place.

    I knew one child whose desperately miserable mother murdered him and then killed herself. She and her estranged husband owned five estates in Marin County worth untold millions.

    And I served as a volunteer counselor on a 24/7 suicide prevention hotline. The agency fielded over 3,000 phone calls a month.

  5. Bob Becker says:

    In re: Neal’s post: in the past few days, I read Reuters story reporting a study designed to answer the question “Can Money Buy Happiness?” The answer, according to the study, was “Yes, but only up to a point.” The study said that increasing income did increase the happiness of those receiving it, up to about $75K a year. Beyond that, increasing income had no effect on the happiness of the people making the money.

    I’m leery about such studies [how you quantify happiness escapes me, which means the study was probably based on the self-reporting by the subjects of it, which is dicey too]. But taking the results seriously for the sake of argument, the point seems to be that the lack of income necessary to provide what I guess we could call the security of a mid-range middle class life creates stress and friction and so unhappiness, but that once sufficient income is achieved to provide a mid-range middle class life, happiness no longer depends on levels of wealth or income. Not sure that’s necessarily so [again, I'm leery of such studies], but thought I’d mention the results in light of Neal’s post.

    Link to the Reuters article here: http://www.reuters.com/article/idUSTRE6873PB20100908

  6. ctrentelman says:

    Krugman’s post has more than a thousand comments, and this one got more than 3000 favorable votes. It’s from a guy in Canada:

    My household makes just over $250,000 here in Canada. One of the best bargains I get for my money is living in a place where I and everyone I know sends their kids to public schools because they are really good. We end up with few criminals, because students learn how to be productive good citizens in schools.

    A second bargin I get is universal health care. Great care (rated well above the American system in most measures) whenever you need it without worry about not being approved. It all comes at a bargain price of about 50% of the cost of the US health system.

    A third bargain is the modernizing infrastructure. Cities in Canada are building new commuter train systems, rebuilding old overpasses and other roadways, building new schools, new recreation centres, etc. We are not quite like a new city in China, but we are not the decrepit cities of the USA where governments are shutting the lights out at night because they have no money. In Canada, we realize that we can’t live off of the work of our grandfathers forever.

    A forth bargin is the right of Canadian mothers (or fathers) to spend a decent period of time with their children when they are born. With one year maternity leave, we can ensure that parents and kids bond and families have some time to look after one another. I personally think it preserves a lot of marriages. (the pay is about 60% your full pay for the year so it is still a financial sacrifice).

    Speaking of marriage, I am glad that my tax dollars don’t go to perverse things like trying to stop gay people from getting married or raising children together – what a waste.

    The next bargin is public universities – a place where my children and the children from all types of households can go to and graduate with a big debt, but not a devistating one.

    Lastly (there are more, but I have to get back to my work), we get governance. This includes a banking system that is there to support the economy, not end run it to make a few $$.

    With all of that said, I have to say that along with this, I enjoy one of the free-est countries on earth. Our business freedoms are as extensive as the USA. We are free to hunt and own guns (aside from assault weapons and who needs those anyways). IN fact, I have lived in the USA and I have to say, I can’t see any freedoms there that we don’t have here.

    Oh yeah, and my total tax bill is about 2% higher than it would be in the USA. To me, its a bargain!

  7. Pulse says:

    Sharpen the guillotines.

    That has a way of putting things in perspective for folks.

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