Days of Change

Day 1079 – Wealth vs. Income

October 19, 2011
1 Comment

Most engineers will be familiar with the equation s=0.5*a*t^2+v*t+x. This formula tells you where you’ll be from where you are in a certain period of time, given acceleration is constant and you know the starting velocity. If acceleration is 0, it’s still constant and now your position is just the velocity multiplied by the time at that velocity. If you accelerate at 10 m/s^2 for 10 seconds starting at a speed and position of 0, you’ve traveled 500 meters. If you travel at 10m/s for 10 seconds, you’ve traveled 100 meters.

So, what does this have to do with money? Let’s call s your accumulated wealth. Then v would be your salary and a would be any adjustments to that income. That makes x anything that moves your income up or down, like expenses or one-time bonuses. Time remains the same.

This is the difference between wealth and income. Wealth is rarely constant. We are all either losing or gaining wealth by the year or even the day. Income tends to be stable, to the dismay of many. Even people with significant changes in incomes usually have even larger changes in their total wealth to match.

The United States used to tax wealth before they taxed income. The “rich white male landowners” of the past were the only ones allowed to vote because they were the ones paying the taxes. As the voting base expanded, so did the tax base. The federal government abandoned that system, presumably because it would eventually wipe out people who lived from the fruits of their land. The states didn’t really learn that lesson. Now people are being forced out of their only asset because they can’t pay property taxes. The feds avoid that by taxing wealth at the time of death.

The difference between wealth and income is one of the things being willfully ignored by OWS. 1% of people are “rich” and there’s something wrong with that. Maybe 1% of the incomes in this country are too high and there’s something wrong with that. Or is it that 1% of the population (over 3 million people) are controlling the government? 2% of the population could have switched votes in 2008 and gotten John McCain elected. Then again, he’s owned by Wall Street. That’s why he took federal matching funds instead of raking in unlimited cash.

There are 3 million Americans out there who make up 1% of the population. One percent of what? Are they the ones who made a lot of money last year, some for the first time? Are they people who are sitting on millions of dollars of assets from generations past? Right now, it’s both. Why is it 1%? It roughly equates to the top tax bracket, but that’s an income figure, not a wealth figure. I keep hearing about the “wealthiest” Americans, not the highest earners.

I’m sure I’ll get accused of being vague, but it’s the protesters who are being vague. You have to define your damn terms. We have an estate tax now. The wealthy are being taxed on their wealth. We have an income tax. People are being (progressively) taxed on their income. If you oppose the loopholes, join the Tea Party. If you oppose the accumulation of wealth, join the protesters. I’ll say one thing. If you think rich people don’t like paying tax on income, wait until you tell them they have to give up the assets they already paid taxes on.

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