Taxing the rich sounds great, and most of us are for it. After all, if the government needs more money, what's wrong with getting it from the guy with the most money? That way, it certainly won't cost us anything, or will it?
Last week Chuck C., an executive with a major insurance company, was riding the train from his suburban New Jersey home into New York City. Sitting next to him was a home remodeler, whom we'll call Rick the Remodeler. They talked about the new tax program and what they both thought it meant to them personally.Rick liked the idea of soaking the rich for taxes. Chuck didn't. Neither considered himself wealthy.
"I need my basement remodeled, but with the new tax law you won't get my business," said Chuck.
"Why not?" asked a surprised Rick.
"I'm not rich, but I do earn more than $100,000 (which in the New York metro area isn't that much). It looks like the new tax law is going to cost me about $5,000. I had planned on remodeling the basement of my new house, but the money I would have sent your way is now going to be grabbed by Uncle Sam," explained Chuck. "Would you rather have had my five grand or would you rather see it go off to Washington?"
A stunned Rick responded, "I'd rather have the money. If it goes to the government, we'll never see it again."
"Exactly. If people have the money to afford to remodel their homes, your business will employ more people," said Chuck. "And, if your profits held, you might then buy a new car or some furniture. Who do you think those companies employ, the rich? No, they pay the salaries of a lot of other people who might like to have their basements redone but won't be able to because of the tax bite or because they're unemployed."
When Congress deals with unpopular legislation, such as tax hikes, they like to use labels for the victimized parties - labels that most of us won't identify with. However, in the land of the great middle class almost no one is rich, but everyone is taxed.
OIL UPDATE: In Saudi Arabia, the noise of military training missions and all the supply planes flying overhead is nothing compared with the ringing of cash registers.
The Saudis are currently cranking out 8.25 million barrels per day (bpd) to the tune of a $6 billion a month profit. By year-end, Saudi oil output will pass the 8.5 million bpd level on its way to its 1980-82 daily production high of 10 million bpd.
The quota gloves have come off as other OPEC producers want to get in on the windfall. The United Arab Emirates, Nigeria, Mexico and Venezuela have also increased their output. Meanwhile, the Soviet Union is desperately trying to modernize its oil industry. It already produces over 10 million bpd, and the Soviets hope it will become the backbone of their emerging free market economy.
The possibility of an oil shortage inflation spike under current conditions seems extremely remote. If war does break out, supplies will naturally suffer, hence the price will probably return to the $40 a barrel level. But, if war breaks out and the U.S. is able to bring it to a quick and definitive close, look for the Saudis to keep the oil pumping - if for no other reason than to assert their dominance over both supply and price.
U.S. oil stocks this week rose to 344.5 million barrels, according to the American Petroleum Institute, up slightly from 344.4 from a year earlier. Meanwhile, the American Automobile Association reported that gasoline prices fell slightly this week to $1.377 per gallon. This was the first decline since September 18.
There were job losses in the construction and manufacturing sectors, which could not be offset by the slight gain in the services sector.
Reader questions will be answered and may appear in this column, when mailed to Gary S. Meyers at 308 W. Erie, Suite 300, Chicago, IL 60610