Monday, December 12, 2011

What is “rich” in Sarasota?

By Dean Kalahar

Class warfare and income redistribution rhetoric has always been fashionable among self anointed protestors and politicians who play the old game of divide and conquer, telling us the greedy “rich” need to “pay their fair share.” This would be tedious if it did not have serious implications for tearing communities apart, including our own. Let’s take a look.

According to IRS data, there are 1.38 million Americans in the top 1% earning at least $343,927 a year. This is a generous living but hardly the cash flow to purchase a corporate jet and luxury yacht. There are 138,000 Americans in the top .1% earning over 2 million a year. They more truly represent the vision we have of “rich,” but only equal .04% of the population.

Going even further, we can say “rich” and attach images of Oprah and Gates, two of the 5,309 people who make over ten million a year, but comparing .004% of the population to the 330 million other Americans to define the economic fabric of our nation is statistically meaningless.

What do Americans earn? 91.7% make less than $100,000 a year, with 71% making between $0 and $50,000 and 20.7 % making between $50,000 and $100,000. Only 8.3% of Americans earn over $100,000 year while 1.8% earn over $200,000. Good incomes to be sure but hardy “rich” once Uncle Sam takes his cut.

Focusing on the extreme ends of the earning scale to define “rich” versus “poor” is like comparing Warren Buffet to a homeless person. Elites who smugly spew indignation to protect a frail sense of self may create moral melodrama, but choosing the vivid exception to statistical truth does not trump demographic realities. In short, the vast swath of Americans make between $25,000 and $75,000 a year. Instead of being a nation of “rich” and “poor,” we are a nation of income equity and mobility.

Sarasota County is no different. The average adjusted income per household is $55,157. So why do we see opulence here in Sarasota? Because the so called ‘rich” spent the better part of a lifetime working hard at building a business or career, saving and investing for a rainy day, paying off a home and planning for their future. They no longer work, and live off their investment income and social security, but they certainly have paid their “fair share” along the way.

Many locals may live well now, but what is unseen are the years of scrimping and saving that went towards the ability for Sarasota seniors to live out their retirement years with some degree of comfort. Contrary to the static class system argument of neo-hippy malcontents, there is an easy explanation for America’s narrow income variations.

Experience, time, and age must be factored into any income analysis. Young people have fewer skills and earn less; older people have more skills and earn more. Incomes increase over time.

The “have” and “have-nots” are not different people, just people at different stages of their lives. The top 20% retire while the bottom 20% increase their human capital and move up while younger workers enter the workforce and continue the cycle. $66 thousand a year gets you into the top 25%.

Likewise, the bottom 20% does not mean “skid row.” There are the painfully poor 3.5%, but most of the people in the bottom 20% in America do not live on the streets or remain there for very long.

The “poor” in America are far richer in real economic terms than the rich in many places around the globe. Defining poverty and affluence is difficult when the bottom 20% in America has a higher standard of living than the top 20% in many other countries.

Income and class mobility is also a dominant feature in America. An absolute majority of people in the bottom 20% move into the top 20% in less than twenty years. Treasury Dept. studies show incomes in the bottom 20% grow at a much faster rate than in the top 20%, while the top1% actually move down in income and bracket over time. Factoring for inflation, the median income of all tax filers increased 24% over the ten year period studied.

The economy is not a zero sum game where the benefit of one comes at the cost to another. The class warfare attack on the “rich” is really an argument against free markets, wealth creation, and life saving economic growth. Polarizing citizens based on highly subjective emotional terms like “rich” and “poor” is counterproductive at best and immoral at worst.

Free market entrepreneurial capitalism allowed for the success of Apple’s Steve Jobs. Attacking the “rich” to pay their “fair share” through forced income redistribution will mean less Apples, jobs, and prosperity.