Wealth's upward flow biased

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The principal axiom of science is that, without external stimulus, everything tends to degrade. For example: Water flows downhill. Heat flows from high to low temperature. Living things grow old and die.

An axiom of economics is that absent restraint: Wealth flows upward; those who have, get more. History shows that it has always been thus – sovereign and subjects, master and slave, “noble” and “base-born,” rich and poor. History also shows that such distinction was by coercion or birth, not choice.

There have been at least two attempts in history to resolve this injustice among people – the division among the Israelites of the “promised land” on their return from slavery in Egypt; and the birth of the United States, based on the truth that people are created equal and granted certain inalienable rights by God. That truth, expressed in the Declaration of Independence, was codified in the Constitution. So was born a new nation, not without flaws, but unique in the world.

Under our Constitution, people may be equal in a legal sense, but some people are smarter than others, work harder than others and manage better than others. Therefore, it is inevitable that, in any enterprise where wealth is involved, upward flow occurs. Such enterprise is not inherently wrong – certainly not when it is free enterprise.

Sadly, however, the upward flow of wealth in this country is biased, increasing the gap between those with wealth and those without. That bias is caused by:

• a tax code that taxes wages/salaries at a higher rate than investment income;

• crony capitalism – the illegitimate transfer of wealth from government to corporate America, particularly Wall Street, at taxpayer expense;

• the selfish and foolish transfer of industrial production overseas, causing the demise of the middle class.

Hubert Baker

Aiken, S.C.

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shrimp for breakfast
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shrimp for breakfast 11/15/11 - 01:57 am
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True.

True.

LocalLawyer
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LocalLawyer 11/15/11 - 02:05 am
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"History also shows that such

"History also shows that such distinction was by coercion or birth, not choice." But then you say the practice of free enterprise (some are smarter and work harder) building wealth is good. Seems like a contradiction sir. Lots of big words, but what's your point?
As for the OWS crowd, guess what? Life is not fair. Didn't your Moma tell you that? Mine did, so I busted it to have a descent life. That used to be he American dream. Now it's "gimme gimme gimme, it's not fair!"

nofanofobama
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nofanofobama 11/15/11 - 08:19 am
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where does investment income

where does investment income come from???????? those who invest had to work for that money to invest. so it seems that by definition the original investment money was already taxed. and now its return is taxed again but at lower rate .and when i am paid for my salary there is no risk...investment always carries a risk and is needed in a captital system...unless your a friend of obumler...

Carleton Duvall
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Carleton Duvall 11/15/11 - 08:33 am
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Let's not forget that

Let's not forget that investment income(dividends) is taxed twice.The first by the corporate income tax and then again when that money is distributed to stockholders. So to say that investment income is taxed at a lower rate than wages is not true. Just another false statement by the left.

Bizkit
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Bizkit 11/15/11 - 08:55 am
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Wow, America use to be a

Wow, America use to be a country where you get an education, get a break, get an idea, and work hard and you can join the 1% of the successful.Every nationality and color comes to our country and their children are better off and have increased their wealth. Now, America has the same opportunity, but those who don't reach the same success feel "justified" in stealing it from others. Sick really. Demonize those who succeed so it can ease your conscience when you steal their spoils. Sick, especially with such an unequal progressive tax code which should be unconstitutional because it discriminates and supports unequality before the law. It is called perrsonal responsibility-the wealthy didn't steal anything from you , except in the perverse machinations of your mind. What is great is all people, in theory, can join the 1% of the wealthy-plenty of high school grads in the 1% and plenty of PhD who aren't so the lack of an education isn't necessarily self limiting.

augusta citizen
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augusta citizen 11/15/11 - 09:15 am
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Good comments Bizkit.

Good comments Bizkit.

JRC2024
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JRC2024 11/15/11 - 09:55 am
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Wealth, yes I have it and

Wealth, yes I have it and have worked 41 years and saved and invested to gain it. As local lawyer infers my mother took me to the bank at 6 years old and opened a savings account with the nickels and dimes she made me earn. All through high school I worked on the weekends and always saved part of what I earned. It has paid off and paid off big over because of the time value and because I could see that it would help me later. So Mr. Baker do not tell me I have not earned it and that it was given to me because of my station in life. My family was a normal middle class family but my parents were good teachers. That is one thing for which I am grateful. Work never hurt anyone but thinking I owe someone something will.

seenitB4
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seenitB4 11/15/11 - 10:08 am
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JRC...You had a very smart

JRC...You had a very smart mother...:)

Swampman
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Swampman 11/15/11 - 10:44 am
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I really hate stating the

I really hate stating the obvious, but...

You all do realize that it is not, in fact, possible for "all people, in theory," to "join the 1% of the wealthy" - not even theoretically. Any 1% subset implies that 99% are not part of that subset. Basic math.

Also, every study ever done of the subject demonstrates that successful parents are more prone to beget successful children. They tend to be better educated, more affluent and possess superior skills for building a successful life - mostly because that's how they are raised. That's just reality.

Interesting, the notion of noblesse oblige - that to whom much is given, much is expected - has long been a guiding principle of many wealthy people. In other words, they well understand their position relative to the rest of their society and appreciate the social responsibility that comes with it. It is this concept - a sense of the "social contract" - that has been shredded by the contemporary cult of Me, as in "I've got mine and screw you." That is what many of us find so contemptuous in the conservative class warfare rhetoric. (Hint: everyone engages in class warfare, don't lie to yourself about that.)

Personally, I have been far more successful than I probably have any right to be, though it isn't so much from working hard as working smart. And getting some really good breaks along the way, no doubt about that. I suspect many other successful people, if they are honest, could say the same thing, which is why some of the self-congratulatory and self-impressed rhetoric of the 1% and their political apologists wears a little thin with me.

allhans
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allhans 11/15/11 - 02:37 pm
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Swamp Man..How do you know

Swamp Man..How do you know what that 1%'er might be doing to help others? I am continually surprised when my daughter mentions some act they have done to help others ( and in a BIG way).
Most folks don't talk about the good they do, they are not self-congratulatory, they weren't raised that way.
I know of one family who declined scholarship funds for their son to attend GT because they knew there were others needing it more.
Never think the rich are heartless...nothing could be further from the truth.

willie7
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willie7 11/15/11 - 11:21 am
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An Excellent Post,
Unpublished

An Excellent Post, Swampman.
Well Stated!!!!

Chillen
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Chillen 11/15/11 - 11:22 am
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Excellent letter Mr. Baker.

Excellent letter Mr. Baker. I believe that soon this wealth envy rhetoric will die a miserable death. Most Americans are just too smart to fall for it.

I started with nothing, literally zero in the bank.

I went to work for a company & learned a skill. When the 5 o'clock whistle blew, everyone else shuttled out of the office & I stayed behind. When there was snow on the ground, everyone else called in to stay home & I went to work. I never used my sick days "just because". I put in 200%.

After 15 years I felt I'd learned enough & I ventured out to start my own business. Now I have owned it for 10 years. I am doing well despite the politician's hands in my pocket, relentless regulations and the continual bashing of success, morale & desire to succeed by this inept administration.

This did not come easy. It came with hard work, a good attitude & determination. It also came with risk. I left a well paying job with good benefits to create a new company. Now I support myself, my family & my employees.

It can be done in America. If you want it bad enough. Some people are just too lazy, feel entitled and want it given to them. And the government happily obliges.

justthefacts
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justthefacts 11/15/11 - 11:38 am
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I agree with Allhans.

I agree with Allhans. "noblesse oblige" is very much alive and well. Unfortunately, the more the government takes by force, the less available for charitable giving.

carcraft
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carcraft 11/15/11 - 11:42 am
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Interesting that Rodger Moore

Interesting that Rodger Moore is one of the one percenters, rose up the hard way and now encourages the slothful, lazy and criminals that make up the occupy movement that Obama embraces! Do people realize how much Moore is worth?

Bizkit
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Bizkit 11/15/11 - 11:52 am
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Well swampman, that is a non

Well swampman, that is a non sequitur. You assume the 1% is a fixed percentage of the population-which of course is nonsense. The number of poor or rich or middle class can change one way or the other. So theoretically all Americans could earn income that would put them in the upper class. The social contract you speak of comes from the Bible where those who are give much then much is expected. As you say, the I have mine so up yours is really a secular notion.
Because if they were of a faith, like Christianity (where I personally know two millionaires that give their wealth freely because their philospophy is it isn't mine but the Lords so I freely give) then you will see the giving (data to support too). There is no social contract except dog eat dog (social Darwinism)-it is the faiths that teach and propose altruism.

orb
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orb 11/15/11 - 12:13 pm
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Some of the above posts make

Some of the above posts make the same points that Hubert Baker makes. In a "free enterprise" system those who work hard, work smart, and manage better can succeed. That does not alter the fact that wealth flows upward. That also does not alter the fact that the existing Federal tax code is an abomination.

Why should the taxpayer subsidize any company/corporation? That is not "free enterprise".

Why should some companies/corporations receive subsidies from the taxpayer and others not: Political payback/corruption?

Why is it that General Electric supposedly paid no Federal Income tax in 2010?

Why should the taxpayer bail out those companies [Goldman Sachs, Bank America, Citi Bank, GM, Chrysler] whose policies put them on the verge of bankruptcy? Why not let the "free markets" work?

Why should the taxpayer bail out those home buyers who bought more than they could pay for?

Why should the renter subsidize the home buyer?

Why should the taxpayer pay for other peoples/companies/corporations mistakes?

orb
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orb 11/15/11 - 12:12 pm
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Chillen You started a

Chillen

You started a business. You worked harder, worked smarter, and managed better and apparently succeeded. You did not indicate what your business was but I assume that you produce/make/sell something.

Now do you give away the product of your business or do you sell it? If you give it away you will not be in business very long.

If you sell your product do you make a profit? If you don't make a profit you will not be in business very long.

If you make a profit then wealth flows from the purchaser of your product to you. That seems to be the point that Baker is making. Nothing wrong with that as long as there is no coercion, no crony capitalism, no payoff by the politicians, no government subsidies.

orb
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orb 11/15/11 - 12:21 pm
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Someone above mentioned the

Someone above mentioned the double taxation of dividends. But is this correct?

Under our system of taxation businesses are allowed to deduct taxes as an operating expense:

“Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.”

http://www.irs.gov/businesses/small/article/0,,id=109807,00.html

Do large businesses, especially corporations actually pay taxes or are the taxes they pay passed on to the consumer in the cost of the product.?

How about that Chillen? You have to make a certain amount of money to stay in business. Does the selling price of your product reflect the amount of income tax you must pay?

justthefacts
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justthefacts 11/15/11 - 12:23 pm
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Orb, all your questions would

Orb, all your questions would appear rhetorical. At least in a country where common sense reigned supreme. But, not here.

justthefacts
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justthefacts 11/15/11 - 12:29 pm
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Orb, not enough time here,

Orb, not enough time here, but business pay taxes based on profit AFTER any deductions for operating expenses. It reduces tax liability, but doesn't eliminate it.

orb
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orb 11/15/11 - 01:03 pm
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justthefacts Yes but taxes

justthefacts

Yes but taxes are also deductible as an operating expense which obviously reduces the tax burden on the corporation.

I lean toward eliminating all taxes on that part of corporate profit payed out in dividends and then taxing dividends at the same rate as wages/salary.

CorporalGripweed
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CorporalGripweed 11/15/11 - 01:07 pm
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I submit that if all wealth

I submit that if all wealth in this country was suddenly distributed evenly, within a year those that were wealthy before would be just as wealthy. Likewise those that were poor would be just as poor. Most wealth is accumulated, I believe because of good decesion making on a day to day basis. Sure some is inherited but with the confiscatory death tax policy we have had it is a very small percentage. And it has been my experience (at least in MY case) when I was nearly destitue it was due to very poor decesion making on my part.

orb
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orb 11/15/11 - 01:27 pm
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CorporalGrip Probably take

CorporalGrip

Probably take longer than a year but your comment seems to be the same as the premise of Baker's letter: Wealth flows upward. Nothing wrong with that as long as corrupt politicians don't bias the transfer of wealth. It is just as wrong for the political system to bias the accumulation of wealth as it is for the political system to force the distribution of wealth.

harley_52
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harley_52 11/15/11 - 01:37 pm
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orb said "Yes but taxes are

orb said "Yes but taxes are also deductible as an operating expense which obviously reduces the tax burden on the corporation."

You have an incorrect notion about how corporations pay taxes. Income taxes are most assuredly NOT deductible expenses.

Chillen
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Chillen 11/15/11 - 01:51 pm
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@orb. I don't get any crony

@orb. I don't get any crony capitalism money or special favors from the govt. Nor do I sell anything that flows directly or indirectly to them. I am a tax giver, not a tax taker. Most businesses operate that way.

I'd be doing much better if I didn't have to write huge checks every month and every quarter to the IRS & Georgia Dept of Revenue.

The whole tax system makes me sick. Upper middle class & lower upper class Americans are paying more than 50% in total taxes.

allhans
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allhans 11/15/11 - 02:45 pm
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I would like to see more of

I would like to see more of the do-nothings get a job, earn a paycheck that has taxes withheld, and get off the public dole. That would solve so very many problems.
You know, pay into the public trough, not take from it.

stillamazed
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stillamazed 11/15/11 - 03:09 pm
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Amen allhans, I could not

Amen allhans, I could not agree more. I agree with you also corporalgripweed when you watch those shows about people who win the lottery you see that in no time the majority of them are broke. Look how many rappers and such make millions then file bankruptcy, you have to know how to handle money in order to have money and most people who have never had any or who have no concept of how to manage it when they get it will end up broke again.

LocalLawyer
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LocalLawyer 11/15/11 - 03:28 pm
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I have to agree with Chillen.

I have to agree with Chillen. Every time my business gets ahead, here comes the IRS to take it all away. Like Chillen, I walked off of a high paying job to start my own business. I took a huge risk as a 29 year old lawyer. I had a wife and a son and no money or clients. Even my own Mother told me I was crazy. I worked 80 hours a week for my clients. I still fight hard and help people in bad situations. Then my accountant calls and says wow...
I am still paying my student loans and credit cards from law school and college. I'd be spending that tax money to pay off debt, purchase goods, investing it if I could, and hiring more employees if I didn't have to pony up such huge checks to Uncle Sam every month/quarter and again at the end of the year. You want to create jobs? Don't tax the snot out of small business owners.
Someone once told me to go to college and get your education, build a business, be successful, that is the American dream! I would ask that someone to warn me next time, and explain to me that I would have to pay $51,000 in income taxes per year at 30 something years old while I am still paying for my education. That was a personal rant, and I sincerely apologize for getting off subject or sounding like a whoa is me. Just stinks to pay so much and not be able to hire needed employees or buy the ones I already have health insurance.
Then I see kids my age and equally as educated protesting against capitalism. That drives me up a wall. Take a risk, build a business, make your Moma call you crazy. It's the crazy ones that make it big.
Finally, I encourage anyone who wants to change their life, no matter what their education or circumstances, to read the book Rich Dad, Poor Dad.

Carleton Duvall
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Carleton Duvall 11/15/11 - 03:30 pm
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If you are not a tax

If you are not a tax accountant or tax lawyer you probably are going to get your foot stuck into your mouth when you start making statements about what you know about taxes. To clear the matter up, unless tax laws have changed since I retired, state taxes are deductible on a company's federal tax return. Federal taxes are not deductible on a company's federal tax return.

Carleton Duvall
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Carleton Duvall 11/15/11 - 03:41 pm
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This is my last post for the

This is my last post for the day. I would like to give those of you that are familiar with the burden of federal taxes on business an insight of what I would do if I was king. I would abolish all corporate income taxes. I would require all corporations to pay at least 50% of their income to stockholders in the way of dividends. The retained income could be used by corporations to either pay down debt or for capital improvements. If they didn't within three years they would be required to pay any unused monies to stockholders as a special dividend. Dividend income would be taxed as ordinary income.My friends, this would stimulate the economy like nothing else.

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