Punchinello’s Chronicles

March 5, 2009

Trickle-Down Economics Revisited

Filed under: Butterfly Wings — Punchinello @ 7:00 am
Tags: , , ,

Let’s not make too much money. It’s not worth it, these days.

I knew a guy a few years ago, who built up a small single-owner business. He was an agent and brokered musical bands. His job was to find bands, then place them into nightclubs. So he also had to find nightclubs and speak with their owners. For his work and efforts, he took a commission.

At first he didn’t have more than one or two bands, and knew only a few club-owners. But over the years, he worked hard and found more bands and clubs. His revenues began to increase. Eventually, he earned, let’s say, $85,000 per year in gross revenues. I’m making up that number, but it’s reasonable.

The first year he earned this money, he went to pay his taxes. It turned out he was in a particular bracket where you could earn up to $90,000 and pay X% in taxes. I’m making up the bracket numbers too, but they’re illustrative.

After he’d paid his taxes, he had, let’s say, $70,000 left to keep for himself. He was happy and liked what he could do with that money. So he figured he should get more bands, more clubs, and earn more money.

A couple of years went by. With a lot of extra work, extra effort, and less time at home with his family, this agent was able to get his gross revenues up to around $100,000 for the year. When he did his taxes, he discovered he was in a whole new tax bracket.

After he’d paid his taxes on this increased revenue, he had about $75,000 left to keep for himself.

He sat back and pondered the situation. When he worked a decent schedule, spent time with his wife and kids, enjoyed a few days off, and had the time to take small vacations, he enjoyed life. He’d thought that if he earned more money, he would be able to enjoy life even more.

His thinking was that although he was working much more now, the increased money would make life down the road that much better. The problem was he only gained $5,000 for all that extra work.

It didn’t take him long to figure out that he was an idiot for working that extra amount. He wasn’t seeing his wife, wasn’t seeing his kids, didn’t enjoy any days off, never got a vacation, and never got to use all the nice things he’d bought. He didn’t want to hire employees or expand the business because that would mean new headaches of payroll taxes.

So he quit working so hard. He went back to his more enjoyable life and stopped trying to make more money. There wasn’t any incentive there.

The result was that bands that he might have found weren’t found. Clubs that might have had better bands didn’t have better bands. What could have happened, didn’t happen. And most importantly, the extra money the government would have gotten in taxes, the government didn’t get.

The government and many people in America have drawn a line in the sand. If you earn more than $250,000 then the people are going to come after you! They’re going to take your money, tax you, demand that you stop investing in financial portfolios. They’re going to tax your investments, your capital gains, and tax whatever money you want to leave for your children.

If you have periodic trouble paying a loan, you’re going to have to go bankrupt and the hell with all the bailouts and helping hands other people might get.

Why would someone who’s already making $200,000 a year and living a nice life want to earn more? What’s the incentive to turn themselves into a target for public hangings and burning at the stake?

Those small business owners who might hire more people, don’t need to hire anyone. Or if they already have someone working full time, why not just push those folks back to part time?

Oh…wait…! That’s that stupid “trickle-down economics” theory nobody believes anymore. It’s the same logic that tells us smokers will smoke forever, no matter what the price of cigarettes. Increase the price to $1,000/pack of cigarettes, and smokers will pay the money no matter what.

Increase the work, effort, sweat, anxiety, stress, and time involved in earning $250,000/year, and those stupid capitalists will just suck it up. They’ll just keep working. They’ll just keep hiring. They’ll just keep paying more taxes. After all, they’re just greedy robots, programmed to take more and more money. Right?

Do YOU need a job? How badly? Are you desperate? Well then, why not go talk with your neighborhood small-business owner and ask about getting hired? Tell him or her that by hiring you, they’ll make more money in the long run. That’s a good thing, right?

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