I don’t think he understands the difference between “wealthy” and “rich”.

If he was in my class last month, he’d know that we defined a “rich” person as someone having a high income but not necessarily any assets. The rich have all the trappings of money; fancy car, nice clothes, vacations. But the rich usually carry a huge foundation of debt and all their income goes to maintain their lifestyle. These are the people who are one paycheck (or illness*) away from bankruptcy. Many of them earn more than $100,000 annually.

Wealth is created by converting income into assets. If you focus on building wealth, you live within your income and eschew consumer debt. As your assets increase, so does the income they produce.
Income from an asset is not subject to social security tax and can usually be reduced by business and/or investment expenses. In many cases it’s also subject to a lower** capital gains tax instead of ordinary income tax.

Senator Obama’s latest proposal to save a broken and misguided social security system is to raise taxes on the “wealthiest” Americans. Currently everyone*** pays social security tax (6.2%) on income up to $102,000. If you’re self-employed, you pay 12.4%. (This is both the employer & employee contribution.)

Under the new plan, there would be no taxes due on income from $102,000 to $250,000. Taxes would resume on all income over $250,000, presumably with no cap.

Even though the social security system is irretrievably broken and needs to be radically changed, this is one of the most ignorant proposals I’ve seen on this subject.

1. If you make over $250,000, you probably have control of how you’re paid (it means you’re the CEO, CFO, etc.) All you have to do is shift some of your income to dividend income (taxed at a lower rate) or bonus/1099 income (subject to self-employment tax, but eligible for business deductions.)
2. Most wealthy people don’t draw a salary. Their income is untouchable under this plan.
3. Employers will also have an incentive to circumvent the higher salary, since they’ll have to pay 6.2% on $250,000.

The Democrats complain that the rich get richer and the middle class never has a chance. This proposal illustrates how government policies prevent the middle class from creating wealth and moving into the upper class.

If Barack Obama really wanted to lift the middle class up, he’d allow private social security accounts that could transfer to your heirs once you die.

He’d abolish the estate tax, which prevents people who spend a lifetime working to build a legacy for their children from actually doing so.

And if Barack Obama really wanted to end poverty, he’d create & support government policies that rewarded citizens who graduate high school, get a job, wait to get married and only have children (whom they can afford) after they’re married.

Senator, my next class is August 6th and you’re welcome to attend.

*They are also among the uninsured – not because they can’t afford the premium, but because they don’t want to.
**Senator Obama & the Democrats in Congress want to increase capital gains tax too.
***Except for the unemployed who are paid this money.

Posted By: Betty Kincaid