Another email from work...

I received this email at work from a co-worker who I admire greatly:

Subject: FW: A Letter For Ashley's Everywhere - An awsome letter!


Bill is 63 years old and owns his own business. He is a life-long Republican and sees his dream of retiring next year is now all but gone. With the stock market crashing and all the new taxes coming his way, Bill knows he will be working for a good number more years.

Bill has a Granddaughter. Ashley is a recent college grad. She drives a late model car, wears all the latest fashions, and also likes going out and eating out a lot. Ashley campaigned hard for Obama, and after he won the election she made sure her Grandfather (and all other Republican family members) received more than an earful on how the world is going to be a much better place now that Obama won the election.

Ashley recently found herself short of cash and cannot pay her bills, again. As she has done many other times in the past, she e-mailed her Grandfather asking for some financial help. Here is his reply:

Sweetheart,

I am replying to your request for more money. Ashley, you know I love you dearly and am sympathetic to your financial plight. Unfortunately, times have changed. With the election of President Obama, your Grandmother and I have had to set forth a bold new economic plan of our own....the 'Ashley Economic Plan'. Let me explain. Your grandmother and I are highly productive, wage-earning tax payers. As you know, we have lived a comfortable life and in return have forgone many things like fancy vacations, luxury cars, etc. We have worked hard and were looking forward to retiring soon. But this plan has changed. Your president is significantly raising our personal and business taxes. He says it is so he can give our hard earned money to other people. Do you know what this means, Ashley? It means less income for us. Less income means we must cut back on many business and personal expenditures. One example is, we were forced to let go of our receptionist today. You know her. She always gave you candy when you visited my office. Did you know she worked for us for the past 18 years? I can't afford her anymore.

That is a taste of the business side. Some personal economic affects of Obama's new taxation policies include none other than you. You know very well that over the years your grandmother and I have given you thousands of dollars in cash, tuition assistance, food, housing, clothing, gifts, etc., etc. By your vote, you have chosen another family over ours for help. Judging from your Email requesting more money, I recommend you call 202-456-1111. That is the direct telephone number for the White House. You yourself repeatedly told me I was foolish voting Republican. You said Mr. Obama is going to be the people's president and is going to help every American live a better life. Based upon everything you have told me and things we heard from him as he campaigned, I am sure Mr. Obama will be happy to send a check or transfer money into your checking account. Have him call me for the transaction and account numbers, which by now I know by heart.

Perhaps you now can understand what I have been saying for all my life: those who vote for the president should consider what the impact of an election will be on the nation as a whole, and not just be concerned with what they can get for themselves (welfare, etc.). What Obama voters don't seem to realize is all of the "government's" money he is 'redistributing' to illegal aliens and non-taxpaying Americans (deemed "less fortunate") comes from tax money collected from income tax-paying families. Remember how you told me, "Only the richest of the rich will be affected"? Guess what, honey? Because of our business, your Grandmother and I are now considered to be the richest of the rich. On paper, it might look that way. But in the real world, we are far from it. But, as you said while campaigning for Obama, some people will have to carry more of the burden so all of America can prosper. You understand what that means, right? It means that raising taxes on productive people results in them having less money. Less money for everything, including granddaughters.

Congratulations on your choice for "change." For future reference, I encourage you to attempt to add up the total value of the gifts and money you've received from us over the years, and compare it to what you receive over the next four years from Mr. Obama.

Remember, we love you dearly... but from now on you'll need to call the number referenced above when you need financial help.

Good luck, Sweetheart.
Love,
PopPop

So...

There are so many angles to this email that needs to be discussed.

First of all, the person who sent this to me I respect greatly and I am almost certain understands the faulty reasoning in this email, so I believe this to be the most egregious part of the email. This person not only sent the email to everyone at work, he also passed it along to many of his close friends and professionals in the community. The person who sent this is probably the best banker I have ever met. Here is my problem with passing on an e-mail when you know the logic is flawed: it makes it appear that you will jump at any comments that are ideologically similar to your own, even if they don't present the truth. It takes away from your credibility and promotes ignorance. This email was sent to feed off of people's emotions, while not looking at facts. Emails that tout anonymous stories of this nature, in my experience, are normally not factual. They are written to misinform and generate emotion. They make us feel better about ourselves, while pointing the finger at someone else.

Some will still agree with the principal of the email. When I read this email I see the principal message as being that the current economic downturn is Obama's fault and that Bill is justified in blaming Obama and his followers for his predicament. Here is where that logic is flawed:

1. Obama has been in office less than 200 days. The problems behind this crisis are rooted much deeper than anything he has done. I say this while acknowledging Obama has made some mistakes and admitting he hasn't handled the situation very well. There have been way too many people claiming they know the root of the crisis who have been very much wrong. This crisis occurred for many reasons to name a few: cheap interest rates for too long, stagnant median income growth over the last 10 years, people not saving enough, China's current account surplus, deregulation, leverage in banks, etc. For more on this there are experts that are much better than me, see: baseline scenario, naked capitalism, the big picture, and the economist's view. (I will say with an almost certainty that the Community Reinvestment Act had nearly nothing to do with the crisis.)
2. If good ol'grandpa Bill let his receptionist go, it had nothing to do with proposed tax changes. Obama's proposed increase in income taxes will increase taxes on income above $250,000 by 4.6%. (about where they were under President Clinton). So say Bill makes $400,000. His tax bill will go up about $6,900 (4.6% X (400,000-250,000)). If This was enough to let go of one employee, wow. Plus, taxes haven't increased yet and they won't be increasing until probably 2011, perhaps 2010 (which would be paid by April 2011). Why did he let his nice receptionist go now?
3. Now people pay more taxes than just income taxes so their is no doubt there could be additional taxes increasing. The most apparent increase will probably be capital gains taxes which will go from 15% to 20%. This would be income from stocks, bonds, and other assets you hold and then sell after the go up in value (primary residences are excluded most of the time). Normally, if you have income from this category you are relatively well off and your marginal tax rate is normally higher than the 20% rate, so this income will still be taxed lower than your normal income. Also, under president Bush this was lowered dramatically, and the proposed increase would still be lower than what it was in the 90s. Bill mentions hard earned money, most of the time, capital gains are not hard earned (except perhaps when selling a business venture). (For more information see wikipidea, which I am not a big fan of, but this is pretty concise and mostly factual).
4. Grandpa Bill also mentioned corporate taxes. There is no doubt that the US has some of the highest corporate taxes in the world, but the irony is that the majority of businesses in the US, unless they are publicly traded, are not taxed under the corporate tax rate. Usually businesses are set up as Sole Proprietors, Limited Liability Companies, Partnerships, and S-corps, which their income is passed to the owners and taxed at the individuals tax rate. This is one of those things that the media almost never discusses. I work at a bank. I look at tax returns literally every day at work, and I can count on one hand how many businesses I have seen that are set up as a regular corporation, and that is out of hundreds of businesses. There are very few times when it makes sense to be set up as a regular C corp, and normally if a business is set up this way, they have a great deal of assets.
5. The email somehow equates young with privileged (yes Ashley is privileged). This is irritating. I am young and yes I voted for change and I have not been entirely happy with that change. I am also pretty privileged. I am white, I grew up in the mid west around people who spoke like rich people, and attended quality schools. I was by no means as privileged as Ashley though. The subject of the title speaks to Bill's disdain for the younger generation. There are some lazy people out there, but more that are discouraged and think they don't have a chance no matter how hard they work. I think most people on welfare would trade places with Ashley. It appears by Bills comments that Ashley is lazy, but she still has a college education. If you grow up poor, you cannot get a college education if you are lazy. Ashly will end up being fine. She speaks the language of the rich and has a college degree.
6. "Perhaps you now can understand what I have been saying for all my life: those who vote for the president should consider what the impact of an election will be on the nation as a whole, and not just be concerned with what they can get for themselves (welfare, etc.)." The irony in this statement is so deep. Bush gave the largest handout to the wealthy of any recent president and maybe more than any president ever, got us into two wars with no way out, destroyed our image internationally, and set the economy up for disaster. He will go down as one of the worst presidents ever. When I went to the voter box, I wasn't just thinking about myself. I was thinking about the nation.

I would like to reiterate that I have not been happy with much of what Obama has done, and I am sure in the future I will go into it more. With that being said, I am pretty sure things would even be worse if McCain had been elected.

Lastly, I came across a great blog called ataxingmatter. The author has been linked to by many top economists in their blogs and she seems pretty knowledgeable.

Long enough post for now... More posts coming soon. I would like to hear some comments from anybody that reads this. maybe just to know I am not in a vaccuum.