Recently, while reading an article on some other subject, I was distracted by a teaser news add flashing in the right of the browser. The teaser, along with the actual article, was titled Hardcore Liberal Celebrities. I clicked over to what turned out to be a CBS News picture gallery of Liberal Hollywood celebrities. Each of the 61 pictures had a caption below describing the actor’s Liberal leanings and/or distain for George Bush and his administration. (http://cbs3.com/slideshows/liberal.celebrities.politics.20.968399.html)
It got me to wondering why these major celebrities don’t seem to care the same way that I do when taxes are raised on “the rich”?
I earn an average of $220,000 per year and am considered, based on the fact that I am in the second highest bracket just under these mega stars, a “rich” person. After doing some light research I’ve discovered the reason that mega rich Liberal Hollywood types don’t care about 3% to 5% tax increases on “the rich”. The answer is simply that they can afford tax increases with no problem while that same 3%to 5% tax increase dramatically affects my lifestyle and future.
Let’s do the math. In 2006 the 100th highest paid celebrity was Ty Pennington. (http://www.forbes.com/lists/2006/53/J2KW.html) Ty pulled in a cool $6,000,000.00 that year while I earned $196,000.00. In 2006 Ty was in the maximum tax bracket of 35% (lowered from 39.1% in 2001 by George Bush) while my federal tax rate was 2% lower than Ty’s at 33%. (http://www.moneychimp.com/features/tax_brackets.htm)
So, here is how it breaks down for me with my 2006 income:
$196,000.00 x 33% federal tax rate = $64,680.00 going to Uncle Sam (Gulp! I sure hope he spends that efficiently.). That left me $131,320 left to pay for my state, local, sales, property, capital gains, car and sin taxes and my living expenses, savings, etc..
Let’s try with Ty’s income of $6,000,000.
$6,000,000 x 35% = $2,100,000 of Ty’s money going to Uncle Sam (It would take me 9 and a half years at my annual average income just to make enough money to pay Ty’s 2006 federal tax bill.) That left Ty with $3,900,000 to pay for his state, local, sales, property, capital gains, car and sin taxes and my living expenses and savings.
Huh. Interesting. I wonder if Ty feels my pain when they raise the federal tax rate 5%? Let’s see.
Using my 2006 income of $196,000 x (33% + a 5% federal tax increase for a total of 38%) = $74,480 in federal tax that I would have to pay leaving me with $121,520. That is a bottom line loss of $9,800 for me in this example. That reduction in income will affect things like the quality and quantity of foods we buy and at which store we buy them. It will affect things like if we can take a vacation, the type and amount of new clothes for ourselves and the kids, how much we eat out at local restaurants, how much we can save for retirement…I could go on.
With an increase of 5% Ty would be burdened with a 40% federal tax bill. Let’s see if you think his tax burden will affect his standard of living in any way.
$6,000,000.00 x 40% = $2,400,000 in federal taxes. In this example Ty sustains a bottom line loss of $300,000.00 over the 35% federal tax rate calculated above. That leaves poor Ty with a mere $3,600,000 to live on. I sure hope he was able to get by in 2006.
Incidentally, the number one paid star on the Forbes list in 2006 was Tom Cruise. This was a return to the number one slot which he held in 2001 as well. In 2006 his income was
$67,000,000. At a federal tax rate of 40% Tom and his family would need to figure out a way to get by on only $40,200,000.00. Think he and his family would have any lifestyle changes? I'm guessing...No!
These stars have multiple mega homes, sometimes in exotic parts of the world while I have one modest 4 bedroom home that looks like every other ticky tack home in my mid-Western neighborhood (which I love). They fly private jets to where they need to go while I cram myself into the first seat available on a Southwest flight (which beats the heck out of driving for 3 days). Eating healthy, organically grown, high end foods is their standard while I consider it a luxury (and we try to indulge as often as we can). I could go on but you get the point. Raising a mega celebrity's taxes 5 or even 10% is not going to change anything in their lifestyle. But raise this person’s (me) taxes 5% and it will have a measurable impact on me and my family's lifestyle.
I don’t want Ty’s taxes to go up. That is not the point. I actually want Ty’s and everyone else's taxes to go down. What I don’t want are Liberal Hollywood mega stars telling me that they think that “rich” people like me need to pay more in taxes. These limousine riding Liberals have no perspective on the impact it has on “real” people that don’t earn $20,000,000.00 for a movie Like Tom Cruise or who don’t earn $52,252,672,00 a year like Bruce Springsteen. (http://www.paywizard.org/main/VIPPaycheck/VIPPAYcheckmusicians/musicians-salaries/vip_details?id=bruce-springsteen)
When taxes are raised on “rich people” like me there are personal sacrifices that I have to make in my life. When taxes are raised on these mega stars there are no sacrifices for them. They live their lives unaffected by the increased tax burden. Perhaps what we should do is pass an 80% federal tax on all of the Forbes top 100 celebrities. Maybe then we will see a change in heart from the Hollywood Liberal elite on taxation. I’d be in support of finding out.
P.S. This is not a "woe is me" story. I am fortunate and I know it. I'm just not in the mood to be called "rich" by a mega Hollywood star that will never understand want or need regardless of how dramatically their taxes are increased.
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