The meritorious rich and taxation

[JDPriestly]

The argument is often made that the wealthy should not be asked to pay a higher marginal rate because, after all, they worked so hard to earn their money, and unless we allow them to keep just about all the money they make in their lives, then we are somehow penalizing them for their hard work. I don't think I got that argument quite right, but then it doesn't make sense to me in the first place. Many of us have worked extremely hard, are smart and remain poor.

In his book, Outliers, Malcolm Gladwell places in question the conventional myths about how it happens that certain people become wealthy while others who work just as hard do not.

Here are some interesting facts that Malcolm Gladwell points out:

Name Birth year
John D. Rockefeller 1839
Andrew Carnegie 1835
Frederick Weyerhaeuser 1834
Jay Gould 1836
Marshall Field 1834
George F. Baker 1840
Henry Green 1834
James G. Fair 1831
Henry H. Rogers 1840
J.P. Morgan 1837
Oliver H. Payne 1839
George Pullman 1831
Peter Arrell Brown Widener 1834
Philip Danforth Armour 1832

These men were rated as being among the 75 richest people of all time. Their wealth was, Gladwell suggests, made possible by the expansion of the railroads and innovation in the U.S. that took place after 1860. Yes, they worked hard, but they were born at the right time and place and profited from resources -- land and other resources -- that arguably belonged to everyone and for which they paid very little.

Another interesting list:

Bill Gates born October 28, 1955
Paul Allen born January 21, 1953
Steve Ballmer born March 24, 1956
Steve Jobs born February 24, 1955
Eric Schmidt born April 27, 1955
Bill Joy born November 8, 1954
Scott McNealy born November 13, 1954
Vinod Khosla born January 28, 1955
Andy Bechtolsheim born September 30, 1955

Again, these individuals were certainly talented, creative and worked hard -- but would they have achieved the success they achieved had they been born five years earlier or later.

The book Outliers is light summer reading -- entertaining and fun but still makes you stop and think. I recommend it.

[HughBeaumont]

1. The "Self Made Millionaire" myth

http://www.commondreams.org/archive/2007/11/07/5075

The truth is, the rich use and benefit the most from public resources. Consider it payment for services rendered, thank you very much. Unless, of course, one believes "taxes are for the little people".

What Forbes means by "entirely self-made" is that the fortunes were not inherited but derived from business activity. Does this make the Forbes definition of "entirely self-made" reasonable? After all, if someone starts with modest resources, does well in business, and makes a fortune, isn't it fair to attribute that wealth to individual merit? Not really, though Forbes would like us to think so.

To see what's wrong with this idea, it's easiest to start with criteria that ought to disqualify a person from claiming to be "entirely self-made." After we've applied these criteria, we can see who's left in the pool. So, then, let us scratch from the list of the self-made anyone whose accumulation of wealth has been aided by any of the following:

Laws concerning property or contracts, and the public agencies that enforce such laws
Public schools or employees educated in public schools
Employees or customers who rely on public transportation
Roads, bridges, airports, sewers, water treatment plants, harbors, or other utilities built and maintained at public expense
Mail systems built and operated at public expense
Public hospitals and government-licensed physicians
Health and safety regulations created and enforced at public expense
Police and fire protection provided at public expense
Public libraries and parks
Any public amenities that add value to commercial or residential real estate
Government contracts
Government-provided business incentives
Regulatory agencies, such as the Federal Trade Commission or the Securities and Exchange Commission, that sustain trust in the stock market
A government-granted license permitting the exclusive use of a broadcast channel
The Internet
A form of currency legitimated and backed by a stable government
Social welfare programs that keep the poor from rebelling
The U.S. military

If we use these criteria to determine who can legitimately claim to be "entirely self-made," the Forbes number drops dramatically. It's not 270 out of 400. In fact, it's precisely zero.

If not for the legal and political arrangements that we create and maintain as a society -- with contributions from us all, costs to us all, and benefits to us all -- and if not for what we call "the public infrastructure," nobody could accumulate wealth. In short, there can be no private wealth without common wealth.

What's hilarious is that Steve Forbes himself isn't self-made. He's part of the "Lucky Sperm Club" - he inherited his father's publishing empire.

[valerief]

3. Exactly!!!!! They have access to public property we can't even breathe on. nt

[gmoney]

4. Don't forget tax incentives...

Wal-Mart decides they want a store in Bufmuck, AL, so they approach the city council, promising to open the store and create 200 jobs. In exchange, they want the land for free, or at least free of property taxes, free infrastructure improvements like water, electric, sewage, as well as road construction, changing traffic signals, etc. Then they want tax incentives for years, and so on and so on. Of course, Wal-Mart will not use local labor or materials suppliers to build the store -- they have their own crews. So the community invests hundreds of thousands of dollars to entice this "private enterprise" company to town to create a few minimum wage, part-time, no benefits jobs, and maybe a handful of managerial positions (for people they probably transferred in from out of town). And this doesn't take into account at all the predatory business practices that will drive plenty of locally owned competitors out of business.

[JDPriestly]

10. Thanks. Great points.

I must add. I posted this not out of jealousy, but out of an interest in giving DUers an honest perspective. So many people feel that those who become the self-made are just such exemplary individuals. Well, the truth is, that they were unusual. They probably did work hard. But, as Malcolm Gladwell so persuasively explains, they are also lucky. And often one of the factors in their good luck is the accident of birth, where, when and to whom they were born.

I recommend the book.

[anonymous171]

20. EXACTLY!! nt

[readmoreoften]

2. How about: would Bill Gates be rich if he didn't grow up in a banking family?

No. He's just a businessman, not an innovator.

[unblock]

5. i've often wondered how much *i* could have accomplished if *i* had $5mm handed to me at age 19.

[burning rain]

6. Whether they're "meritorious" or not isn't really the point.

"Punishment" and "class warfare" aren't the point. They're simply in a position to pay a higher rate than others without pain, and we have important public priorities that need funding.

[Javaman]

7. Exactly, I seriously doubt the bill gates of the world have to choose

between eating and paying a bill.

[JDPriestly]

11. Also very true. In fact, your point that they should pay because they

can is probably the best. But this argument that you should not "penalize" those who have worked so hard and who so deserve their billions is just nonsense. Accidents of birth have a lot to do with who has money and who does not.

[Wednesdays]

17. Amen! Check out my signature.

:hi:

[abumbyanyothername]

8. Exploitation of the commons

The first group definitely got outrageously rich by exploiting the common wealth that was the North American continent. At the time these men were born, the land of North America was held in common "ownership" and by the time they made their fortunes it had been divided up and privatized. The correlation is not coincidental at all.

I would venture a guess that the second group also made their fortunes through a mass privatization of a formerly public resource.

[fascisthunter]

9. Great points

[cali]

12. Here's what Bill Gates Sr. has to say about this.

Gates says that the rich should pay high(er) taxes because the conditions and infrastructure of this country is what enabled them to become and stay wealthy.

[Selatius]

13. I never really bought the argument. Since they use more resources to maintain operations, then ...

they should necessarily pay more back to society. If I ran a huge manufacturing plant that employs thousands of people, of course those people would be right to demand I pay them back for occupying their labor potential with my designs besides just wages, pension, and health care. Not just that, but I bought their land and built a factory on top when they could've easily found an alternative for that piece of land. Furthermore, I am now using up a sizable amount of power from the power grid now, most of it built with public money. They would be even more justified if I were a gigantic polluter that dumps mercury into the local river because it's simply cheaper to do that than to pay out money to clean it up or puts up smokestacks that spew pollution into the air that they breathe.

[Selatius]

14. I believe Carlos Slim is now the richest man in the world. He lives in Mexico.

He became a baron when Mexico privatized its once public telecommunications grid. He bought in on the ground floor when the grid was auctioned off, and he has been benefiting from that ever since even though it was built with taxpayer dollars.

[abumbyanyothername]

15. Mexican telecom is

outrageously expensive also.

[lexanman]

18. Well he obviously deserves it because he is rich and works hard

and if you are poor, well its your fault. Using taxpayer dollars to help himself out and then making telephone/internet extremely expensive, well, thats hard work, dont you know.:wtf:

[Hannah Bell]

16. more telling = the family & organizational ties.

from the top list:

Rockefeller, OH Payne, HH Rogers = Standard Oil

Peter AB Widener, OH Payne = American Tobacco Company

Carnegie, Widener, Payne, Morgan = US Steel

etc.


Representative bio:

George Fisher Baker (1840-1931), financier, co-founder of the First National Bank of New York, which merged with the Astor/Stillman Rockefeller-dominated National City Bank in 1955 to become First National City Bank, then Citicorp.

Often worked in concert with Morgan...

Baker's sister Elizabeth married Grant Barney Schley, financier.

Schley's business interests included Chase Bank (later the Rockefellers' Chase-Manhattan, now JPMorgan-Chase) & his associates included Oliver Hazard Payne, Standard Oil partner, & Thomas Fortune Ryan, tobacco & transport magnate (american tobacco Co.).

Ryan's grandson would later marry one of George F. Baker's great-grandchildren:

George F. Baker + Florence Tucker Baker = Evelyn Baker
+ Sir Howard Bligh St. George, 9th baronet = George Baker Bligh St George
+ Katherine Delano Price Collier, US Representative & 1st cousin of FDR = Miss St. George
+ (1) Alan Ryan (grandson of Thomas, financier & chief of Stutz-Bearcat - bankrupted trying to cover shorts)
+ (2) Angier Biddle Duke, Duke Tobacco (a family associated with the Ryan tobacco empire).

Alan Ryan's first wife was Janet Newbold (publishing heiress). She divorced him & for her third husband chose James S. Bush, brother of Prescott Bush.

Grant Schley's nephew Reeve Schley married Kate Prentice. Their grandchild = Christy Todd Whitman.
Kate Prentice's second cousin Ezra married JD Rockefeller's daughter Alta.

George F. Baker's son George F. Jr. married Miss Breevort Kane. Their son GF III married a Drexel-Munn, descendant of the Drexel banking house that was one of JP Morgan's original partnerships (Drexel-Morgan).

Incidentally, Angier Biddle Duke's mom Cornelia was the great-granddaughter of one of the Drexel founders, as well as the second-great-grandchild of Nick Biddle, founder of the Second Bank of the US (precursor of Federal Reserve).

GF Baker's daughter Flo married Thomas Suffern Tailer, whose mom was grandchild of one of the original Brown Brothers (as in Brown Bros Harriman).

He remarried to a Sturgis (Russell Trust/China Trade Family).

GF Baker's daughter Edith married John Schiff, son of Kuhn-Loeb financier Jacob Schiff.

John Schiff's great aunt Nina & aunt Freida married into the Warburg banking family (e.g. Nina's husband = Paul Warburg, promoter of the Federal Reserve, & Freida's = financier Felix, whose granddaughter married FDR's son Franklin Jr.)

John M. Schiff & Edith Baker's grandson recently married Al Gore's daughter.

Original link between the Baker & Morgan empires = Peabody

Charles A. Peabody (1849-1931)

After graduating from Columbia University and Columbia Law School, he joined his father's law firm, Peabody, Baker and Peabody.

Partner Fisher Ames Baker was counsel to the First National Bank and the uncle of its President, George Fisher Baker.

"It was said at the time Mr. Peabody left law for insurance, that the change was, at least in part, due to the influence of the elder Baker in the councils of the Mutual."

Peabody was trustee of the estate of the first John Jacob Astor since 1893, and was associated with William Waldorf Astor and represented him in this country....

his granddaughter, Anita Peabody Hadden, married Arthur W. Page Jr, whose brother Walter H. Page became chairman of the Morgan Guaranty Trust.

Walter H. Page joined J.P. Morgan & Co. immediately after graduating from Harvard in 1937....senior vice president of the Morgan Guaranty Trust in 1964 and vice chairman in 1968.

In 1969, the holding company J.P Morgan was formed to acquire the
Morgan Guaranty Trust, and he became vice chairman of that as well.

"In the 1970s, Mr. Page helped create the plan that led to the formation of the Saudi International Bank.

'The relationship between Morgan and the Saudi central bank was considered a great coup for the Morgan firm,'" according to the company historian.

Page married Jane Nichols, the daughter of George Nichols, and a granddaughter of J.P. Morgan Jr. through his daughter, Jane. (Miss Jane Nichols Becomes Engaged. New York Times, Nov. 3, 1941.)

http://www.smokershistory.com/MorganGT.html#Walter_H._Page

Drexel connection to George Fisher Baker = Mary Astor Paul

"the daughter of James William Paul, Jr. (1851-1908) and Frances Drexel (1858- 1901), the daughter of Anthony J. Drexel (1826-1893), the financier known as 'the man who made Wall Street.' Anthony J. Drexel was the founder of the banking firm Drexel & Co. (Drexel-Morgan = another incarnation).

She was named for an aunt, Mary Paul Astor, who in 1878 joined fortunes with William Waldorf Astor, better known as Baron Astor of Hever Castle."

http://www.newyorksocialdiary.com/socialdiary/2006/11_24_06/socialdiary11_24_06.php.

A family cousin, Katherine Drexel, was recently canonized Saint Katharine by the Catholic Church. " (St. Katherine's step-mom emma = Jackie Bouvier Kennedy's great-aunt).

Mary Paul Astor married Charles Munn:

"founder of the Everglades Club, Seminole and Gulf Stream Golf Club...member "le beau monde", Café Society and Jet Set for more than six decades...credited with popularizing the blue blazer (Captain's jacket), ascot and flannel trousers, as the official uniform of the social set..."

Their daughter Frances married George Fisher Baker (3rd, b. 1915, grandson of the patriarch), the one who shot himself on his Florida estate.

To tie Brown Brothers to this conglomerate:

Rev Joel Benedict of Connecticut had 2 daughters:

Louisa (b. 1795) married James Brown, son of Alexander & Grace Davison Brown, Alex being the founder of the Brown dynasty & James being founder of the US branch that became Brown Bros Harriman.

Sister Sarah married Alonzo Potter (b. 1800).


Louisa's daughter Margaretta (1829) married James Couper Lord of the Lord law/iron/finance family, e.g. Lord, Day white shoe firm, 1848-1994, firm of the NYT until the Pentagon Papers:

http://www.time.com/time/magazine/printout/0,8816,878422,00.html

The Lord's grandchild, architect James Brown Lord, married Mary Townsend Nicoll, whose second husband was Thomas Fortune Ryan (american tobacco co), mentioned in posts above.


Louisa's daughter Sarah Benedict Brown married Alex Brown, another Brown Brother, son of James Brown's brother William.


Louisa's 3rd daughter Mary Louisa Brown married Howard Potter, Alonzo Potter's son by another marriage. Their children:


1. James Brown Potter (1853): his daughter Anne (1879) married James Alexander Stillman, National City Bank (now Citicorp), whose father was this guy (speaking of RRs):

"James Stillman... born on June 9, 1850, at Brownsville, Texas...took over his father's financial and mercantile empire in New York, Texas, and Mexico in 1872 and turned it into the controlling interest in the National City Bank in New York and the most powerful force in the development of the Rio Grande valley....with the other three members of the "Big Four"- W. H. Harriman, Jacob Henry Schiff*, and William Rockefeller-control of most Texas railroads...

In 1876 Stillman supported the successful Revolution of Tuxtepec, conducted by Mexican general Porfirio Díaz from Brownsville, which resulted in the overthrow of the Mexican government. Díaz's partisans called themselves the "railroaders."

http://www.stillman.org/g1736.htm


Then James Stillman & Anne's daughter Anne Stillman married Henry Pomeroy Davison:...son of this Morgan partner:

http://en.wikipedia.org/wiki/Henry_P._Davison

Anne Stillman's Henry was the son who ran TIME mag (v. the one who ran the CIA).


1a. Anne Potter's 2nd husband was Fowler McCormick, son of Cyrus McCormick, McCormick Reapers. Their son married JD Rockefeller's daughter Edith. McCormicks & Rockefellers (as Avery ancestor) had already been associated in the farm implement biz before...

Anne died 1969.


2. Elizabeth Potter (1856) married Clarence Cary, old Virginia line, descendant of Jeffersons, Randolphs, Fairfaxes. (and incidentally, r/t the "Carey" in the Joni Mitchell song, who now works in the financial industry).

Their child Gwendolyn Playfair Cary married Frank Hunter Potter (1882), the grandson of Alonzo Potter & Sarah Benedict above, (also descendant through his mother of Francis Scott Key).

Gwen & Frank's child Pauline married George Phillipe de Rothschild.


2a. Eliz & Clarence's son Guy Fairfax Cary married a Burke-Roche, whose grand-neice = Princess Di.

[JDPriestly]

19. Very interesting. I'm saving a copy of your post to my personal files.

[HughBeaumont]

21. "This is the land of FREEDUM! There ain't no monarchies or royal families in the US!!"

Uh . . .

[anonymous171]

22. saved nt