"The Rich" Deserve a Tax Cut

By GREGORY J. RUMMO
THE COURIER NEWS, JANUARY 22, 2002

SENATE MAJORITY LEADER Tom Daschle has opened the year with more of the same old tired rhetoric from the Democrats, whose only strategy is to obstruct the Republican’s domestic agenda.

With the economy still weak and teetering on the brink of recovery from a mild recession, he figures he can make political hay by playing the class envy card and continuing to bash President Bush’s tax cut as “a tax cut for the rich,” a hackneyed expression and not a haymaker, although reminiscent of something else found on the farm.

The truth is this: A poor person never gave anyone a job.

To stimulate the economy effectively, it is necessary to provide that stimulus to those people most capable of creating supply and demand, while employing more people in the process—to businessmen—“The Rich” in the words of the Democrats.

Let me tell you a story that will help you understand what happens when a businessman invests his money in corporate America.

There was a rich foreigner named Joachim who had this idea to start an import-export business in the U.S. He lived in a fancy house in Hamburg, Germany and drove a very expensive Mercedes S-Class 500 series. Starting with $200,000, he hired an American—we’ll call him Greg, because I’m partial to that name—and rented a small office in New Jersey.

Initially there was no business but that changed rapidly. Three months into the first year, Greg hired an assistant. In the first year, the company managed to eke out a small profit of $50,000 on sales of $3 million.

The firm continued to grow during the second year. By now there were four people working for the company, which in addition to providing them a job, also provided them health and life insurance, a pension plan, a year-end bonus, and company cars for Greg and the other sales person.

The second year ended with sales of five million dollars. This grew to seven million by the end of the third year and to nine million by the end of the fourth, during which time the company added its fifth and sixth employees.

By year ten, the company’s sales were over $20 million. By year 15, that figure had risen to $25 million. The company now had eight full-time employees and one consultant.

During those fifteen years the company continued to provide its employees excellent benefits. It purchased over a dozen automobiles for its sales force. After the cars were depreciated, they were traded in and replaced with newer models.

Each person had a PC, which was upgraded often, when newer technology made an older computer obsolete. Some employees also had company-purchased laptops.

The office was decorated attractively and furnished adequately. There was a full kitchen with a microwave, a sink and a large refrigerator that was kept stocked with beverages and snacks.

During this time, six employees purchased houses. Two got married. Ten children were brought into the World, all of them covered by the company’s health insurance.

The company also did something else during those fifteen years. It paid corporate taxes at a combined federal-state rate of about 42%. Additionally, income tax was withheld from the employees’ salaries. Sales tax was paid on all of those automobiles, computers, desks and chairs and other supplies that were purchased. Import duties—another tax—were also paid to the Treasury Department on dutiable items coming into the country that the company sold to its customers. 

Management estimates the company has generated and paid several million dollars of tax revenues during the years it has been operating here in America.

Now pause for a minute and reflect on what you have just read.

The story is not fictional. And the rich man, Joachim Moeller, was a real person with a dream to make more money than he was already making in Germany, Hong Kong and China. He passed away several years ago but his memory lives on. When he started J. A. Moeller Inc, he invited people to join him along the way in his entrepreneurial vision. Everyone who did was blessed financially in some measure.

Some were passive beneficiaries—the vendors who sold the company its fixed assets, the banks, which made money on the fees and interest it charged and the federal and state governments, which got fat checks every quarter for estimated taxes.

The more the company sold, the more profitable it became. But everyone benefited—not just The Rich Owner. So the next time some idiot tries to explain to you why The Rich don’t deserve a tax cut, show them a copy of this column.

Oh, by the way—I’m the Greg mentioned earlier. And we just started our sixteenth year. n

E-mail the author at GregoryJRummo@aol.com