Comedian Art Linkletter (“Kids Say the Darndest Things!”) was a big “C” conservative who believed in smaller government, lower taxes, privatizing social security and pulling oneself up by one’s boot straps. He was a lifelong friend of Ronald Reagan, who ignored his advice to stay out of politics. Ironically, by also ignoring his own advice, he became one of the richest men in Hollywood.
Linkletter had a tough beginning. He was abandoned as an infant before being adopted into a “loving home” by a back-country, one-legged preacher who was “poor as a church mouse.” According to his New York Times obituary, as a 6-years old he added to the family coffers by sorting through piles of discarded lemons outside a packing plant, cleaning them, packaging them, then selling them to neighbors.
At 16, he left home with $3 (sometimes as much as $10, depending upon the telling), rode the rails, became a hobo and did odd jobs to survive before landing in Wall Street as a typist. There he witnessed the stock market crash of 1929 and its affect on his bosses. After the crash, he ended up in San Diego where he was offered a radio job as an undergraduate attending what became San Diego State University. That opportunity morphed into a career in radio and then in the nascent television industry. By 1940, he was pulling in over $100,000 a year. “ It would be $1 million today,” he told Larry King in 2000.
“I never had any money,” he told King. “And when I started making money, I found I had a partner — Uncle Sam. And this was at the time when the income taxes were going like this [his hand traces an upward arc] and as I got into the real money, I was paying 93 cents on the dollar, counting California and federal [taxes]. So I thought,’ I got to do something with this money.’ So I was going into treasure hunts — you know — for maps that you buy and you go right out and the gold mine is waiting for you. Inventors got to me, con men got to me. And after losing a certain amount of money, I began to learn how to do business.”
He became business savvy by insisting that he be added to the board of any business he invested in. That let him see firsthand and learn from successful business leaders. “I got a partner — Uncle Sam — and he proved to be a very eager, greedy partner; the more money I made, the more money I gave him. I began to see ways to invest money so that I had something to keep,” he told King in 2005. “And I wrote off things.”
Linkletter was willing to take big risks with his and Sam’s money. If his [state and federal ] tax rate was 93 percent, he reasoned, then he only risked seven cents on each dollar; Sam risked the rest. Out of each taxable dollar, he could pay $.93 to the government and keep $.07 or write off $1 in investment, risk his $.07, and have the potential for a huge upside. If the investment tanked, he lost $.07; if it succeeded, he pocketed the windfall.
With Uncle Sam as his “partner,” Linkletter became extremely wealthy. He invested in shopping malls, hotels and a million-acre sheep ranch in Australia, gold mines, and new television shows. One of his most famous – and most charming – investments was in a weird children’s toy. “Yes, I backed the hula hoop. I had a lot of other people come to me with ideas that turned out well,” Linkletter liked to recall. That single investment paid off multiple times, continuing to add to his personal treasury for the rest of his life.
Some businesses tanked, of course, but because he could either pay the government $.93 or write off a $1 and risk $.07, he was always looking for investment opportunities. If the prospect appeared to have potential, he was in. “I’ve learned it’s always better to have a small percentage of a big success, than a hundred percent of nothing,” Linkletter famously stated. Here’s how he explained it to Larry King:
ART LINKLETTER: I never gambled any money I couldn’t afford to.
LARRY KING: Playing with house money.
ART LINKLETTER: More than house money. There was a time back about 35 years ago when the highest tax you could — tax-bracket — you could make was the 90 percent with state and federal. So I was playing on ten cent dollars when I bought a million acres of property in Australia, and made it into a big thing, it was with tax dollars. If they were going to tax you for 90 percent, I was going to get into oil, because you get not intangible write-offs against all of the drilling expenses, seven-year write-off on all the equipment you have to buy, but the gas that comes in, and the oil that comes in, you get 15 percent tax free.
Which begs the question, if the ratio were reversed, would Linkletter have invested in the businesses he did; would he have ended up as wealthy as he ultimately was?
Income tax is paid on cash you have received. You can put it under your mattress, stick it in a bank, take it out and count it every night as you watch television, or do something with it. Uncle Sam wants you to save some of it, spend some of it and, if you have extra, stimulate the economy by sharing some of it with someone who has a great idea but no cash.
The problem is that expecting low tax rates on high income earners to magically transform hoarders into “job creators” goes against human nature.
Every time you cut taxes, more of the risk is transferred from government to the investor. As the derivative market fiasco shows, it is easy to risk someone else’s money, but way less fun to gamble with your own.
At Romney’s effective 14 percent federal income tax rate, he has to toss in $.86 of every dollar he gets to write off. A low tax rate creates misers, not investors. And who can blame them?
That’s probably the biggest reason why more and more studies are showing that there is no, none, nada, zero, zip evidence that tax cuts for the wealthy create jobs.
During the Great Recession profits soared for business and the very wealthy, but very little cash went into creating jobs. Instead, the wealthy wrapped their arms tighter and tighter around their stash. According to Bloomberg news and many other sources, “companies, excluding financial institutions, are sitting on a record $1.74 trillion in liquid assets.”
Meanwhile, left with little other choice, start-ups turn to the cash-strapped worker for funds.
In a capitalist economy, money needs to flow. Start-ups can’t start up and existing small businesses go under when money dries up. Without available capital, the economy seizes, causing jobs to plummet, GDP to fall, long-term investment to stagnate and per capita wealth to evaporate. The rich may be swimming in pink lemonade, but over the long haul, the country, itself, will be back to digging through rotten lemons to survive. And that’s not funny at all.
Lillian Davis is a local progressive activist in Southern Nevada with years of experience promoting and advocating for issues such as education funding, labor rights, protecting the social safety net, preserving the environment and revenue reform in Nevada.