Many, if not most, of people who become wealthy do so with a single big payoff. Maybe they made a single big deal. Maybe they get a big payoff for an idea. Maybe they won the lotto. Many of the people who make a million dollars do it during a single year of their lives. They then parlay that money into a retirement nest-egg over the rest of their lives. That is the idea of the millionaire next door. He isn’t a jet-setter with a mansion and a yacht. He is a guy in your neighborhood who worked hard for a one-time pay out or just got lucky. Either way, he made a lot of money in one tax year, paid the taxes and is growing his nest egg. He is living the American Dream of song, story and proverb.

An example of this, as I mentioned in another post, was President Harry Truman. When he left office in 1953, he was broke. He had to take a loan to live. Fortunately, he made a lucrative deal with a publisher to write his memoirs. Unfortunately for Harry, however, was that the top marginal tax rate in 1953 was 92%. Truman ended up paying two thirds of the $670,000 he was paid by the publisher in taxes. After he paid his expenses, he netted about $37,000. The windfall of the deal for his memoirs did not make him rich. It didn’t even solve his financial problems. His once-in-a-lifetime opportunity for financial security was stolen by burdensome taxation.

This is how a tax code designed to “tax the rich” mostly just keeps regular people from realizing the dream of financial security. Nancy Pelosi, as part of her her health care monstrosity, wants to do to Americans what the government did to Truman in 1953.

The bill is funded largely from a 5.4 percent tax on individuals making more than $500,000 a year and couples making more than $1 million, starting in 2011. The tax increase would hit only 0.3 percent of tax filers, raising $460.5 billion over the next 10 years, according to congressional estimates.

Sounds good, huh? Hit those fat cats where they live; class warfare at its finest. Sadly, it will also hit people like those I describe above. The spin has you believe that the people who will get taxed will be those who make over a million dollars every year – year in and year out. It will, however, also apply to those who have been struggling for years or decades with an idea or a plan that will result in a one time pay out. If you distribute the tax over all the years leading to the final payout, it is just another tax on the middle class. There is no doubt that is how it will be manifested tens of thousands of times.

Furthermore, the plan is not indexed for inflation and, brother, inflation is in our future. That means that in ten or fifteen years when a salary of $500,000 is typically middle class, the middle class will be paying Pelosi’s punitive marginal rate.

This is how they destroy the dream. This is how they make sure that financial security is more difficult to achieve. It is already very difficult to become wealthy in this nation and this sort of plan makes it more difficult. Each time they cut into opportunity, the dream dies another tiny death. At some point, people just quit trying. High marginal tax rates are a disincentive to growth and investment, chill job growth and damage small businesses organized as LLCs. Pelosi is spreading economic poison.

In 1953 Harry Truman made $670,000. In 1954, he made about $12,000. So too in 1955. Punitive taxes stole his one shot at financial security on the belief that the “rich” should be taxed at punishing rates. The only thing is that Truman wasn’t rich, he was practically destitute. The government made damned sure he stayed that way. “Taxing the rich” as often as not, just prevents regular people from achieving any degree of independence from the government. Pelosi is making yet another cut in the death of a thousand cuts to which the government is subjecting the American Dream.

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