Class Warfare is Here

Hard to believe that it’s now been three and a half years since the Occupy Wall Street movement was first making headlines.

It’s less hard to believe that this supposed revolution — spearheaded primarily by un-housebroken vagrants, heavily indebted liberal arts students, and iPhone/iPad/Starbucks fanatics of all shapes and sizes — fizzled as soon as the balmy NYC fall turned into a cold and wet winter.

Personally, I find it ironic on several levels.

The first is that the nucleus of these protests — if they can be called that — was Zuccotti Park, a 33,000-square-foot, publicly accessible section of Lower Manhattan named after John Zuccotti, Chairman of Brookfield Properties.

Brookfield, to those who aren’t aware, is a commercial real estate company that’s majority owned by Brookfield Asset Management — a financial firm with more than $180 billion under management.

The second is that this supposed anti-consumerist movement seemed to be populated primarily by individuals who wouldn’t have been able to even find Zuccotti Park without the assistance of a slew of electronic devices, all supplied by the same corporations the crowd was supposedly at war with.

The third is less ironic than it is plain sad.

College and graduate school students, fueled by the passionate yet directionless platforms of the movement, felt emboldened to even decry their own tuition payments — payments they agreed to make in return for services rendered by the educational institutions of their choosing.

It all made these series of protests, from Los Angeles to New York to our own Baltimore Inner Harbor, a bit of a joke.

Nobody knew exactly why they were there or what they wanted. They just knew that they wanted to pay less, work less, earn more, and, in some cases, defecate on parked police vehicles.

When people questioned them about their plans or points of contention, they were met with infantile anger, smug conceit, a combination of both, or, in the more measured examples, plans of setting committee meetings to develop a formal list of demands.

The results of those committee meetings, if there were any to speak of, never saw the light of day before the climate made the OWS movement a “work-from-home” style revolution.

And for me, that was the single biggest point of irony — because if it’s wealth inequality that these people wanted to protest, if it was governmental bias towards the rich they wanted to combat, they had more ammunition than they needed to fire some meaningful shots across the bow of the status quo.

The Wealth Gap Was Manufactured by the Feds

The first big artillery shell has nothing to do with corporate bonuses and everything to do with how the truly wealthy make their wealth: through investing.

I’ve written about this ad nauseam here and in other publications, and it still completely baffles me that middle-class America seems to be completely unaware that their ability to create wealth is legislatively stifled by the very same federal government to which they appeal to close the wealth gap.

It’s called the Accredited Investor Rule, and it’s been on the books since one of the greatest champions of egalitarian society — FDR — was president.

In fact, it was during his administration that the SEC first established the requirements for individuals interested in getting into the fastest, strongest-returning investments available.

I’m not going to go into detail about this law because you can Google it yourself all you want, but the sections that apply to most Americans state simply that unless you make $200,000 a year (as an individual) or have $1 million in liquid net worth (the equity in your house doesn’t count), you’re out of the game.

Plain and simple.

So if you want to invest in a pre-IPO tech stock — like Facebook, Google, and Apple all once were — you can forget about it.

To even consider that sort of thing, you already need to be rich… already a member of the 1%. And unless you’re a member of the 0.1% or 0.01%, you’re still not likely to find these opportunities.

Was that a major talking point for OWS? No, it wasn’t. They were more concerned about the fact that people who invest in securities don’t have to pay as high a tax rate on the gains as they would on regular income.

However, even this complaint from the self-appointed representatives of the 99% was misguided, because middle-class stockholders benefit from the lower capital gains tax rates the same way billionaires do.

In my mind, even mentioning that disparity is tantamount to shooting wildly into the crowd, hoping to hit a single person.

But shoot into the crowd they did, asking the government, and oftentimes Obama specifically, to “tax the rich,” despite the fact that the one percenters already accounted for more than 35% of federal income tax revenue for that year.

Time to Redefine What it Means to Be Rich

And that’s where the failure really took place in my mind: the threshold where OWS decided middle class ended and rich began.

Just because 1% happened to be a very easy-to-remember, iconic figure to cite doesn’t mean it made any sense.

To make it into that 1%, you, as an individual, need to make a bit over $340,000.

However, the premise that these people are “rich” is erroneous. Their only real claim to this status is that they lose the highest percentages of their income to taxation.

As this chart shows, the richer you are past a certain point, the lower your percentage burden becomes.

It was this very paradox that Warren Buffett was referring to when he stated that his tax exposure, as a billionaire, is smaller than that of his secretary.

And yet blame was dispensed equally, as if both Buffett and his tax attorney, who probably makes several hundred thousand a year, were one and the same.

But it’s this distinction that rests at the heart of the argument and is the foundation for the economic hierarchy upon which our society is built.

What these protesters failed to grasp was that it’s not the corporations that created the mega-wealthy oligarchy that makes up the richest several hundred Americans — it’s the very government to which the protest was appealing.

Using mechanisms like the Accredited Investor Rule and tax loopholes, which allow rich individuals and companies to shelter their earnings, the savviest, smartest, most ambitious, and, in many cases, most ruthless American and foreign investors were able to run away from the pack into a modern-age royalty class.

It’s not the doctor or lawyer making $180,000 a year that was the enemy — indeed, people like that paid the highest level of income tax because they are seen as rich but are not rich enough to escape into the loopholes and gaps created for and maintained by the truly rich.

Devil in the Details

And it’s this misunderstanding that’s at a peak today. During WWII, for example, when the upper-tier tax bracket maxed out at 94%, a “rich” individual was pulling in in excess of $2 million in inflation-adjusted dollars annually.

Today, that threshold stands at $250,000… meaning a “rich” person 70 years ago was more than eight times richer than a “rich” person today.

However, because the “perceived as rich” segment of the population was in the hundreds of thousands, they were targeted, demonized, and bullied by crowds who didn’t know or care about the difference.

So to those who think the class war is coming, all I have to say is that it’s been here for decades, and it was brought to you by one of the great liberal figureheads of our time: Franklin Delano Roosevelt.

And it’s not a war of rich against poor; it’s a war of rich against middle class — orchestrated by the super-rich to deflect attention from their own campaign of wealth and asset collection.

It’s been working for decades, and based on the vehemence of the OWS participants, it’ll be working just fine for decades to come.

In fact, members of this top-echelon elite were so unimpressed by the Occupy hordes that they even let the protestors to use their front yard (Zuccotti Park).

This is how the true rulers of this nation operate, and when it comes to this rarified class, there is no substantive difference between a billionaire, a prominent lobbyist, and a prominent politician.

Indeed, they are oftentimes all one and the same.

You Can’t Change the World; You Can Only Change Your Place Within It

Are you shocked? Are you surprised?

You shouldn’t be… Because the ultra-powerful have been using the well-to-do, the bourgeois, and the professional and educated but not necessarily affluent as the great scapegoat for most of human history.

Hitler used it to consolidate power; Maximilien Robespierre used it to drive the French Revolution; before them, a long succession of kings and emperors from Europe to the Far East used it to leverage control over the masses by allowing them to feed their passions on the blood of the perceived exploiters.

So where do you stand in all this?

Well, few of us have a choice of where to stand, unfortunately. It’s hard to convince a homeless man that a 30-something lawyer driving a BMW isn’t a rich man.

But what you can do is fight against the practical issue the OWS movement was purportedly there to combat: wealth inequality.

And the only way to do that is to improve your own situation until you no longer feel the pains that moved some of these people to march on Zuccotti Park in the first place.

You can grow your wealth, and you can minimize your tax exposure just like the rich do… but because you’re not one of them (yet), you need to take some steps to get there.

In the next few weeks, I’ll be releasing a detailed report on how to make the first and most crucial move to get this process started.

It’s much easier than you might think, and the only reason more people don’t use it to achieve success is because so few know it exists.

Look for my report to come out shortly. I promise once you see it, you won’t look at the wealth gap with the same eyes.

Until then…

Fortune favors the bold,

Alex Koyfman

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