Who Actually Earns $400,000 Per Year?

by Emily Guy Birken · 5,853 comments

Surgeons

After the unending media coverage of the fiscal cliff throughout December 2012, it was a relief to everyone when a last-minute compromise was reached. In particular, the most reported-on compromise had to do with the extension of the Bush-era tax cuts. Those cuts will remain in place permanently for any individual making less than $400,000 per year, and for couples earning less than $450,000. Those fortunate few who make more than that amount will see their rates rise from 35% to 39.6%.

The news about this particular tax rate increase got me wondering: what professions can expect to earn that kind of money? Since I don’t personally know anyone bringing home $400,000 per year, I decided to find out what kind of jobs command such high salaries:

1. The President

Perhaps the most famous $400,000 per year job is the leader of the free world. The office of president not only pays a $400,000 annual salary, but also provides the president with a $50,000 annual expense account, a $100,000 nontaxable travel account, and a $19,000 entertainment account.

There are some obvious downsides to this particular career, however. Besides being very difficult to get, the job is highly stressful, and advancement post-office can be considered somewhat iffy. And, of course, you can’t expect regular raises: the last salary increase for the commander-in-chief (from $200,000 to the current rate) was in 2001. Prior to that, the previous raise (from $100,000) occurred in 1969.

2. Surgeons and specialists

Even a local general practitioner can expect to pull in over $100,000 per year, but the real money in medicine is reserved for those who specialize. Anesthesiologists, heart surgeons, and brain surgeons can all expect to make up to $400,000 per year at the height of their career. Plastic surgeons can make up to twice that amount.

3. CEOs

The median salary of a Chief Executive Officer is over $700,000. These directors are in charge of both short- and long-term profitability for their companies. CEOs generally have to know the industry backwards and forwards (although there are certainly plenty of counter-examples), and need to have worked their way up over many years.

4. Wall Street Bankers and Lawyers

If you work in either finance or finance law, the place to go for fat paychecks is Wall Street. According to an October 2012 report, “the average salary of financial industry employees in New York City rose to $362,950 in 2011.” While that still falls short of the mark required for the higher tax bracket, it’s important to remember that this figure represents the average (meaning some people are making more) and that there have almost certainly been raises in the past year and a half.

The Top Percent of the Top Percent

These high-income earners are really rare. Consider the fact that most articles listing the highest paying jobs in America don’t even include any professions with median salaries of $400,000. Those individuals making $400,000 per year are in the top one percent of the top one percent — and often, they’re also public figures.

Thankfully, even though individuals in this bracket are few and far between, the government estimates that raising the tax rate on this small group will raise about $600 billion in new revenues over the next decade.

Not bad for a group that small.

What other professions that earn annual incomes of $400,000? 

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{ 5853 comments… read them below or add one }

Steven H October 6, 2015 at 6:12 pm

A couple more tonight:
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Rick Deckard January 31, 2013 at 5:19 pm
A high tax rate on those jobs that pay over a certain threshold will likely do nothing to the productivity of the top earner. There is no logic to the idea that more pay means proportionally more effort. If that were true, a CEO would be working 100 or more times as hard as his gardener.

Instead, if the tax rate is very high on high incomes, it encourages a company or owner to re-invest the money that would have gone to a bloated CEO salary back into the company itself as the additional $ will hire many more workers at much lower salaries, which can actually increase the productivity.

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Ricardo November 13, 2015 at 5:50 am

Your logic to withhold high salaries from CEO’s is flawed beyond belief. Compensation isn’t about how hard one works, but how effective the effort is. A ditch digger works hard, really hard – but he’s never going to make much money. A CEO who’s hired to turn around a failing publicly traded company (name any one of hundreds) is going to use their skills to work smart and build a team and a culture to right the ship. That is worth considerably more than “working hard”… Your method will not allow great leaders to leave good jobs to attempt to tackle hard ones where there is great risk.

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Steven H November 18, 2015 at 8:32 pm

I see your logic Ricardo, but you are missing the point. I am not raising status or wage of a ditch digger above CEO. Of course a skilled manager should earn a very good living. But at some point of raiding the salaries of the middle class and working class to inflate the salaries of the most wealthy, it gets out of hand. Should we for instance, over the next 30 years seek to double or triple the real incomes of the upper 1% while giving 90% of Americans a 25% cut in their share of the national income pie. No? Why not? Don’t the rich deserve more than other common folks, due to their more effective effort, and indeed, do they deserve just as much as they can manipulate into their bank accounts by any political and economic means they can muster?

How about if you give 75% of all national income to the upper 1% and split the rest among every one else. When is it too much?

From 1980 to today, with a couple of hiccups after 2000 and 2009, the richest 1% went from receiving about 10% of all income to about 23% of all income, a 130% increase. The lower 90% went from receiving 66% of all income to 50%, which is about a 25% decrease. Last time it got this bad in 1929 and we know how things went after that.

AND why should the rich, especially the million earners, whose real inflation adjusted salaries have more than doubled in 35 years complain if an additional 10 or 15 or 20% gets pulled from their income? Would you take that deal? Let’s say someone is going to double your income, whatever it is, and then take back 20% of total income, which is 40% of what they added to your income. Would you take the deal? Of course. you still have a 60% pay increase. Would you then complain about the taxes instead of rejoice at your prosperity?

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Nat December 2, 2015 at 11:36 am

These are tough questions you ask that don’t have any clear, provable right or wrong answer. In fact there are likely many different “right” answers for different situations. A large struggling publicly owned company perhaps should hire as much of a “sure bet” stellar CEO to turn the company around, thus preventing the possible loss of jobs for the thousands of employees of that company sbould it go belly-up. The CEO’s being considered for the task may be reluctant to take on the challenge because of the increased risk of failure since the company is already struggling. Since the company is desperate for stellar leadership, the stakes are high, and the potential candidates are sparse, th3 compensation offered would likely be very high.
Top-down / central planning type questions that you’re asking like “Should we for instance, over the next 30 years seek to double or triple the real incomes of the upper 1%…” are going in the wrong direction and sugfesting that one size fits all decisions should be made to limit the pay of upper management. The market is best suited to make these decisions.
Speaking of “the market” making decisions conjures thoughts of greedy rich old Republican men smoking cigars and cackling as they count stacks of gold bars, but in reality what “the market” would be in this example is the board of directors seeking to hire the new CEO, and the candidates available that might have the ability and willingness to take the position. The board has the best interest of the company in mind and the candidate has his or her interests in mind while negotiating pay.
If the desired candidate refuses, for example $5MM/yr because they can get $6MM/yr elsewhere, or maybe can get $5MM/yr elsewhere with a more successful company, shouldn’t they choose the better option?
And if the board of directors could hire another candidate that is just as promising for a lesser amount, say maybe $1MM/year, wouldn’t they? The market handles pricing for specific situations at particular points in time far better than third parties can by trying to figure out some ambiguous one-size-fits-all formula for “how much is too much”.
And if you have your retirement funds invested in one of these publicly traded companies don’t you want it run by the candidate that the board of directors found to be the best value proposition?
…Sincerely, a rich old greedy Republican man cackling whilst counting my bars of gold. Buahahahaha!

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Dynx December 14, 2015 at 7:35 pm

Here’s the other side as a well paid employee. I bring in millions(2.7 to be exact last year. They don’t pay money without knowing what they are getting)…why would I take less? Sure my salary has gone up over the years but that’s because I can demand more. I work in the medical field so let move it to something more closely related to your point.
My buddy from college is in corporate tax law. He makes a lot more than me. He demands a high salary. He studied law and is very good. Recently, he argued and won a challenge that saved his company millions. So, should he be paid in the top .1%? Yeah, that’s less than he directly made his company. His secretary may not have gotten a raise in who knows how long. Who cares? She can be fired and anyone with a HS degree can file his schedule etc (it’s a shame that now you need a 50k BS degree to get the job but that’s the governments fault for screwing education). Anyway….would it be fair to tax him 10% more? Sure why not? But he’s in demand. He would (and has) said “well, taxes went up, now I need x dollars more or I’ll leave”. And people will hire him. That’s how it is. I bill more than 5 times my salary. I like where I live but I’m not stupid. The take home goes down I’ll up and leave. Someone will pay me at 25%, it’s just the activation cost of moving. That’s where income growth comes from. That’s why salaries for high level people go up. We make the money. The marginal benefit of us staying gets reduced we leave. And frankly a lot of the benefit we provide is snaking through the gov. Trying to squeeze money out of corporations that have a lobby and lawyers that are a lot…lot…lot smarter than senators

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James December 15, 2015 at 11:17 am

Would be nice for Steven H to try and address these points of view. Love the point about analyzing this from the top-down being so misguided. Well said!

Always nice to hear from people like you guys and Peter, Ken, etc. throughout this thread who have real-world business experience.

Steven H December 15, 2015 at 10:02 pm

Nat and Dynx,

Thank you for your comments. I really do understand the negotiating advantage of a scarce resource like a good surgeon or a cover corporate lawyer, and how their salary is increased by demand and competition. I think the point you are missing is the instability of a market or a company or a country when such concentration of negotiating power is allowed to accumulate among a small population at the expense of the larger population. The attitude stated by Lynk is classic:
“That’s why salaries for high level people go up. We make the money.” “His secretary may not have gotten a raise in who knows how long. Who cares?”
Isn’t the entire corporation required in order to make money, including the secretaries? Aren’t patients with income required in order for doctors to make money? If you neglect the incomes and economies of the customers in the equations, then you ignore the largest part of the economy. When the wealthiest people start believing that only they are worthy of raises and that only they “make” the money, that is the time to bring reality back into play.

Democracy was established for a reason: to prevent the tyranny of “the general prey of the rich on the poor”, as Jefferson said. When power and wealth become too concentrated among a financial and political elite, the people can vote to establish policies to return the people’s wealth to the people. That is not, as some would claim, an un-American concept. It is the very heart of the philosophies put forth by our founders. Madison, for example, said “The great object should be to combat the evil [of factions]: 1. By establishing a political equality among all. 2. By withholding unnecessary opportunities from a few, to increase the inequality of property, by an immoderate, and especially an unmerited, accumulation of riches. 3. By the silent operation of laws, which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigence towards a state of comfort.”

The solution to unbounded demands for salary is simple, and often used in the last century. Extraordinarily high marginal rates for extraordinary income. Some have discredited the usefulness of 90% marginal rates on high incomes because “nobody paid those rates”. But that is indeed the point. What is the use of demanding double an already extraordinary salary if you know that 90% will go to taxes? Such policies can put a much-needed brake on the demands for $10 million plus salaries (for instance).

Power and negotiating strength is indeed the driving force to increase salaries. This is why we need a resurgence of labor bargaining entities such as unions, or perhaps the German model which puts labor representatives right in the company board of directors.

The rich really don’t “make” all the money. Put a bunch of lawyers in the wilderness and all you will have is high-minded conversations about starving to death. The workers who actually DO something make the money.

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James December 16, 2015 at 6:39 am

Those with the talent will always have the “negotiating power”. No amount of government policy is going to change that. Ever.

And nobody with any sense is seriously proposing/considering taxing ANYONE at 90%.

And no – patients with income are no longer required for the doctor to make money since our government is now paying people’s medical bills for them.

Steven H December 16, 2015 at 10:49 am

James, people of talent and skill will always and should always merit a higher salary. The issue is always how MUCH higher. Only a fool would advocate to keep increasing wealthiest incomes at nearly double the percentage increases of everyone else. And yet the GOP candidates propose this.

Do really want this country to devolve into a wealthy overclass and impoverished underclass as the middle class shrinks? That is where we are heading if we don’t fix this.

What is your solution?

James December 16, 2015 at 12:27 pm

My solution is to maintain that the government has NO SAY WHATSOEVER in what a private company or business owner chooses to pay their employees. (other than setting a minimum wage)

Therefore I don’t want the liberals trying to prevent higher salaries for CEOs or whatever wealthy successful people you abhor – NOR do I want the GOP proposing that we raise CEO salaries.

I’m not going to go back over all the other more reasonable and practical solutions again in detail but they include changing the education system to enable technology workers, incentivize keeping jobs in the US, training and mentorship programs, small business owner tax breaks, revising the crippling ACA and other entitlement spending costs that choke mid-level payroll.

Nat, Dynx, Peter and whomever else should make as much money as they can. They deserve it. And I don’t care how much it is relative to their secretaries. Or how much more a basketball player makes than a hot dog vendor at the same game. Deal with it and go develop your talents so you can be paid as well.

The problem is with the unskilled/untalented. There are much fewer jobs for them anymore with technology and shipping jobs overseas. The only choice is to train them for the 21st century – not to hand them other people’s money or give them undeserved pay raises (like Tiffany pointed out above). But I’m sure you disagree. Until you get money taken away from the ‘rich’ you will not be happy. I think you should admit that once and for all. You will accept no other solution.

Steven H December 16, 2015 at 7:28 pm

“My solution is to maintain that the government has NO SAY WHATSOEVER in what a private company or business owner chooses to pay their employees. (other than setting a minimum wage)”
— Glad you acknowledge need for minimum wage.
— I don’t want the government saying what a company pays their employees either, beyond minimum wage, and of course setting certain labor policies like the 40 hour work week, definition of exempt/non-exempt, restrictions on child labor, and setting union policies. But having government micro-manage salary is not what I am advocating.

“practical solutions again in detail but they include changing the education system to enable technology workers”
— Agreed. Requires government oversight and investment in the education system.

“… incentivize keeping jobs in the US”
— Agreed. Requires sound government trade policy and tax incentives.

” … training and mentorship programs, small business owner tax breaks”
— Agreed. Also requires government policy changes for the tax breaks and to incentivize good business behavior.

“revising the crippling ACA and other entitlement spending costs that choke mid-level payroll”
— Single payer healthcare would be cheaper and alleviate a lot of paperwork on small business. As for SS/ Medicare and Medicaid, they are popular, unlikely to go away, and not as much of a burden on the country as some would claim.

“Nat, Dynx, Peter and whomever else should make as much money as they can. They deserve it. And I don’t care how much it is relative to their secretaries.”
— You should. Study history, especially the Gilded Age. Those who don’t know history are doomed to repeat it. Capitalism does not self-balance. Well-regulated capitalism can be balanced. Deregulated capitalism is a disaster.

“The problem is with the unskilled/untalented. There are much fewer jobs for them anymore with technology and shipping jobs overseas. …”
— What about plumbers, secretaries, teachers, firefighters, house-builders, architects, janitors, cleaning-people, restaurant owners and workers. We still need these people, and they still need a living wage. You can’t just say these people should get a different job to make more money. We need people in these jobs. Middle and working class people need a raise. And the problem is NOT with the unskilled/untalented, it is with the underpaid and overworked. This is the problem with high income disparity.

Steven H December 16, 2015 at 7:44 pm

I hate typos. My post to Nat and Dynx misstated Dynk’s name as Lynk at one point and referred to cover attorneys instead of clever attorneys. And there was a third one, what was it … Oops.

Sam January 16, 2016 at 5:36 pm

I am a physician and I make over 400k a year.
However I spend over 18 yrs of my life- which is half my age ,in training and education.
Over and above I work over 80 hrs a wedk which incldes every other wefkend and every other major holiday.
I believe I get paid less compared to my level of training and the amount of time and effort I put in my job.

Will be glad to work for less money if I can get all weekends and major holidays to spend with my family on top of 4-6 weeks of paid vacation that an average american like yourself gets.

Sam

Daniel M January 17, 2016 at 9:35 pm

Steven H you are simply wrong. You side stepped the fact that there are more secrateries than CEOs available. Supply and demand. You sir are simply uneducated.

Irrational Exhuberance December 28, 2015 at 11:27 am

Trickle down economics has been proven without any doubt in academia, looking at historical data as well as projecting it, to fail. The rich qet wealthier a lot faster than the not wealthy in scenarios where taxes are lifted on the wealthy. Most wealth built is built in higher returning investments in any said year! You think a CEO is going to plop more money in their company when they can get a nearly 50% gain in real estate in hyped cities where their large behemoth company is planning to open offices and create new jobs? You’re sadly mistaken and while I think Reagan was a great statesman, this was his folly. Trickle down economics is a myth. I know the reality — I did the same thing, you invest where the returns take you long or short.

Besides if you did your homework, you’d realize that a majority of the gain in wealth and these CEO’s and Surgeons came not from their massive pay checks which are taxed right in my book, the deductions however I’d argue with. Where did their wealth come from recently? Homes. Yes you read that right — real estate. If you could have afforded real estate in Seattle during the crash, and be able to pay the taxes and hold on just a little bit, you’d have a ton of cash today. Most folks couldn’t do that save for the Amazon Execs, Microsoft Execs, Zillow Execs and executives at many companies in Seattle that are just as corrupt as execs planning games for FIFA and the Olympics.

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Steven H January 10, 2016 at 7:40 am

Thank you for a fine post, Irrational Exhuberance. I hope it’s OK that I reposted it part of it down lower on the thread where it will be seen. I almost didn’t see it up here.

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Steven H October 6, 2015 at 6:25 pm

Last one, bookending with another MOR post:
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Man-of-Reason January 24, 2013 at 12:57 pm

Not every business owner is greedy or unfair to his workers, nor every worker who doesn’t make enough to pay taxes, a “freeloader” or spendthrift. All of that is mutually exclusive.

The enmity between employees and their employers can only be mitigated through communication which fosters trust. Yet, we are deliberately limiting the ability of employees to be heard as more states pass “Right to Work” laws or eliminate the ability of workers to negotiate wages and benefits.

Without the benefit of communication between all associated humans, a business becomes amoral as opposed to moral or immoral. Amoral is considering the bottom line and competition in the marketplace and excluding the consequences to the lives of real people. Cigarette companies, old time slave holders, and even the Catholic Church have be good examples of that. It is very difficult for corporations to consider anything other than the bottom line and therefore, we form governments, not only to protect us from external threats, but also from internal threats from amoral interests which have no responsibility to promote the public interest.

When a man can’t tell his employer why he thinks he has more value than reflected in his wage, or such statements fall on deaf ears, he will feel exploited regardless of your opinion. To say that exploitation doesn’t happen, or that it’s simply a complaint of young spendthrifts to justify not being promoted or achieving your level of success, is a red herring which has no bearing on the subject. You see, Thomas Jefferson was a spendthrift also and managing money is a weakness for many across class lines.

The fact is that currently the U.S. has a problem with the growing gulf between wealthy and middle class. The fact is that tax favorable legislation for the wealthy, reduced regulations on corporations, reductions in union representation for workers, and reduced benefits to our safety nets, have all contributed to a distrust of government to represent the interest of all citizens. The fact is that “greed” did contribute a great deal to the current recession and debt crisis we are now faced with.

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Steven H October 8, 2015 at 4:32 pm

A couple of posts tonight. First is regarding straw man arguments.

The Straw Man fallacy is committed when a person simply ignores a person’s actual position and substitutes a distorted, exaggerated or misrepresented version of that position.

The idea of course, is that it easier to refute a fake straw man argument than an actual argument. In today’s political environment however, it seems to many observers that the GOP stands up a bunch of arguments as false and fragile as any straw man and which are easy to refute, but which they stand behind none-the-less, continually stuffing the straw back in as best they can. Such as the following political and economic arguments:

1) Seven Benghazi investigations costing $14 million found no significant governmental wrongdoing but we need an 8th one costing $4.5 million (so far) to figure out what really happened and it is not a political witch hunt.
2) Accusations against Planned Parenthood are clearly based on heavily edited undercover videos which misrepresent what actually happened, yet despite multiple state investigations that have found no wrongdoing, we need a congressional select committee to investigate, but this is not about abortion nor is it a political witch hunt.
3) We need more guns to stop gun violence.
4) We need more tax cuts to solve the deficit problem.
5) We need more tax cuts specifically going to wealthy people to help solve the high income disparity problem.

On that last one, which has the most relevance to this forum, that is amazingly an actual argument, as per:

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Appearing at a candidate forum in late January, three likely Republican presidential contenders — Senators Ted Cruz,Marco Rubio and Rand Paul — all made a striking confession: They considered “the increasing gap between rich and poor” to be a problem. But on the question of whether the government should intervene to solve it, Mr. Cruz and Mr. Paul rejected that approach, and Mr. Rubio appeared to agree with them. When “government takes over the economy,” Mr. Cruz said, “it freezes everything in place. And it exacerbates income inequality.” He proposed lowering taxes and loosening regulations instead. …

Jeb Bush, arguably the most outspoken potential Republican candidate on the subject, has struck much the same posture as his more conservative rivals. “We believe the income gap is real, but that only conservative principles can solve it by removing the barriers to upward mobility,” Mr. Bush wrote when announcing the formation of a political action committee this year. Mr. Bush vowed to “celebrate success and risk-taking, protect liberty, cherish free enterprise.” … It’s not just right-wing presidential aspirants like Mr. Cruz and Mr. Paul whose statements on inequality diverge from public opinion.
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The Democrats don’t need to create straw men when the GOP does it for them. The mystery is why the GOP actually believes any of these arguments can have any credibility. And why we let them get away with it.

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Steven H October 8, 2015 at 5:07 pm
Steven H October 8, 2015 at 5:03 pm

This is a test. Debt Ceiling Silly Season is approaching and everyone needs to understand some facts about the debt ceiling so they can follow the news stories. Based on news reports so far, some of our potential Presidental Candidates would fail this test. So test your knowledge and answer the following True or False.

1) Raising the Debt Ceiling authorizes new government spending.
2) Raising the Debt Ceiling authorizes governmental borrowing in order to pay financial obligations that have already been incurred.
3) The government can prioritize important bills and deprioritize less critical bills to avoid default and stay under the debt ceiling.
4) Government systems are set up to pay bills automatically millions of times per day, when they come due, and their is no legal, technical, nor practical mechanism that exists to allow bill payment prioritization.
5) Defaulting on our debts due to a refusal to raise our debt ceiling will help the US credit rating by showing we are serious about debt reduction.
6) Defaulting on our debts due to a refusal to raise the debt ceiling would create a catastrophic reduction in our credit rating and US financial credibility, along with an increase in our interest rates for borrowing.
7) Limiting the debt ceiling will reduce the deficit.
8) Limiting the debt ceiling will simply postpone payments that must eventually be paid, possibly result in default, and possibly raise our interest rates on borrowing, all of which ultimately increase the deficit.

Answers tomorrow, but I think most people can figure this out. Not sure about Ben Carson.

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Steven H October 8, 2015 at 5:14 pm

Let me add two more:
9) You have to cut raw dollar federal spending and reduce the raw National Debt value to control debt long-term. Our goal should be to eliminate the National Debt completely.
10) You can control debt, with the least negative impact on economic growth, by maintaining an annual deficit that is a bit less than annual GDP growth. Setting a policy of true budget surpluses and eventual debt elimination is counter-productive and will result in excessive taxation, and constriction of economic growth.

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Steven H October 9, 2015 at 6:04 pm

The solutions are easy. Odd numbers are false, evens are true. But you already figured that out, right?

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Steven H October 9, 2015 at 6:14 pm

I find it remarkable that I put all those posts on the previous page showing how the experts in economics backed up my assertions on the best way to pay down the national debt, and that aiming for surpluses and paying down the dollar debt was not the way to go. After all of the insults and complaints I got telling me I was being partisan and naive and that I needed to take an economics course to understand how things really work, there is a deafening silence when I show that the people who would teach such an economics course back up my assertions. No comments? I guess I was finally persuasive and convinced the doubters…

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John Dillinger CPA October 12, 2015 at 8:48 pm

Believe it or not in San Francisco $450,000 a year for professional couples is barely enough to make ends meet! Marginal tax rates should take cost of living into consideration.

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Peter October 13, 2015 at 6:48 am

More than 1/3 of the top 1% income earners live in four metro areas – NY/NJ, DC metro, LA and SF. All places where it is extremely expensive to live.

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JTM November 13, 2015 at 5:11 pm

Could you please explain how they “barely make ends meet”. Even in these areas, there are many who make less than 100k/year. I would posit that their choices, especially towards what their living quarters are, make it hard to make ends meet. What other expenses are so detrimental? Though they may not like it, they could easily choose to live differently, like those who make much less, and they wouldn’t be under so much financial pressure. But, you know, keeping up with the Jones’s and all…

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Tiffany Sparkles November 18, 2015 at 10:53 am

God forbid someone doesn’t have a smart phone, for example. Or a car. Or a flat-screen TV. These are now “entitlements”, not “luxuries”.

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Steven H November 18, 2015 at 8:13 pm

Or heaven forbid they should cook in a kitchen instead of eating out.

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Tiffany Sparkles May 3, 2016 at 12:00 pm

Exactly! What people think they are entitled to is crazy outta whack in America. Americans are lucky – they don’t even know what poor really looks like.

Steven H November 18, 2015 at 8:11 pm

And yet these same $450K/couple people would vote against $15/hr minimum wage, which is about 7% of that “barely make ends meet” household income. Do you see some irony here?

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Tiffany Sparkles November 19, 2015 at 6:57 am

I would vote against that too. Would have to cut back my employees if that were to happen. Would rather just pay my employees who deserve it more than minimum wage than have to pay everyone $15. Imagine many other small businesses would have same problem.

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Steven H November 20, 2015 at 9:32 am

So you have sympathy for a household earning $450K a year, but you couldn’t care less about a minimum wage household with a single minimum wage worker earning $15K a year, who feeds and serves those $450K earners. Seems rather harsh.

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Tiffany Sparkles November 20, 2015 at 10:18 am

I have sympathy for everyone. But that doesn’t mean I just want to double people’s income for no reason. To be honest, if I have 6 employees making $7/hour and minimum wage goes up to $15/hour I would probably go down to 4 employees just to make the costs work. And 4 people get their income doubled for no apparent reason whatsoever and 2 people now have no job at all. And what about those that have worked their way up to make $40/hour? How are they going to feel if the lesser employees get 100% raises and they get nothing? Bad business for me and kind of a nonsensical suggestion.

Steven H November 20, 2015 at 7:59 pm

OK, how about raising from $7.25 to $10.10? This proposal is a couple years old, but did you know …?

The Fair Minimum Wage Act (H.R. 1010) will increase the minimum wage in three steps, from $7.25 to $10.10 per hour. The rate will then be indexed to inflation each year thereafter. In addition, the legislation will increase the required cash wage for tipped workers in annual 85 cent increases, from today’s $2.13 per hour until the tip credit reaches 70 percent of the regular minimum wage.

Business for a Fair Minimum Wage (July 2014): 61 percent of small business owners with employees strongly favor raising the national minimum wage from $7.25 to $10.10 and adjusting it to keep up with the cost of living in future years.

Small Business Majority (3/6/14): Small Businesses Support Increasing the Minimum Wage to $10.10

Wall Street Journal/ NBC (12/11/13): 63 percent of Americans support raising the minimum wage to $10.10 from the current $7.25 rate.

Quinnipiac Poll (12/10/13): American voters support 69 – 27 percent, including 49 – 44 percent among Republicans, raising the minimum wage. No group is opposed.

National Journal Poll (12/17/13): 71 percent of Americans support raising the minimum wage.

ABC News/Washington Post poll (12/18/13): 66 percent of Americans support raising the minimum wage.

Steven H November 20, 2015 at 8:02 pm

And the increase is not “for no reason”. It is due to the fact that minimum wage has steadily declined by inflation, causing people to work harder for less money “for no reason”. In other words, the very good reason is to help restore the working and middle class and build up the customer base that every small business owner needs to have as a market. One person’s employee is somebody else’s customer.

Tiffany Sparkles November 23, 2015 at 10:58 am

So I should tell my foremen that have worked their way up to a $15-20/hour pay scale that I’m giving the laborers raises to equal the pay of a foreman because “minimum wage has steadily declined by inflation” and that I’m trying to “restore the working (offensive term by the way) class”??? Wonder how that will go over? I think the foreman think they are part of the working/middle class too. Hell, I think I am as well. Maybe we should all get raises.

PhilosoFred November 11, 2015 at 7:33 pm

I guess I don’t understand why most or all of the Republican Presidential candidates want to give even more big tax cuts to the wealthiest people when (a) it will balloon the deficit, and (b) income inequality is already a threatening the well-being of the country. Wouldn’t it make more sense to boost taxes to pay down the deficit, or at least, if tax cuts are affordable, to just give them to middle class where it is needed?

Ballooning the deficit and crushing the middle class hardly seems like conservative principles. Aren’t the Republican candidates just trying to give away free stuff to their donors? That’s certainly what it seems like.

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Tiffany Sparkles November 12, 2015 at 9:46 am

Rand Paul doesn’t want to balloon the deficit. The problem is the Republicans want to give away free stuff to their base(tax breaks) and the Democrats want to give away free stuff to their tax base (higher entitlement spending). It’s all the same song and dance – both sides of the aisle – year after year after year after year. We are DOOMED

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Tiffany Sparkles November 12, 2015 at 9:47 am

And neither reduce the deficit. If you want that, you vote for Rand Paul.

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PhilosoFred November 13, 2015 at 8:45 pm

Tiffany, rand paul’s tax plan, as I undetstand it, is a flat tax with a $50k deduction which gives it some small progressivity, but less than the current tax policy. Plus it adds a VAT tax. Both amount to more tax burden on the middle class than the rich. And it counts on cutting government programs that serve the poor and middle class in order to make up the shortage of the tax benefits that go to the rich. So once again, its frer stuff for the rich, and crushing the middle class.

How about a plan that balances the budget without taking anything away from the middle and poor and without giving one more dollar in tax breaks to the rich, since they absolutely do not need it?

Not politivally likely is it? Not as long as the rich folks grt to buy our politicians.

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PhilosoFred November 13, 2015 at 8:49 pm

Sorry for the phone typos …

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Tiffany Sparkles November 14, 2015 at 8:05 am

Actually he wants to cut spending across the board – everywhere including the military. Not targeting the poor or middle class at all. He also simply wants to pass on most of these Federal costs to the states. I don’t love flat taxes, but he does propose that we eliminate the payroll tax which is a huge benefit to the poor and middle class. The reduction of taxes on small businesses would also be a huge benefit to the poor and middle class. And most specifically it removes EVERY special interest tax break and loophole.

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Tiffany Sparkles November 14, 2015 at 8:07 am

Oh and no VAT tax in his proposal…. Reading some of the past posts I am guessing the PhilosoFred is Steven H….am I right?

PhilosoFred November 14, 2015 at 11:07 am

http://www.thefiscaltimes.com/Columns/2015/07/08/Here-s-Why-Rand-Paul-s-Flat-and-Vat-Taxes-Are-Economy-Killers

I only know what I read about Rand’s tax proposals. This article says it has a VAT tax or something like it. The article, which seems to actually like the flat tax idea, still thinks it won’t work. It just seems to me like a complicated plan to hide that you are shifting more money from poor to rich.

The article says…
“In addition, Paul proposes a 14.5 percent “business activity tax” that would operate much like a European Value Added Tax or VAT. Despite its widespread popularity among OECD nations, VATs serve as a pernicious form of taxation, harming American consumers through increased prices and broader tax bases.
Unlike a conventional sales tax that is only charged at final sale, VATs are charged in small amounts along the entire supply chain. Ironically, the “business activity” component of Paul’s proposal will be primarily borne by consumers, as corporations charge higher prices to customers in order to shoulder increased costs. …
when combined with the 14.5 percent business activity tax, it will not lower rates as much as advertised. The tax rate on income that is spent, rather than saved, will be 29 percent, not 14.5 percent.”

And no I am not Steven H.

PhilosoFred November 14, 2015 at 11:21 am

Tiffany, I can see the appeal of the Paul tax plan if you don’t look too deep. A $50K earner would pay no income tax and no payroll tax. A 100K earner would only pay 14.5% on half his income. And no matter how much you make, you pay no more than the 14.5% on your income. But how can this possibly work? How can everybody pay less?

Cutting the military? With ISIS attacking Europe? Blindly cutting government agencies? This seems naive to think it is just that easy.

The business/VAT tax apparently makes up the difference and increases costs on everything. Since poor and middle class spend more of their money, they ultimately pay more of their income into the flat and VAT.

Money for government has to come from somewhere. If the rich pay less, everybody else pays more. So beware any tax plan that rich people are trying to sell you.

PhilosoFred November 14, 2015 at 11:25 am

And Paul’s tax plan is estimated to cost $1 trillion over 10 years, ADDING to deficits and debt, even after rather optimistic business growth projections.

PhilosoFred November 14, 2015 at 11:56 am

I’m trying to be fair so I looked up another article, this one from the Tax Foundation, which is supposed to be non-partisan, but Wikipedia also describes as friendly to business and conservatives. It says the Paul plan will cost $1.8 trillion over 10 years and it gives a table of benefits to various income groups under “static” and “dynamic” economic assumptions. Under dynamic assumptions, most people get a 14% to 15% increase in after tax income, but people making more than 1 million dollars get a 27% increase in after tax income. 27% increase!!!! No wonder the millionaires like this plan.

http://taxfoundation.org/blog/economic-effects-rand-paul-s-tax-reform-plan

Since purchases will presumably cost more due to higher prices from the business tax, this erodes that income increase for most folks. And since the tax won’t pay for itself, it would probably have to be higher than 14.5% anyway just to avoid a ballooning debt. There is no real guarantee that anyone making less than a million dollars will benefit from this deal.

PhilosoFred November 15, 2015 at 8:21 am

It’s interesting looking up the details of Paul’s Flat/VAT taxation plan, but it just proves what I originally stated. Paul’s plan, which is actually less debt-ridden than some of the others in the GOP, still primarily (or only) benefits millionaires, and just makes the income inequality problem even worse, as do all of the Republican plans. It could possibly be fixed to be revenue neutral, but the basic structure is flawed: giving free stuff to millionaires at everybody else’s expense. All flat tax plans are structured this way. Since Republicans, even more than Democrats, are dependent upon rich donors, this is completely expected.

As for the proposals of the Democrats, they are also too expensive. USA Today “Making College More Expensive” thinks the Democrat proposals for free or lower cost tuition generally are not addressing the full problem, or not in the right way.

The Republicans oversimplify the problems of government and taxation by claiming they will slash entire government agencies, which they cannot and will not actually do. The Democrats oversimplify the problems by claiming they will vastly increase taxes on wealthy to pay for all of their big plans, which they cannot and will not do.

Are we DOOMED?

No. But we need to have more nuanced solutions. No one thinks that the politicians in either party will do be able to accomplish all of their goals. But we need to at least move in the right direction. Small business needs to be boosted, which may require better tax incentives and some regulation streamlining. Taxes need to be made more progressive, not less, to have upper incomes help close the gap on our deficit without costing the middle class. Something needs to be done about our too-expensive higher education system beyond throwing federal dollars as tuition subsidies and loans. We at least to restore the old policy of carefully price-controlled state colleges which kept private tuition down through competition. We need to keep improving the ACA, not throw it out the window.

Neither party has all of the answers. But it at least looks like Democrats are aimed in the right direction of trying to help the middle class directly. The Republicans are still claiming they will help the middle class by giving middle class money to the upper class. That has not worked very well in the past, and I don’t think it will in the future.

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Steven H November 17, 2015 at 7:01 pm

Nice posts, PhilosoFred. Welcome aboard.

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Martin November 16, 2015 at 6:37 am

Not sure how someone could have the perspective that the Democrats are trying to help the middle class. Sure that’s what they say but their policies – particularly those of the establishment like Hillary – say otherwise. Hillary’s palms are as greased by the rich as any republican.

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Steven H November 17, 2015 at 7:28 pm

Martin, what policies of Hillary’s would hurt the middle class?

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Steven H November 17, 2015 at 7:21 pm

Martin, as a Democrat, I too am worried about Hillary’s ties to big banking. And unlike Bernie, she has a SuperPAC. But if I am looking for someone to
promote legislation and appoint Supreme Court judges to
(a) reverse the dangerous impacts of Citizens United ruling
(b) restore the Voting Rights Act
(c) enact sensible tax policy that increases marginal rates on millionaires instead of giving them even more wasteful government subsidies and tax breaks
(d) respect science and address global warming
(e) respect the freedom and liberty of women to make their own medical decisions
(f) strengthen labor policies like minimum wage and unions
(g) have a fair and equitable immigration policy

… then Hillary is really the only viable candidate to vote for.

If you instead want to allow continued massive corruption of government through “donations” of the rich, to bankrupt the government with big unfinanced tax giveaways to millionaires, to erode the voting rights of the young, poor and elderly, to ignore science, to control and micromanage women as if they are too stupid and immoral to make their own decisions, to force the poor and middle class to struggle with declining wages and unmanageable student debt, and to march 11 million immigrants naked back across the border, then go ahead and vote GOP. They’re your guys. But I hope you don’t really want to make that choice.

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Martin November 18, 2015 at 8:27 am

That’s a bit of a slanted view of the Republicans, I must say. Clearly we all know what side you are on! I’m surprised that you think Hillary would stop “massive corruption of government through donations of the rich” or not “bankrupt the government”. Even if somebody likes Hillary, I’m not sure how they would think she would not do these two things. As a democrat myself, Hillary would be very hard to vote for.

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Steven H November 18, 2015 at 8:00 pm

OK, granted, its a bit of a caricature of the GOP. Yet, to be honest, the rightmost elements of the GOP are a bit of caricature when viewed in broad daylight. Trump? Carson? Cruz? God help us if any of these nuts were to lead the nation.

As for Hillary, I think she is a lot less likely to bankrupt government than any of the GOP. To the best of my knowledge, every single GOP candidate who has a tax plan intends to cut taxes in such a way that deficits will skyrocket and most of the giveaway goes to millionaires. This is dreadfully bad planning for the economy. They CLAIM to want to cut government, but if history is any teacher, they will not follow through with the latter sufficiently to fund the cuts in revenue. Cut taxes now; fail to cut government later; reward the donors first. That’s the policy.

Hillary at least has motivation to reward the middle class and not millionaires primarily. And she can raise taxes as needed to bridge the deficit without getting flak from her base. Not true of GOP. And yes, I think she would advocate for reversal of Citizens United. Do you think GOP would?

I support a lot of Bernie’s ideas. Is that who you prefer? Not a bad choice. I just worry that a labeled Democratic Socialist cannot win and that he doesn’t have the breadth of experience that Hillary can bring to the job.

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Steven H November 18, 2015 at 8:06 pm

Or is that you, O’Malley?
😉

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Martin November 19, 2015 at 7:44 am

That’s awful naive to give Hillary the benefit of the doubt but not the GOP. They are all the same when it comes to this – just different rhetoric. And if Trump, Carson and Cruz are “nuts” then Bernie Sanders is like Chex Mix! One thing I like about Trump and Sanders though is that their campaigns are not funded by Super PACs. That’s 90% of the problem right there.

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Steven H November 19, 2015 at 7:45 pm

So you are a Democrat who can’t seem to fathom voting for any Democrats for President? You never answered why Hillary would be hard to vote for.

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Steven H November 19, 2015 at 8:25 pm

And I give Hillary the benefit of the doubt because she is running to support the middle class. At least, if she is politically pandering, she is pandering to the middle class, a group that needs some pandering to at this point in history. The GOP is pandering to millionaires who already have historic highs in wealth and income share. They don’t need more.

And yet, each of the GOP tax plans that have yet been put forward reward millionaires with higher percentage increases in after tax income (20 to 30%) than the middle class (10 to 15%), according to Tax Foundation. And they all increase deficits (except possibly Rand Paul’s if you believe the dynamic projection … but his also raises product costs for consumers with his business/VAT tax, as PhilosoFred pointed out above).

If the United States is to be judged as a business, why should it invest most heavily in tax cuts for the millionaires who already have hoards of capital, and short the middle class who are starved for disposable income which actually fuels the economy. Every single GOP candidate is pandering to millionaires and ignoring the working Americans who both need and deserve a boost in income. This is why I do not give GOP benefit of doubt. Because I have no doubt that the more Republicans who are in office, the dimmer this country’s economic and social future will be.

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Martin November 20, 2015 at 10:05 am

I guess I don’t have the disdain for the millionaires of the country that you do I suppose. I do have disdain for dishonest leadership – and I just view Hillary as someone that will say whatever she needs to say to further her own political career – and yes, as someone who is driven by money and her Super PACs (i.e. millionaires) rather than by the American people at large.

So no, I can’t see myself voting for any of these Democratic candidates. Once again, we have another tough decision to make between lots of unlikeable options.

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Martin November 20, 2015 at 10:07 am

And Trump, Carson and Paul aren’t pandering to millionaires. Whether you like them or not, that isn’t true at all. Paul is practically a libertarian, Trump is paying for his own campaign and if Carson is pandering to anyone, it is the religious right.

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Steven H November 20, 2015 at 7:27 pm

dis·dain
dis?d?n
noun
1.
the feeling that someone or something is unworthy of one’s consideration or respect; contempt.
“her upper lip curled in disdain”
synonyms: contempt, scorn, scornfulness, contemptuousness, derision, disrespect; More
======
I don’t have disdain for millionaires. I just don’t think we need to invest even MORE of our taxpayers dollars in tax breaks to millionaires when it is the middle class who have been shorted for decades.

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Steven H November 20, 2015 at 7:48 pm

My definition of catering to millionaires:
Giving economic advantage to millionaires at the expense of taxpayers and/or average citizens.

According to Tax Foundation dynamic scoring (most optimistic), let’s list tax plan impact after ten years to:
(a) the projected percentage income increase to average median income Americans
(b) the projected percentage income increase to upper 1%
(c) net cost to government revenue over the 10 years (negative adds to debt)

Trump: 19.5% , 27%, -$10.1 Trillion
Paul: 14%, 23 to 27%, +0.74 Trillion (also adds business/VAT tax increasing consumer prices, as per PhilosoFred’s post up the page)
Carson: [analysis not available, but as a flat tax would give huge benefit to upper 1%]

So yes, each of these candidates are pandering to upper 1% and millionaires. Why go into debt investing in the one segment of the economy where that investment is wholly wasted? And no, I’m not saying that millionaires are a waste, but giving more and more money to the wealthiest and highest paid people on earth and in all of human history IS indeed a waste.

pan·der
?pand?r
verb
1.
gratify or indulge (an immoral or distasteful desire, need, or habit or a person with such a desire, etc.).
“newspapers are pandering to people’s baser instincts”
synonyms: indulge, gratify, satisfy, cater to, give in to, accommodate, comply with
“David was always there to pander to her every whim”

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Steven H November 20, 2015 at 8:05 pm

(a) and (b) in above post were AFTER TAX income, directly impacted by the tax giveaways to the rich that the GOP candidates propose.

Steven H November 20, 2015 at 8:18 pm

“someone who is driven by money and … millionaires … rather than by the American people at large.”

That would accurately describe EVERY single GOP candidate, including Libertarian Paul and self-funding TRUMP. You don’t think Trump would seek to grease his own skids once in office and pass a bunch of costly pro-business laws that would fund him and his cronies for decades? His tax plan adds $1 Trillion/year to debt!!!! While the economy is projected/assumed to be in growth. God help us at the next downturn. Every one of the GOP wants to get in office to pass laws that cut their own taxes and those of millionaires and just presume that some benefit will “trickle down” to the average schmuck.

The following facts are proven:
Trickle down does not work. Tax cuts don’t pay for themselves. And the average American is more prosperous under Democrats.

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Martin November 22, 2015 at 9:32 pm

Kind of a naive, overly simplified partisan slant really. To each their own though. Totally respect why you see it the way you do – and I’m sure many others share your sentiment.

Tiffany Sparkles November 20, 2015 at 10:19 am

It’s amazing the amount of misinformation on here. Not sure where people are getting their news!

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Steven H November 20, 2015 at 7:23 pm

For instance … ?

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PhilosoFred December 10, 2015 at 8:05 pm

Hi Tiffany,

Not much conversation here lately, and this is a late reply. I apologize for that, but I have to mention that you are responsible for significant misinformation here, so please give a little leeway to others, and don’t be so quick to judge others on the sins you are committing.

You said that Rand Paul’s proposals do not include a VAT tax and eliminate all loopholes. But Paul’s proposals do indeed include a business tax that most articles liken to a VAT tax, and Paul’s proposals are actually criticized for leaving the mortgage and charity deduction/loopholes in place, along with the earned income tax credit. Now I think those deductions are fine, but it is still not quite correct to say he eliminates ALL tax breaks and loopholes.

And you do not specify what posts you claim have misinformation. Mine? Whose? No one can defend their posts if you do not clarify your claim.

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Peter N November 21, 2015 at 7:51 pm

All democrats do is talk about taking wealth from others. Give me a plan about generating wealth.
Democrats are lame and their leaders pander to the stupid masses.
Yes, I have disdain for liberals that only want to take but not make.

Steven H cherry so called “facts” from other liberals.
BTW, what tax breaks I have missed? My taxes of gone up not down.
I am calling Steven H out on this one.

Tiffany, if none of the 4 employees are worth $15/hr what then?

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Tiffany Sparkles November 21, 2015 at 9:19 pm

They aren’t worth $15/hour now! In fact, every time we post a job we get LOTS of applicants so I know many others would love to have the job at the current $8/hour pay scale.

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Steven H December 12, 2015 at 6:25 am

Peter N, the plan to generate more wealth for the country is in restoring the dominance of the middle class. With this plan we all win. Plans that continue to suppress the middle class in order to shift even more income to the wealthy is just the rich taking wealth from others. The recent tax increases you dislike are simply a partial return to financial norms that allow small deficits and a stronger economy. The tax cuts that Rebublican candidates are proposing are just pandering to the rich, and are the promise of a financial sugar rush to the money addicts. Such cuts would give a short drunken boost to the economy at the cost of a long term hangover of economic instability and government debt. And once again, all wealth creation goes to those who already have the most, while the middle class muscle of this economy withers.

We need a plan of wealth creation for the country, not just the economic elite.

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Steve Davis December 1, 2015 at 10:06 am

Steve,
If you were in the top 1% what would you propose? Maybe take 50-60% of your salary instead of 40% (Current tax bracket) for redistribution (ie taxes)? Guess what, if you are making $32,500 or more in the US then you are in the top 1% for the WORLD! Congrats, you should take the difference between your proposed increase ~60% and your current tax % and donate it to the 99% in the world. What is stopping you?

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Peter December 4, 2015 at 6:59 am

Good point…. “poverty” in the US is a very relative thing.

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Steven H December 11, 2015 at 6:05 am

Poverty income is relative to where you live. $5000/yr is good living in some cultures but not in a US city. So your argument doesn’t really make sense.

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Nina December 2, 2015 at 10:21 pm

Real Estate Agents – good ones earn at least 400k.

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PhilosoFred December 10, 2015 at 8:23 pm

My earlier posts complained about the tax plans of the GOP candidates, all of which seek to lower taxes on businessmen, investors, and high-earners. I understand that the theory is this will improve the economy and lift all boats. But I also understand that this is not how it has worked, and the tax foundation analyses show pretty clearly that all the tax plans redistribute even more income to the upper 1%. Middle incomes may rise but not by much, and most plans don’t even fund the government fully, adding to debt.

It just seems to me that the party of businessmen should have a better business plan for the country. There are pretty good arguments out there that the income inequality problem is a real issue that is dragging down our middle class and our economy. There is additional evidence that government debt is a real issued that we should be using this period of growth to start reducing our relative debt burden. And yet all of these businessmen put out plans that give almost nothing to middle class while heaping vast new tax breaks on the rich, or they heap benefits on everyone by bankrupting the government. This worries me because the only real policies that Republican politicians pass reliably are tax breaks. And everything they propose is good for them and ultimately damaging for the middle class and for the country, by even the most basic analysis. Doesn’t anyone else see this as a problem?

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Steven H December 12, 2015 at 6:40 am

I do. Thanks for the logical arguments. The unfortunate answer to your post is that too many businessmen follow the philosophical guidance of Ayn Rand. At some point,acting in self interest means abandoning the good of the company or the country, and just maximizing profits for individuals at the top. This is the demonic attitude that must be fought.

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PhilosoFred December 10, 2015 at 8:27 pm

If the richest 1% have gained their larger income share by getting tax and financial breaks over decades while the middle class incomes have stagnated, isn’t it time for the upper 1% incomes to stagnate for a couple decades and for the middle class incomes to grow faster in percentages, not slower, than the upper incomes? Rather than grow upper incomes by 27% in 10 years and middle incomes by 10 or 15%, how about reversing those numbers?

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Peter N December 15, 2015 at 9:21 am

“If the richest 1% have gained their larger income share by getting tax and financial breaks over decades while the middle class incomes have stagnated, isn’t it time for the upper 1% incomes to stagnate for a couple decades and for the middle class incomes to grow faster in percentages, not slower, than the upper incomes? ”
Name them!
The richest 1% have become richer because the Fed keeps printing currency that inflates the prices of stocks and property. The Fed must do this to keep the economy afloat. It is all an illusion. Eventually the the stock market will crash, money will inflate and become worthless. The rich will be rich only in a relative sense but they will lose the most.

“Rather than grow upper incomes by 27% in 10 years and middle incomes by 10 or 15%, how about reversing those numbers?”
Gains in the stock market or in real-estate are not income.

I have said above in previous posts why incomes for middle class America have not risen.

I can see the libtards still don’t have a plan to make people worth more so they deserve higher pay relative to machines or foreign labor. They are not interested in creating wealth only re-distributing it. That will only be a race to the bottom like currency war.

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Steven H December 15, 2015 at 7:49 pm

“The richest 1% have become richer because the Fed keeps printing currency that inflates the prices of stocks and property.”
— That’s a contributor recently but not the whole cause.

“Gains in the stock market or in real-estate are not income.”
— The 27% increase in incomes projected by the tax foundation to go to the upper 1% was actual income, not stocks and property.

“I can see the [liberals] still don’t have a plan to make people worth more so they deserve higher pay relative to machines or foreign labor.”
— The middle class is already “worth more”. They just are not getting paid more. The shape of the market has been distorted to make CEOS and investors receive more than they are worth, and everyone else to receive less. We need to make the market work differently and then people will get paid their worth. We also must motivate and adjust the jobs and careers and skills of people within that economy.

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Peter N December 17, 2015 at 10:45 pm

“— The middle class is already “worth more”. They just are not getting paid more. ”
Are you stupid? A person is worth more if they can find just one person that thinks they are worth more. The fact they are worth less shows that EVERYONE thinks they are worth less.

“The shape of the market has been distorted to make CEOS and investors receive more than they are worth, ”
But there is at least one person that thinks they are worth what they are getting paid. Small company CEOs get paid based on their success and pleasing many. All your middle class people need to do is please just one employer.
” We need to make the market work differently and then people will get paid their worth.”
The free market does that.
“We also must motivate and adjust the jobs and careers and skills of people within that economy.”
We agree here.

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Steven H December 15, 2015 at 9:29 pm

“Name them!”
I presume you mean the tax breaks and financial advantages that favor the rich. Here are a few.

On June 7, 2001, President George W. Bush signed into law the Economic Growth and Tax Relief Reconciliation Act, the first of two “Bush tax cuts.” That measure reduced the top income tax rate from 39.6 percent to 35 percent, and reduced capital gains and estate taxes. In the 10 years after the first Bush tax cut went into effect:

The richest Americans received the most benefit from the Bush tax cuts.
$520,000: The average tax cut received by the top 0.1 percent of Americans, those making more than $3 million a year. That is over 450 times the tax cut received by an average middle-class family.
The middle 20 percent of wage earners (making between $40,000 and $70,000) received less than 11 percent of the total Bush -era tax cuts.
The bottom 20 percent (making less than $20,000) received only a 1 percent share of the Bush tax cuts; 75 percent of these low-income families saw no tax benefit at all.
The average middle-class family received one-eighth of the tax breaks that a family in the top 20 percent of income earners received while the average working-class family reaped less than one-hundredth of the average tax cut received by a family in the top fifth of earnings.

From BankRate.com (2011/2012 data, some rates may have changed but these are still benefits that have benefitted the wealthy):

Mortgage deduction: According to a study by The Wharton School at the University of Pennsylvania, mortgage interest deductions for households with incomes between $40,000 and $75,000 average just $523, while households with incomes above $250,000 enjoy an average write-off of $5,459, or more than 10 times as much.

Capital Gains: Most of the capital gains are earned by folks in the top 10 percent, and it’s even concentrated more than that. So the capital gains tax break, which is a 20 percentage-point difference in the amount of tax that is paid on those, is going almost all to the top 5 percent.” In fact, Americans with an annual income of $1 million or more, or 0.3 percent of all taxpayers, enjoy 70 percent of the capital gains benefit. The favorable capital gains rate is expected to save the wealthy (and cost Uncle Sam) $38.5 billion for fiscal 2012, according to the Office of Management and Budget.

Inheritance: Under special Internal Revenue Service inheritance rules, when you inherit assets such as stock, real estate or a closely held business, you are allowed to step up their basis — what the deceased originally paid for them — to their current fair market value. Therefore, when you sell the assets, you would only be taxed on their gain in value from the time you inherited them. Step-up in basis is expected to save the wealthy (and cost Uncle Sam) $61.5 billion for fiscal 2012, according to the Office of Management and Budget. “Not surprisingly, this tax expenditure overwhelmingly benefits those who inherit from large estates because it allows gains to escape capital gains taxes if held until death,” says Hanlon.

Retirement Plans: Since the wealthy have more to save, they tend to reap more of the tax benefits of saving for retirement. According to the Tax Policy Center, the top 20 percent of income earners enjoy 80 percent of the tax write-offs for retirement saving while the bottom 60 percent take advantage of a whopping 7 percent of the tax savings.

Charity: The problem with the charitable deduction is similar to the mortgage income tax break: The value of the deduction increases with income. “If I give $1,000 to charity and I’m in a 10 percent tax bracket, I get $100 back on my taxes,” says Wilkins. “But if I’m in a 35 percent tax bracket, I get $350 back from the federal government.”

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Peter December 16, 2015 at 12:47 pm

I had to come back just as an “expert witness” to refute some things in this last post. Not to debate Steven H (there is no point to that and he appears to have a new round of sparring partners) but just to add my two cents since he referenced a few things from my life’s work….

1. Retirement plans – The wealthy and the poor have an equal playing field when it comes to saving in retirement plans. A while back, the maximum allowable contribution was changed to a DOLLAR limit rather than a percentage of pay. Plus it is capped at only $18k/year. Sure, if you make more it is easier to save – but this is no different for someone making $2m/year vs. $80k/year. The reality is though that an overwhelming amount of people (including those that can afford it) do NOT contribute to their company’s retirement plan. I have held countless 401k enrollment meetings in my career and you would be shocked at the reluctance people have to save money – even in a tax-advantaged way. You know who takes the most advantage of this tax benefit? SMART people….and those with long-term planning in mind. This crosses economic lines.

Charity – Doesn’t this tax break then motivate the wealthy (who can most afford it) to give back? I’m not sure how this is a bad thing. Accusing me of giving $250k to buy equipment for a local school or hospital as being anything but generous is preposterous.

Capital Gains – Maybe you don’t realize how progressive capital gains tax rates are. If you are in the 10-15% income tax bracket, you pay ABSOLUTELY NO taxes on gains. Beyond that it rises progressively to 15%, 20% and eventually 25%.

Estate – And then finally, to include the step-up in basis as a benefit for the wealthy is absolutely crazy. This helps the middle class far more than the wealthy as beneficiaries get to keep 100% of what they inherit even if they sell the asset. What you failed to include was the outrageous and frankly unconstitutional estate tax which takes sometimes more than half of your assets when you die and gives it to the government. There has been talk of repealing the estate tax and stepped-up cost basis rules, but it is universally believed to be much better for the lower incomes the way that it is.

To say that the capital gains, charitable giving, estate and retirement tax breaks only help the wealthy is like complaining that eating vegetables and exercise only benefit the healthy. Your cause-and-effect logic is flawed.

Sorry – didn’t want to get engaged with this pointless political spin again but thought I would at least interject some facts in case others are reading.

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Peter December 16, 2015 at 12:58 pm

I should also add…

Mortgage Deduction – This actually goes away when you are in the 1%. I get ZERO benefit for this now. Once you make over $254k (single) or $305k (married) you start getting phased out of this benefit. Plus you can’t deduct a mortgage larger than $1m. So this is yet another benefit CLEARLY capped for the wealthy but extremely helpful for lower wage earners to be able to afford to buy a home. Yet you complain and call it a “break for the wealthy”.

I, for one, have a $950k mortgage and deduct exactly NONE of the interest I pay. I am maxed out at only being able to save $18k pre-tax (less than 2% of my pay). I also pay over 30% capital gains on anything I sell. When I die, my kids will split my wealth 50/50 with the US Government.

My mother pays no property taxes, deducts her mortgage interest fully, pays no capital gains and can put about 33% of her salary into a pre-tax 401k.

The only advantage I have over her is that I get a bigger tax break (percentage-wise) when I give to charity. But let’s be honest….you WANT me giving money to charity. That is the ultimate wealth transfer from the rich to the poor – building schools, helping the sick, etc.

Steven H – please stop the foolishness. You listed a whole slew of “loopholes for the rich” that were either untrue or actually even more advantageous for the lower wage earners.

Steven H December 16, 2015 at 7:36 pm

Your points are pretty good Peter. I got lazy and quoted a bankrate.com article for most of the post. I did think it was interesting to see their perspective but I see yours too.

The only part of my post I really defend as a big boost to the wealthy is the Bush tax cuts (and the Reagan cuts that preceded them) that were of huge benefit to the rich while bankrupting the treasury. But we’ve been over that road.

Steven H December 16, 2015 at 8:05 pm

Having trouble posting. Will retry …

Peter, you have some pretty good points. I got lazy and quoted most of my post from a bankrupt.com article (as I attributed in the post).
I thought their perspective was interesting but so is yours, and your comments on tax changes are more up to date.

The one part of my post I will defend as a huge benefit to the rich was the Bush (and Reagan) tax cuts, all done while depleting the treasury. And yes there was Democrat spending in the budgets but also a whole bunch of Reagan and Bush defense and war spending. Those tax cuts, if they were ever needed as a temporary kick to the economy, were retained for much too long. We are still paying the bills and will for a long time. But we’ve been over that discussion …

Steven H December 12, 2015 at 6:29 am

Is anyone else noticing a problem with the comment page? Maybe we have finally overrun its comment count array. Evertime I post, it clears the page and says there are only 63 comments. I have to go back a page and forward again to see the posts. Weird.

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Steven H December 13, 2015 at 8:22 pm

PhilosoFred’s reference to the Tax Foundation analyses of Rand Paul and other tax plans have an interesting nugget of information that I only recently realized fully. Recall that the Tax Foundation is a self-proclaimed non-partisan group but is generally believed to have a bit of a pro-business pro-conservative perspective. No big problem with that but the point is that is not liberal.

Its tax analysis of the different tax plans project the impact of those tax plans as they are projected to ADD to status quo. In other words they project the *additional* GDP growth of the country and *additional* income growth of various subsections due to the tax plans.

For example, both Rubio and Paul tax plans are projected to increase incomes of upper 1% by about 27% over 10 years DUE TO THE TAX PLAN and its side effects, but only raise median and middle class incomes by 14 to 15%. Interesting.

What produces income disparity? What defines high income disparity? It is the condition of highest incomes rising faster than middle or low incomes, when calculated as a percentage. Therefore, these analyses back up an assertion for which I have been repeatedly ridiculed: that tax policy can produce high income disparity and can also be used to reduce it. And here you have a pro-conservative organization stating in its own analyses that the GOP tax plans will increase income disparity, by raising high incomes around 27%, with about half that percentage for everyone else.

Doesn’t this pretty much prove that tax policy is a significant contributor to high income disparity?

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James December 15, 2015 at 11:13 am

The smart people you chased away with your close-mindedness weren’t denying that tax policy is a contributor to income disparity. They were simply saying that there are so many other greater factors that aren’t “political” that have a greater impact. But you choose to ignore those because they aren’t “liberal vs conservative”. (For instance, something VERY significant like the evolving technology revolution and its impact on the working class)

Fortunately all of this stuff is still posted on here so you can go back and re-read it if you so choose. Or keep arguing with the straw man – either way…. :)

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Steven H December 15, 2015 at 7:40 pm

“The smart people … weren’t denying that tax policy is a contributor to income disparity.”
— But I’m pretty sure they objected to using tax policy to correct the problem. I’d find the quotes but the posts seem to be missing.

“They were simply saying that there are so many other greater factors that aren’t “political” that have a greater impact. … like the evolving technology revolution and its impact on the working class.”
— And I don’t deny that these things have an impact. But we can’t CHANGE those things to fix the problem. Just because we understand that loss of manufacturing, and cheap labor overseas, impacts working class salaries does not mean that we should not address the problem with other tools: like labor policy, trade agreements and tax policy. Merely understanding the sources of the disparity problem neither fixes nor negates the problem of a struggling middle class and its impact on the whole economy. It’s all well and good to say people need more education or a different career, but society and government still need to be involved to make that happen, by making education more affordable. And by adjusting tax policy to accelerate the fix.

“Fortunately all of this stuff is still posted on here so you can go back and re-read it if you so choose.”
— Actually, pages 2-10 seem inaccessible to my computer or phone browsers. I can read this page and page 1. The rest seems to have vanished.

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James December 16, 2015 at 6:41 am

Sure we can change those other things. Society needs to adjust to a 21-century world rather than your approach of comparing everything to the 1950s or 60s. Society and government should be involved but it isn’t all about spending more money or stealing from those who have already earned it.

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Steven H December 16, 2015 at 7:54 pm

Not trying to go back to the 50’s or 60’s. Also trying very hard not to go back to the Gilded Age. I reference the past to learn from it, not return to it.

Peter N December 17, 2015 at 11:01 pm

“— But I’m pretty sure they objected to using tax policy to correct the problem. I’d find the quotes but the posts seem to be missing.”
Yes, I object. That is the gov choosing winners and losers. The free market should prevail.

The libtards still haven’t figured out how to create wealth or make people richer. Their only solution is taking money from those that can and giving it to those that can’t.

Steven H has yet to respond to this point. Steven H has yet to see the reality of the economic situation.

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James December 18, 2015 at 10:58 am

The problem is that Steven H sees raising taxes on the wealthy as the PRIMARY way to narrow the income disparity. He really isn’t interested in any other solutions other than taking money from the wealthy and giving it to the middle class. If we don’t do that, then in his mind we can’t fix the problem.

This is largely fueled by the fact that he views the income of the wealthy as “undeserved”. He would say “how can you justify that the pay of the 1% has risen at a far more rapid rate than the 99%?” – and then conclude that the increase was undeserved and should be returned to the 99%. Most of the rest of us don’t agree with this which is why we bang our heads against the wall when talking with him.

James December 18, 2015 at 11:00 am

And I should add…. raising taxes on the wealthy doesn’t even accomplish what he wants. You take more from the rich, but you actually give it to the government. This doesn’t necessarily fall into the hands of the less fortunate. It may instead go to “building democracy” in another country, or possibly just go to general Federal waste.

Steven H December 18, 2015 at 4:47 pm

“He really isn’t interested in any other solutions other than taking money from the wealthy and giving it to the middle class.”
— James, I agreed with the need to do almost all of the things you suggested up the page. Don’t lie about my stance and what I am interested in. Listen to my words, not your biases.

“And I should add…. raising taxes on the wealthy doesn’t even accomplish what he wants.”
— Tax policy can control distribution of wealth as much as any other single cause. Even the Tax Foundation, a business friendly analyzer of tax plans says so. GOP tax plans proposed, which make huge cuts to taxes of the wealthy and much much smaller cuts to everyone else, will double the percentage income increase of millionaires vs almost any other subset of the population. That’s not me making that claim. That is organization full of folks and economic models a lot smarter about this subject than you or I.

You think it is fair to shift or “steal” money from the middle class and give it to the rich but unfair to return it back to the middle class where it will better strengthen the economy. That makes no sense. Why is stealing from the middle class OK?

Also we have to fund the government. You can dream about slashing and burning government programs, but that is a fantasy. So where will the money come from to fund government? From those that have, or those that don’t?

And why, why, why do you even talk about stealing money? Business regulation policy, tax policy, and all the other government policies absolutely positively impact how the profits of this country get distributed and whose pockets they end up in. Everybody with a modicum of common sense and observational skills recognize this. When policy changes, some winners win and some losers lose but it is not theft. It is policy. And policy always changes. And the losers are never going to like it. But the wealthy have been winning long enough by a huge and growing margin. Of course they don’t want the rules to change. They want to think they make all the money and deserve all the praise. They are winning, and hate to admit that maybe, just maybe, parts of the game are rigged in their favor. It’s time to shift money back where it will do good, using every policy available. And tax policy is going to have to be adjusted to help this goal.

Peter N December 19, 2015 at 7:20 pm

All you do is talk about redistributing wealth and not creating it.
What an idiot. How does tax policy make people smarter or more productive?

Steven H and other libtards have yet to answer my question.

Steven H December 19, 2015 at 9:58 pm

Peter N,

Here is one way of stating it:

The country is creating wealth. Policies control its distribution. Government controls the policies. The rich control the government. So it does not seem surprising that the rich have manipulated the government to set the policies that impact the distribution system to favor themselves.

As an extreme example, consider a slave economy. The owner of the slaves benefits from the work of the slaves but pays them little or nothing. The slave owner controls the work conditions and prevents the slaves from improving their situation. Does it make sense to blame the slaves for not making themselves more productive or worth more than some other slaves?

Our economy is not degraded to that of slavery. But when we set education as the way up and out of poverty or joblessness, and then set the costs of higher education far beyond the reach of those who most need it, we are condemning people to stay in their impoverished conditions.

And similarly, when we prevent the middle classes, who are educated and not impoverished, from participating in the growing prosperity of the country by suppressing their wages and compelling them to compete with foreign slave-like workers who work for much less, we are also condemning our own citizens to a lesser quality of life.

Here is the question I want, in all seriousness, for you to answer. What obligation do we have as a country to uphold the quality of life of our own citizens? I’m not talking about avoiding personal responsibility. I’m talking about recognizing the shortfalls in education and career planning and actually spending some societal money and effort to do something about it. I’m talking about setting fair trade policies to prevent unfair labor competition. If the country’s economy is suffering due to a poor match of skills and need in this country, do we just allow most of the country to fail, and a few to massively profit from that change, or do we actually try to fix the problem?

James December 20, 2015 at 8:12 am

You proved my point. All you really care about is redistributing wealth. Not growing the economy or fixing the actual problem. Very short-sighted and narrow minded. But of course you have heard that before.

Steven H January 10, 2016 at 7:58 pm

James, we agree on the other solutions. Tax policy is the point of disagreement, and so that is what i discuss. There is no point in continuing to discuss the points we have already agreed on. Got it?

Steven H December 13, 2015 at 8:26 pm

Clarification:
What defines high income disparity? Highest incomes having a higher than typical share of all income. What produces high income disparity from a balanced economy? It is produced when highest incomes rise faster than middle or low incomes, when calculated as a percentage.

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Peter N December 17, 2015 at 11:11 pm

“What defines high income disparity?”
Why does it matter?

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Steven H December 18, 2015 at 6:11 pm

Concisely:
1) Tax Foundation analysis is one of many proofs that tax policy CAN affect income disparity. It can make it worse or better. Tax policy is certain to change. Should we set it to make income disparity worse or better?
2) Government deficits are still larger than desirable for most folks. Either government should get quite a bit smaller or taxes should go up. Government spending relative to the economy has not grown in 7 years and there are more pressures to increase rather than decrease spending. Despite the desires of some for government shrinkage, that prospect is unlikely. Therefore, our choices are larger deficits or larger taxes. What should we choose?
3) If we raise taxes, we can raise on everyone equally (as a percentage of income) or weight the change more toward getting more money from the poor or middle class, or more from the rich (as percentages of income). Which is the choice that is better for overall economic growth of the country?
4) If we avoid raising taxes to focus exclusively on economic growth to increase funding of the government and to improve the health of the middle class, then we are focussing on relatively long-term solutions such as changing education systems and business motivations. Meanwhile, during this long-term experimental time period, income disparity continues to increase and deficits rise. Is this really the best choice?

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Steven H December 18, 2015 at 6:33 pm

The “concisely” post above did not seem to answer Peter N’s question.
That’s because it was meant as a stand-alone post summarizing previous posts in what is hopefully a new perspective to encourage discussion. It was accidentally posted as a reply to Peter N. Sorry for confusion.

And by the way, I hope that posters have noted that I, for one, am avoiding disparaging remarks against other posters such as those that are still being cast against me. I am trying to return this forum to some productive discussion. I hope other long-time posters will assist.

I also realize that some posters are tired of tax discussions. I get it. You may think taxes are high enough and that the solution to disparity and/or deficits is to shrink government. But assume for a moment, as dec ads of history suggest, that government is not likely to shrink much if at all. Then we almost certainly need to address taxes. Doesn’t this make sense? This is where my questions above come from.

Yes, we need to do more than address taxes. Most of us agree in broad terms that we need to at least try to improve education and better train our population to be prepared for jobs of this century. But as many note, delay is just a form of denial, and saying we have to wait a decade or a generation for experimental educational changes to possibly maybe have some favorable impact on the economy, is just a form of delay in order to avoid making an unpleasant tax decision.

And IF we get all these folks trained, but still don’t engineer the economy to give better raises to the middle class, income disparity may just stay the same with a better educated, and even harder working population. For no one has offered any actual proof that poor job skills are the cause of high income disparity.

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Peter N December 19, 2015 at 7:37 pm

“And IF we get all these folks trained, but still don’t engineer the economy to give better raises to the middle class, income disparity may just stay the same with a better educated, and even harder working population.”
The question is “are these trained people worth the raise relative to what I can get over seas”.
I think the answer is yes but our gov makes it too easy to sit on your ass and still get a paycheck from the gov. There is no hope for the terminally stupid and ignorant. There will always be winners and losers.

I have been to China 5 times how. A Chinese engineer gets paid about 1/6 to 1/5 of what a US engineer gets paid but the Chinese engineers aren’t that productive. Some of it is education, some of it is the way they do business and culture.

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Steven H December 19, 2015 at 9:34 pm

Peter N, Don’t you think our country has an obligation to have trade policies that protect our own citizens against unfair overseas competition? I understand that we have to deal with globalization, but i also understand that using overseas labor often means subsidizing and supporting foreign companies that take advantage of substandard work conditions, unpaid overtime, poor quality control, and industries with little or no pollution controls. Of course the US companies trying to hire US citizens have trouble competing.

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James December 20, 2015 at 8:09 am

I agree with all of that Steven H. And if you believe all that you should vote for Trump rather than Hillary….

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James December 20, 2015 at 8:14 am

And the best way to raise revenue to the government is to improve the economy. Not redistribution of wealth. That does nothing. If you raise taxes on the wealthy and just give it to the middle class (who already barely pay any taxes), you have accomplished nothing positive.

Steven H December 21, 2015 at 4:14 pm

I am trying to respect all opinions, but I have great difficulty giving a trump presidency any credibility.
I don’t think he can actually get the gop nomination.
I don’t think he has a prayer of beating Hillary.
And I dont think he has a clue about running this country.

And I would fear for the world if he got rlected.

Just my opinion.

Steven H December 21, 2015 at 8:21 pm

But rather than focusing on where we disagree, James … I am glad we agree on the need to economically defend our own labor force. Actually doing it in an age of global trade is difficult, but we should not compel our own workers to compete head to head with 60 hr a week foreign company workers treated like slaves.

Peter N December 23, 2015 at 10:33 pm

China imposes a tax or tariff on products we sell there. So does India.
Yet we have no tariff on their products. Why? Obama could have and should have changed this when he and the democrats had complete control. They didn’t. Why?

I know this because we sell products into China. The tax or tariff makes our products very expensive. I have been to China 5 times now.

I agree with James. Trump is the just the right ass hole we need to stand up for America. We need a nationalist for a president.

Obama has been ROAD. Retired On Active Duty.

However, none of this has anything to do with redistributing wealth or making the American workers more productive. I repeat. The libtards only want to redistribute wealth, not create it.

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Steven H December 29, 2015 at 8:07 pm

I don’t know who these lib-tards are you rail against. Most Americans just want the people who actually create wealth to actually get to keep some, instead of having it reappropriated to the most powerful and wealthy. That is, that we want to STOP the immoral redistribution of wealth away from the actual wealth creators that has been happening for decades. That is what I am advocating for. You seem to be advocating for more redistribution of wealth to the wealthy.

I think American workers are already incredibly productive. Look how wealthy they made their overseers.

😉

Steven H December 21, 2015 at 8:41 pm

And while I agree that improving the economy raises government revenue, we also need to be prepared to keep the deficits less than GDP growth. Otherwise debt grows faster than the economy. Its OK for Congress to have compromises like the recent budget bill that increase spending on both political sides. But doesn’t it make sense to raise taxes to match the increases? It just seems fiscally responsible to me.

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James December 22, 2015 at 7:18 am

Totally agree that we need to keep deficits down. A few ideas:

– Eliminating federal waste
– Reforming SS and Medicare
– Revamping Obamacare so it doesn’t line the pockets of the insurance companies
– Reducing military spending
– Eliminating pointless agencies like the Department of Education and sending more power to the states

If we start here we should be able to accomplish quite a bit.

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Steven H December 29, 2015 at 7:43 pm

I’m mostly in agreement with the PRINCIPLE of what you propose, but let me play devil’s advocate for a moment with your list.

[Eliminating federal waste]
=It’s difficult to eliminate something that is almost impossible to measure. Polls indicate that people BELIEVE that government wastes 50% of all spending. But this is not a study or statement of knowledge, but only just a cynical belief. It’s very unlikely that waste is that rampant.
=People are wasteful. That includes people in and out of government, people in all levels of private enterprise, and people in all walks of life. You can’t ever eliminate waste. It is literally not “humanly” possible. You can only find means to encourage efficiency and reduce waste.
=Defining what is waste and measuring it is difficult. We could set up a whole program to define, measure, analyze, and seek to eliminate government waste, ant yet to some, that whole program would be another example of government waste.
=Heritage Foundation has an article listing types of waste:
>Spending on projects that cost more than the benefits they create;
>Government intervention in the form of subsidies or regulations that cause individuals and businesses to reduce their productive efforts or to engage in unproductive activities. A direct example is lobbying for additional government favors (“rent seeking”) instead of seeking profit from serving consumers to the best of their ability;
>Federal spending on functions that could be better performed by the private sector, or by state and local governments;
>Mis-targeted programs whose recipients should not be entitled to government benefits;
>Spending on outdated, unnecessary, or duplicative programs; and
>Inefficiency, mismanagement, and fraud.

http://www.heritage.org/research/reports/2014/10/eliminating-waste-and-controlling-government-spending

=Unfortunately, some of these categories are very subjective and the application of the definition is subject to political or social perspective. For instance, in the article, the authors object to “corporate welfare” as wasteful. And who would object to eliminating corporate welfare? Surely we could all agree to that. But the examples in the article include “ending energy mandates”. There are many who believe that energy self-sufficiency is an important national goal and that energy mandates (fuel efficiency goals, support for renewable energy research, etc) are an important part of investing in our future. Apparently the authors see all this as waste.

=Some of the other solutions or approaches in the article are sound in principle, but as might be expected from a political think tank, the solutions tend to advocate for a particular perspective of shrinking government and ending or vastly reducing social safety net programs. Clearly these authors will have different definitions of waste than those with a different political perspective.

=The point is that government is in a continual cycle of attempting to reduce waste. Yes it is a great idea to remove duplicative programs and expensive programs with minimal benefit, BUT that is harder than it seems. And one person’s useless government funded fruitfully research is another’s “discovery of genes that cause cancer, genes that [affect] metabolism, genes that cause developmental defects, genes that play a critical role in neurodegeneration [and a] discovery tool for many, many different pathways, proteins, diseases.” [see factcheck.org Paul Knocks Flies and NIH Funding]

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Steven H December 30, 2015 at 8:32 pm

“fruitfully research” should read “fruitfly research”.

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Henry December 31, 2015 at 10:05 am

Don’t worry about the spell check. Doubt anyone read it haha

Steven H January 1, 2016 at 6:54 am

You did.

Steven H December 29, 2015 at 7:54 pm

[– Eliminating pointless agencies like the Department of Education and sending more power to the states]
= This goes along with the last post. Who says what is useless? If an important current national priority is to improve the education system, wouldn’t elimination of the Department of Education be counter-productive and poorly timed? And they are only about 2% of the budget, so it is hardly a big savings to eliminate them.

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James December 30, 2015 at 6:48 am

What does the Department of Education do? Your reply is exactly the problem. People get all up in arms about the elimination of something without even knowing what role it plays. Elimination of the FEDERAL Dept of Education doesn’t mean we don’t care about education. And reduction of military spending doesn’t mean that we are now in danger.

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Steven H December 30, 2015 at 8:29 pm

James, I am not an expert to defend the DoED. But I could say your reply is exactly the problem as well. You want to eliminate agencies without knowing anything about their function. You just assume it must be useless because it is the federal government.

You can look up info on the DoED as easily as I can, but as i understand it, one of its most important functions is to collect data on the status and quality of education throughout the country. We cannot improve what we have not measured and evaluated. Another important function is the monitoring of civil rights aspects of education.

But basically, it seems obvious to me that an improvement in the nation’s education system requires a national agency to oversee it. Anything less would be chaos.

James January 2, 2016 at 7:24 am

Point being there is a lot of waste in the government…..

Steven H January 3, 2016 at 9:18 am

Yes James, there is waste, and there are already attempts to reduce it. But not everybody agrees what is waste and what is valid investment. That is the point.

Meanwhile we have a deficit that cannot be shrunk simply by reducing government waste, a tax code that has been improved slightly and has reduced deficits but which still vastly favors the rich, a middle class under threat by stagnating wages, exported jobs, and outrageous education costs, and upper class which is profiting enormously by those same conditions that hurt the middle class.

We agree that we must improve the education system. That will take state funds, federal funds, and federal oversight from a functioning DoEd. And it will take more taxes, not fewer. And the oppressed middle class should not have to contribute very much to that tax increase.

We agree, I think, that the middle class is under threat, and that higher minimum wages tied to inflation will help. We agree, I think, that individuals must also be motivated and guided to train for productive technical and non-technical careers. This will require government oversight, ideally with cooperation of private industry.

I hope we are in agreement that we need better restrictions and constraints on national and multi-national industry, so that they do not eliminate and overrun the competition from small and medium size businesses. I believe these restrictions should include tax rules and high marginal tax rates on 10 million plus incomes. You likely have different solutions for the same goal.

James January 4, 2016 at 6:23 am

“a tax code that has been improved slightly and has reduced deficits but which still vastly favors the rich”

I don’t agree. People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing. That does not “favor the rich”.

Steven H January 10, 2016 at 10:43 am

James: People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing. That does not “favor the rich”.

That is one statistic in isolation. And a deceptive one, at that, as has been addressed many times. Despite the lack of federal income tax burden, the lower quintile of earners still pays 20% of their income in some kind of tax. Look at the big picture. The millionaires have benefitted from policies that have increased their income tremendously at the expense of all other income groups, and yet their effective federal tax rate (income and SS) was until recently LOWER on that income than for people making $100K. And even now, with increased taxes on millionaires, it fails to counter the increased share of the economy they enjoy from decades of tax advantage over everybody else.

We have policies and tax rates that STILL favor the rich. This is pretty much indisputable.

James January 10, 2016 at 12:28 pm

Anything but indisputable. Millionaires pay over 40% in taxes, plus payroll taxes, property taxes, sales taxes and estate tax. Half pay no income taxes, no estate taxes, reduced property taxes but do have payroll taxes and state taxes.

Steven H January 10, 2016 at 6:54 pm

James, let’s at least get the numbers straight. When you say that “People making $1m still pay more than 40% in Federal income taxes”, do you men that they are paying an effective federal income tax rate of 40% of their income? That seems to be incorrect by any tables I have found. Effective federal income tax rates on upper 1% were about 22.8% in 2012 and the rate DECLINES as you look at the richest of rich, to only 17.6% for the upper 0.001%. (It’s hard to find good tables more recent than 2012, but I’m pretty sure effective tax rates have not gone from 22.8% to 40%.)

Perhaps you mean that millionaires pay 40% OF all federal income taxes. That is a completely different statement. In 2012 the upper 1% (with AGI above $434K, so its more of the population than just the millionaires) paid about 38% of all federal income tax.

http://taxfoundation.org/article/summary-latest-federal-income-tax-data-0

Steven H January 10, 2016 at 7:19 pm

Also there is an article i referenced in a previous post (probably one page back, haven’t looked for it yet) which indicates that if you summarize all taxes (federal income, FICA, state, property, sales, etc), all income groups pay about the same share of taxes as they receive in income. It goes up slightly for richest folks but really our tax system, in toto, is practically flat.

Realizing that fact, it is completely absurd for rich folks to complain about how high their percent share of the tax burden is. It is high because their share of the income pie is high, and for no other reason.

In fact effective federal income tax rates on the upper 1% have gone DOWN since 1980, even as income shares went UP.

Stats on upper 1%, 1980 vs 2012 (from taxfoundation.org)
Income share: 8.5% –> 21.9% [2.6x ]
Federal Income Taxes: 19.1% –>38.1% [2.0x]
Effective federal inc tax rate: 34.5% -> 22.8% [0.66, or 2/3]

So, when income shares of the upper 1% have gone up 2.6x but the effective tax rate was cut by a third, how could you possibly argue that tax and labor policy has NOT clearly favored the rich?

Steven H January 10, 2016 at 7:20 pm
Steven H January 10, 2016 at 8:29 pm

Found my other data on how our current tax system is practically a flat tax.

Lowest 20% receive 3.3% of all income and pay 2.1% of all taxes.
Middle 20% receive 11.2% and pay 9.9%.
Within the upper 10%:
The upper 1% receive 21.6% and pay 23.7%.
The next 4% receive 14.2% and pay 15.2%.
The next 5% receive 10.1% and pay 10.7%.

http://www.taxjusticeblog.org/archive/2015/03/the_facts_missing_from_the_deb.php#.VX-aY2A326M

Peter N December 23, 2015 at 10:41 pm

There is a drug that was prescribed for me. It cost almost $400 per quarter. I could buy the same drug from Canada but it is illegal. I have found another solution but my point is that Obama also favors the drug manufacturers. American pay much more for their drugs than other countries even if they are made here.

I think military spending will always be necessary. It could be more efficient but the defense of our country is part of the US Constitution. I would ruthlessly cut those agencies that are not mentioned in the Constitution.

I would not be afraid to ruthless defend the US Constitution against ALL enemies foreign and DOMESTIC. Read the other the president, senators, representitives and military people take. I would hold them all to their oaths.

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Steven H December 29, 2015 at 6:16 am

I agree our drug prices are too high. The reasons for the low prices in Canada and elsewhere are (a) price controls in those other countries, (b) simpler health systems with fewer organizations negotiating the prices.

If we were to have a single-payer system here, we could have lower negotiated drug prices with the big pharma companies. Our current system encourages lobbying by the powerful pharma companies and insurance companies who profit off of the high cost of health care, although somewhat less than the pre-ACA system which was even worse.

Interestingly, the changes due to ACA will put some pressure on drug prices via competition and consumer awareness. My wife uses an inhaler that was redesigned to be more complicated and efficient. Our company just went to a health insurance plan where we pay for the drugs and then get reimbursed. This was partly to get a lower cost plan under ACA rules. Now i see that the cost for that inhaler for one month is $300. Unacceptable. I can go online and get coupons to cover half or more of the cost. I can get the drug from cheaper pharmacies. All because I see the price and how I can save myself and my company plan some money.

All that said, we should have some sort of drug price controls here. The difficulties are battling the lobbying forces of insurers and pharma. Yet another reason to legislate a revocation of the Citizens United ruling.

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Peter N January 5, 2016 at 9:13 pm

“. The reasons for the low prices in Canada and elsewhere are (a) price controls in those other countries, ”
Explain! If the drug companies charge $390 for a 3 month supply here then how can I get the same drug and quantity in Canada for $109. If the supply comes from the US then how can Canada subsidize the $280 difference?
Why is it illegal to buy from Canada? I have lived there. Canada is not a 3rd world country.

Your Obama Care is a fraud is so many ways. It has nothing to do with making medical care cheaper. It is just another wealth distribution scheme.

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Steven H January 10, 2016 at 7:52 am

Come on, Peter N. This is basic. The health care system is like a business negotiating with a supplier. Canada negotiates a lower price, like Wal-Mart negotiating with a supplier vs Joe’s corner store. Canada doesn’t “subsidize” the cost. It pays less, like Wal-Mart. The US doesn’t negotiate as well, because it doesn’t have a single point of contact like Canada. Every insurance company negotiates separately, and they don’t have a real vested interest as they can just pass costs to the consumer.

ObamaCare has weaknesses. The thing is, the previous system had even more weaknesses. People getting dumped from policies over technicalities when their care got too expensive. People losing all coverage when they lost or changed jobs, and then were unable to get new coverage due to pre-existing conditions. ObamaCare is the imperfect middle-ground between the really awful pre-ACA system and the much preferred Universal Healthcare.

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Steven H January 10, 2016 at 8:02 am

And of course, the uninsured have no negotiating position at all, and will go into bankruptcy to buy the over-priced medication.

2013 CNBC article
Medical Bills Are the Biggest Cause of US Bankruptcies: Study
http://www.cnbc.com/id/100840148

also 2015 article from USA Today, search for keywords:
usatoday consumers-still-struggling-with-medical-debt

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Steven H January 10, 2016 at 10:53 am

PeterN: Why is it illegal to buy [medications] from Canada? I have lived there. Canada is not a 3rd world country.

Big Pharmaceuticals want to established closed systems. If Canada negotiates a lower price for the Canadian market, they don’t want that price to be available to everyone. So they negotiate rules to their advantage. If we had a system like the extraordinarily popular healthcare system in Canada, maybe we could negotiate the same prices.

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Peter N January 13, 2016 at 11:37 pm

So why didn’t Obummercare truly make drugs more affordable. All obummercare did is get other people to pay for the uninsured. It didn’t make anything more affordable for the rest of us.

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Steven H January 10, 2016 at 7:43 am

Nice post up the page that some may have missed over the holidays.

http://moneyning.com/career/who-actually-earns-400000-per-year/comment-page-12/#comment-1398380

Irrational Exhuberance December 28, 2015 at 11:27 am
Trickle down economics has been proven without any doubt in academia, looking at historical data as well as projecting it, to fail. The rich qet wealthier a lot faster than the not wealthy in scenarios where taxes are lifted on the wealthy. … [more in the most. click on the link.]

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Steven H January 10, 2016 at 10:09 am

I’ve been rereading this page. Here are a few select quotes that help to summarize the arguments against raising taxes or even addressing high income disparity.

Nat: Top-down / central planning type questions that you’re asking like “Should we for instance, over the next 30 years seek to double or triple the real incomes of the upper 1%…” are going in the wrong direction and sugfesting that one size fits all decisions should be made to limit the pay of upper management. The market is best suited to make these decisions.

Dynx: That’s why salaries for high level people go up. We make the money. … His secretary may not have gotten a raise in who knows how long. Who cares?”

James: Therefore I don’t want the liberals trying to prevent higher salaries for CEOs or whatever wealthy successful people you abhor – NOR do I want the GOP proposing that we raise CEO salaries.

Peter N: All democrats do is talk about taking wealth from others. Give me a plan about generating wealth. … I can see the libtards still don’t have a plan to make people worth more so they deserve higher pay relative to machines or foreign labor. They are not interested in creating wealth only re-distributing it.

Peter N: ” We need to make the market work differently and then people will get paid their worth.” [quote from Steven H]
The free market does that.

Peter N: “— But I’m pretty sure they [conservative posters] objected to using tax policy to correct the problem [of high income disparity].” [quote from Steven H]
Yes, I object. That is the gov choosing winners and losers. The free market should prevail.

James: raising taxes on the wealthy doesn’t even accomplish [reduction of high income disparity]. You take more from the rich, but you actually give it to the government.

===
Or to summarize further: The free market best determines all incomes. There are no significant changes that government can or should make to address high income disparity, and if any such government incentive IS found, it is equivalent to stealing from the rich, or income redistribution, and is an unjust and undesirable distortion of the market. If people’s salaries are not growing at the national rate, it is their own fault for not making themselves more valuable with different skills, or more effort. It has nothing to do with government policy or market manipulation by wealthy and powerful people.

If my summary above is indeed the fairly stated perspective of the above posters, I find it naive, deceptive, and self-serving. As well as inconsistent.

Points and counterpoints:
1) Government policy is supposedly either incapable of correcting high income disparity or, if capable, should be off-limits for use. Specifically, tax policy should not be used. – This disregards the studies (Tax Foundation, and others) showing that every analyzed tax policy proposal of Republicans will increase high income disparity SOLELY from the impacts of that tax policy, and the primary characteristic of each policy is slashing taxes on the rich. It is extraordinarily inconsistent to claim that government policy changes will not fix a problem while supporting policies (tax cuts for wealthy) which every credible study confirms will make the problem worse.
2) Income redistribution is morally abhorrent, but only when moving money from rich to poor, and not the reverse. — The contradiction in this statement is obvious. It is extraordinarily inconsistent to abhor income redistribution that is unfavorable to you, but to advocate for it when it favorable to you.
3) Free markets are perfect, or near perfect, and should not be modified or constrained by government policy. — Free markets are DEFINED by government policy. The only truly free market, unbounded by government policy, is that of warring slavelords. Since government policy DEFINES and CONTROLS the free market, it can be used to reshape it, control it, improve it, … or make it worse. Claims that there exists a free market independent of government policy seem absurdly idealistic.

Here is the thing that we all agree on. In this country, capitalism harnesses the power of free will, ingenuity, hard work, and the reward for successful application of the previous, to improve our society, our economy, our world, and the lives of our citizens.

Here is the point which we should agree on, but some may dispute. Humans in their societies lean toward empire building, and the most wealthy and powerful will almost always seek to increase their own wealth and power at the expense of others, simultaneously degrading the efforts and abilities of those the conquer and rule and oversee.

Here is the assertion which divides us on discussing income disparity. When the wealthy and powerful increase their wealth and power much faster than the general population [as human nature naturally inclines], the general population has both the right and responsibility to reverse the process through policy changes. This will improve the quality of life of most citizens and of the society at large. And this is the genius of Democracy, that it allows the general population to make this decision.

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James January 10, 2016 at 12:29 pm

LOL – still beating the same narrow-minded drum.

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Steven H January 10, 2016 at 6:05 pm

Refining the argument.
Realize also that those who refuse to accept any possibility of raised taxes as a need or solution are at least as stubborn and narrow-minded as those who insist on it.

Do you at least agree agree with the first two of the last three paragraphs? And do you agree that the last paragraph concisely describes the point of our disagreement?

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Steven H January 10, 2016 at 6:13 pm

And do you agree with my summary of your arguments in the “Or to summarize further” paragraph?

I am truly interested in stating your argument correctly.

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James January 11, 2016 at 8:16 am

NO I don’t agree with your summary of my arguments. They are typical of your approach. You turn a well thought out argument into a slanted, political, juvenile version of others’ perspectives. You keep running people off because of this. It is asinine….

Here is the part I agree with: The free market best determines all incomes.

I originally was going to counter/reword all your other remarks but seem to remember others doing this and it was relatively pointless.

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Steven H January 13, 2016 at 8:04 pm

Why do you think it is pointless to express your argument clearly and concisely if I have failed to do so?

I would say that my post above is the farthest thing from being juvenile. I have an opinion and you have a different opinion. I have stated mine. My summary of “your” argument is an amalgamation of actual statements from either you, or Peter, or Peter N, or other posters you have agreed with. Not all of you have precisely the same opinions, I understand that. But I still think the paragraph expresses what has been said here by these various posters without twisting or distorting. If it does not express your opinion, then please enlighten me with a modified version.

James January 14, 2016 at 11:03 am

Because I (and many, many others) have expressed our arguments before. If you listened the first time we wouldn’t need to keep retreading the same material…. By your ‘summary’ you clearly aren’t listening to Peter, Peter N, me or any others if you think that is what they are saying.

James January 14, 2016 at 11:06 am

….and here is where you go and pull selected lines out of previous posts and say “tell me what I am missing”. I’ve been down this road before – not going there again. Not sure why after 2-3 years on this comment board you would all of a sudden understand the point of view of someone outside your narrative.

James January 11, 2016 at 8:24 am

“all income groups pay about the same share of taxes as they receive in income. It goes up slightly for richest folks but really our tax system, in toto, is practically flat.”

This is LUDICROUS! I have been in just about every tax bracket there is in my lifetime – from unemployed to minimum wage to a 7 figure income. I will tell you firsthand that our tax system is anything but flat. You are letting the top 1% percentages get skewed by people who are retired and derive the majority of their income from dividends and interest. And as usual you aren’t seeing the true story because it disagrees with your narrative.

PLEASE – I would love as everyone does their taxes to anonymously post their income and their effective tax rate. Maybe if some of the more intelligent posters came back (JTM, Ken, Peter, Man of Reason, Stevendad, JB, etc.) they could post this. I know nobody wants to engage with Steven H anymore, but I for one would love to see the numbers anecdotally.

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Steven H January 13, 2016 at 5:50 am

James, look at the article. I did not say federal income tax system was flat. I said this article above calculates that the sum of all taxation is almost flat. It is so typical of you to take my arguments and distort them into a slanted political juvenile version. Adsress my actual arguments and we can have an adult discussion.

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James January 14, 2016 at 2:22 pm

uh…. I didn’t say anything specifying the “federal income tax system”. I just quoted you. I was talking about the sum of all taxation too. I addressed your argument directly.

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Steven H February 8, 2016 at 8:27 pm

You didn’t address the argument. You refuted it with your opinion, without referencing the article and without offering any facts.

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Steven H January 13, 2016 at 5:53 am

Also, james, you have not addressed your statistics error claiming that millionaires pay 40% of their income in federal income tax. Do ypu habe a source for that stat?

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James January 13, 2016 at 6:42 am

I just know what I pay and what the other partners at my law firm pay.

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Peter N January 13, 2016 at 11:51 pm

The top federal income tax rate is 39.6%.
SS tax 6.2%
Medicare 1.4%
That is 47.2%
not counting all the local taxes and fees.
Then there are taxes on investment income.

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Steven H January 15, 2016 at 5:45 pm

True. But someone in the 39.6% bracket is not paying 6.2% on all of their income for SS. So you can’t add all of those percentages without stating some caveats.

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James January 16, 2016 at 3:36 pm

Boy that was missing the point…..lol

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Steven H January 13, 2016 at 11:35 am

The tax policy center and tax foundation each have good tables on effective tax rates of upper 1%. The most recent effective federal income tax rate for this group is under 23%. Tables go through 2011 or 2012. Look up effective tax rate tables. Tax policy center also sums impact of other federal taxes, including corporate. This total is 29% in 2011.

Perhaps you can explain how you and your fellow lawyers pay at least 33% more than the average of your income group. Or provide a source rather than a personal guesstimate.

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James January 13, 2016 at 12:23 pm

I have told you before – your “across the board” stats include retirees and people who get most of their income passively – through investments, etc.

If the majority of your income comes from wages, you are getting crushed – particularly with the new tax increases Obama has added.

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James January 13, 2016 at 12:24 pm

And if you are looking at the 1%, you are including people who make $350k. Once you get up over $500k, your tax rates go up significantly.

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Peter January 13, 2016 at 12:40 pm

I just did my taxes and my effective Federal tax rate is 33.4%. It was 28% in 2014 and 26% in 2013. This does not include payroll tax, property tax, state tax, local taxes, etc.

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Steven H January 13, 2016 at 8:05 pm

Thank you for the data.

Steven H January 13, 2016 at 7:43 pm

Yes, you are correct there will be quite a broad spectrum of effective tax rates for high earners depending upon what percentage of income is coming from investments. I was using a published average.

For the record, I think most tables use ratio of tax paid to AGI as the effective rate. The taxable income is often lower than the AGI, so if you take the ratio of taxes to taxable income, you get a higher rate. I’m not sure which definition you are using.

My effective rate (tax/AGI) in 2014 was 13.3%.
My tax to taxable income rate was 16.8%.
So they can be quite different.

The 2015 top marginal rate is 39.6%, and 39.0% would be the approximate effective rate IF you made, say $7 million, and your AGI was actually your taxable income (no exemptions or itemizations) and all of your income is from wages. But this, I think you will agree, would be the rare exception more than the rule.

I tried a few calculations using 2015 rates, and ignoring Alt Minimum Tax for simplicity. Someone single in 2015 and earning $1M in wages with no exemptions (AGI=taxable income) would have an effective tax rate of 35.2%. Any exemptions or capital gains income or carried interest income would effectively lower that rate. It’s generally true that earners over $1M will be more likely to have significant investment income. Perhaps this is less true among lawyers you work with?

Anyway, I think it may be more correct as a general statement to say that most million plus earners pay 20% to 35% of their income in federal income taxes, depending on proportion of wage and investment income, with the average being somewhere around 25% (according to published tables). I think it is too much of an exaggeration to say that, in general, million plus earners pay 40% in taxes, since there is likely a very small percentage with effective rates over 36%, it’s almost impossible to get to the asymptote of 39.6%, and the average is around 25%.

Sound reasonable?

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James January 13, 2016 at 8:38 pm

No it doesn’t. I was using effective tax rate by its actual definition – total taxes paid divided by total income. If I used AGI the number would be a higher percentage.

Regardless, I pay close to 40% when you count payroll tax, state tax, federal tax and property tax. Actually you don’t even need to include property tax. I’m at 40 percent just from federal and state.

The numbers are skewed by the Bill Gates of the world who have gazillions of dollars in dividend income which is taxed at a lower rate. Not the rest of us making $350-$1m mostly from income. We are getting raped by the tax code…..to insinuate it we essentially have a flat tax is honestly the dumbest thing you have said on here.

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James January 13, 2016 at 8:41 pm

Why don’t you listen? I’m telling you that EVERY attorney I know and have talked to has said they are paying in the high 30s in effective federal taxes. Yet you try to “hope” that this isn’t true or is an anomaly. Learn something!!!! I guarantee that if someone other than Peter who makes good money comes on here with their effective tax rate it won’t be 20-25%.

This is no different than republicans touting welfare queens…..sure they are out there but most people aren’t abusing the system – they are surviving on it. And most people who make $350k-$1m are getting destroyed by the tax laws.

Steven H January 15, 2016 at 5:21 pm

James, I don’t understand why you get so snippy. I haven’t disputed anything you are saying here, and if anyone is not listening it is you.

You made the blanket statement that millionaires (or million plus earners) pay 40% of their income in taxes. When the highest marginal rate on income is 39.6% and there are various deductions and additional impacts like lower rates on capital gains, your blanket statement is just untrue or at least woefully incomplete.

If you are telling me that most lawyers you know are in the 35%-40% effective rate range, that is interesting and I have no reason to doubt you, but I have also calculated that the ratio of federal income tax/AGI at income of $1M with no deductions and no income set aside into investments or coming from investments yields an effective rate of just 35.2%. Perhaps you know some extraordinarily high income lawyers or there is some tax subtleties i am missing, but I am just using math and published tax rates here.

My calculator does not have a “hope” button, so I am not using that.

Peter has said his effective rate is 33.4%. That fits in with expectations for a high earner in the $700-$1M range. But it is not 40%, and that is my point. 40% is an exaggeration when you use it as a generality of what rich people pay in federal income tax.

As for the 20-25% rate (22.83% in 2012, probably closer to 25% now), that is a published average for the upper 1%. It’s not my number. I didn’t make it up. And I already agreed it is skewed by those with investment income. In fact, the highest earners have even lower effective rates, and since they are part of the 1% they are definitely going to skew the averages.

Effective federal tax rates in 2012
Upper 1% : 22.83%
Upper 0.1% : 21.67%
Upper 0.01% : 19.53%
Upper 0.001% : 17.60 %

So once again, I have agreed with you on the substance of your argument (effective rates depend on ratio of investment income, rates can soar up to around 35% for millionaires), I have presented you with facts backed up with data, but I disagree with your one statement that millionaires generally pay 40% of their income in taxes. And rather than acknowledge the truth of what I have presented to you, you get all snippy and irritated and insult my character. I really don’t understand this behavior.

Steven H January 15, 2016 at 5:29 pm

“to insinuate it we essentially have a flat tax is honestly the dumbest thing you have said on here”

It is not a dumb statement. It is a statement based on average data across income groups, based on published information within an article I have provided to you, and it is true within the assumptions of those calculations. Rather than just calling something dumb, one could make the more insightful statement that taxes within the upper 1% are far from flat because of the disparities between wage earnings and capital earnings. I would agree with that.

Why do you always feel you must insult people you disagree with? Do you do that in real life as well as online?

James January 15, 2016 at 8:34 pm

Since you didn’t read it the first time….

Regardless, I pay close to 40% when you count payroll tax, state tax, federal tax and property tax. Actually you don’t even need to include property tax. I’m at 40 percent just from federal and state

Steven H January 15, 2016 at 9:26 pm

Actually, James, I did read that part, and yes the effective rate goes up when you add multiple taxes. I am not disputing that you pay an effective rate of 40% when you add federal and state income tax, or federal income and tax and some other tax. I understand your point that wage earners in the 500K to 1 mill range get hit with much higher effective percentage rates than averages for the 1% indicate.

The technical point that I was making was that your original statement was not really correct.
[People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing. That does not “favor the rich”.]
People making $1M do not pay more than 40% of their income in Federal Income Taxes. That is not really possible under most circumstances with a top marginal rate of 39.6%, unless you add some unusual tax circumstance or you start fudging the definitions. They only pay 40% or more if you add other taxes on top. Please be willing to concede this technical point so we can move on.

And ON AVERAGE, including investors, the whole of the upper 1% pays closer to 25% of their income in federal income taxes, with the wage earner paying a considerably higher rate, but still less, not more, than 40%. Again, this is tabulated data, not my opinion, so let’s move on.

I think the larger argument you are making is that people in your circumstance, high earners of wage income, are hit particularly hard with taxes, whether you consider federal income or total tax, and in fact pay higher total tax effective rates than just about anybody else. AGREEMENT ALERT: This is actually a pretty good discussion point.

What that means to me is that the investors are getting even a better deal than the tabulated data suggests. If wealthy wage earners are paying around 35% in effective Federal Income Tax rate and the average for the 1% is 23 to 25% effective rate, than investors are paying way less, maybe closer to the 17.6% or so that the upper 0.001% were paying in 2012.

So perhaps one solution is to raise federal tax rates on capital gains, not on wages, or perhaps to treat capital income beyond a certain amount as equivalent to wage income, and taxes at wage income rates. That would help to even the effective tax rate slopes between wage and investment earnings of high earners, and limit or eliminate the need to raise wage tax rates. How would you feel about that?

And as to whether tax policies favor the rich, perhaps that argument could be refined into a few more more precise statements, including the following two:
1) Federal tax policies from 1980-2012 favored the rich more than policies from 1950-1980 did.
2) Federal tax policies today including recent tax increases are still more favorable to the rich than they were from 1950-1980 (although less so than from 1980-2012).

James January 16, 2016 at 7:53 am

One other point – all the stats you quote have been several years ago (2011, 2012) – you aren’t taking into account the big tax increase that Obama has levied on the upper income earners. Just the ACA alone adds about 4% to everyone’s income tax at that level.

As I file my taxes I will try to remember how the tax laws “favor the rich”. Sorry, but not going to buy it.

Cole January 16, 2016 at 12:10 pm

The long term capital gains and dividends tax rates were increased by over 8% in 2013 to over 23%. These are the highest rates we have seen in 20 years. This is a huge jump – enough for you Steven H? One of the concerning issues is that for most non 1% individuals, it’s never going to be enough in their eyes. Now that taxes are the highest they have been for a couple of decades for the 1%, can we focus on either less spending or smarter spending (or preferably both)?

Peter January 16, 2016 at 3:35 pm

Amen, Cole….. And how about that fact that over 100 million people pay a ZERO capital gains tax rate. Yet, I am taxed at 23.8%.

Me:
23.8% on my capital gains
33.4% effective Federal tax rate
5.75% State tax (and I live in one of the more reasonable states)
12% payroll taxes on the first $110k I earn
1.5% property taxes
Plus – the inability to take deductions others can and 40% plus of my assets going to the government when I die.

My mother making $50k –
0% capital gains rate
9.5% income tax rate
5% state tax rate
12% payroll taxes on earnings
0% property tax
Plus – full deductibility for mortgage interest and 0% estate tax.

Still not enough. Government needs more money to run efficiently. Don’t we all….

Peter N January 13, 2016 at 11:56 pm

I got into the 39.6% tax bracket big time last year.
There is a difference between percent taxes paid and marginal tax bracket.

So when are the lower 50% going to start paying something? Bummer’s approval rating is just about at the level of those that don’t pay federal taxes. That is buying votes.

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Steven H January 15, 2016 at 5:37 pm

Once again, federal income taxes are not the only taxes. State taxes, property taxes, sales taxes, FICA, Medicare tax, are all taxes. And the lower 50% pay them. That IS “something”. Within their incomes, it is a actually a much higher burden on their incomes and lifestyle than taxes on the 1%.

Cole January 15, 2016 at 6:18 pm

Steven H – See my comment at the bottom regarding taxes. When individuals are working and wages are the main source of income, the effective tax rates aren’t close to being flat for the 1%. They are typically over 30%, not including various other taxes (state taxes, Medicare, Social Security, etc.) which often push the rates close to 50%. You can add in whatever other taxes you want (sales taxes, etc.) to non 1% individuals and it’s still not going to be close to 50%. Where it gets interesting is when long term cap gains and dividends are a significant source of income. Warren Buffet claims that his secretary pays more in taxes than he does, which is absolutely absurd. Any W2 income he has received over the years has likely been taxed at over 40% and then invested. Once invested, he pays federal and state taxes every time he receives interest, dividends, and realizes capital gains. That tax rate (including state taxes) is around 30%, depending on the state. Then he reinvests again and then again gets taxed once he receives interest, dividends, and realizes capital gains. This perpetually happens for his entire life. Then, when he passes away, assets over $11mil (I’m rounding) and not going to charity are hit with a 40% federal estate tax (and some states have estate taxes), which depending on how charitable he ends up being could be billions in taxes. If you do the math on all of that, I think it’s safe to say his secretary making $100k-$150k per year isn’t going to come close to paying what he pays. Not close.

Cole January 14, 2016 at 7:02 pm

I’ve been reading these comments for months and decided to finally join the fun. Hopefully I can add some clarity to the numbers as I am a private wealth manager for ultra high net worth clients. I deal with the tax return preparation and planning, as well as the investment management for my clients. I’m definitely going to lean toward the James and Peter camp, while recognizing that the answer is usually somewhere closer to the middle, but in my opinion still further away from Steven H. In short, I believe the 1% pay their fair share. The highest marginal tax rate is 39.6% federal, not including Medicare of 2.35%, and Social Security of 6.2% of the first $120k (I’m rounding) of W2 income – self employed individuals get hit harder with self employment tax. My effective tax rate for 2015 was approximately 33% and many of my clients are over 35%. If you back out the Medicare and SS, the my effective rate is around 30% and many of my clients are over 32%. These numbers are lower than James and Peter might expect, but it is because I live in a high tax state and my clients receive a deduction (partial deduction due to the itemized deduction phaseout) for state taxes paid, which lowers the overall federal rate by a couple percentage points. Also, this doesn’t include property taxes or state taxes. When you add federal, state, Medicare, SS, property, etc, the tax rate ends up being in the 45%-50% range for many 1% people. This isn’t their fair share? Really? Full transparency on this – I’m talking about individuals making more than $1mil. At the lower end of the 1%, the effective tax rates are obviously a little lower. Also, to James’s point, the statistics Steven H is quoting certainly include many individuals with certain investment income which is taxed at a lower rate, but remember, these investments are net of tax to begin with, which means that they have already been taxed at 45%-50% on the money before investing and now they are being taxed again on the growth (I’ll comment on this in another rant).

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James January 15, 2016 at 7:13 am

That’s a great point about the investments being made with after-tax money (already taxed at 45-50%) and then taxed again when they earn or grow. And then the government takes up to 50% of it again when you die. Hard to make an argument that the 1% aren’t paying their fair share or that it is equal to the taxation (percentage wise) of someone making $50k.

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Steven H January 15, 2016 at 9:41 pm

Nice data, Cole, and thanks, but I don’t have time to respond in full tonight. I have some thoughts about the “fair share” discussion, with the short answer being that I care less about arbitrary arguments of fairness or whether something is double taxed (almost everything is), than I do about whether tax and labor and business and export policy create an economic system that is balanced and sustainable and provides most Americans with rising wages and reasonable reward for their work. I think the thumb has been on the sales in favor of the rich for decades. But of course, if you have been reading this forum, you already know the gist of my views.

More later. And welcome to the madhouse.

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Steven H January 15, 2016 at 9:43 pm

Thumb on scales. Not sales. On second thought, maybe thumb on the sales makes sense too. 😉

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Steven H January 17, 2016 at 9:16 pm

Just a reminder for those complaining about today’s “high” capital gains rates.

The rate was 35 percent under Presidents Richard M. Nixon and Jimmy Carter, then dropped as low as 20 percent under Reagan before rebounding to 28 percent. It rose again, to 31 percent, under President George H.W. Bush as part of the controversial 1990 budget deal. Under Bill Clinton, the rate was cut to 28 and then 20 percent, before George W. Bush sliced it to 15 percent. It is now 15% under an income threshold (around $500K) or 20% above the threshold plus a 3.8% medicare surtax on investment for incomes over $250K (roughly – actually the rules are complicated).

So that maximum of 23.8% may seem outrageous but it is still on the low end of historical rates.

Here is a more complete table

Years …………….Indiv. Rate …………..Corp. Rate
1955–1967…………. 25.0% ……………. 25.0%
1968 ………………… 26.9% ……………. 25.0%
1969 ………………… 27.5% ………….…. 25.0%
1970 ………………… 30.2% ……………. 25.0%
1971 …………………. 32.5% ……………. 25.0%
1972–1974 ………… 35.0% …………… 25.0%
1975–1977 …………. 35.0% …………… 30.0%
1978 …………………. 33.8% …………… 30.0%
1979 …………………. 35.0% …………… 30.0%
1980–1981 (Jun 9) 28.0% ………….. 28.0%
1981–1986 ………… 20.0% ………….. 28.0%
1987–1992 ………….28.0% ………….. 34.0%
1993–1997 (May 6) 28.0% ………….. 35.0%
1997–2003 (May 5) 20.0% …………. 35.0%
2003– 2012 ………… 15.0% ………….. 35.0%
2013–2015 ………….. 20.0% …………. 35.0%

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James January 17, 2016 at 9:19 pm

So? Again. Not. The. Point.

Taxes are not flat. The rich pay far far far far more than the poor.

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Peter January 18, 2016 at 12:42 pm

I am astounded that you are still trying to convince people that 2015 taxes are anything close to flat. Have you noticed that for about 6 months you have had nothing but detractors? Did you ever think maybe your point of view might be wrong or at the very least incomplete or misguided?

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Steven H January 18, 2016 at 9:23 pm

James and Peter,

I posted ONE article on the previous page, and reposted it on this page, addressing 2014 statistics that indicate that the totality of the tax system, including ALL federal and state income taxes is a lot flatter than most people realize.

This is not something I invented or that “I am still trying to convince people of” as if it is a long running theme. It’s an article. With some data. And some conclusions. You may read and discuss. Or you can dismiss it out of hand, ignoring information which does not fit your agenda, and attack my character.

You two can be better than this. How is my posting an article of data representative of being wrong or misguided? Did you even LOOK at it?

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Steven H January 18, 2016 at 9:26 pm

In case you can’t find it, here is some of the relevant text:

First, it is critical for lawmakers not to just look at the federal tax system in isolation, as the JCT report does, but at the tax system as a whole. While the federal tax system is generally progressive, state and local taxes are notoriously regressive. In fact, a recent report by the Institute on Taxation and Economic Policy found that the poorest 20 percent of taxpayers pay about twice the state and local tax rate of the top 1 percent.

A study of the overall tax system in 2014 (including federal, state and local taxes) by Citizens for Tax Justice (CTJ) found that our tax system is just barely progressive overall. For example, the richest taxpayers are paying tax rates very close to the rates paid by middle class Americans, with the middle 20 percent of taxpayers paying a 25.2 percent rate and the top 1 percent paying 29 percent on average. In addition, each income group’s share of total taxes paid closely mirrors their share of total income, with the top 1 percent paying 23.7 percent of all taxes while earning 21.6 percent of all income.

Lowest 20% receive 3.3% of all income and pay 2.1% of all taxes.
Middle 20% receive 11.2% and pay 9.9%.
Within the upper 10%:
The upper 1% receive 21.6% and pay 23.7%.
The next 4% receive 14.2% and pay 15.2%.
The next 5% receive 10.1% and pay 10.7%.

The article also discusses the disparity between wage and capital income, as we have also addressed here.

http://www.taxjusticeblog.org/archive/2015/03/the_facts_missing_from_the_deb.php#.VX-aY2A326M

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Cole January 18, 2016 at 9:47 am

I’m not sure that any of my comments so far should be construed as a “complaint” and I don’t remember writing that the rates were “outrageous”. I accurately indicated that long term cap gains rates are the highest they have been in almost twenty years, which your table confirms. Note the following facts/comments:

1. Highest marginal tax rates (39.6%) on ordinary income (wages, ordinary dividends, interest, etc.) equal their highest levels in 30 years. Furthermore, 30+ years ago, the highest marginal rates were a lot higher, but inflation adjusted these rates were imposed on income in the millions and there were so many deductions allowed that very few were actually hit with these rates.

2. Capital gains rates (23.8%) are at their highest level in almost 20 years. Although individual cap gains rates were higher 20+ years ago, the corporate rates were lower which has an offsetting impact (I’m not suggesting a 1 for 1 impact because I have no idea exactly, but there had to have been some offsetting impact).

3. Qualified dividend tax rates are taxed at the same rate as long term capital gains and are at the highest they have been in almost 15 years. However, Steven H could make the argument that they were taxed as ordinary income before 2003, so while these rates are they highest they have been since 2002, they are still far lower than what they were prior to 2002. Corporate tax rates were lower though, so again there is some offsetting effect.

4. Medicare tax rates (2.35%) are at all-time highs.

5. Payroll taxes equal all-time highs.

6. State taxes are at all-time highs, with some being through the roof (California’s tax rate on income over $1mil is 13.3% and New York’s state and local taxes are similar).

My basic premise is that the economic system is one large equation with hundreds, if not thousands of variables, with taxation and government spending being two of the most significant ones. Proponents of increasing taxes on the 1% have succeeded and taxes have significantly increased on the 1% over the past several years. Although I could argue that taxes on the 1% should be lower, I am not arguing for that and I am fine with eliminating irrational loopholes like the carried interest loophole which would even increase taxes on the 1% more; however, as I mentioned in a previous comment, I believe most answers lie somewhere closer to the middle and enough is enough. You have succeeded in raising taxes on the 1% and will raise significant revenue as a result. Now please look at the government spending variable and figure out how to compromise.

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Peter January 18, 2016 at 12:40 pm

This does talk to the larger point I was making months ago. For some (Steven H) it is never enough. All that matters is what plays politically – “increases and decreases”. The bottom line numbers are meaningless. When that is the case, then there is no increase that is enough because it ends the ability to cash in the political currency.

The “middle” is not available. It is a win/lose game for the political parties. And it is unfortunate.

The irony that the 1% haters don’t realize is that when you do find success and make incredible money you find yourself feeling and becoming so generous. I know I am far more generous than I was when I was in the bottom 20%-ile. Sure, I can afford to be now – but it is more than that….you want to help others that are less fortunate. The problem that people who are extreme left-leaning like Steven H don’t seem to realize is that it is the government’s inefficiencies and behind-the-scenes promises to corporate America that stand in the way of this exchange truly happening. It is not helping the struggling I oppose – it is the Federal government’s facilitation of it that is – and frankly always has been – a total disaster.

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Steven H January 18, 2016 at 9:04 pm

Cole, perhaps I took the “High enough for you, Steven H?”, as a complaint, when maybe was not intended specifically that way. That’s neither here nor there in the discussion. Anyway, no offense was taken or intended.

Yes, many rates are relatively high in recent historical terms, especially on the 1%.
My point in posting the table is:
For 36 of the 61 years covered by the table (since 1955), capital gains rates were 25% or higher than today’s 23.8% (including the 3.8 Medicare surtax). The table was just offering perspective on today’s rates, which are high in recent history but low relative to most of the last 60 years.

Also, while the tax rates you reference are indeed higher relative to the last 20 or 30 years, I think it is worthwhile to remember this:

– We have not raised enough revenue in most years since 1981 to pay the government bills or lower the debt/gdp ratio. Except under a few years of Bill Clinton, deficits have soared BECAUSE of those low tax rates. Yes, of course there was spending, by both parties. And defense buildups and unnecessary wars and all that. But without those irresponsibly lowered tax rates of the last 35 years, we would not be having to pay the piper with the higher tax rates necessary today.

– And when the richest 1% (especially the investors) have benefitted extraordinarily over those 35 years from the low tax rates and business-friendly policies and deregulated economic systems, with huge increases in income and wealth relative to the rest of the country, all while the treasury is being depleted and both public and private debts are growing, it seems more than a little disingenuous for them to complain that they have to give back when the bills come due. They have received almost all of the gains which built up the debt in the first place.

– If the distribution of income in this country had not shifted so much money from the middle class to the rich, there would not be nearly so much need for the poverty programs and medical assistance that costs the government so dearly.

Cole, by the way, I really like that you are bringing data, facts, and statistics to this forum. And you have several good points, such as many state tax rate increases being quite high. I agree the economic system has many many variables. I know that federal taxes have gone up, and I don’t have all of the data from the last couple of years because it does not seem to be compiled yet. I am not posting old data from 2012 by choice. It is just what is available. And understand that I do not hate bankers, investors, lawyers, or anybody in the 1%. Nor do I want to punish success or tax anyone into oblivion.

But I think that an impartial observer looking at the status of our economy, and the distribution of wealth and income within our population over time would come to the conclusion that the wealthiest in this country have been getting a really sweet deal, and have been prospering not only from their own efforts but partly or even mostly at the expense of efforts of the rest of the population. For most of the country in the last several decades, wages stagnated or declined, education and medical costs increased, medical care availability was declining (pre-ACA), and there have been increasing cycles of banking and economic malfeasance costing the public billions if not trillions, and there has been a small population coming out on top.

You may not see it that way, but many do.

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Cole January 19, 2016 at 1:06 pm

Just to be clear on the numbers -the 3 largest sources of taxable income are wages, long term capital gains, and qualified dividends. Over the past few years, the highest marginal tax rates: 1) on wages have gone from 35% to 39.6%; 2) on long term cap gains and qualified dividends have gone from 15% to 23.8%. If we use your information, which indicates that the effective federal rate on the top 1% was almost 23% in 2012, it is simple math to assume that that effective rate is likely now 5% to 7% higher for the top 1% (depending on the weighting of the income). So, the 23% effective rate on the top 1% is now 28% to 30% which is dramatically higher than it was in 2012 and should generate substantial revenue as a result. Again, this doesn’t include state tax rates also being at all-time highs. The tax system is now even more progressive than it has been in decades.

Let’s assume I agree with your historical assessment that rates were too low for a period of time. Great, but now you have succeeded in raising the effective tax rates on the top 1% substantially over the past few years. Do you think it is possible that the same impartial observer you mention would conclude that maybe we should focus on the spending side now? A truly impartial observer would not require one side to completely compromise with the other side doing nothing.

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Peter January 20, 2016 at 6:27 am

Especially when the last two administrations have DOUBLED our spending. 2015 Federal spending was more than 2x 2000 spending.

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Steven H January 20, 2016 at 8:35 pm

Just to keep things in perspective …

In those 15 years from 2000 to 2015, the economy grew by 75%, despite the great recession, and population increased by 13.5% and inflation increased by 37.6%. Real per capita (adjusting for inflation and population) spending went up by just 34.9% in that time period, not 2X. And actually it went up that amount in just the 9 years from 2000 – 2009, and has declined since.

Real per capita federal government spending has actually declined about 4.9% in 5 years from 2010 to 2015, and it had declined another 3.9% from peak recession spending in 2009 to 2010, for a net decrease of 8.8% under Obama.

Avoiding the anomalous economies of 1981, 2000 and 2009-10, we can compare 10 year intervals in years ending in 5, just to get our bearings.

2005-2015 – real per capita spending increased 15.2% (increase of 26.3% occurring in years 2005-2009 with declines afterward)
1995-2005 – real per capita spending (RPCS) increased 19.6% (only 2.1% of which occurred in 1995-2000)
1985-1995 – RPCS increased 9.2% (actually a 10.3% increase from 1985 to 1992, with a decline in spending afterwards)
1975-1985 – RCPS increased 41% (13.9% just from 1981-1985, Reagan’s first 4 budget years)

The point of all these numbers is just to get some perspective. Saying the raw dollar spending doubled over 15 years can seem outrageous. While it’s a correct mathematical statement, it does not account for other factors.

Spending went up faster than GDP over those 15 years, which is a bit of a problem, but spending/GDP in 2000 was at a low of 17.4% GDP, a low rate not previously seen since 1974. So it’s a bit of a red herring as a reference baseline. Spending in 2015 was 20.5% of GDP, which is less than the average spending in either of Reagan’s 2 terms or of George HW Bush’s 1 term.

Spending did decline to less than or equal to 20% from 1994 to 2007. Unfortunately, tax cuts in the 2000’s cut revenue from a healthy 19.7% of GDP in 2000 to a 45 year low of 15.3% of GDP in 2004 (not seen since 1959), which then dropped even lower to 14.5% GDP in 2010 from the recession.

Sorry, for going on and on. These numbers fascinate me and I keep thinking of new things to look up. The bottom line is that today’s spending is not so extreme. It has gone up about 15% over the last 10 years in RPCS (considerably less than 2 of the 3 previous 10 year periods since 1975) and is now at 20.5% GDP, which is less than the averages in the 80’s or early 90’s.

In fact, after years of RESTRAINING RPCS growth, it is probably time to increase spending again. Our infrastructure is in need of repair, our education system needs revamping, and military budgets are under pressure from continuing world conflicts. We need to invest wisely now so that our economy has the necessary ingredients to grow again. Because that is what will really save the economy.

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Steven H January 20, 2016 at 8:39 pm

Bad ending statement. The economy growing will save the economy? I meant that the economy growing will save the COUNTRY. Sorry ’bout that.

Peter January 20, 2016 at 8:45 pm

But until you get serious about reducing spending – or at least entertain it – there is nothing more to discuss with you really. We have already accommodated your request which is to raise taxes significantly on a small portion of the population. What you want has already been done. Like Cole says, now we must address the other side of the balance sheet rather than just spend the extra revenue to win votes.

Steven H January 21, 2016 at 11:44 am

You think taxes have gone up enough and that we need spending cuts/restraints. I think taxes of only gone up part way to where they need to be and that real per capita spending has already been cut and restrained for years. I think we need more govt investment now, not less.

But lets say that the penny pinching majority in congress has missed some low hanging fruit that can actually be cut without hurting the middle class, or damaging our infrastructure. What would thatbe? I think single payer healthcare would be a costsaver. It is for Canada.

Part of the problem is that you think programs like social security are a failure while I think SS is a resounding success.

Steven H January 21, 2016 at 7:17 pm

So where could you save several hundred billion from the budget?

Peter N January 21, 2016 at 8:14 pm

” I think we need more govt investment now, not less.”
????
If you want a good example of gov investment look at China and the mess they are in. Too much of their investment goes into things that don’t have any return on investment.

Steven H you just don’t get it. Investment is not the key word. Investing profitably is where its at but that isn’t the governments priority.
The US gov should stick to spending on those things mandated by the US Constitution and leave all else to the states as specified by the 10th admendment.

Notice, Walmart raised wages and now will close many stores.

Cole January 21, 2016 at 9:07 pm

Steven H has become my part of my weekly entertainment. Last year in one of his posts he described himself as “proudly liberal; fiscally middle of road (advocating responsible balance of government revenue and spending)”. Wow if that’s true, it would be scary if he were fiscally liberal – I guess it would be flat out socialism? Funny stuff.

Peter January 21, 2016 at 10:13 pm

Haha – I have learned to view it the same way as well. As entertainment. Same way I look at Glenn Beck or Hannity, just on the other side. Infotainment if you will. Much easier to deal with from that perspective and a lot less frustrating.

James January 22, 2016 at 6:26 am

Very true Peter N. The government “invests” in things for political gain not for return on investment. Don’t see that changing any time soon…. No matter how high you raise taxes, the government will just spend more. Never a popular platform to run on to spend less because of the reply Steven H said….someone will always say “how can you cut XXX?” “Don’t you care about XXX?” So stupid.

If we stay with 14 aircraft carriers (nobody else has more than 2) and don’t fund building of 2 more, we aren’t “weakening our defense” and “opening ourselves up to attack”. But that’s how it will be sold. Just as an example.

Peter N January 22, 2016 at 8:27 pm

Steven H must be a Bernie Sanders support. A socialist. Socialist don’t know how to do things profitably either.

“The problem with socialism is that you eventually run out of other people’s money.”
? Margaret Thatcher

Steven H January 21, 2016 at 7:10 pm

News of Interest:
CBO Report quoted below; Summary points I find interesting:
– Military spending increase is first increase in 5 years
– Discretionary non-defense increase is about 4%
– First increase in year to year deficit since 2009
– Debt will increase (spending increases > revenue increases)
– Revenue will increase from increased tax rates, bracket creep, and economic growth
– Corporations got a tax break from extensions of expired tax provisions (!!!)
– If current law stays constant, spending will rise from 21.3% GDP in 2016 to 23% GDP in 2026. Not catastrophic, but probably requires some attention; either tax increases to pay the bills, or a plan to trim some budget items.

From the CBO – Jan 19, 2016
##The Budget Deficit for 2016 Will Increase After Six Years of Decline##
The 2016 deficit will be $544 billion, CBO estimates, $105 billion more than the deficit recorded last year. At 2.9 percent of gross domestic product (GDP), the expected shortfall for 2016 will mark the first time that the deficit has risen in relation to the size of the economy since peaking at 9.8 percent in 2009. About $43 billion of this year’s increase in the deficit results from a shift in the timing of some payments that
the government would ordinarily have made in fiscal year 2017, but that will instead be made in fiscal year 2016, because October 1, 2016—the first day of fiscal year 2017—falls on a weekend. If not for that shift, the projected deficit in 2016 would be $500 billion, or 2.7 percent of GDP.

Federal outlays are projected to rise by 6 percent this year—to $3.9 trillion, or 21.2 percent of GDP.

Discretionary outlays are projected to be $32 billion higher in 2016 than they were last year. That upturn results largely from the Bipartisan Budget Act of 2015 (Public Law 114-74), which increased statutory limits on discretionary funding, and from the resulting appropria- tions for 2016, which were equal to those limits. According to CBO’s estimates, discretionary outlays for national defense—in their first increase in five years—will edge up slightly this year, and nondefense discretionary outlays will climb by 4 percent.

CBO expects federal revenues to rise by 4 percent in 2016—to $3.4 trillion, or 18.3 percent of GDP. That overall increase results from growth in some sources of revenues and declines in others. Revenues from individ- ual income taxes are projected to rise by 5 percent—more than the percentage increase in nominal GDP—because people’s nominal income will increase and also because their income will rise more than will the tax brackets, which are indexed only to inflation. That phenomenon, real bracket creep, occurs in most years when the econ- omy expands. Economic growth also will contribute to a rise of 3 percent in payroll taxes, CBO estimates. In contrast, corporate income taxes are projected to dip
by 5 percent, largely because of recent legislation (the Consolidated Appropriations Act, 2016, P.L. 114-113) that extended several expired tax provisions retroactively to the beginning of calendar year 2015. Revenues from other sources are estimated to increase, on net, by
9 percent, primarily because of recent legislation (the Fixing America’s Surface Transportation Act, also called the FAST Act, P.L. 114-94) that increases remittances to the Treasury from the Federal Reserve.

In CBO’s projections, federal outlays remain near 21 per- cent of GDP for the next few years—higher than their average of 20.2 percent over the past 50 years. Later in the coming decade, if current laws generally remained the same, growth in outlays would outstrip growth in the economy, and outlays would rise to 23 percent of GDP by 2026. That increase reflects significant growth in man- datory spending and interest payments, offset somewhat by a decline (in relation to the size of the economy) in discretionary spending.

Full report here
https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51129-2016_Outlook_Summary.pdf

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Dave January 29, 2016 at 8:49 pm

The issue is that in SF Bay Area California we need dual income households making $450k (225k ea) just to afford to live and take care of our kids. Now if you include the 13% Ca state income tax rate plus this 40% Fed rate, we are now paying 53% in income taxes. This does not include the 9% sales tax or 1.25% property taxes. So any money that is spent is taxed at 62%. This has to stop. It’s unbelievable and causes companies to struggle to keep up with the demand of salary increases to cover cost of living.

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Peter January 30, 2016 at 8:24 am

True. Also add in the Mello-Roos tax if you are in a new development. I really don’t think the complainers realize all the taxes that the 1% pay and how they add up.

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Steven H February 2, 2016 at 7:53 pm

You are both pointing out the extreme cases. Yes, California taxes are higher than other states, both for the 1% and for the 99%. I don’t understand how any normal wage earner can or wants to live there.

And yes, there are inequities within the upper 1%, with wage earners paying much higher tax rates than investors. So why do the wage earners still defend the low taxes of the investors? If the federal income tax on rich wage earners is 35% to 39%, but the AVERAGE rate for the upper 1% is 20%, then why not beat up on the low rate paying investors and hedge fund managers rather than trying to cut Medicare and kick people off Obamacare? Half of the income of the upper 1% is in the upper 0.1% and half of that income is in the upper 0.01% (approximately). So if effective federal income tax rates averaged 30% for the 99 to 99.9% group, 35% for the 99.9 to 99.99% group, and 45% for the upper 0.01%, most of the rich posters here would have tax rates going DOWN to 30%, and the effective rate for the upper 1% overall would go UP from 20% to about 35%. Any objections? Your tax rates go down and the freeloaders paying less than you pay a more equitable share. What’s wrong with that?

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Peter February 3, 2016 at 7:51 am

I have said at least a dozen times that your vitriol should be directed at the .001% – but you continue to attack the 1% – most of which is made up of successful people who have worked their way up from the bottom and are now getting crushed by high tax rates.

Problem is your rhetoric has to include the entire 1% – there isn’t enough money in raising taxes on a few thousand people to pay for all the government’s spending – and it will never happen anyway as those are the people that pay for elections and rig the game.

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Steven H February 4, 2016 at 10:23 pm

Peter, clearly the 0.001% is a bit smaller population than is useful. And, despite my colorful language (included for emphasis and not emotion) about freeloaders, vitriol is not the point.

I have tried to be clear that discussions about the 1% are generalizations and are a convenient statistical divide. The upper 1% have more than doubled their share of all income. That does not mean every individual in the upper 1% has doubled their share of all income. Also, as pointed out in recent discussions, some people have incomes of $500K entirely in wages, and others have $500K income entirely from investments or carried interest. Their tax burdens are completely different. And as the incomes increase the PROBABILITY of it being dominated by investment incomes increases as well. But it differs from individual to individual.

Generalizations help us under the problem, but they should not be used to suggest every individual is equally represented in the larger group.

What I am suggesting is that it is economically possible, if politically difficult (of course), to raise taxes on three tiers of the upper 1%, such that wage based tax rates on high incomes could actually go down, but added revenue to pay down debt would still be obtained. I just showed how you could increase effective tax rates on upper 1%, primarily by increasing rates on capital gains that do affect investors in the lower tier of the 1%, but mostly impact people in upper 0.1%. If this increased the AVERAGE effective tax rate of the upper 1% by 10 to 15% (again, not all individuals see an increase), then we raise a significant amount of revenue. Total Personal is approximately $15 T. Upper 1% has 20% to 25% of all income. Let’s split the difference and say about $3.4 T going to the 1%. 10% to 15% of this is $340B to about $500B more to the government. That just about equals the projected deficit for FY 2016.It would certainly bring the deficit smaller than GDP growth, thus lowering Debt/GDP and putting us back on path to economic sanity.

So what I suggested does NOT add crushing taxes to rich wage earners who have worked their way up, but it does pay down the deficit by taxing the wealthiest and most able to pay.

Again, this is still a broadly expressed plan, with many details unexplained and lots of political difficulties. As you point out, increasing taxes on those who pay for elections and rig the game is a difficult exercise. But then again, Democracy is always a difficult game. But it is one where the people are given political and legal tools, and are expected to use them to exercise control over small powerful groups who seek to gain unfair advantage.

I don’t expect you to like my plan or advocate for it. What I reasonably desire is for you to at least acknowledge the economic feasibility of increasing taxes on the upper 1% in such a way that we can pay off most of the deficit. And without putting the effective federal income tax rate over 45% on any group.

James February 4, 2016 at 10:08 am

Because not everyone makes every life decision based on taxes. Job opportunities – great weather – progressive thinking…..

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Cole February 5, 2016 at 3:52 pm

Steven H: I’m not so sure that these are extreme cases as there is a higher concentration of folks in the top 1% in California and NY dealing with these issues. Nonetheless, you admit that there are inequities within the 1% so no need to go into that any deeper (at least not yet).

Where it’s clear that people are getting upset with you is that they do not feel you are willing to listen to any view but your own and will not even fractionally consider moving off of your position. Let’s test it.

Big picture, you have argued that the government should spend more and raise taxes to do so. Assume that I agree with you that we should raise the highest marginal LT cap gains rate and qualified dividends rate by basically recharacterizing this income as ordinary income and taxing it at the highest rate. Then assume that I agree with you that we should close stupid loopholes like carried interest. Further assume that it is acceptable to raise highest marginal tax rates on ordinary income for the top earners – say for all income over $2-5mil and then even higher when you get into the really big numbers. This would be a sizable revenue boost as marginal tax rates for the top 1% would now be dramatically increased (and no longer skewed by those at the very top of the 1% category). Is that enough? If not, are you suggesting that we should continue to spend and simply raise the tax rates on higher earners until there is enough revenue to cover expenditures? Or, are you willing modify your position slightly to say that the above would be enough of a tax increase, any more would be unfair, and we should then reduce spending to make the math work? I’m absolutely willing to compromise and think many others are, too. But, if you aren’t willing to move off of your position at all, then there isn’t much to talk about because you can’t argue with someone who isn’t willing to take a holistic approach to problem solving. This is the problem with our country, far left and far right draw a line in the sand with extreme views (even though neither thinks their views are extreme) and won’t budge an inch.

I hope you will address the questions as laid out, but expect you might reword some of this in making your counter argument. If so, please at least answer the simple question: Should we simply just continue taxing higher earners to pay for all government spending, with no caps on how high you would have those taxes go?

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Steven H February 2, 2016 at 8:59 pm

Regarding the shameless post-baiting just up about 5 posts on Jan 21-22 from PeterN, Peter, James, and even new poster Cole. Don’t you have anything substantial to post? Do you miss me so much that you are trying to bait me with insults to come back and say something?

Posting insults against me does not advance this thread in the least. I am not your straw man. Perhaps some of you miss the more congenial language of JTM, Man-Of-Reason, Aspiekid, Normal Joe and some of the other posters who gave up on talking to you guys. So do I. But you all seem to forget that they posted pretty much the same perspective and arguments that I continue to push. Let me remind you:

“There needs to be balance, and sorry, if you take a longer view than the past decade, your taxes have NOT raised. We have simply moved from a point of historically low tax rates to back to where they were previously.” – JTM

“With the weakening of unions, fewer workers have a voice into fair compensation and owners of companies or stockholders and company executives can and do take a bigger piece of the pie for themselves. Because of my situation, I must work harder and longer hours than my boss in order to make ends meet and save for the kids’ college expenses coming up. Although this isn’t a union shop, nor is my occupation a union position, higher union wages lifted all boats to compete, even mine.” – Aspiekid

“Why do some people dislike wealthy? Because some wealthy people belittle everyone else and call them lazy or stupid often while making their living off the backs of their labor or selling products to them. They don’t treat them as a human being. ” – JTM

“A couple of points that deserve thought. At the heart of your presumption that you have all the rights to whatever you earn is the implication that wealth is infinite. On any given day wealth on one level, and income on the other is finite. By definition, if one is to receive more, another must receive less. If you receive more, someone, somewhere is either losing or being prevented from maintaining their ability to grow proportionately. This is the foundation of the current debate regarding income distribution.” – Normal Joe

“And I’m tired of people saying others don’t deserve a livable wage because they didn’t go to college or tech school or something like that. Not all jobs require any of the sort, yet they are required for our society to run well for the rest of us. These jobs should pay a reasonable wage. Many of these people work very hard, harder than many with an education, they have to. Who will do these jobs once everyone is educated?” – JTM

“Humans are the most intelligent species on the planet. So naturally one would think we should have a more intelligent way of thinking. Instead of behaving like the rest of the animal kingdom with the attitude of “everyone for themselves”. There is enough wealth and resources in the world for every single person to be living above middle class conditions. Do people work hard for their millions? Sure some do, and that would be fine if no one else in the world was struggling to survive. We are all human, we are all evolved, we all need a new way of thinking. ” – Austin S

“I believe the point being made is that we are losing the middle rungs of the ladder. Many believe (myself included) without a healthy, robust middle class, we all lose economically and it makes it harder to make it to the upper classes. The wealthy are generally better off with a healthy middle class. We cannot all be educated to PhD level and then have that worth anything, and the jobs below will still remain, they need to be done even if by a PhD. Unless you want to move back to where we have a ruling class and surfs (no substantial middle class), people need to be paid a reasonable wage no matter the job.” – JTM

“The problem is the accelerating income disparities as measured by incomes of the top earners compared to the middle class. No one cares if incomes double at the top so long as the average wage earner shares in the credit for increased productivity by having his income double also. But when per capita productivity in this country doubles and the top 10% triple their incomes while the other 90% take a 6% decrease, something’s very very wrong.” – Man-of-Reason

“You could also take the view that you are fortunate because taxes have decreased to the point where you are livid over the current rates. We still have historically low rates. When will you feel taxes have been cut enough for you? When does that stop?” – JTM

“In 1811, two years after Jefferson left the Presidency, Jefferson wrote a letter to General Thaddeus Kosciuszko, a hero of the American Revolution. Jefferson said that he supported taxes (then tariffs, since there was no income tax yet) falling entirely on the wealthy. As Jefferson explained: “The farmer will see his government supported, his children educated, and the face of this country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.”” – Man-of-Reason

“I was pointing to the posts on here by those who claim to be wealthy. Many of them, in one way or another, claim the poor should just get educated and get a better job. Sounds simple, yes, but reality is there are other things holding them back also. It’s not simple stupidity or laziness. They [the rich] use this as a reason that they [the poor] don’t deserve reasonable pay, though they are performing a job the rest of us count on and many of us wouldn’t do. When the comments from the wealthy on here show a different attitude, I’ll change my opinion. Outside of here, I know many wealthy are very generous individuals and try to help the less fortunate and pay good wages for menial jobs. There are also many who feel otherwise and are quite vocal about it.” – JTM

“Whether reducing the budget or taxing more, it really all about reducing the deficits and national debt. It’s about who pays too and that’s what you’ve been dancing around in this debate. You don’t want to pay. You want someone else to pay.
Reduce SS and Medicare and the elderly pay more. Reduce unemployment insurance and food stamps and those recently laid off pay. Reduce Medicaid, SSI and welfare and the very poor and disabled pay. Reduce the FAA, CDC, FDA, etc., and we all suffer. Reduce aid to education, student loans, Head Start and America’s future in a global economy fails. So don’t give me some simple minded solution of, “just cut spending”. Tell me where, who will pay, and why that’s more fair than asking those most able (You?) and for whom the past thirty five years of tax cuts became the bonanza that increased their wealth many times more than the rest of Americans.” – Man-of-Reason

So when railing against Steven H as the guy who is unreasonable, the guy who doesn’t get it, the guy who is only good for entertainment, the guy who doesn’t understand how the economy works, just remember that I am representative of precisely the same arguments of the fine posters many of you claim to be missing from previous pages. But I am the guy still here and ready to engage you in honest discussion, if you can get off your high horses of feigned superiority and back-slapping insults and actually have a discussion.

Rant over.

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Peter February 3, 2016 at 8:00 am

This is excellent. For the most part, these are fairly thought out points that illicit productive discussion. Only JTM occasionally shares your crass single-minded approach that either shuts down the dialogue or makes us all laugh at you. (And that is only occasional from JTM) The rest of the posters you quoted were intelligent, informed and interesting and productive to talk with – even if they have a different perspective.

However, much like the political debate at large in our media and on our debate stages, the loudest most ridiculous (and often the least informed) voice wins the day. So we are indeed left with you as you drowned out the thoughtful opinions of the other posters and turned the dialogue into the same partisan crap that dominates talk radio.

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Peter February 3, 2016 at 8:11 am

If I were you I would read those quotes over again. And maybe even go back (like you evidently did) and see that the difference between you and them is that you completely lack respect for conservatives, the wealthy, or any differing opinion.

I had a great discussion going with MOR years ago where I thought we were both trying to understand the opposite point of view. It was very enlightening to me personally and helped me see things from a different perspective. We even worked through some solutions (along with Ken and many others) to find a realistic, common ground solution.

You will never find what you are looking for until you open your mind to the perspectives of others – and give them the respect that they might be “right” and that you might be “wrong”. You don’t have it all figured out – and even the most obvious errors you have made in your argument that have been called out you have not listened to. People’s personal experiences (the insurance industry, Wall Street, taxes the 1% pay, small business owner experiences) are debunked because you read an article that says differently.

You are not alone – this is the kind of groupthink that dominates the internet. Like Bill Maher said on his show this week, the internet started as ‘the world of information at our fingertips’ and has devolved into a ‘web of lies’. There is almost no worldview you can subscribe to that you can’t find an avalanche of supporters and supporting evidence online. The growth of ISIS is a great example of the power of this. Donald Trump, Ted Cruz, Bernie Sanders…. more examples of this.

Thinking for oneself and listening to other people’s experiences with an open mind is the only way we truly become more educated and informed. Personally, I feel like I have become more informed due to this comment thread. In my opinion, you have contributed very little to this, unfortunately – other than stifling the discussion and representing the dogmatic extremist view that frustrates me the most.

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Steven H February 5, 2016 at 12:08 am

Peter, I have been rereading these quotes, and they are quite good. I miss these guys. Perhaps I have not been as polite here somehow, but I also am baffled at times as to how my posts are interpreted or reacted to.

Maybe I am too willing to add the provocative phrase, but should use of the phrase “bonus income” really derail an entire conversation? Of course there are also words that irritate me. Like “Zero-Sum-Game”. Or “groupthink”. But I do try to address the issues behind these words directly and not let them distract too far from the point at hand.

But, honestly, if I were to grab a few random posts of my own, how do they differ from the other posters in terms of respect or adding to the discussion?

E.G.:
>>>>
Peter =======
You also don’t believe that the middle class’ perceived struggle is due to automation, a changing economy, their own lack of skills or work ethic.
===========
[Steven H] In order: Yes, yes [I actually DO believe], no, and no [you are correct I don’t believe]. The no’s are because the MIDDLE class clearly does NOT lack skills or work ethic. The yes to automation and changing economy simply acknowledges that the economy is changing, as it has every decade in this country’s history. The difference in the last 35 years (which so closely echoes the gilded age in latter 19th and early 20th century) is not that the economy is changing, but that we are allowing the wealthy to benefit disproportionately from these changes, largely through new rules established of, by, and for the wealthy.

We are a nation for a reason. We vote for a reason. We band together for a reason. We create this country’s infrastructure, policies, communities, families, schools, banks , governments for a reason. And that reason is to establish a more perfect union, not to let a small percentage of the folks run roughshod over everyone else, using the nation’s resources for their own extraordinary gain.
<<<>>>
Peter =====
The job market, suppressed wages, etc. comes back to my point all along with the lost manufacturing and unskilled labor jobs in our economy due to the information age. The unskilled shouldn’t be “compensated” for this.
=========
I understand what you are saying, but wages are going lower on both skilled and unskilled jobs. The availability of cheap labor overseas drives part of this, as does automation. But another large part of it is the OTHER disparity: negotiating power. Cost of flight training to be an airline pilot is $100K but entry salary is about $20K. Students are paying out the nose for college education, but unemployment of college grads is high, and there are more college grads than ever before to BE unemployed. Amazon forces even seasonal factory workers to sign non-compete agreements limiting there job hiring opportunities for 18 months after the seasonal work. Skilled people are suffering low wages along with unskilled, and companies invoke unreasonable burdens on workers, because the large airlines, banks, stores and other companies have negotiating power mostly unfettered by govt or union limitations.

Companies and their high paid management teams are getting rich off of conditions that simultaneously enable them to lord their power and control over the rest of the country.

Why should the richest and most powerful be compensated highly for the advantages that globalization and automation provide, but the rest of the country is not allowed to benefit from those same advancements, and indeed, is made to suffer because of them?
<<<>>>
Ken, your argument assumes that the reward of capital is a fair return for the risk … or if you don’t like the word “fair” then substitute “sustainable”. I think you can agree that there CAN exist conditions where entrepreneurial risk exceeds the potential reward and thus business growth is slowed. This could happen from market conditions, but also from over-taxation or over-regulation. If you agree, then you must also agree that the converse condition CAN exist: where reward exceeds risk and businesses and business income grow quickly. You may see no downside to this latter condition, but it has a cost: it cannot be sustained indefinitely and the extra reward comes from someplace, and and that someplace is getting depleted.

So are we in a stable economy with balanced risk/reward of capital, or one where risk is under-rewarded, or over-rewarded? How do you think that can be determined?
<<<<>>>>
I see what you are saying here. I agree that there are short term imbalances that even out. But the “long term equilibrium” you describe is accomplished with the relatively long-term rules of the system. In other words, the economy is series of chemical reactions contained within a bottle. Equilibrium of sorts is reached within the constraints of the bottle. But what if the size and shape of the bottle itself is forcing an imbalance that causes the system to fail?

The “equilibrium” we are reaching under the current rules of the system is unsatisfactory to most people. This “equilibrium” pushes money out of the middle class and into the upper management, corporate, and financial sectors. Much of what I hear as arguments defending the status quo seems to be mechanical descriptions of how equilibrium is maintained within this bottle. I understand risk/reward processes, capitalism, and free markets. What I am suggesting is that the bottle itself has been reshaped, and it is making most people less prosperous and a few people very prosperous. What I am proposing is that the bottle be reshaped again to make this country and economy more rewarding for more people.

If actions are found and taken that reshape the bottle to restore prosperity to the middle class, then the whole country will benefit.

So when I say that risk-reward is imbalanced and you say it reaches equilibrium, we are speaking truths from differing perspectives. We have equilibrium within current rules. But I would say the current rules are unsustainable, because they put the majority of Americans at great disadvantage. And in a democracy, the majority eventually gets its way.
<<<<>>>>
But I think that an impartial observer looking at the status of our economy, and the distribution of wealth and income within our population over time would come to the conclusion that the wealthiest in this country have been getting a really sweet deal, and have been prospering not only from their own efforts but partly or even mostly at the expense of efforts of the rest of the population. For most of the country in the last several decades, wages stagnated or declined, education and medical costs increased, medical care availability was declining (pre-ACA), and there have been increasing cycles of banking and economic malfeasance costing the public billions if not trillions, and there has been a small population coming out on top.

You may not see it that way, but many do.
<<<<<

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Steven H February 5, 2016 at 12:45 am

“… even the most obvious errors you have made in your argument that have been called out you have not listened to … ”

I understand how this is frustrating. If you are able to list three (or more if you like) examples of such “obvious errors” that I have ignored, I would be happy to address them.

Please allow me to list some “obvious errors” from others that have never been addressed. These are not necessarily from you Peter, and I don’t expect you to address errors of others. I am simply noting that the blame for such behavior can be widespread.

James: Claimed that [People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing. That does not “favor the rich”.]
Obvious Error: It’s pretty hard to pay MORE than 40% of income in Federal Income Tax when top marginal rate is 39.6%. Rather than admit this minor technical error, James just shifted the argument and changed his assertion.

Various Posters, including Peter N, James and yourself, Peter, asserted that GDP was not a relevant statistic when considering discussions of Deficits or National Debt. This seems counter to pretty much every economic analysis I can find, and yet none of you sought to defend your position, instead resorting to ridiculing me.

Similarly, I pointed out that you can reduce Debt/GDP by retaining a deficit that is less than GDP growth, and I posted economic articles defending this stance. This assertion was openly ridiculed and the articles ignored. I can understand if people have a different preference in how to pay down national debt, but it is just wrong to deny an economic and mathematical fact of how it CAN be reduced.

There has been a lot of discussion about how markets are effective at assigning wages, but when you (Peter) complained that it was difficult to get new workers into your job market, you blamed the short-sightedness of the workforce in not seeing the career opportunity, and you were angrily offended when I suggested the starting wages should be higher. You claimed I was trying to explain your business to you. This was baffling to me. Isn’t that what the market assigning wages means, that a labor shortage should invoke a higher wage?

Ken tried to tell me that Medicare insurance costs should be evaluated like private insurance costs, on a per policy basis. When I pointed out that Medicare insures people over 65, and private insurance generally covers people under 65, and that his method gives an unbalanced advantage in lower cost to private insurance in a policy to policy comparison, he never answered. I was accused of not deferring to the expert. I respected the expert but he never answered my good question.

And as for the Founders’ quotes issue, it was Ken who first highly praised the wisdom of the Founders and then when I gave Founder’s quotes he did not like, he posted a bunch that he did like. Except that more than half of his were mis-attributed (originally spoken by relatively unknown people long after Founders’ time) or irrelevant. I posted the rebuke in good humor. But rather than accept the fact that he had erred, he left and never came back.

So what are those obvious errors of mine that I ignored?
I would like to address them.

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James February 5, 2016 at 5:49 am

James: Claimed that [People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing. That does not “favor the rich”.]
Obvious Error: It’s pretty hard to pay MORE than 40% of income in Federal Income Tax when top marginal rate is 39.6%. Rather than admit this minor technical error, James just shifted the argument and changed his assertion.

The top bracket is not 39.6 by the way. There are several federal surtaxes on top of this which can take the bracket even higher. The 3.8% Obamacare tax for example.

Steven H February 5, 2016 at 6:55 am

Ok but the 3.8% obamacare tax just brings capital gains tax from 20 to 23.8 %. If this is a significant tax to a taxpayer it is because of capital gains which bring net effective rates lower than 39.6%, not higher than 40%. I just want you to acknowledge that almost nobody making over a million dollars pays over 40% in federal income tax and that it is difficult to even envision how that can occur with today’s rates and a typical tax avoidance strategy.

It’a small technical admission and does negate your broader arguments which I already acknowledged and discussed above.

It seems important to me to acknowledge our own errors and mistakes as a matter of respect to other posters and to keep the facts straight. If we cannot come to agreement on small technical points of fact, we wi ll neber get anywhere on btoader fiscussions of opinion and philosophy.

James February 5, 2016 at 9:12 am

Wrong yet again. The 3.8% tax adds to all income for those in the 1%. Again you don’t know what you are talking about.

Steven H February 5, 2016 at 10:31 am

Oops. “Does negate” should have read “does not negate”. Sorry about the missing word.

Steven H February 5, 2016 at 11:15 am

James, my understanding is that this investment tax applies to the lesser of net investment income and (modified agi minus a threshold). If you assume cap gain income is 20% tax rate and it is the lesser of the two values, then the cap gain rate is effectively 23.8%. If the other value is the lesser, you may pay a highet marginal rate above 40% on that portion, but that portion is less than half, and the other half is taxed at 20% cap gain. In either case I don’t see how it matches your description.

If you have more insight I am happy to listen. Or I will defer to Peter, who certainly will have more knowledge on this tax.

Cole February 5, 2016 at 2:53 pm

I know I posted a more comprehensive summary previously, but here is a condensed version of highest marginal federal tax rates:
1. Ordinary income (wages, taxable interest, non-qualified dividends, short term cap gains, etc.): 39.6%
2. Long term cap gains and qualified dividends: 23.8% (which includes the Obamacare 3.8%)
3. Medicare 2.35% (which includes Obama’s increase of 0.9% on 1% folks).
4. Social Security 6.2 on the first $118,500 of wages (for W2 salaried employees).

Ignoring self employed individuals, then the only way an individual could pay more than a 40% effective federal rate:

1. You would have to include #1, #3, and #4 above.
2. The person could have very little or no deductions (state taxes, real estate taxes, mortgage interest, charity, etc.).
3. Ordinary income would have to be enormous (haven’t modeled this out, but probably over $20mil).

It’s unrealistic to expect that there are many people who meet the above criteria, but there might be a couple of CEOs or other C-Suite execs in states with no income tax who might get there in a year when they blow out significant non-qualified stock options.

Anyone with sizable LT cap gains and/or qualified dividends clearly wouldn’t pay over 40% as the highest rate is 23.8% on that income.

Self employed folks get hit worse. Without getting into too much detail, they get hit a few percentage points higher.

This isn’t meant to argue that rates should be higher. I just want to make sure everyone here is on the same page so they don’t have to waste time arguing about factual matters.

Steven H February 5, 2016 at 4:16 pm

Thanks Cole. There is a specific question about the 3.8% income tax, though. James claims in applies to all income, and can drive effective tax rates over 40%. I understand from my limited research that it will only affect investment income (raising cap gain from 20 to 23.8%), or it may instead apply to a smaller amount if investment income is greater than AGI minus a threshold. Do you have info to resolve this?

Cole February 5, 2016 at 4:39 pm

The 3.8% is only applied to investment income and will not drive effective rates over 40%.

Steven H February 5, 2016 at 8:50 pm

Cole,
Thanks very much for the detailed replies, and the concise answer for James’ question as well. It helps to get a clear answer from an expert. James doesn’t believe anything I say, so I think he will find the data more credible coming from you.

So James, are you willing to concede on this point? It seems that it is not generally true and would in fact be very rarely, if ever, true that any million plus earners would have an effective Federal Income Tax rate over 40%. Especially for anyone earning under 10 Million or so in wages.

And it does seem my understanding of the 3.8% “Obamacare” tax was about right after all.

James, I’m not meaning to gloat, but after all of your repeated accusations that I don’t know what I’m talking about, you do make me worry sometimes whether I have got things right. It’s just good to know I had a proper understanding of these aspects of the data. Please be more careful when telling people how wrong they are.

Steven H February 5, 2016 at 6:44 am

Part of the point of my last two replies is that I completely agree with your assertion that we need to listen to other arguments, make reasonable attempts to answer objectively to the factual points raised by others, with more factual points to advance the conversation, and to avoid distracting controversy arising from needless insult or already discredited arguments.

Look at my posts just on this page from around December 10 to 30. Can you see how I pursued this approach? James and Peter N repeatedly tried to bait me with insults and obstinance and I consistently responded with polite replies bringing up points to discuss. A few nice threads resulted. But the conversation still ends up with you guys just wasting post space on insulting me as “just entertainment”. Who is being disrespectful here? If you want me to live up to yout stated conversational goals, it would help if you chastise others for their offenses and not just me.

And to be perfectly clear, my post about the points that have not been addressed, both mine and others, is completely in earnest. The refusal some on on this forum to answer my concerns and arguments is abig irritation, and my desire to fully respond to any such offenses on my part is sincere.

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James February 5, 2016 at 9:16 am

The problem is that you don’t respond with any sort of thought. You argue like a defense attorney – countering the prosecution with something that proves your “theory” rather than listening, absorbing and thinking for yourself. You are so worried that your worldview be proven TRUE that you are pointless to talk to (albeit quite fun to have around as others have said).

Since you are such a big fan of going back through the old threads, go back and find instances where you fundamentally changed your opinion or conceded a point to Peter, Ken, Peter N or anyone else you have been opposed to.

James February 5, 2016 at 9:18 am

Never mind…don’t do that. You have already filled this page with enough rehashed stuff. Hopefully others will join and continue the discussion instead of rehashing the discussion that chased everyone away.

Steven H February 5, 2016 at 10:58 am

James, you are much more obstinate than I am. Pethaps you should look back to see if YOU have ever conceded anything. I contend that it is your brick wall attitude, and the similar attitude sometimes expressed by a few other posters that chases other posters away. Please listen to Peters advice and actually listen to the arguments posted and be willing to concede small points when appropriate. Your necessity to never admit any error and never see a different point of view and to rehash old discredited statistics (like using raw dollars in year to year economic comparisons) slows down everybody else and is a big distraction.

James February 5, 2016 at 11:25 am

I’m not defending myself here. For years I was a casual observer and I just miss Peter, Ken, Man of Reason, JTM and all the other people who made this one of the most read comment threads on the topic. I think you ruined it.

Steven H February 5, 2016 at 4:10 pm

You attribute too much impact to me. I hardly think JTM, Normal Joe, MOR, AspieKid and others left due to me. That would make no sense. I agreed with everything they said. Possibly they just ran out of new things to say as the same old arguments kept coming up. But you would have to ask them why they do not post.

Ken left after the Great Founders’ Quote Skirmish. I don’t know why he preferred leaving to just laughing about reposting quotes from a chain e-mail full of bad info. Maybe he doesn’t like losing arguments. I’d be happy to hear from him.

Cole February 5, 2016 at 4:37 pm

These comments are all over the place. I posted the below elsewhere, but the comment might work better here (sorry for the redundancy).

Steven H:
Big picture, you have argued that the government should spend more and raise taxes to do so. Assume that I agree with you that we should raise the highest marginal LT cap gains rate and qualified dividends rate by basically recharacterizing this income as ordinary income and taxing it at the highest rate. Then assume that I agree with you that we should close stupid loopholes like carried interest. Further assume that it is acceptable to raise highest marginal tax rates on ordinary income for the top earners – say for all income over $2-5mil and then even higher when you get into the really big numbers. This would be a sizable revenue boost as marginal tax rates for the top 1% would now be dramatically increased (and no longer skewed by those at the very top of the 1% category). Is that enough? If not, are you suggesting that we should continue to spend and simply raise the tax rates on higher earners until there is enough revenue to cover expenditures? Or, are you willing modify your position slightly to say that the above would be enough of a tax increase, any more would be unfair, and we should then reduce spending to make the math work? I’m absolutely willing to compromise and think many others are, too. But, if you aren’t willing to move off of your position at all, then there isn’t much to talk about because you can’t argue with someone who isn’t willing to take a holistic approach to problem solving. This is the problem with our country, far left and far right draw a line in the sand with extreme views (even though neither thinks their views are extreme) and won’t budge an inch.

I hope you will address the questions as laid out, but expect you might reword some of this in making your counter argument. If so, please at least answer the simple question: Should we simply just continue taxing higher earners to pay for all government spending, with no caps on how high you would have those taxes go?

If you can’t budge based on the above, then I would argue that James is 100% correct. Prove us wrong.

Steven H February 5, 2016 at 9:17 pm

Cole,

I’m sorry to respond late to this one. I don’t always see the replies as do they do end up all over. I’ll reply to this copy since it is farther down the page and more likely to be seen.

First, thanks for the clear post expressing the question.

Second, don’t put too much credibility into the accusations from some on this thread that I am unreasonable and the very representation of all things anti-capitalist. You seem willing enough to let me have my say, but you also sound swayed by those who toss around wild epithets.

Third, let me answer your final question directly and then expound further below:
[Should we simply just continue taxing higher earners to pay for all government spending, with no caps on how high you would have those taxes go?] Clearly, the answer is no. As I tell Peter elsewhere, and Henry below, I have no vitriol toward the rich and don’t care to nail them to the wall or crush them. There is a limit to how much people should be taxed. But taxation AND other labor policy can help to rebuild the middle class, which is the real goal.

Fourth, a little exposition: Yes I think adding tax rates at the 0.1% and 0.01% breakpoints might be about right, as well as taxing capital gains as ordinary income when it gets above some level. The details would certainly have to be worked out.

Investment is also important and there should remain sufficient incentives for investors to take the risks involved. As I worked out in another post, aiming for the effective (not marginal) Federal income tax rates of 45, 35, and 30% for the 3 major tiers of the upper 1% (on the upper 0.01%, the remainder of upper 0.1%, then the remainder of upper 1%), would be a good starting design. My thumbnail calculations show that this would just about zero out the deficit, and would help to more quickly pay down debt. Additional intermediate tiers might make sense within those levels, just to make the curve more regular.

James February 8, 2016 at 9:18 am

If so, please at least answer the simple question: Should we simply just continue taxing higher earners to pay for all government spending, with no caps on how high you would have those taxes go?

Steven H February 14, 2016 at 8:49 pm

Read the post James. I already answered the question directly.

James February 4, 2016 at 10:20 am

LOL – not sure how my reply to the other posters in the Jan 20-22 thread was shameless post-baiting. Whatever….

And in reference to this nonsense below:
James: “No matter how high you raise taxes, the government will just spend more.”
Steven H: Not really true. Wasn’t true from end of WW2 through Carter. Wasn’t true for Clinton. It was only really true for Reagan, Bush, and Bush 2. (Obama’s term doesn’t count)

From 1946 (the year after WW2 ended) to today, total federal spending increased from the prior year 90% of the time. The only ones where it didn’t were:
1947 – down 37.5%
1948 – down 13.7%
1954 – down 6.9%
1955 – down 3.4%
2010 – down 1.7%
2012 – down 1.8%
2013 – down 2.3%

SEVEN years out of 70.

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Steven H February 4, 2016 at 9:39 pm

James,

I am shocked, SHOCKED, I tell you that government spending increases year to year. Despite population increasing every year, inflation increasing every year, and the economy growing almost every year, I agree that we should be spending no more in total actual dollars than 1947.

Not.

Please stop using absurd arguments. You can be more clever than that. Every analysis of national economies looks at spending and debt relative to the size of the economy of that country. It’s not that different than home economics. When you are right out of high school or college, and single, you spend differently in your household than when you have 3 kids, a mortgage and 25 years at a successful job. You don’t sweat that household spending increased each year. You look at what you can afford.

Even if you have debts from a mortgage and car payments that are larger at age 50 than your entire salary was at age 20, it is nothing to worry about if you control debt relative to the size of your income.

Debt was paid down relative to the size of the economy under every administration Post WW2 until the Great Recession, except under three Presidents who thought cutting revenue was more important than paying bills. (Debt/GDP also went up under Ford, but some treat his economics as combined with Nixon, since his was less than a full term.) It is just not true that the governments under Truman, Eisenhower, Kennedy, Johnson, Nixon/Ford, Carter, or Bill Clinton, overspent relative to revenue when you properly evaluate relative to the size of the economy.

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James February 5, 2016 at 9:21 am

The numbers I posted are still true.

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Steven H February 5, 2016 at 10:41 am

But the numbers are almost meaningless. It may also be true that military spending in 2015 exceeded the dollar cost of US WW2 spending ovet the duration of the war. But quoting such statistics is not a useful evaluation of spending. It says more about inflation than anything.

The numbers and stats you quote do not advance your underlying arguments, nor express anything to be concerned about. They seem to be a distortion to overstate government spending. And, as such, they don’t really add meaningful data to this discussion, do they?

James February 5, 2016 at 11:23 am

Then the same is true of the revenue numbers. And you didn’t say Debt/GDP or some other qualifier – you refuted the comment “No matter how high you raise taxes, the government will just spend more”. That part is absolutely, 100% accurate and the numbers back it up.

Steven H February 5, 2016 at 9:36 pm

As for the statement, “no matter how high you raise taxes, government will just spend more”, I will concede that it is technically true that raw dollar US government spending goes up in most years.

Of course that is true whether you “raise taxes” or not. Definitions are tricky here. Revenue generally goes up each year, but most people only consider that taxes are “raised” if there is a new tax or a rate increase. Mere dollar revenue increases are not considered tax increases. Thus, “Tax increases” generally are understood to mean tax rate increases, not tax revenue increases.

There were no tax increases under GW Bush, but spending still went up. So your statement, which is as I said technically correct, gives us no insight as to the relation between taxes and spending or even an understanding of spending trends. So again, your statement is correct, but I do not find it useful.

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Steven H February 2, 2016 at 9:12 pm

James: “No matter how high you raise taxes, the government will just spend more.”
Not really true. Wasn’t true from end of WW2 through Carter. Wasn’t true for Clinton. It was only really true for Reagan, Bush, and Bush 2.
(Obama’s term doesn’t count; spending went up due to Great Recession, not to compensate for a previous tax increase.)
And for those 3, the more accurate phrase is:
“No matter how much you cut government spending, the Republicans will just give away all of the savings and then some to their wealthy constituents as tax cuts.”

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Steven H February 2, 2016 at 9:34 pm

Peter N: “Steven H you just don’t get it. Investment is not the key word. Investing profitably is where its at but that isn’t the governments priority.”

One problem is is that there are some in government that think protecting the incomes of the wealthy is more important than reasonable and profitable investment in the country. Putting money into roads and bridges would be a good investment.

“In total, one in nine of the nation’s bridges are rated as structurally deficient, while the average age of the nation’s 607,380 bridges is currently 42 years. The Federal Highway Administration (FHWA) estimates that to eliminate the nation’s bridge deficient backlog by 2028, we would need to invest $20.5 billion annually, while only $12.8 billion is being spent currently. ” http://www.infrastructurereportcard.org/bridges/

But the highway fund is being boosted through economic tricks rather than a straightforward and timely increase in gasoline tax.

And putting money into healthcare and Social Security that supports our population is also investment of the most important kind. US still ranks last in efficacy of healthcare among 11 countries studied in 2010 and 2014 by Commonwealth Fund (Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States), as well as least monetarily efficient. And the only one without Universal care, of course. So if we want to cut healthcare costs, we need to change our system to be more like other more efficient and effective countries and not go back to earlier US system which was as bad or worse.

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Henry February 5, 2016 at 10:04 am

Steven H – to accomplish your goal of nailing the 1% to the wall with taxes, all you have to do is jack up capital gains taxes. The 1% pays 75% of the capital gains taxes and even with Obama’s hike it is still only 23.8%. Just make that 40% or something – or tax it all as income – and you steal that money back from them and even the score. Then you can pay for more free things those that can’t afford it – like health care, education and maybe even get involved in more military conflicts that we can’t afford to fool with at the moment.

Seems like you are barking up the wrong tree with your focus on Federal income taxes. The 1% are already getting crushed there while half the country pays nothing. Just jack up cap gains taxes and eliminate the payroll tax and the bottom half get a completely free ride and the rich get killed. You could even weight it in different brackets so the really rich get crushed harder.

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Steven H February 5, 2016 at 10:47 am

1) I was already talking about cap gain taxes.
2) your language is too cynical and violent to accurately express my position. I am not about nailing to walls or crushing or getting free things. I am about paying down debt while rebuilding the middle class. And having the investors pay back some of the free things they have already been receiving.

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James February 5, 2016 at 11:30 am
Steven H February 7, 2016 at 8:59 am

Henry: “… to accomplish your goal of nailing the 1% to the wall with taxes, all you have to do is jack up capital gains taxes. The 1% pays 75% of the capital gains taxes and even with Obama’s hike it is still only 23.8%. Just make that 40% or something – or tax it all as income – and you steal that money back from them and even the score.”

Henry talks about stealing from the well-off and also uses violent and extreme language that misrepresents and exaggerates any of the views that I or previous more liberal and centrist posters have used.

This is the sort of hyperbole that destroys honest conversation. Cole has wisely pointed out that “the problem with our country, far left and far right draw a line in the sand with extreme views (even though neither thinks their views are extreme) and won’t budge an inch.” Peter has advocated to “open your mind to the perspectives of others – and give them the respect that they might be ‘right’ and that you might be ‘wrong’.” I agree that is the better approach, and we all need to avoid Henry’s example of attack language.

And of course, to address the small substatial content of Henry’s post, the 1% pays 75% of capital gains (if that is the correct number – I have not researched it) because they have most of the capital and receive most of the gains.

Come on, Henry. You can do better than this.

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Henry February 10, 2016 at 5:58 am

My apologies – just trying to help. Thought you wanted to significantly raise taxes on the wealthy. Cap gains is the easier path that is all.

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Steven H February 7, 2016 at 9:10 am

James: “I’m not defending myself here. For years I was a casual observer and I just miss Peter, Ken, Man of Reason, JTM and all the other people who made this one of the most read comment threads on the topic. I think you ruined it.”

I have used more rambunctious language in the past, but nothing like the brick wall mentality that you, and Henry have been using, and that Peter N often uses (though he has actually been calmer of late — Thank you Peter N.) And if you look at my more recent posts of the last months, especially on this page, I am not trying to rile people up as much as have a good conversation of the type you claim to long for.

So James, you SHOULD try to defend yourself. And if you cannot defend your behavior, change it. You seem clever enough to look up a short article about the 3.8% Obamacare tax before making blanket (and incorrect) statements of how your presumptions trump other people’s knowledge. You seem like you can make a coherent argument without inserting personal insults in each post. You can be the kind of poster you would like to read instead of being much worse than the poster you most like to criticize. You can do better. I’m sure of it.

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Steven H February 7, 2016 at 9:53 am

Okay that’s enough with conversation about the conversation. (Would that be a meta-conversation?) Back to the topics at hand.

Cole said earlier: “Let’s assume I agree with your historical assessment that rates were too low for a period of time. Great, but now you have succeeded in raising the effective tax rates on the top 1% substantially over the past few years. Do you think it is possible that the same impartial observer you mention would conclude that maybe we should focus on the spending side now? A truly impartial observer would not require one side to completely compromise with the other side doing nothing.”

Let me attempt an analogy. Ten men are climbing a sequence of ladders. They all start out carrying an even burden of supplies. At some point, one of the men leaves some of his supplies at the bottom of a ladder, and since the rest know the supplies are needed by all, they divide the extra burden among themselves. The lesser burdened man, then can climb ladders faster, and, seeing the strategic advantage he has found, continues to leave more and more of his burden for his fellows to carry. After the lesser-burdened man is several ladders ahead of his fellows, they complain about the disparity. They compel him to reluctantly take back a tenth of the burden he has, over time, abandoned, by having it lifted to his position by rope. OK, he says, but now that I have compromised, you must all climb back down one ladder so I can keep my lead.

This is an imperfect analogy, but I am trying to communicate the different perspective that many might have to your assertion and your question. Of course it is reasonable to compromise and to have a give and take in political plans. Of course, there will be no progress if everyone stands firm like east and west-bound Snitches (if you remember your Dr. Seuss). Of course, the process will take time, decades probably, to dig out of the hole we took decades to dig.

But realize, as we all try to climb our economic ladders, that many still see the net doubling of income shares to the 1%, and the simultaneous tax cuts disproportionately benefitting that group, and the resulting accumulation of the nation’s wealth going to a smaller and smaller population, as equivalent to the wealthy shedding their burdens for everyone else to carry. And now that tax rates have been restored to something closer to, but still less than, rates from the pre-1980 decades, but with no progress on labor unions or labor or trade policy or education costs or the other policy changes required to actually help Americans lessen their burdens and climb the ladder, it seems disingenuous to expect most Americans to trade equally, burden for burden with the 1%. We have run high deficits for decades, primarily benefitting the 1%. We have let the wages of the middle class stagnate or decline, increasing the burdens on poverty programs we all have to pay for. The investors within the 1% may have to increase tax burdens on themselves at HIGHER rates than the 60’s or 70’s to compensate for the low burden they carried for decades.

There will have to be compromises on both sides, for decades to come to recover for the excesses of revenue shortages of the 80’s and 2000’s, as well as the disregard for the middle class in those years and in the 90’s. And their are financial challenges in the Social Security and health care problems that will require compromises, cost-cutting and tough decisions to keep them viable.

But I don’t think the argument can be made that the today’s higher taxes on the wealthiest American are the end of the conversation or of the compromises that must be made by the most well-off. A truly impartial observer would not require one side to take back only a fraction of the burden they have abandoned to others for decades. They might have to carry more than their original share for a time, to allow the rest to recover their strength.

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Steven H February 7, 2016 at 10:07 am

Before someone takes my above post as “proof” that I am just trying to tax the wealthy into oblivion, I have to indicate that that the changes mentioned by Cole would likely be enough for several years. They would likely cut deficits down to manageable levels. And as we continue to address our nation’s economic challenges, there will have to be cost-cutting and probably some tax increases across a broader base. I do NOT believe in the wealthy carrying an ever-increasing tax burden, and I do not believe in infinite government spending. There are reasonable compromises to be made.

And I have to applaud Cole for moving this conversation in a more productive direction than it has gone for about 2 years. Too often, we have gotten mired in the language of the Henrys and their like. If we can talk honestly about compromises and potential solutions, expressing personal experience and perception, but backed up with data, we may all end up enlightened.

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Henry February 11, 2016 at 9:47 am

LOL – not sure how I’m to blame for the conversation hahaha….. only posted a few times and was just trying to support your diatribes by making a totally valid point. Cap gains is where you nail the rich (and as you put it, “take back the excess income” they have taken from the rest of us). Income taxes are barking up the wrong tree. But I’ll go away since clearly I’m screwing up the conversation with my once-a-month comments!

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Steven H February 12, 2016 at 10:19 pm

Henry, your comments are always welcome, when kept in respectful tone. The point I was making is that attack language is destructive to the conversation. I have used it in the past, thinking it was colorful and interesting, but it spoils the discussion. Other posters did not like how such language of mine distorted their motives, and similarly, I don’t like how language of “nailing to the wall” distorts my motives.

You are correct that higher cap gains taxes would be generally more effective at raising income and suppressing abuses in the economic system, than focussing on marginal wage tax rates. But you seem clever enough to make that point without using attack language. That’s all.

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Steven H February 14, 2016 at 9:01 pm

I should be clearer about one thing. I am not the one to determine whether your comments are welcome. This is certainly not my blog. You have the same right to post whatever you want, that any of us have. I’ m just saying that, in my opinion, your posts will be more effective if you leave out the colorful language that misrepresents other people’s intentions and/or attacks their character.

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Henry February 16, 2016 at 4:56 pm

Steven H – to accomplish your goal of nailing the 1% to the wall with taxes, all you have to do is jack up capital gains taxes. The 1% pays 75% of the capital gains taxes and even with Obama’s hike it is still only 23.8%. Just make that 40% or something – or tax it all as income – and you steal that money back from them and even the score. Then you can pay for more free things those that can’t afford it – like health care, education and maybe even get involved in more military conflicts that we can’t afford to fool with at the moment.

Seems like you are barking up the wrong tree with your focus on Federal income taxes. The 1% are already getting crushed there while half the country pays nothing. Just jack up cap gains taxes and eliminate the payroll tax and the bottom half get a completely free ride and the rich get killed. You could even weight it in different brackets so the really rich get crushed harder.

_________

Nowhere did I misrepresent anything you said. Nor did I even come close to attacking your character. Trying to help you in your argument or so I thought. Jeeeezzzz

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Steven H February 17, 2016 at 10:06 am

Lol henry. And I’m not laughing at you but with you.

You are in the same well of confusion I was in months ago. I used language talking about the increases in shares of all income going to the high rarners as “bonus income”. I talked about rich stealing from the poor and middle class. I thought I was just using colorful, mildly provocative language to engage folks in the conversation. I ended up teeing off a lot of folks who would not even hear my arguments because of the language I used.

It turns out high earners who are playing by the legal and established economic rules dislike being told they are thiefs receiving bonus income. A better way of saying the same thing is that many high earners within the 1% receive double the share of all income they might have received 3 decades ago for the same skill, effort, and value to society, all while 90% of Americans receive, on average, about 20% LESS of a share of all income than they received for the same skill, effort, and societal valuue.

Obama fell in the same trap with his statement about businessmen “You didn’t build that”. Wheter his intention was to say that businessmen are not responsible for the infrastructure that enables business, or that businessmen are not solely responsible for the business itself, obama hobbled his argument by being insensitive to how his words would be received. Businessmen are proud of the work they put in to building a successful business. They don’t like that effort being minimized, even to acknowledge facts like the necessity of infrastructure. From their perspective, infrastructure is the background that pre-exists and they are the uniqie additional element that creates the business on top of that background. You have to acknowledge this perspective before the argument can be made successfully that society builds anf pays for the infrastructure and thus also contributes to successful businesses.

When you offer to help me nail rich people to the wall, you imply that is what my goal is, and that is an indirect attack on my character.

Thank you for helping me with facts. I am just trying to help you with style.

Henry February 17, 2016 at 10:40 am

I think there is a huge difference here though! The phrase “bonus income” is offensive. That implies that they didn’t rightfully earn it. Calling them “thieves” is also offensive. That implies that the 1% are immoral.

The phrases I used like “nailing the 1% to the wall” or “stealing money back from them” wouldn’t be offensive to the 1% – they were just appealing to what your primary goal seems to be on here for YEARS – making the 1% pay more taxes.

All my point was that this is best accomplished through capital gains hikes – and this wouldn’t hurt the small business owners and high wage earners that are legitimately earning their income and already getting “nailed” (as Peter and others have pointed out).

Oh and by the way – I don’t agree that the lower portion of wage earners necessarily have the same skill and value to society as they did years ago. We live in a vastly different society today.

Still shaking my head at how I’m getting a lecture about “tone” from Steven H!

Steven H February 17, 2016 at 12:28 pm

Another point, Henry, as to the substance of your post:
“Seems like you are barking up the wrong tree with your focus on Federal income taxes. The 1% are already getting crushed there while half the country pays nothing. Just jack up cap gains taxes and eliminate the payroll tax and the bottom half get a completely free ride and the rich get killed.”

Marginal tax rates in the upper echelons of the 1% were once in the 50 to 90 percent range. So I hardly think a $10M wage earner is getting crushed with a 39.6% rate. I would welcome the opportunity to be so crushed. While cap gains ought to be taxed higher, wages above some multimillion dollar threshold might also merit a higher marginal rate.

Henry February 17, 2016 at 8:31 pm

Yeah! Why not raise them BOTH! Hence….nail them to the wall.

Steven H February 20, 2016 at 3:48 pm

(Sigh.) Fine, Henry. In that terminology, the rich have been nailing the middle class to the wall, or the floor, for decades. “Let’s cut their salaries AND eliminate the safety nets AND ship their jobs overseas. Then when they complain, we’ll scream class warfare!” Is that the kind of conversation you want? I was trying for something a bit less accusatory.

Steven H February 20, 2016 at 4:03 pm

HENRY: <>

So yes there is a huge difference. “Bonus Income” and “Thieves” are offensive to you, and “Nailing to the wall” is offensive to me. So you are completely fine with insulting and offensive language as long as it does not insult you. You think that I should not insult you, but you see no need to put any similar constraints on yourself?

I was initially baffled at how this logic of yours works, but I see it does fit in with Ayn Rand’s philosophy of self-interest. It correlates with those among the rich who are greatly offended by the principle of redistribution of wealth from rich to poor, but who happily advocate for redistribution in the other direction. Forgive me if I am taking your comments to extreme levels, but you seem to be saying that you are completely fine with dispensing with any consideration of others’ interests or feelings as long as you get what you want and nobody insults you.

If that description is offensive to you, it should be. But it is a more accurate interpretation of your words than you might like to admit. So if you don’t like how your words come across, try changing your words.

And if you want to argue with my posts and words from previous pages, put your replies there where they will lie unseen and inoffensive.

Henry February 22, 2016 at 7:23 am

Your argument would work if I was a 1% or even slightly “rich”. I’m not really offended by any of this language. I would think that if you are comfortable calling someone a “thief” that you would feel comfortable “nailing them to the wall”. Not sure how that is misguided. But who cares really…..just trying to make a point about cap gains taxes vs income.

Steven H February 22, 2016 at 9:31 pm

Ok, enough conversation about the conversation. My point is that I am trying to improve the caliber and tone of my posts. It’s up to you to post however you like.

Steven H February 7, 2016 at 4:23 pm

Here is a post that I found of some interest. It will probably offend some of the rich folks here, but that is not my intent in posting it. Heck, it will probably offend some of the non-rich folks here, but for different reasons. I am posting it because it both enlightened me and saddened me. I am posting it because, if readers can get past being offended by it, it may serve as the basis for a little discussion.

The post basically started because of the rant of some lawyer who claims, despite his household income (estimated at $400K to $500K / yr from his letter), he does not consider himself rich. And he is in that class of people who are very offended at being told they might soon be paying more in taxes. The original lawyer rant is embedded, but there is also analysis of that rant that makes the lawyer look very self-absorbed and unaware of real struggles of people who are nowhere near as well-off as he is.

I am curious whether he posters here feel more sympathy for the lawyer’s position or for the guy who criticizes the lawyer’s rant.

http://delong.typepad.com/sdj/2010/09/in-which-mr-deling-responds-to-someone-who-might-be-professor-todd-henderson.html

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Cole February 8, 2016 at 1:24 pm

I feel no sympathy for either and think both are ridiculous. The person making $400k + is doing just fine and saving toward retirement someday and it doesn’t concern me that he cannot live a more enhanced lifestyle, nor save more for retirement; however, the guys criticizing him seem exceptionally offended and upset by the person saying he isn’t “rich”. Here is the problem as I see it:
1. The law professor making $400k+ is not making a compelling argument at all as it relates to the tax increases for people making over $250k. His assertion that he isn’t rich and then foolishly outlining a budget that most view as lavish is simply clueless in today’s environment. I don’t think he is ridiculous or out of touch for saying he is not “rich” (because he probably means “wealthy” – see below). I think he is ridiculous because he is a law professor and thinks this is a good argument to make against raising taxes.
2. The guys criticizing the law professor were clearly in favor of the tax increases on those making over $250k and are appalled by someone making $400k+ claiming they are not rich. They are entitled to their opinion and I agree that the professor’s argument is very weak, but why such hostility? Why so divisive? It would be simple to discount the professor’s argument with a couple of sentences.

My take: It’s likely the professor construes the word “rich” to mean “wealthy”. If so, he could be absolutely correct when he says he isn’t rich (wealthy). Just because you are a high earner doesn’t mean you are rich (wealthy). It means you make a lot of money each year relative to the rest of US citizens (and the world). If you live in a high cost area, then even if you make top 1% income, it might take decades to build wealth. I think it is absolutely reasonable for him to say he isn’t rich (wealthy). But, using this as the sole argument against tax hikes is clueless. I feel no sympathy for the professor based on this argument. His inability to make a better argument is head scratching because he is a law professor. Ridiculous.

On the other hand, it would have been fairly simple to tell the professor that compared to most he is doing very well and over time he will be able to amass retirement savings greater than the vast majority of US citizens, despite increased taxes. Furthermore, they could have argued that he likely has some kind of a defined benefit pension that will pay him significantly into retirement and is probably worth millions. Tell him his argument is not compelling in the context of raising taxes, but why the attack and why are they so upset with him saying he isn’t rich? Why so quick to overreact? I get the feel that they are more upset with his premise that he isn’t rich (which again could be semantics and is absolutely debatable), rather than his use of this premise to argue taxes shouldn’t be increased on him – which I think is ridiculous. If they want to say that his argument is not very compelling, then great and I agree, but being so upset about someone not thinking they are rich (wealthy) makes me wonder where their hostility comes from. Ridiculous.

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Peter February 9, 2016 at 7:45 am

Totally agree. On both sides it is the kind of nonsense that muddies the argument. Almost everyone feels some level of frustration on their income not being “enough” – and I think the lawyer is expressing that but it is a bit of a surprise that he is using that as an argument for lower taxes.

The hostility against the “rich” is no surprise though. The president, the media and politicians in general have exacerbated this class warfare environment. Rather than focusing on the tiny group of people that make tons of money, take risks that affect the economy, and generally influence policy (like Occupy Wall Street did) – the vitriol has reached a lawyer who makes $400k in a large metropolitan area. He is not the target – nor even a small part of the problem with income disparity.

In a way it is like bashing all Muslims because of ISIS. I think the sentiment the lawyer is expressing is one that I have tried to articulate – that the rhetoric thrown at the 1% is inappropriate, misguided and flat-out offensive. Throwing the anger at the elite corporate tycoons that manipulate markets and control people like Hillary Clinton and George Bush is far more appropriate.

Those people in the $250k-$1m range are carrying the burden of taxes and being blamed for something we had nothing to do with.

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Steven H March 4, 2016 at 6:21 am

There are actually 4 posts to comment on:
The law professor’s complaint, the original critique by Michael O’Hare, and the subsequent commentary by J Bradford DeLong, which was the commentary I directly linked to, and then I also want to respond to some of Cole’s commentary.

1) I think we all agree that the law professor’s post was rather foolish. If he was looking for sympathy, he made a poor argument. He claims not to be rich, it seems, because he can identify people who are much richer than he is, and so he doesn’t feel rich. He feels like upper middle class, because he has all of the normal mortgage, medical, education, auto, and service expenses that anyone has. He doesn’t seem to want to face the fact that the magnitudes of each of his expenses, like his income, are many times the national median.

To a certain degree, I understand his frustration, and it is the same attitude I have seen on this board. Tax increases are a change to the status quo. The professor has stretched his expenses to absorb his income, and an increase in taxes upsets his personal economic balance. Rather than recognizing and acknowledging the extraordinary monetary advantage the professor has achieved relative to most other Americans, and how the historically low tax rates have benefitted him in the past, he only sees the difficulties a tax increase will cause him in the near future.

In looking up at the actual “super-rich”, he does have a valid point, though not very well stated, that has also been pointed out here. The salaried rich pay much higher tax rates than the (generally) much wealthier and higher income investor class, and so the salaried rich are more burdened. But rather than complaining about higher taxes which are ultimately necessary to pay the nation’s bills, the professor would have been better served in his argument to acknowledge the exalted lifestyle he has been able to achieve, to be gracious in willing to pay a bit more in taxes, but also to more directly point out that the much richer and more lightly taxed investor class should have a more significant bill to pay.

2) The O’Hare post was harsh, but I understand the revulsion that comes from a presumably intelligent person making 9 times the median income claiming they are not rich. The professor deserved the slap-down.

3) The DeLong post was measured and analytical. I did not see it as harsh at all. Reread what I consider the meat of his post:

DeLong ============
By any standard, they are really rich.

But they don’t feel rich. They have a cash flow problem. When the bills are paid at the end of the month, the money is gone–and they feel that they have to scrimp.

I know how they feel. My household income is of the same order of magnitude than theirs (although somewhat less) and we too had to juggle assets quickly when it developed that an error in Reed College’s housing system had caused them not to charge us $5,000 that we owe. We too have chosen to put our income in places (tax-favored retirement savings vehicles, building equity, housing, private college costs) where we think it is better used than $200 restaurant meals, $1000 a night resort hotel rooms, or $75,000 automobiles. But I don’t think that I am not rich.

Professor Xxxx Xxxxxxxxx’s problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot be you all of that.
==============

This is not harsh or ridiculous. It is straight talk.

4) Cole, I don’t think the professor was reflective enough of his post to be mincing words between “rich” or “wealthy”. And most people think that someone earning around a half-million a year is rich, regardless of whether they retain any of it in a cash reserve. He has a nice house, private education for his kids, a nice lifestyle with expensive cars. He is rich. The fact that he does not recognize or acknowledge it is what rightly raises the ire of those who have much lower incomes. And the fact that his “wealth” is embedded in his house, cars, and retirement fund, doesn’t really exempt him from being labeled wealthy, either.

Ultimately, the professor’s argument seemed to be that he should not have taxes raised on him, because he has spent all of his money on himself and his family and a lavish lifestyle and he can’t afford the added expense. And that is not a good argument.

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Cole March 4, 2016 at 9:46 pm

This is all semantics and people have every right define such a subjective word however they want. It’s all relative – maybe his idea of rich is a $10+ million net worth. Maybe it’s $50+ million. It doesn’t matter. Who cares? Why are people so upset? He’s not saying that he’s not better off than most people, he just doesn’t consider himself rich relative to where he wants to be. Again, he’s just stupid for using this as an argument against tax hikes. I agree with Peter 100% that Obama, liberal politicians, and the media have absolutely exacerbated the class warfare issue with repeated rants of “the rich paying their fair share”. And, it’s really a misrepresentation. Be more specific and direct your rants to the non-salaried, ultra high dividend and capital gain earner with a low effective tax rate, not the $400,000 lawyer in a large metropolitan area paying the highest marginal tax rates. Be frustrated and jealous of the Blackstone CEO who made over $800mil last year, with a huge piece being taxed at a low rate. A little different situation don’t you think? If so, politicians and the media should be specific – otherwise all the uninformed just lump everyone together who make a lot more than them. Sick of hearing it.

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Steven H March 5, 2016 at 10:47 pm

Cole, I’m not exactly a hyper- religious person, but I recall a Bible parable (and this is paraphrased from memory, so forgive any altered details) about a man who owed money to a very rich man and had trouble repaying the loan and begged for mercy. The rich man had mercy and was lenient to the debtor, forgiving his debt. This debtor had also lent money to a much poorer man who, at some point, could not repay the loan on time and was called out by this lender. Though the poor man begged for mercy, none was offered, and the poorer man was jailed. When the rich man heard of this, he called out his debtor for offering no mercy when he had been given mercy, and he had the unforgiving debtor jailed until his debt could be paid.

The point? We have a culture and attitude, encouraged by no less of a source than Gods word, to scoff at hypocrisy and the failure of those who have been much to have sympathy to those who have been given little. So when some people hear the frequent cries of the rich that taxes are too high and that the solution is to take away the safety nets of those who struggle, those same people are impatient with those most privileged folks who have been given much but who squander their wealth and so claim they have no more to offer to pay as taxes to support the society that helped to make them rich in the first place.

How different from this parable is the banker who has been bailed out by government but who then acts to purposefully lose refinance paperwork in order to accelerate foreclosures? And rightly or wrongly, people perceive this law professor in the same way. His posted commentary may not have directly blamed the poor for their troubles, but the constant and familiar barrage of attack from those in the wealthy class is so frequently heard: that the rich justly earn all they receive, and the poor are poor for their lack of skills and effort; that the rich should be taxed less and the poor should be taxed more to have skin in the game; that even the middle class are not advancing in pay because they have not married the right person, chosen the right career, or worked long and hard enough. And so, with this assault from the rich ever ringing in their ears, people with incomes from $10K to $100K have understandably little patience for a rich person (and, by the way, since words have meaning, a rich person does not have the right to redefine himself as not rich) who whines about how hard life is at $400K or more. Even after all taxes, their income is many times the country’s median after tax income. They are rich.

The perception of many, when they hear this rich man’s complaints, is to believe that rich people want to take away benefits and increase taxes on people making $50K but simultaneously want to claim that life is hard on the $400K earner and that he cannot possibly be asked to pay more.

Is this a fair attitude against this law professor’s post? Not entirely. But you asked why people get so upset. This is my attempt to answer that question.

Steven H March 5, 2016 at 11:03 pm

By the way, Why do those who most benefit from the redistribution of income from the poor to the rich, always want to label the acknowledgment of that redistribution as “class warfare” started by the other side. No matter by what mechanisms we believe that shift or redistribution occurred, whether it be globalization and trade policy, tax policy, union-busting, bank deregulation, etc, a significant portion of the shift occurred because policies regulating labor, trade, regulation, and monopoly enforcement were rewritten to benefit the more powerful and wealthy. So if there is class warfare, wasn’t it started by the people who rewrote the rules to shift money from poor to rich, and not by the people from whom that money was taken?

Peter March 7, 2016 at 1:18 pm

Totally agree Cole. They can’t target the people you mentioned though because the Blackstone CEO probably put up quite a bit of money for their campaign. They have lobbyists who were promised things and all kinds of business dealings with the politicians. I mentioned a while ago – that while I may make a 7-figure income, I have almost NO power.

The problem is – if they target those people they cut off their funding at the knees. This is what makes Trump and Sanders interesting – they have no part of this “big money” train. And you can see how CRAZY Trump’s lead is making the GOP powers-that-be. They have no control over him (clearly).

This whole argument about what we do going forward is all nonsense until we attack the true problem – politicians in bed with corporate America. The frustration of poorer people is always acceptable and shouldn’t be dismissed. Problem is – thanks to our President and his rhetoric – it is being directed at people that don’t deserve the vitriol, people that earned their money WITHOUT taking from others or stepping on anyone’s head to get there. People that realized the American dream with hard work, luck or whatever and are now being asked to pay even more for it than they already do.

Just watch Bernie Sanders. His sound bites sound as though he is going to go after the 1% – which includes me and the individual in the story in this thread. However, in the debates and through longer explanation, you discover that his real targets are much more specific. But making your whole campaign about taxing passive income or hedge fund profits more aggressively doesn’t resonate with the masses. Most people don’t even know what those things even are. It really is a shame that our leaders today (and yes I’m including Obama, Congress, and both parties’ braintrusts) are so divisive.

And yes, I am VERY sick of hearing it too.

Steven H March 8, 2016 at 6:53 pm

Peter: ========
This whole argument about what we do going forward is all nonsense until we attack the true problem – politicians in bed with corporate America.
=============

Absolutely agree with you on this one, Peter.

I think though that you may be overreacting to the President’s “attack” of the 1%. The 1% is a statistical group, but, as we have laid out in some of these discussions, it is not a uniform group. Upper-class wage-earners are taxed at higher rates than the passive incomes (investors, etc). Small business owners are worth more per dollar of income in advancing our economy than hedge-fund managers. But politics is discussed in broad terms. Rather than attack the President for his broad use of terminology, I think small business owners might do better to promote the cause of small business with the Democrats, publicizing its importance to the economy, and then unite in suggesting and even demanding the sorts of tax reforms on large corporation profits and incomes, and on carried interest and large income capital gains, etc, and other reforms such as those Cole has listed.

Cole February 26, 2016 at 9:06 pm

Steven H – You asked about this article and I answered almost 3 weeks ago. Obviously no obligation, but just curious what your thoughts are.

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Steven H March 2, 2016 at 10:42 am

I’ve been out of pocket. I’ll try to get back in the conversation soon.

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Steven H March 4, 2016 at 6:24 am

Replied above.

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Peter February 8, 2016 at 9:23 am
Peter February 8, 2016 at 1:19 pm

Just as an idea…. this proposal is every bit as feasible as making people between $250k and $1 million in income carry the burden.

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Nicholas February 9, 2016 at 4:51 pm

I make 400k a year selling cars. I’m one of the best car salesman in the country and work 60 hours a week.

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Peter N February 11, 2016 at 12:10 pm

Good for you but being taxed at 39.6% plus not counting other taxes is kind of a disincentive to work over 40 hours a week.
Basically you are working about 24 for the gov each week. 60hr*0.396.
So you are getting taxed on the hours over 40 at a high rate. Do you think that is fair?

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Peter February 10, 2016 at 6:04 am

http://www.cato.org/blog/cam-newton-adding-super-tax-insult-super-bowl-injury

Yet another article pointing out what I feel every day….disincentive to grow my practice if we have Bernie Sanders style upper brackets. This is real.

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Peter N February 11, 2016 at 12:52 pm

That article is a warning to system integrators ( engineers that install and start up new machinery ). These projects can take weeks. Who wants to go to California and have them take all your money?

I will retire asap if Bernie wins. I make enough money from investments but even they will be taxed at high or higher rates if Bernie gets his way.

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Steven H February 12, 2016 at 9:58 pm

That’s an interesting article, Peter. I don’t like the impacts on traveling wage earners (sports players, stage , equipment installers) of such state tax policies. They seem a bit like highway robbery. People shouldn’t be penalized heavily for bringing commerce into a state.

But I am actually more interested in the article’s introduction. The three scenarios make a sound argument. But it leaves out additional scenarios, such as when a large company has control over the wages of its employees. Now you have two potentially repressive forces on the employees: The taxes on added income and the wage policies of the employer. The company management has incentive to increase it’s own income which it can do by
— increasing product efficiency (manufacturing efficiency for hardware, process efficiency for services, etc)
— suppressing wage growth, which shifts wage income from employees to company profits and/or management income

The latter policy temporarily increases corporate economic efficiency and profits, but potentially DECREASES long-term corporate efficiency AND overall societal economic efficiency in the long run because
— morale is lowered among working employees due to their own economic stress
— less disposable income is available to the employees to use as customers at other businesses

At some level of this shifting of wages upward to management then does not spur economic growth. It inhibits it.

In this sense, higher taxes on large corporations and large management salaries can INCREASE overall economic efficiency by discouraging management from suppression of average salary workers.

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Steven H February 12, 2016 at 9:59 pm

Lost a word in my second line above; should read:
(sports players, stage actors, equipment installers)

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Steven H February 12, 2016 at 10:01 pm

And last paragraph should read:

In this sense, higher taxes on large corporations and large management salaries can INCREASE overall economic efficiency by discouraging management from suppression of average workers’ salary.

I really wish we had an edit button.

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James February 16, 2016 at 9:59 am

Thanks for posting. Just more motivation for the high earners to either retire, shrink their businesses, minimize staff or just shut down altogether. Think this is the part that some don’t understand.

It really isn’t complex. If you have a business and taxation is increased against the owners/principals/key employees, it decreases employment so that the company can make a profit – or at the very least it reduces possible wage increases to the lower, more expendable earners. Not talking about factory workers or something from the 1920’s or 50’s economy – talking more about about the small to medium size business environment that is so prevalent in today’s economy.

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Steven H February 16, 2016 at 8:33 pm

Most people understand that there are extreme tax or wage situations that are destructive of business and the economy, and that there is a sweet spot of productivity and prosperity in the middle. The difficulty arises in determining where the sweet spot actually is and where we are relative to that spot at any given moment.

So, as you say James, it is possible to overtax businesses and business leaders, driving them out of business, depleting the store of investment capital and damaging the economy. Conversely, it is also possible to have such generous tax rates and such lenient business and labor policies that businesses and business leaders prosper while the wages and prosperity and disposable income of most workers and average citizens stagnate or decline. In the former situation, which we may have been in in the late 70’s with higher marginal tax rates, and high inflation, it would make sense to temporarily cut tax rates. In the latter situation, it makes sense to move in the other direction by raising marginal rates and capital gains on highest earners and strengthening labor protections.

The business class will always want tax breaks and the working class will always want higher wages and a better life paid for by the taxes on business. But the actions we actually take depend on where we are relative to the sweet spot. Do you think there is a shortage of capital, or a shortage of middle class income? That determines what direction we should go.

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Admin (Prentender) February 17, 2016 at 11:29 am

Steve H and to all others. If I had had made two typo’s that you had made in an earlier post I would be out of a job. Shame on you all. Large corporations taking advantage of tax loopholes (like having livestock on their corporate property is blasphemy and disgraceful). Middle class workers work just as hard if not harder then CEO’s and President’s of companies. They do not receive the “perks” of golf outings, country club memberships, etc., etc. They haven’t seen a raise in pay in over a decade due to the “Leadership” of a corporation receiving millions of dollars for even failing at their job! I’ve watched as mid-guided CEO’s walk away after 6 months at “trying new leadership” – “resign” (the cowardly way of being fired) and receive $27M for their “effort.” It’s distroid America. There is no “Middle Class” anymore. Open your eyes and see the truth and carnage you have created to the American Dream. There is no American Dream anymore. It’s greed, selfishness, and criminal.

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George February 19, 2016 at 8:04 am

No CEO I know would spell destroyed “distroid”. Look in the mirror before getting too bitter.

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Steven H February 17, 2016 at 12:38 pm

I always regret typos and long for an edit button on these posts. But this is a conversation, not a literary publication, and typos creep in. Especially from a phone. You typed “mid-guided” and “distroid”. So lighten up about typos.

As to the rest of the post, I agree with your sentiments, as you should see from my posts. You are obviously frustrated with high income disparity and the shift of money from middle to upper class. So am I.

Thanks for the post. I was starting to feel lonely. :-)

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Cole February 17, 2016 at 7:22 pm

Admin – I’ll take your comments in order:

I agree that large corporations in many cases do not pay enough in taxes. I further agree that many of the corporate loopholes are absurd. Fix these issues – close the loopholes and raise the taxes on corporations, but only on very large corporations with hundreds of millions or more in revenues. Don’t hurt the small and medium sized businesses with less revenue. In fact, reduce their taxes, or the American Dream truly is diminished.

I’m not sure you have spent much time with or around C Suite Executives because most work 70-100 hours per week and have throughout their careers. They work a lot harder than 99%+ of the average workers. Furthermore, their responsibilities are exponentially more difficult and stressful than the average worker. And, even though you don’t want to hear it, they have more skill and talent than most. Sorry.

C Suite Executive pay is not the cause of average workers not receiving a raise. Use some basic assumptions and do the math – if you redistribute 95% of C Suite Executive pay at a large company to all the employees you would be looking at a few hundred bucks each a year per the average worker. No big impact. Having noted that, I’m would be OK with potentially capping really big numbers (maybe under $20mil, again not for Founders though).

I agree that C Suite severance plans can be absolutely ridiculous. I also agree that CEO pay can be unreasonable in some instances (usually stock option based when stock increases dramatically). Eliminate severance plans for short term executives and potentially cap CEO pay at some level as mentioned above, but do not cap Founders pay as they had the idea and took all the risks.

The American Dream is still obtainable. First, I would argue that the American Dream has already been obtained by most in the U.S., even with the current levels of income inequality. An average worker, working 40 hours a week and making $50,000 per year and enjoying the lifestyle it affords, is better off than the vast majority of the world in many ways. Second, my dad has never made more than $30k in a year and he’ll be the first to admit that he didn’t take the steps necessary to get to the top 1%. He will also admit that he has a pretty good life. He doesn’t blame anyone but himself. On the other hand, he believed (believes) in the American Dream and understood the possibility of upward mobility and motivated me to achieve more. He never told me “open your eyes and see the truth and carnage you have created to the American Dream. There is no American Dream anymore. It’s greed, selfishness, and criminal.” After borrowing every dollar necessary to attend college, working hard to achieve academic excellence, and then working 60-80 hours a week for over a decade, I now find myself in the top 0.2%-0.4% of income earners. I make my dad’s full year pay in two weeks. Still young, but hopefully working toward top 0.1% and hopefully can amass wealth over time, if high cost of living and taxation don’t make it impossible. If my dad had kept telling me what you are telling everyone, then I’m certain I wouldn’t be here (a bit of a self-fulfilling prophecy). For those who don’t achieve the holy grail of 1% status, there is this built in excuse that the system is broken or they would have made it. I would argue that more than half of U.S. citizens (probably 2/3 to ¾) have had more opportunity than me, but here I am living your version of the American Dream. I guess this is why I get so frustrated when people lump all 1% folks into their rants, because I was piss poor and worked my butt off to get here and then have to listen to people tell me that I don’t deserve it and should redistribute my income to those who had more opportunity than I did. While you argue you are trying to resurrect the American Dream, I would argue that your rants are part of the problem and you are partially responsible for killing it. Feel free to get upset about ridiculous severance plans and absurd CEO pay (not always, but sometimes). Raise long term cap gains and qualified dividends taxes and close corporate loopholes. Even increase tax rates on regular earnings over $5million. All of these should help your cause. Listen to Steven H and make coherent arguments as to why different parts of our system could be changed to improve quality of life for many. I’m fine with all of that and agree that there are injustices that could be fixed by not taking a fully capitalistic view and including government controls. But, you’re not going to convince me that I should feel guilty or somehow have to justify my situation or pay more taxes. Resent me if you will, but if so, then you are resenting the American Dream.

I’m sure this will be unacceptable to both sides, but again, I believe the middle ground is usually the right answer.

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Peter February 17, 2016 at 8:34 pm

Brilliantly said……

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Peter February 18, 2016 at 9:51 am

Your post also speaks more to what matters more than income disparity….income mobility. And despite the sentiment of some, the facts and stats back up that income mobility is still very strong in the US. This has been relatively unchanged since the 1970’s….

64% of all people born into the bottom income quintile will move up. 11% of them move all the way to the top income quintile. Even 8% of the people born into the top quintile drop all the way to the bottom.

Mobility absolutely still exists in the US – as does economic growth and opportunity. And unfortunately, on an individual level much of one’s personal mobility still has to do with things like coming from a two-parent household, quality of education, proximity to a large metropolitan area, racial factors and other outlying things.

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James February 23, 2016 at 12:09 pm

Naaahhh – more fun to whine about one’s circumstances and blame someone else. :)

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Steven H March 6, 2016 at 7:47 pm

Cole, I held off on responding to this post because I wanted to consider it carefully. I agree with much of it, and I respect your obvious passion for achievement. I am particularly appreciative that you, unlike many on this blog, are willing to acknowledge and call out the areas in which SOME of the high income or very wealthy are receiving absurd compensation (some instances of CEO pay, severance plans, and capital gains incomes), and there may be some need for reasonable governmental regulation and control.

And thank you for the respectful acknowledgment that I have made at least some coherent arguments. (Usually I can only tell that I have made a particularly cogent point when a poster stops talking to me after losing an argument. LOL.)

There are other conversations that can be derived from this post, such as the potential impact that C-suite executive pay may have on the entire income slope of the organization, and hence on low level workers.

There is also a point to be made that many don’t consider mobility into the 1% as a holy grail or even a desirable life goal, and that we need these people to fill other necessary jobs, and this is why we need to restore a system that gives reasonable incomes for all of American workers, including the plumbers, construction workers, and hotel room cleaners. And that we need an education system that does not bankrupt those people when they seek to educate their kids.

But for now, let me just congratulate you on a well-written post. I also agree the middle ground is usually the right answer.

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Peter N February 27, 2016 at 10:37 pm

This is what Bernie Sanders and Steven H want for us
http://www.proudcons.com/wp-content/uploads/2015/10/socialism.jpg

BTW, I just cut back my hours. There is no point in working hard in this environment. I hit the 1% two years running but I am at retirement age. I am going to slack off. Actually, I could have retired years ago.

Steven H, how is that going to help generate wealth? You can’t tax wealth that doesn’t exist. Actually it does exist but you can’t tax income that doesn’t exist.

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Steven H March 2, 2016 at 3:51 pm

By cutting back your hours, you are creating opportunity for someone else to provide the services you are no longer providing. If the person who takes up the slack is a younger less affluent entrepreneur, then income and wealth is redistributed in the best possible way. You get to rest, and someone else gets to earn that money.

Wealth is not generated only by the people who already have it. Wealth is more efficiently generated by those who don’t yet have it but are working to acquire it. I’m sure you are a fine manager of your company. But other people can create and run companies too. There will be no less wealth in the country just because you cut back your hours. Just less in your pocket.

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bob March 2, 2016 at 10:01 pm

The French tried reducing their hours to increase employment. Their unemployment rate remains bad and their economy comatose. The economy benefits if people work and compete for as long as they can, and they should be encouraged to do so. It’s better for the country and tax revenue if Peter N keeps working and a younger person finds a different job then for him to replace Peter.

Also people at the top are not easily replaced. By your logic of having successful people “rest” so that new people get a chance sounds like a zero sum game. Therefore it was good that Steve Jobs died so a younger more innovative man could take over Apple. Warren Buffet should retire so a younger more energetic person can do better with Berkshire.

People retiring early due to aggravation is not a good thing, and a way for younger people to move up. The company and the country benefits if everyone works and competes.

In capitalism no one needs to step down for someone else to be creative. Who retired so Microsoft and Facebook could get started?

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Peter March 3, 2016 at 4:36 am

Agreed. It is a myth to think of today’s economy like the manufacturing days of old. Sure, it makes sense to replace the higher paid, higher tenured assembly line worker with a younger, cheaper employee. This also has been working in such industries as hospitality management. But it is very different when you are talking about the highly paid employees – the innovators and small business owners. They are not so easily replaced.

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Steven H March 25, 2016 at 8:56 pm

The French regulating people to work less is different than people working less because they have made enough money.

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Steven H March 2, 2016 at 4:11 pm

As for your link to the school teacher in Denmark dissing her country’s “socialist” policies, it is a fake, unsourced post from a likely conservative activist, using a photo of Danish actress Mille Dinesen, her photograph taken from promotional material for the TV show “Rita”.

Some of the information on high taxes is true but there is a lot of fake information in your linked meme as well, such as claiming that the suicide rate in Denmark is almost double that of the US. In fact, snopes.com indicates:
==
According to the World Health Organization (WHO)’s most recent statistics, Denmark’s suicide rate was 8.8 people per 100,000 (versus 12.1 per 100,000 in the United States) in 2012. WHO data from roughly a decade ago reported a suicide rate of 11.9 per 100,000 people in Denmark (versus 11.0 in the United States). While the U.S. and Denmark maintained similar rates of suicide per capita in years past, Denmark’s suicide rate was markedly lower than that of the States by 2012 (and didn’t appear to ever have been three times as high).
==

Also home ownership rates in Denmark are about the same as US, unlike the claim in your post. And so on. Basically the post is a lot of bunk. You should really check snopes.com before reposting this sort of thing.

I worked with an engineer here in the states whose wife came from Denmark, and he visited there often, and he told me how happy and relatively stress-free the people there are. People like their system there, just as Canadians really like their “socialist” healthcare system. It’s only the conservatives here who think those systems are awful.

Read here:
http://www.snopes.com/denmark-socialism-brutal-meme/

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Peter March 4, 2016 at 10:06 am

Really, none of this matters with all the horrible presidential candidates we have this year. We are now down to 6 people between the two parties – and any one of them would be their own separate disaster.

Frankly, only Kasich looks to me like he might actually be a pragmatic leader. But of course, he hasn’t been attacked like everyone else. Hillary is more cronyism and corruption and shouldn’t even be considered after Benghazi and the email thing. Cruz is another dogmatic ‘dig your heels in and fight for what’s RIGHT’ religious right type – nothing will be compromised or get done if he is president. Bernie is too idealistic and impractical – there is no way he could deliver half of what he is promising. And who knows what the heck Trump is…..

I do actually like that two of the candidates (Bernie and Trump) have turned the elite-driven campaign finance approach on its ear. With Trump comfortably out in front it is no surprise the Republican establishment is going bananas.

If there was ever a time for a third-party candidate to do well (Gary Johnson, Bloomberg, Trump?) then this is it. Both parties are an embarrassment.

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Steven H March 4, 2016 at 7:02 pm

Peter, you have fallen prey to that groupthink thing you are always complaining about. There have been, what, about eight separate investigations into Benghazi and NONE of them have uncovered the kind of scandal that the GOP political propaganda machines have been trumpeting. Similarly, the email issue appears to be way overblown. Just because the GOP throws TRUCKLOADS of mud doesn’t mean the target is actually dirty.

Get used to President Hillary. She is the only viable and capable candidate out there.

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Steven H March 6, 2016 at 9:00 am

Well, I probably didn’t need to add that last two sentences. Just couldn’t resist a mild poke-back.

The real point of the post is that Benghazi has been proved a sad tragedy where any mistakes were made in “fog of war”, not political opportunism or criminal act. Regarding the existence of retroactively classified e-mail, any knowledgable observer of the murky world of government classification knows that mistakes are easily made and that it happens all the time. It is not really in the purview of the Secretary of State or any government employee to be wholly responsible for the reclassification and microscopic review of gray area communications that have been received from others. Certainly gross violations are required to be reported and reckless discussions of clearly classified material in unclassified venues is a violation, especially if they are released to the public. But reception of gray-area material from other government personnel in private conversations on a private server is not really a serious crime or security threat, and certainly nothing to disqualify someone from the presidency. Anyone who claims that it is, has fallen prey to the empty mud-slinging and the ultra-partisan complaints of political hacks. IMHO.

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Peter March 6, 2016 at 12:18 pm

Let me break from ignoring your posts to point out one unquestionable inaccuracy …. Hillary’s email situation is far from an innocent mistake. And even if it was, it is one that would have any other Federal employee fired on the spot and clearances removed. This is the community I work in and I have yet to find any single person in said community that is dismissive of this very, very serious crime.

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Steven H March 6, 2016 at 7:14 pm

Peter, This is subject I also know quite a bit about. And there is one thing you are correct about: Most federal employees will get fired for purposely mishandling classified information. But most federal employees don’t get fired for doing what Clinton did because, and that is easily seen because the handling of what I am calling gray-area material over unclassified channels is extremely pervasive among high level government officials with clearances.

My experience in talking with many people is that if you are Republican or just don’t like Hillary, you think the email scandal is a dire situation that should disqualify her from the Presidency. If you are a Democrat or someone who likes Hillary, you think the whole thing is a non-issue. And if you are an objective observer with some knowledge of security clearances and procedures, you are (a) waiting for the investigations to be complete and (b) seeing nothing that has been revealed so far that is out of the ordinary or of significant concern.

Here are some things you should know:

1) The use of the private e-mail server was not illegal.
2) Use of private unclassified e-mail accounts for government business (slightly different issue) is neither illegal, nor unusual among government employees.
[Mrs Clinton is far from alone. Other politicians and officials – both in federal and state governments – sometimes have relied on personal email for official business. Colin Powell, secretary of state under President George W Bush, told ABC he used a personal email account while in office, including to correspond with foreign leaders.]
[Outside of Washington, former Florida Governor Jeb Bush – a possible 2016 candidate for the US presidency – relied on a private email address (jeb@jeb.org). Like Mrs Clinton, he has selected which correspondence to make public.]
[Government Executive magazine conducted a poll in February 2015 of 412 high-level federal workers and found that 33% of those surveyed said they use personal email for government business “at least sometimes”.]
3) All government material that is being released to the public goes through an additional review process to verify nothing is classified in the released information.
4) Classification is tricky. Individual bits of information may be deemed unclassified, but when assembled together, it may be considered classified. Releasing all of Mrs. Clinton’s e-mails as one set of documents subjects the content review to these more strenuous rules. Also different organizations within government have different classification rules for the same information. Also some of the same information that is deemed classified because it came from a classified source can be deemed unclassified when it comes from a public source. All of this can cause some of the e-mails to be retroactively classified when they were reasonably deemed unclassified when originally sent and received.
5) Most of the questionable e-mails Mrs. Clinton received were written by other experienced government employees and diplomats.
[“If experienced diplomats and foreign service officers are doing it, the issue is more how the State Department deals with information in the modern world more than something specific about what Hillary Clinton did,” said Philip H. Gordon, who was assistant secretary of state for European and Eurasian affairs and was the author of 45 of the sensitive emails from his non-classified government account.]
6) It is easy to over classify information because of the vagueness and complexity of rules.
[The analysis raises difficult questions about how the government treats sensitive information. It suggests that either material is being overclassified, as Clinton and her allies have charged, or that classified material is being handled improperly with regularity by government officials at all levels — or some combination of the two.]
[“I think Colin Powell summed it up well,” [Hillary] said. “When he was told that some of his emails from more than 10 years ago were going to be retroactively classified, he called it an absurdity. So I’m hoping that, you know, we’ll get through this and then everybody can take a hard look at the inter-agency disputes and the arguments over retroactive classification.”]
[Still, some diplomats who have reviewed their emails that have now been classified have expressed puzzlement. Several said in interviews that they thought the State Department’s review process relied on an overly broad interpretation of ­public-records laws that restrict release of certain information involving relations with foreign governments.]

So again, this “scandal” just like “Benghazi!”, is 99% hot air and harrumph, and the investigation is more likely to result in changes to government-wide policies on security than any criminal indictment of Hillary or her staff.

Peter March 6, 2016 at 9:16 pm

Your first paragraph was enough. Fair enough….

But you start adding up all the “stories” around Hillary Clinton and I’m not sure why anyone would trust her. I don’t care about politics as you know – and I’m not on a “side”. I just think Hillary is so typical of what is wrong with the marriage of big money corporations and politics.

James March 7, 2016 at 1:05 pm

Wow, Steven H never struck me as a Hillary supporter. Your worldview doesn’t line up with her very well – she is a benefactor of the 1% crony capitalism stuff you rail against. Might be worse than any candidate in either party when it comes to this.

Steven H March 7, 2016 at 7:28 pm

Thank you Peter. Your “fair enough” surprised me, but is much appreciated.

Steven H March 7, 2016 at 8:21 pm

As for the “stories” around Hillary, maybe there are things she has actually done I would disapprove of. But that is true of most human beings. Consider the following, and don’t take this personally Peter; I know you are usually apolitical and this is not against you, just provoked by your comment. But I have to get this rant out.

I just get tired of the mud-slinging against Democrats that is so absurd. And yes there is some mud tossed against Republicans, but the quantity and pervasiveness of GOP institutions and media outlets hurling outrageous accusations against Democrats is far more sustained and prevalent. Remember the accusations that Bill Clinton had killed off many of his own staff and acquaintances? The birther stories against Obama and the fake pictures of his ghetto relatives? Obama spending spree? Billions spent on Obama vacations (he has taken fewer vacation days than any President since Carter and the costs per day are comparable to other Presidents)? The stories about Obama and Hillary watching the embassy being attacked live via drone and preventing help from arriving?

Did you know that in the 20 months following the Benghazi attacks, there were 281 segments on Fox News alleging a cover-up by the Obama administration, and 105 attempts to link Benghazi to Hillary’s political ambitions, and a total of almost 1100 segments on Fox in that time period with some significant discussion of Benghazi, averaging almost 2 segments a day over that period. And yet after all of that time and all of that mud and all of those false stories and accusations, 7 completed investigations, 11 published reports, and $20 million spent on the 8th investigation, it has been shown there was no coverup, no drone watching at the white house, and no stand-down order. The first investigation, called by Hillary herself, found significant errors and mistakes in procedure, and these were acknowledged and actions were put in place to correct them. The rest has been a waste of time and money and constitutes a vicious partisan attack on a public servant, and that sustained and costly attack should actually itself be under investigation as a supreme example of Congressional fraud, waste, and abuse.

I could go on and on.

Suffice it to say that I am not convinced that a fair method to evaluate someone is by the summation of the unfounded and unproven stories that get passed around about them, or the quantity of mud that gets hurled at them.

Rant over.

Steven H March 8, 2016 at 6:01 pm

James,

Frankly, I would have loved for Joe Biden to be a candidate. Bernie Sanders is competent on many issues and I love how he highlights the high income disparity issue and gets young people excited about politics. And I’m with Peter on being delighted how he has not relied on super-PACs. I will certainly support him if he can pull off the nomination, but it will be very close. He actually has higher favorability ratings than Hillary among Dems and GOP and that unpredictable blue-collar vote that supports Trump right now. He would clearly win against Trump or Cruz. But Hillary is extremely competent, a solid fighter, and has a broader set of skills that I think may be needed in the next 8 years. You say she is a recipient of 1% favors but she is much more likely than anyone on GOP side to raise taxes as required to balance the budget and resist pandering to billionaires. She might even put Glass-Steagall back in the window.

The GOP has imploded and now has virtually no chance at the White House. If Trump or Cruz gets the nomination, GOP will likely lose the Senate as well, by some analyses. Trump is too much of a wild card, and actually too incompetent to be allowed to be a US or world leader. I think a majority of Americans recognize this. Everybody who works with Cruz hates him, on both sides of the aisle. Not a good leadership quality. Rubio blows with the wind and is just not ready for prime-time. As the GOP “commits suicide on live TV” (as one wag put it), the Dems are going to have a pretty smooth path to the White House, I think, whoever they nominate.

James March 8, 2016 at 6:26 pm

Lol what a surprising take on things!

Steven H March 8, 2016 at 6:29 pm

I have two last comments on Hillary’s e-mail, because I forgot to include them earlier and they are too juicy to omit.

1) The government servers that include their e-mail servers suffered a massive breach by Chinese hackers. FBI investigation of Hillary’s server found no evidence of breach. Her use of the private server turned out to be more secure than the government account.

2) More classified information was leaked at a Darrell Issa public hearing trying to attack Hillary over Benghazi than was ever leaked by Hillary’s server. Why does he still have HIS job?

http://www.ibtimes.com/spy-effort-hurt-hearing-reveals-location-cia-base-libya-845997

Econ4dummies March 13, 2016 at 12:06 am

Steven H

1- several of the emails contained classified info at the time ( and info is classified, not a piece of paper). As Sos, she should know what constitutes such designation.

2-a large number of the emails contain large sections of info that are worded almost exactly like emails that were classified ( most likely the content was transcribed copied into a new email to send to Clinton)

3 -Since she kept the server and the emails were subsequently classified, she was now in possession of classified material on a non secure server as a civilian.

4- As some documents WERE classified at the time, she committed a crime by sharing them with her lawyer who did not have proper clearance

5- An email account is not the same as a private network and Clinton used a private server exclusively.

6- Jeb is irrelevant when talking about a federal law- duh

7- All 8 hearings took place before the full release of all the emails so it proved nothing since not all the evidence was disclosed.

8- If Clinton had either used the gov’t server or turned over the server when requested, it would not have cost as much money so blame her.

9- 100+FBI agents would suggest it is not exactly jaywalking and they are investigating her since it involves her server and her actions regarding it.

10 the last batch of emails released included one where she sent around an email to staff asking if the content was classified and if not, to send to NY times. Why ask if it didn’t exist?

11- She knew to ask a staffer to strip the classified markings and send it to her private email address

12- Obama claimed he didn’t know yet multiple emails were exchanged with him

James March 15, 2016 at 8:40 am

The email thing is disgusting – and I’m sure just like Whitewater and everything else around Hillary it will be covered up somehow. Should be fired from public office for such a blatant, unnecessary disregarding of security rules.

Steven H March 21, 2016 at 9:29 pm

Econ,

The general reply to your post is that you don’t really understand how classification works. Just because someone claims an e-mail is classified NOW, in the context of releasing the whole of her e-mail to the public, does NOT necessarily mean it was classified THEN in the context of private messaging between government officials. As I said before, classification is complicated. There are individual words or facts that one intelligence agency may deem classified within their organization, and which another intelligence organization uses freely as unclassified. There are sets of individual facts that, when expressed separately are completely unclassified, but when associated together are classified. And that does not even get into the differences in interpretation of the byzantine classification rules by different organizations and different individuals within those organizations. Or the fact that it is the SENDER who is responsible for classification markings and knowing the rules that apply, and not the RECEIVER of an e-mail.

Also, it is difficult to discuss the details of the particular e-mails that are claimed to be classified, because someone is now claiming them to be classified and not releasable to the public, so you and I can’t know exactly what they say.

To address your points more specifically:

1- “several of the emails contained classified info at the time ( and info is classified, not a piece of paper). As Sos, she should know what constitutes such designation.”
– As I said, retroactively classifying them now does not mean they were classified then. I’m sure Mrs. Clinton knew the rules and followed them, occasionally stretching the rules to get the job done without overtly breaking the rules, JUST LIKE EVERY OTHER HIGH GOVERNMENT OFFICIAL.

2-“a large number of the emails contain large sections of info that are worded almost exactly like emails that were classified ( most likely the content was transcribed/copied into a new email to send to Clinton)”
– Again this is hard to assess without specific information. But know that not every sentence on classified servers or in classified e-mails is actually classified. Classified e-mails are often comprised of 90% unclassified information with a few classified facts. Often, e-mails are completely unclassified, but are incorrectly labeled with classified markings, due to the sender’s misunderstanding of the rules. Transcribing some unclassified portions of a communication from a classified server to an unclassified server is neither unusual, nor criminal, nor even particularly surprising.

3 -“Since she kept the server and the emails were subsequently classified, she was now in possession of classified material on a non secure server as a civilian.”
They were not deemed classified until she AFTER she turned over the e-mails, and they were presumably already deleted off the server at that point. Regardless, this is a minor technicality at worst.

4- “As some documents WERE classified at the time, she committed a crime by sharing them with her lawyer who did not have proper clearance”
I don’t know what clearance her lawyer had. Do you? And again, they were RETROACTIVELY classified. I have heard NO ONE verify that any of the info in those e-mails were indisputably classified AT THE TIME of their original sending or receipt.

5- “An email account is not the same as a private network and Clinton used a private server exclusively.”
– … which turned out to be more secure than the government servers which, unlike Hillary’s server, were hacked by the Chinese.
Using the server was NOT against the rules and not illegal. She says it was a bad idea in retrospect, but it still turned out to be more secure. Just bad PR, that’s all. Some of Colin Powell’s unclassified e-mail was retroactively classified, and he was using AOL. You think that is somehow better or safer?

6- “Jeb is irrelevant when talking about a federal law- duh. ”
It’s relevant, but to a different aspect of the accusations. Too tedious to discuss.

7- “All 8 hearings took place before the full release of all the emails so it proved nothing since not all the evidence was disclosed.”
The 8th investigation is still ongoing. And nothing nefarious regarding Benghazi was in the e-mails. But GOP is still fishing, still spending our money.

8- “If Clinton had either used the gov’t server or turned over the server when requested, it would not have cost as much money so blame her.”
The GOP wasted money on at least 6 useless fruitless investigations fishing for dirt before they found out about the server. If they hadn’t found the server, what makes you think they would be spending less money on their fruitless partisan taxpayer-funded fishing expeditions? GOP in Congress should all be wearing T-Shirts: “I spent $20 M trying to take down Hillary Clinton and all I got was this lousy e-mail server”.

9- “100+FBI agents would suggest it is not exactly jaywalking and they are investigating her since it involves her server and her actions regarding it.”
– Nice try. The FBI has said Hillary Clinton is not the target of the investigation. They are investigating the security of her server and the content of her e-mails and the practices of the individuals she corresponded with. By the way, they are also investigating the private e-mail accounts of Condoleeza Rice and Colin Powell, who also had retroactively classified e-mail in their non-government unclassified accounts, and who also are NOT deemed targets of the investigation. So, yeah, so far, it’s about like jaywalking. Technically illegal, but everybody does it.

10 – “the last batch of emails released included one where she sent around an email to staff asking if the content was classified and if not, to send to NY times. Why ask if it didn’t exist?”
– She asked to get a second opinion on whether information was classified. This is highly appropriate and shows proper respect for security. What’s your beef? And what do you mean if “it” didn’t exist? What is “it”?

11- “She knew to ask a staffer to strip the classified markings and send it to her private email address”
– Again, stripping classified markings off the unclassified portion of a classified e-mail is completely OK. Required, actually, if you are going to forward completely unclassified information.

12- “Obama claimed he didn’t know yet multiple emails were exchanged with him”
Didn’t know what? That Hillary’s private e-mail was on her own server, rather than AOL (like Colin Powell’s)? How could he possibly know? The e-mail address might tell you who owns the server or it might not. And personally, I think owning the server is a lot safer than having it on aol, or gmail, or yahoo. You are really stretching here.

Maybe the FBI investigation will reveal some breach of protocol by Hillary. But if so, it seems unlikely, from the information revealed so far, that Hillary has done anything more seriously wrong than previous SOS’s Powell, or Rice, or any of dozens of high level bureaucrats that she corresponded with. As much as the GOP (and you, seemingly) would like to discover some high crime which would take Hillary out of the Presidential race, this just ain’t the place you’re going to find it. Not in Benghazi either. Nor by digging up any of the old fake scandals from decades past. Face it, Hillary is probably more squeaky clean than most of the Congressmen who are investigating her. Certainly most of THEM would completely wither under as much scrutiny.

Steven H March 22, 2016 at 8:59 pm

James, you seem to also be a victim of groupthink and GOP marketing. The Hillary e-mail server story is such a minor issue, all that will ever come out of the FBI investigation are some rule changes and another document for government employees to sign. All that this “scandal” revealed is that government bureaucrats disagree on what some classification rules are. Really, there are 10,000 bigger issues for our Congress and our press to discuss and solve. This only persists because it is the only mud ball the GOP has against a most talented and capable Presidential candidate they don’t happen to like.

Steven H March 8, 2016 at 11:22 pm

Enough politics. Back to economics.

There has been occasional mention of economic mobility in these conversations, including the assertion that high income disparity doesn’t really matter as long as there is economic mobility, meaning the opportunity to move up economic ladders and improve one’s life by hard work. I’d like to talk about that a bit.

First of all, it is hard to deny that economic mobility is important. We Americans like to believe that it is a hallmark of our society that anyone can become successful here with hard work, no matter how lowly our birth. And there are many people you can find that exemplify that principle. Some of them are here on this forum, and if you go back through these pages, you can read Peter, Peter N, Cole, Stevendad, and others describe how hard work brought them from relatively humble beginnings to successes in finance, engineering, business, medical or other well-paying careers. We all want to succeed and improve our lives, and in America there are opportunities for most people to do so.

There are questions about just how mobile our society is. How does it compare to other societies? How does today compare to the past?

[Stepping away for Google search …]
[back now …]

OK, it’s complicated (of course). Good news, of sorts: A recent study out of Harvard has found that, despite increasing income disparity, socio-economic mobility has not changed significantly in the US over the last 50 years, at least by the following measure. 50 years ago, about 8% of folks in the lowest quintile would eventually move up to the upper quintile. Today, it’s about 9%, or equal within the margin of error of the study.

In analysis by The Economist magazine, it’s noted that we can’t be completely celebratory about this stat however. Since income disparity is moving new income mostly to the rung of the ladder of the upper 1%, it is not too surprising that it has little impact on the mobility among the other lower rungs (quintiles).

“Whatever the explanation, it would be unwise to take much comfort from this study. For a start, since the gap between top and bottom has widened, the consequences of an accident of birth have become bigger. Second, if the gains of growth are going mostly to those at the top, that bodes ill for those whose skills are less in demand. Many economists worry that living standards for the non-elite will stagnate for a long time.” – The Economist

Bad news: According to information gathered on Wikipedia, we are considerably less mobile than our European cousins.: [FYI: I am cutting and pasting without editing the footnote markers.]

“Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility.[3][7] One study (“Do Poor Children Become Poor Adults?”)[7][11][20] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. The four countries with the lowest “intergenerational income elasticity”, i.e. the highest social mobility, were Denmark, Norway, Finland, and Canada with less than 20% of advantages of having a high income parent passed on to their children. (see graph)[7] Nobel Prize-winning economist Joseph Stiglitz contends that “Scandinavian countries changed their education systems, social policies and legal frameworks to create societies where there is a higher degree of mobility. That made their countries more into the land of opportunity that America once was.”[21]”

and…

“According to journalist Jason DeParle

“At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent)—a country famous for its class constraints.[23] Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes. Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.[3][24]”

National Review (the ultra-conservative magazine) doesn’t dispute these figures directly, but indicates that absolute mobility is also important; meaning that staying in the same socio -economic class isn’t so bad as long as the status of that class is rising. Scott Winship writes:
“What looks like fairly low levels of relative mobility in the U.S. translates into surprisingly high levels of absolute mobility. My research finds that roughly 40 percent of today’s 40-year-olds who grew up in the bottom fifth of income remain in the bottom fifth. But over 80 percent are better off in absolute terms than their parents, after adjusting for the rising cost of living and declining household size. Stunningly, the median change experienced by today’s fortysomethings was a 93 percent rise in household income compared with that of their parents.”

[Note that the impressive median change is for all forty somethings, not those in the lowest quintile. He doesn’t give us that stat.]

So it’s a little muddy. We aren’t as mobile as most of Europe, we have neither increased nor decreased mobility in 50 years, but many of us still experience absolute, if not relative, mobility. So is there a problem or not?

Here is another way of asking the question. What does it matter if the rungs of the ladder are getting further apart as long as people can still have freedom and opportunity to climb up?

Here is why it matters. Someone is always stuck on the lower rungs. As most of today’s new income and wealth goes to the upper 1%, rather than being distributed among all quintiles, that impressive National Review absolute mobility of today’s twenty somethings is unlikely to be so impressive in twenty years. And as fewer people’s incomes improve, more people’s incomes also stagnate and decline, even as the country’s GDP and net income increases.

Now if you are a smart, ambitious person, driven to climb the ladder, you don’t really care what the lower rungs are like, because you have determined you are not going to be there. It’s like starting out in Honduras, which is roughly in the next to lowest quintile of GDP per capita and determining that you are headed for the US. You don’t care what happens to the economy of Somalia (lowest quintile) or even what happens to Honduras, because you are going to be in the US. Similarly, people moving up the ladder seldom look back. If people don’t like their rung, they should climb. Everybody can climb, right? That’s what mobility is!

But the fact is, not everyone can climb. Health, IQ, circumstance, and even the passion for a career that is not all that financially rewarding (artist, musician, social worker) keep people from scaling up to the uppermost 1% or even the uppermost quintile. Various physical, mental, and social barriers present challenges that are often unseen and unfathomed by others. To these people it absolutely does matter what the incomes and quality of life are like on the lower rungs. And we should care too, because you can’t just dismiss all of these people who are not in the uppermost quintile as unskilled or lazy or damaged. We need these people to fill the less desirable jobs and they deserve a decent life.

It’s getting late and I have to move to conclusion …

So I would contend that mobility is NOT the most important measure. High income disparity damages our economy and population despite a consistent ability of less than 10% of the population (a small amount really) to escape the lowest quintile and move to the upper quintile. We need to also pay attention to what the absolute mobility is today, and not just what it was 25 years ago, and to do a better job of lifting up all of this nation’s citizens, not just providing an escape route for small percentages to climb higher, while providing a small number of the most successful with outrageous reward.

Reply

Econ4dummies March 13, 2016 at 12:17 am

As most of today’s new income and wealth goes to the upper 1%, rather than being distributed among all quintiles………….

False .

1-there is a top 1% for every ranking and top 1% of income is not the same people in the 1% of wealth

2_ You wrongly believe that the income is earned by the existing 1% but it has never been tracked as to where the 1% were in prior years. The rank is where you ended up so by definition the largest increases will be in the 1% since they cant move up any more.

If the poorest person in the country won a million dollars in the lottery, they would be part of the 1%.

Since the ranking is done each year, it only measures the totals for each group, not the change in the group from the prior year.

and the rungs in Europe are tighter so it is easier to move up in Europe but that is irrelevant since the dollar scale is not equivalent.

You do also realize that there is 25% more people in the top 1% now than 30 years ago so of course the total income increased

Reply

Steven H March 21, 2016 at 10:36 pm

OK, Econ4Dummies, you are apparently new to this conversation, so you have not been fully exposed to the facts of the matter. So welcome aboard, and let nme catch you up on a few things.

I am well aware that income and wealth are different, but it is true that most new national income and most wealth is going to the upper 1%, for both respective categories.

You say “You wrongly believe that the income is earned by the existing 1% but it has never been tracked as to where the 1% were in prior years.”
Your sentence parses a little strangely, but suffice to say that the incomes of the 1% have been rather thoroughly tracked over the last century in the US by researcher Emmanuel Saez at Berkeley, and in other nations by Thomas Piketty, a French economist who accomplished the remarkable feat of establishing a bulky tedious book full of economic research onto the number one spot of the NY Times bestseller list.

You can find and download Emmanuel Saez’s Excel spreadsheets online showing the incomes of the upper 10%, 1%, 0.1% 0.01% and some other subcategories, broken out by any of a number of fascinating subcategories. If you google income inequality and see a chart of the incomes of the 1% in the US over the last century, that probably came from Saez.

“Change in the group” – You seem to be referencing income mobility, which certainly exists. But you seem to be implying that my arguments are somehow weakened with the knowledge the today’s 1% are not comprised of the precise same membership as last year’s 1% or last decades’. It does not matter to the arguments against high income disparity that there is a little income mobility. And as you point out: “the rungs in Europe are tighter so it is easier to move up in Europe”. Precisely. There is more income mobility, and more ability to move up the rungs of the ladder, if there is not such a high income disparity from rung to rung. That does not negate my argument. Rather it strengthens it. Lower income disparity is better.

Actually, there are about 35% (not 25%) more people in the US than 30 years ago, and so there are also 35% more in the 1% , as well as every other percentile category. That is why you have to normalize by total income of the US.

Here is the thumbnail summary. Numbers are rounded but still generally accurate.
From 1950-1980, the upper 1% received about 10% of all income in the US. After the Reagan tax cuts (mostly benefitting the rich) and his SS tax increases (mostly costing the middle class) and a few other factors including gutting of banking regulations and weakening of unions, the share of income (including capital gains) to the 1% increased to 14% of all income by the late 80’s and has risen and fallen across the downturns of 2000 and 2008, but is up to about 22% of all income today.

The change in shape of the curve from 1980 to today is such that if you are in the upper 10% of all incomes you are breaking even or gaining in income shares, but below that mark and you are losing ground. The further up the ladder you are the better. The group in the upper 0.01% of all income earners received about 0.5% of all income in 1980, but over 4% of all income today. That means incomes in that group have gone up over 8x in share, even as real GDP per capita (and hence total income, approximately) has gone up about an additional 75% in those 35 years.

And I say the shape of the curve, because it would be incorrect to assume that all boats are getting lifted (everybody is gaining ground) while the upper 1% is just rising a little faster. The share of incomes going to the upper 1% is not a standalone statistic, but instead reflects the overall income trend across the income curve.

Another rule of thumb:
In 1950-1980, about 1/3 of all income went to the upper 10%, about 1/3 within that group went to the upper 1% and about 1/3 in that group went to the upper 0.1%, and so on. By 2008, and today, about 1/2 of all income went to the upper 10%, half of that to the upper 1%, and half of that to the upper 0.1% and so on. Or, to look at it another way, the lower 90% of Americans went from earning about 66% of all income to earning only about 50%, a relative decline of 16/66 or 24% in income share. Meanwhile, overall share to the upper 1% doubled and to the upper 0.01% roughly octupled.

These are the numbers that are worrisome, especially when you recognize that the incomes of the upper 1% have never stayed over 20% of all income for very long without an economic crash. It has only crossed into this territory 4 times in the last century: just before crash of 1929, just before downturn of 2000, just before Great Recession of 2008 and now.

Reply

Peter N March 9, 2016 at 10:13 pm

“But the fact is, not everyone can climb”
The law of nature that will not ever be broken. Only the strongest, fittest, most adaptable will survive. I didn’t make this law, it just is. Why is this law wrong? It has worked for millions of years. It is why we are here instead of dinosaurs.

“. High income disparity damages our economy and population despite a consistent ability of less than 10% of the population (a small amount really) to escape the lowest quintile and move to the upper quintile. ”
Why? You keep saying this without any proof or facts to back you up.

I recently saw a video made by Robert Reich. It is full of liberal propaganda and self promotion but he said that it isn’t the income disparity alone that is the problem. It is the fact that rich people don’t spend proportionately to their income and that spending creates jobs IF there are people that the capital to take advantage of the spending.

In the end it comes down to why the lower paid people aren’t worth more. You can’t refute this. Some people are not worth the minimum wage.

I have said this before, why don’t the liberals create wealth and jobs?

Reply

Peter March 10, 2016 at 6:58 am

I think this is one of the two biggest problems with our economy – and what will have to change to get the middle class going….

1) The rich aren’t spending their money. This can also be applied to corporations. Some of this is due to Washington gridlock, tax law uncertainty and economic malaise. Fortunately, the trend is starting to change here.

2) Our education system feeds into a early-20th century economy. We need education to feed into the jobs of tomorrow. The gap between the skilled and unskilled is widening dramatically.

Saw a great comment in an unrelated article about the robotics and AI revolution that touched on this. Quote from it:

“The best way to tackle the big upheavals that are coming, Thrun has argued, is not by trying to rein in technology, but by improving education. “We are still living with an educational system that was developed in the 1800s and 1900s,” he told The Economist last fall. His online university, Udacity, now has 4 million registered users worldwide and offers “nanodegrees” in computer-related fields. “We have a situation where the gap between well-skilled people and unskilled people is widening,” he said. “The mission I have to educate everybody is really an attempt to delay what AI will eventually do to us, because I honestly believe people should have a chance.”

Reply

Peter March 11, 2016 at 3:18 pm

Oh and by the “trend changing” I don’t mean that any of the hindrances I mentioned are changing. What I meant was that some money has slowly trickled back into the economy.

Reply

Steven H March 11, 2016 at 6:37 pm

Peter N———-
Only the strongest, fittest, most adaptable will survive. I didn’t make this law, it just is. Why is this law wrong? It has worked for millions of years. It is why we are here instead of dinosaurs.
——————-
The difference is that we have evolved into communities with civil societies. Rather than killing, starving, or enslaving the weak, we now reward the strongest and smartest and most hardworking people, but simultaneously protect the weakest and most vulnerable citizens from abuse by the strong. High income disparity is an evolutionary step backward into less civil society.

You say I have not proven that high income disparity damages society and yet you seem to accept that it is a problem that rich people do not spend in proportion to their income. That is the proof! People making tens of millions of dollars do not spend very much of that money. And when that money that otherwise would have gone to wages of middle class as disposable income languishes instead in the relatively closed system of the economy of the 1%, the economy suffers. The dots connect. I don’t see how to make it any plainer.

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Steven H March 12, 2016 at 5:11 am

It must have been late. It was Peter N who asked the question. But Other Peter who accepted that rich not spending is part of the problem. Regardless, the rich, and corporations, accumulating and preventing capital from being transformed into middle class wages is indeed part of the problem and is exhibit #1 in the proof that high income disparity is harming the economy.

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Peter March 12, 2016 at 8:13 am

Corporations not spending…..and small business owners not hiring or expanding. That’s what I meant. Not the stereotypical rich not buying Maseratis or beach houses.

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Steven H March 12, 2016 at 7:35 pm

Peter, it’s true that such business spending is not happening. But I don’t buy the arguments about that being caused by uncertainty blamed on some government policy. There is uncertainty about the economy, but I think that is largely caused by the lack of spending by the middle class, and that is caused by low wages due to the high income disparity. As I have been saying, the idle money is in the hands of the wrong economic class. Too much money retained at the top starves out the middle and slows down the whole economic system. Don’t you think that all of that idle capital would be used to start new businesses and create new jobs EXCEPT that there is a shortage of customers with cash? That is the root of the problem IMHO.

Peter March 13, 2016 at 8:54 pm

No. I don’t think that is it at all.

Peter March 14, 2016 at 7:39 am

Consumer spending has been rising dramatically. The “middle class not having enough money to buy products” theory just doesn’t hold water. Consumer spending is NOT idle – nor has it really ever been.

It is also not “the government’s fault”. Again, much of this relates to the changing demographics of industry in our country – as well as the slow growth expansion of the past 7 years.

Steven H March 17, 2016 at 7:32 pm

Wow, really, Peter? You don’t believe in the middle class squeeze? Median incomes decline, medical and education costs spiral up, and consumer debt is high, but you think consumer spending is not impacted by any of that?

Let’s check an investor’s view:

The Decline in Discretionary Spending Capacity Is a Problem:
(Jan 2016)
One of the issues I raised in yesterday’s column, … is the failure of the Federal Reserve’s model of economic activity to properly account for the reduction in consumption potential. This reduction is being caused by the increasing percentage of personal income, previously counted as discretionary, being reallocated into the servicing of necessities.

Necessities like health care, insurance and utilities, which are funded from disposable income (money left after taxes but before necessities are paid for), have a much lower economic multiplier impact than do goods and services paid for with discretionary income (what’s left over after the necessities are paid for).

One the of the first areas of consumption to exhibit the cost of this forced reallocation are sales of goods and services that have a predominantly female clientele.

In this column, I will simply look at the performance of the stocks I’ve discussed in past columns that cater to female spending … In the past two years, nearly all of the seven stocks that cater to higher-end female spending are down substantially.

http://realmoney.thestreet.com/articles/01/06/2016/decline-discretionary-spending-capacity-problem
====
From Market Realist: (Oct 2015)

Since the recession ended, US real household consumption has remained well below the historical average.

Most economists and investors understood that it was going to take some time for US consumers to repair their overextended balance sheets after the 2008 crisis. But seven years after the bursting of the credit bubble, things haven’t changed much. Even as job growth has surged and gasoline prices have plunged, consumers are proving slow to respond.

Since the recession ended in 2009, US real household consumption has remained well below the historical average.

Remember, consumption is a major driver of the economy, accounting for ~68% of the US GDP (gross domestic product). So a revival in consumption is paramount for sustained economic growth.
====

Other headlines alone tell the same story:
Feb 2016: Stocks Riskier Due to Less Discretionary Spending – Barron’s
Dec 2015: Holiday Spending Questioned as Retail Sales Sag – US News
Apr 2015: Where Have All the Consumers Gone? – Bloomberg View
Apr 2015: U.S. Sees Unexpected Decline in Discretionary Spending … [prnewswire]
Aug 2014: Americans Keep Skimping Like the Recession Never Ended … Bloomberg

Sure, there is also an occasional story about how low gas prices convert to a little extra spending money. But gas prices won’t keep declining, so that is a short-term anomaly, not a trend.

And BEFORE the Great Recession spending was only up due to increased debt loads on consumers, a trend that is, and was, completely unsustainable:

Wikipedia “Middle Class Squeeze”:
The ratio of household debt to GDP rose from approximately 47% GDP in 1980 and peaked at 96% GDP in 2009 … More than 92% of the 1.6 million Americans who filed for bankruptcy in 2003 were middle class … The squeeze on the middle class is also causing difficulties when it comes to saving money for retirement because of decreased real incomes and increases in consumer prices. In 2007, 1 in 3 American workers said they hadn’t saved at all for their retirement and of those who have started saving, more than half claim to have saved less than $25,000.
===

So I don’t know where you are getting your statement that Consumer Spending is rising dramatically. Investors who actually track this stuff seem to disagree. And they see it affecting the economy. Why don’t you?

Steven H March 17, 2016 at 7:48 pm

Found another one Peter, to better explain my claims. Hope this helps.

This 2014 report by Morgan Stanley (hardly a liberal stalwart) has one of the more comprehensive analyses I found regarding Income Inequality and Consumer Spending. In fact, it is called “Inequality and Consumption”.
http://www.morganstanleyfa.com/public/projectfiles/02386f9f-409c-4cc9-bc6b-13574637ec1d.pdf

A few select quotes:

With all income groups withdrawing from the marketplace to focus attention on balance sheet repair, consumer spending experienced the sharpest decline of any recession, and took the longest to reach its previous peak .

So, despite the roughly $25 trillion increase in wealth since the recovery from the financial crisis began, consumer spending remains anemic. Top income earners have benefited from wealth increases but middle and low income consumers continue to face structural liquidity constraints and unimpressive wage growth. To lift all boats, further increases in residential wealth and accelerating wage growth are needed.

Moreover, the US far outstrips the global average for inequality. In 2011, the average income of the world’s richest 10% was nine times that of the poorest 10%. In the US, the ratio was much higher, at 14-to-1.

Total outstanding student debt surpassed $1 trillion in 3Q 2013 and sat at $1.1 trillion at the end of 2Q 2014, growing on average an incredible 12% a year for the past 8 years (Exhibit 20). The average student loan balance per student aged 22 to 25 has about doubled from nearly $11,000 in 2003 to more than $20,000 by the end of 2012. Meanwhile, the proportion of students at age 25 with loans increased from 25% to 43% over that same period. Indeed, student debt is now the largest component of household debt outside of mortgages.

Further, as we will discuss later in the section that explores Household Debt, consumption for the debt- laden student population may be depressed. Indeed, the share of consumption driven by college age consumers has been in decline since 2003.
====

Enough, Peter?

Steven H March 17, 2016 at 8:02 pm

Peter, I almost missed this statement:
“Again, much of this relates to the changing demographics of industry in our country – as well as the slow growth expansion of the past 7 years.”

Yes the slow growth expansion is a problem. And what causes that, Peter?

Let me repeat the expert testimony:

“Remember, consumption is a major driver of the economy, accounting for ~68% of the US GDP (gross domestic product).”

“So, despite the roughly $25 trillion increase in wealth since the recovery from the financial crisis began, consumer spending remains anemic. Top income earners have benefited from wealth increases but middle and low income consumers continue to face structural liquidity constraints and unimpressive wage growth. To lift all boats, further increases in residential wealth and accelerating wage growth are needed.”

This has been at the heart of my thesis, and it is good to hear the experts agree.
– High income disparity represents a shift of money from middle income to top earners.
– This shift results in anemic consumer spending.
– Anemic consumer spending slows the economy.
– Slow economy restricts wage growth of middle incomes.
– Slow wage growth of middle incomes helps to drive high income disparity.

It’s a cycle. And what is the solution? Not starting more businesses. Not reduction of taxes or of tax ubncertainty. Not cutting government spending. According to Morgan Stanley:
“To lift all boats, further increases in residential wealth and accelerating wage growth are needed.”

Peter March 17, 2016 at 10:08 pm
Steven H March 18, 2016 at 12:29 pm

Nice data, but incomplete.
Your single chart says nothing about whether this spending is disposable, discretionary, or necessities, nor whether it comes from the middle class or upper class. I think the articles I linked to are more complete in their analysis.

Peter March 18, 2016 at 2:45 pm

Makes no sense. I made a statement about consumer spending and posted the data to back up what I said. Every post is “incomplete”. Just adding facts to the discussion. Maybe there are those readers that preferred your posts and links though. No argument from me (vs you at least)…. To each their own – just wanted to include the stats.

Steven H March 22, 2016 at 8:41 pm

It’s a good chart, Peter, and well-sourced, but it makes me wonder what is missing. If all of those analysts I linked to — most all of them investors and not just political ideologues — are saying there is a shortage with some components of consumer spending, how does it fit in with the chart you listed which shows the overall total of consumer spending rising at a fairly constant rate? Are all of the analysts wrong? I have to think that there is something missing, that the chart needs to be broken down into types of spending, and where the spending is coming from in quintiles. I am prone to think the analysts are not fools. Thus I said the chart seems incomplete.

For instance, what if most of the consumer spending for middle quintiles are spent on medical, housing and education? Then those consumers have little left for frills to spend at local small businesses or eating out at restaurants. What really matters is how much discretionary income is available to consumers, not just total consumer spending. Maybe something like this.
http://www.gailfosler.com/wp-content/uploads/Slide232.png

Peter March 23, 2016 at 6:57 am

That says it all. Believing “analysts” (and only those whose conclusions you agree with) over raw, unadulterated data. Not much I can do with that.

Steven H March 24, 2016 at 8:46 pm

That’s rather petty, Peter. I explicitly chose neutral analysts without a political horse in the game, and you just cherry-picked a chart that has a trend you agree with, without any analysis to show that it makes a relevant counter-point. There is lots of raw data out there. Explain how it matters.

Peter March 28, 2016 at 5:52 am

Nothing cherry picked. You disputed that consumer spending had been rising and I simply posted the data. No spin there.

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Steven H April 2, 2016 at 12:06 pm

I did perhaps fail to emphasize that it is is DISCRETIONARY spending per household that is critical, although that WAS in the analyses I posted that you likely ignored. Total discretionary spending goes up with population, and is a less useful or insightful statistic.

So you get a point for an accurate chart, but not necessarily a meaningful one that provides insight.

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Dynx March 10, 2016 at 8:25 pm

Well, been awhile since I last saw this but good to see people are still banging their heads into the wall and charging the windmills.
I have to say Steven H and the other guy, won’t bother scrolling for his name:
Your solution to the problem of unfair gov. Advantage to the rich seem to be to give MORE power to the government. Brilliant. Simply, amazingly and stunningly brilliant. Your basic premis is that the table is tilted to the rich. The 1%. And how will we fix that? Well, we must usher in a new (only its not new) era of tax complexity. More breaks here, fewer deductions there. More investment over on this side…and a little more here. And certainly Hillary/obama/whatever dem of the election cycle is up will get it right this time. Reality is, they may tax that guy that makes 250k a bit more sure. But the rich, the really rich have no worries. Because they’re on the inside. And to avoid paying 20% more they can part with 5% to get that tax break you want gone, that deduction you want reduced to not effect them.
The truth is, when you’ve got 18 million dollars in liquid assets the government doesn’t take half over the cap when you die. You could ask my grandfather but he’s dead. It’s moved long before that and parceled out in cash, hidden in life insurance policies etc. cause when you have that much money you can live on the 5 million and move the rest. Now let’s say all you have is a 6 million dollar family business….well now you’re f*cked. Or more precisely your kids are. Now how are you going to make your family move to that rich stratosphere? You can’t. Congrats. More wealth equality. You get the semi-upper crust but never the really rich. And the more rules, the more expensive lawyers and CPA’s needed to keep you up there all it does is cement the rich where they are. Sure you even out the other 98% of the peons. If that’s your goal you’re on track. Me? I rather have opportunity.

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Steven H March 11, 2016 at 6:45 pm

So you are saying that since more money to the rich increases their control over government and causes government to exhibit less control over the excesses of the rich and powerful, that we should then give up the good fight and forget about government by the people, shrinking the power of the people even further. Brilliant. More tax cuts to the rich, more oppression of the poor by the rich and a hastening into a gilded age of class divide to put the late 1800s to shame. And why try to tax inheritance because the rich hide it. So just give up. Forget the lessons of the last several thousand years and we can devolve to warring slavelords.

No, thank you.

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Steven H March 11, 2016 at 8:05 pm

Concisely, a nation without a strong government of, by, and for the people, is a nation without opportunity for the many, and excessive riches for the few.

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Steven H March 12, 2016 at 5:30 am

The fallacy in your argument, Dynx, is that giving mor power to the government that is controlled by the rich is giving more power to the rich. That is not how it works or what is happening. The party of the rich wants to shrink government so that is controllable by the wealthy few. They want to remove all of the benefits that government provides to the citizenry so that they can better control that contingent as well. And so that they pay less in taxes.

A strong government that works in conjunction with the people and looks after the interests of all citizenry, and not just the wealthy, is a good thing for the country. Privatizing government services does not necessarily make those services better or more efficient. Sometimes it does, sometimes it doesn’t. Privatizing jails just incentivized private industry to jail more people in the least costly and least humane ways possible. Privatizing public education as charter schools is a mixed bag of success and failure. Government is the ONLY means of making society answerable to the people instead of big money. But only if we get big money out of government with better regulation, and not by giving in by shrinking and neutering the power of the people to govern.

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Dynx March 13, 2016 at 12:41 pm

I’m sorry which jail are you referring too that goes out and arrests people then sentences them? Oh right, that’s the benevolent government. You’re providing ample evidence you lack the intelligence to discern what the real problem is.

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Dynx March 13, 2016 at 12:49 pm

Sorry this is disjointed but what? Who? The party of the rich wants to shrink government?!?! When was the last time a republican (which I assume you mean) shrank government? When we move past this republican/democrat crap and realize their both screwing us maybe we can make some progress. Keep fighting people that are basically in the same boat as you though. That darn guy making 400k he be holding me down!!! Never mind that kindly billionaire claiming he wished he could pay as much taxes as his secretary though….he cool.

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James March 15, 2016 at 8:38 am

Couldn’t agree more. Need to move past the Democrat/Republican crap. When it comes to the game being rigged and big money ruling the day, both parties are the EXACT SAME at the top. Hillary might be the worst of all the candidates when it comes to this.

Steven H March 17, 2016 at 10:32 am

“When was the last time a republican (which I assume you mean) shrank government?”

Never. But they do shrink government revenue by cutting taxes for the rich and then demand we cut spending on the poor to pay for it. We can’s stop talking about Republicans vs Democrat as long as the Republicans keep siphoning off the country’s profits into their own and their contributors’ pockets.

Steven H March 17, 2016 at 10:29 am

Listen and learn, Dynx.

Government puts people in prisons but private prisons determine how to treat them, and they also lobby for more prisoners.

A few problems with private prisons:

One way for-profit prisons to minimize costs is by skimping on provisions, including food. A psychiatrist who investigated a privately run prison in Mississippi found that the inmates were severely underfed and looked “almost emaciated.” During their incarceration, prisoners dropped anywhere from 10 to 60 pounds.

States sign agreements with private prisons to guarantee that they will fill a certain number of beds in jail at any given point. The most common rate is 90%, though some prisons are able to snag a 100% promise from their local governments. Because of these contracts, the state is obligated to keep prisons almost full at all times or pay for the beds anyway, so the incentive is to incarcerate more people and for longer in order to fill the quota.

One in every four people that is incarcerated worldwide is held captive in a United States jail. How is it that a country with only 5% of the world’s population has 25% of all the inmates? Simple: prisoners are source of revenue for private companies, so the demand for incarcerating them is especially high.

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Dynx March 18, 2016 at 4:19 am

So….
To summarize you say the “party of the rich wants to shrink gov. So that it is controllable by the wealthy few” Direct quote. I refute that BS. You then dance around and change it to they “shrink revenue”. You then proceed to harp on private prisons more which I suppose is an attempt to divert attention from the above inconsistencies but really quite nicely proves my point. Which is again: large, overreaching gov. Essentially run by large donors is not going to be fixed by giving that gov more power so that it can extract more money from large donors for more specific favors. You have the problem nailed. Your solution is just ass backwards and I think it may just be that you’ve got yourself invested in the us vs. them “go team” mentality. Divide and conquer is a good approach and the funny thing is they win noatter which side you go to. Think about it.

James March 18, 2016 at 5:49 am

The irony is that Steven H is just like Ted Cruz. Read his description of him below. That sounds almost exactly like how Peter and Ken described him.

The country needs far fewer people like Ted Cruz and Steven H in the dialogue if we are going to change anything for the better.

Steven H March 18, 2016 at 11:57 am

Poor comparison, James. We both live in Texas. The similarities end there.

Steven H March 18, 2016 at 12:07 pm

Dynx, I said the GOP *wants* to shrink government. And that is indeed what they always say they *want* to do. Smaller government is there oft-stated platform. You have pointed out that they do not actually do that (and that they are then hypocrites). I agreed with you. The inconsistency in that argument is with the GOP and not with my statements.

What they actually do is shrink revenue, presumably to follow the “starve the beast” tactic. It never really works. It just runs up debt, which is why the only Presidents to run up Debt/GDP between WW2 and the Great Recession were Reagan, Bush, and Bush2.

The point about prisons was simply as an example of the failure of privatizing everything that government does, which is another oft-stated goal of the GOP. Privatize jails. Privatize schools. Privatize healthcare. Capitalism is always superior to any government-run solution. Except that it’s not. Not always.

Steven H March 12, 2016 at 6:43 am

But don’t think I am saying that government must be bigger and bigger to be better. The size of government alone does not measure its effectiveness. We need lean efficient government, and we need it to provide certain services to its citizenry to keep the population healthy and the economy prosperous, but that does not necessarily mean larger or smaller government. It just means better government.

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Peter March 12, 2016 at 8:15 am

I am all for smaller and better government myself. Neither party wants that though – nor do the people that fund their campaigns.

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James March 18, 2016 at 12:20 pm

If by some miracle you thought about my comment, you would see that your detractors describe you almost word for word the way you describe Cruz (who I would no doubt assume you are a detractor of). That’s not a good thing.

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Steven H March 22, 2016 at 8:19 pm

LOL. And your detractors describe you the same way, James. The thing about Cruz is that his COLLEAGUES in his own party despise him. That’s a whole ‘nother level of despicability.

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James March 23, 2016 at 6:42 am

Show me a post where someone (other than you) has described me in such a way.

Steven H March 24, 2016 at 8:14 pm

Detractors detract. It happens by definition. If people don’t like my opinion, they write an opposing opinion, and sometimes when they have no intelligent argument to offer, they spout insults instead. What you are saying is nothing more profound than that all the people on this limited little blog who disagree with me, disagree with me; and that a couple of them (and you) have on occasion attacked my character rather than offer substantive replies to my arguments. The corresponding statement about Cruz would be to say that Democrats in Congress don’t like him. What I am saying is that even the Republicans in Congress don’t like him, which is a completely different thing. So your comparison of Cruz to myself not only lacks profundity, but it lacks any relevance or accuracy.

James, you complain about people making personal attacks rather than having substantive discussions on this blog, and yet you are one of the primary repeat offenders. The fact that few people call you out on your childish antics has less to do with the high level of your postings than it does the self-restraint of everyone else.

Now can we get back to topics of substance?

James March 25, 2016 at 9:44 am

Didn’t think so.

Others have posted well thought out explanations (especially Peter) explaining why they discontinue any dialogue with you and it sounds EXACTLY like an open letter to Ted Cruz – at least the way you described him (which I agree with by the way).

But of course you won’t see it this way – only agreement I’ll get from you is when I’m praising a democrat or insulting a republican.

Steven H March 25, 2016 at 10:10 pm

James, I usually appreciate Peter’s posts, but his most recent critique of me, way up the page, was off the mark. I was a little disappointed personally that he felt the need to attack me, but I was even more disappointed that he scrambled facts about my arguments.

Specifically, he claimed I don’t listen to experts, and that I don’t acknowledge when the same experts have clearly proved me wrong. This is simply not accurate. I have listened to these arguments and countered them. In a post further up the page, responding to Peter, I went through and recalled every possible example I could recall and in that post I indicated how I had not only listened to the so-called experts but countered the arguments with logic and additional expert testimony and articles. I am in no way guilty of failing to listen to arguments. Quite to the contrary, when my counter-arguments have prevailed, you and Peter and Ken have usually simply refused to acknowledge that my counter arguments even exist.

The refreshing thing about Cole coming on to this blog is that he is willing to acknowledge that I have occasionally made a good argument, and that maybe there are some reasonable tax compromises that can be made that might cost some rich folks a few bucks, above and beyond current tax rates.

I have to point out that I was pleasantly surprised that Peter backed off on his critique of Hillary’s emails. His “fair enough” was a simple acknowledgment that I had made my point, and I really appreciated it. And yes, if you look back, you can find places where I have similarly backed off when I overstepped the facts with some of my posted assertions.

I don’t want to waste a lot of time here doing a tit for tat recount of insults and offenses, but here is a brief list of some of the facts that I believe have been adequately proved by me, repeatedly disputed by you and Peter and Ken, yet never really resolved. It would be nice if my proofs were either acknowledged or properly countered.

With the current top marginal tax rate of 39.6%, it is not true that millionaire wage earners pay federal income tax effective rates of more than 40%.

Cost per policy is not an equitable means to evaluate medical insurance when comparing private insurance of under 65 folks vs Medicare folks over 65.

It is a reasonable national fiscal policy goal to pay down debt/gdp by retaining a deficit that is somewhat less than gdp growth, rather than demand that deficits be completely eliminated.

It is reasonable national fiscal policy to allow national debt in raw dollars to increase as long as debt/gap decreases.

How about making my day and agreeing with the above 4 reasonable statements. I’m not even asking you to agree that the last two are the best approaches, or the approaches you might prefer, but just that they are reasonable. Can you do that much?

Steven H March 25, 2016 at 10:15 pm

That was “debt/gdp” not debt/gap. Fighting the spell checker here.

Steven H March 28, 2016 at 10:39 pm

And just to answer your earlier post more directly, James, I don’t know of any other detractor on this blog who describes you like Cruz or makes any other nasty comments about you. Most other people on this blog don’t waste their time posting insult posts against other posters. I only do it in defense when I am attacked. You and Peter N seem to go out of your way to insult others to pick a fight. It’s not very constructive behavior, and I wish you would cease and desist.

Speaking of “cease and desist”, I will say that I thought the most amusing insult you tossed at me was that I argue like a lawyer. Didn’t you say you are a lawyer? Or do you just work with lawyers? And I really don’t understand what style you want me to argue in. You want me to respect the opinions of experts, but you don’t want to read or digest the expert article links I post. You want me to listen to the experiences of others but you don’t want me to add to the discussion with experiences of others. The best lawyer, despite all of the modern-day jokes, is usually considered someone exhibiting the very pinnacle of oratory style and comprehension of the pertinent facts. If you don’t want that kind of argument, what do you want?

Dynx March 11, 2016 at 4:02 am

About the only thing I agree with you on is that Trump would in fact be a very scary guy to have in the whitehouse.

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Steven H March 22, 2016 at 8:15 pm

Glad we agree on something. :-)

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Dynx March 11, 2016 at 8:18 am

I think Peter makes a good point above. Why can’t we improve education? (your answer will be we don’t find it enough, in fact if I asked you the solution to ANY problem it would be funding). Reality is that entrenched people with a political advantage have a huge interest in keeping it the way it is since they benefit from the way it is. If they can convince useful idiots to vote for giving them more money to keep it the way it is all the better. So you vote for more funding. The administrators and union leaders get more money, the teachers get another 50 cents and some new crayons, nothing changes because nobody with sway really wants it to change and next election the higher ups have Hillary v. 2.0 tell you they need more money again and we repeat. If we’re really pissed off we vote for more regulations (written by the education lobby) that new education paradigms can’t afford to keep up with and further entrench what we have and who has what. Less gov involvement is the answer. less regulation. Innovation at the state and local level. There will be failures but that’s always going to be the case. Voting for more centralization of power only works if you have benevolent saints running the works and we don’t, never have, never will.
If things keep moving in the direction they are I’ll try to convince my kids to go into politics. Not for the social good, for themselves. “Tell them you’ll give them free stuff, tell them they don’t have to do anything. It’ll be a lie but who cares, get your pension, nice cushy lobby job after and screw em”. That’s how people think, that’s how families with enough money to win elections think. They don’t care about you, stop voting to give them more power. Hillary and trump are only the most obvious examples of this. I think Bernie is the only person that actually believes what he’s saying but he’s a loon. We need a libertarian movement in this country instead of slashing at each others throats with envy. You do you, want to marry a dude have at it. Want to smoke weed all day good for you. Here’s a safety net, you won’t starve. Want to move up in the world? You can but its gonna take hard work and some luck. That’s the best we can hope for.

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Steven H March 11, 2016 at 7:04 pm

So much cynicism. Lighten up.

We absolutely need better education policy. And while we should not just throw money at the problem, I’m pretty sure that cutting funding won’t help either. We do need to modernize our education system, both at the grade school and college level. It will take money. TANSTAAFL. When I went to high school, they were actually pretty innovative. Trimester system. No more than 5 classes a day, just 4 for some students. Same classes each day, not alternating schedules each day. Trade classes available (metal shop, work shop, automotive repair). Work coop programs with local businesses in 5th period. Etc. In a public school system, by the way. All of this excessive standardized testing is stupid. We need to measure our education system but not motivate schools to spend 75% of time just teaching to the multiple choice tests. We need to prepare students for college but also realize that 70% of students will not graduate college and need sufficient skills right out of high school to get real world jobs, like basic finance, programming, and problem solving skills. Maybe an entrepreneurial class. We need new ways of financing education without charging families $100,000 per child for skills they may never use, or career training for jobs that are not available.

This will take clever thinking, state level innovation, and yes, it will take more tax money, too.

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Econ4dummies March 13, 2016 at 12:40 am

The average Chicago public school teacher retiring today is a multi-millionaire with a starting average pension of more than $77k / year and total payments of $2.4 million dollars.

All this for a 50% high school graduation rate.

And they have even convinced the poor retired worker with an average Social security payment of $20k starting at age 65 to feel sorry for them and pay higher taxes to fund the pension shortfalls.

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Peter March 13, 2016 at 8:52 pm

We already pay more per student for education than any other nation. Yet we rank behind many of them. Money not the issue – it’s the management of those funds.

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Dynx March 12, 2016 at 4:03 pm

When they deliver the critical thinking and state level innovation and I hear a legit plan….I’ll be standing by with the money. Doesn’t happen though. But pie in the sky is good. It beats being a cynic in the real world but apparently doesn’t pay as well.

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Peter March 14, 2016 at 8:08 pm

Great clip from an article I ran across about Hillary discussing what onslaught she should expect from Trump…..

“Cue up the Pearl Jam, folks, because we’re going all the way back to the ’90s: Whitewater, Travelgate, Troopergate, Lewinskygate, with a little Vince Foster Murdergate, for a dash of blood. But wait—those are just the golden oldies! You’ll also be hearing about the Clinton Foundation and the Clinton Pardons. Of course, what respectable slander campaign would be complete without the new material? Benghazi, the private email server, the Wall Street speeches?”

The article is obviously playing politics, but the fact that the list is this extensive says plenty doesn’t it? Or are all of the above issues overblown right-wing conspiracy?

Just saying, I was surprised to find Steven H supporting her. Bernie Sanders was who I certainly expected and think that he would align with.

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Steven H March 17, 2016 at 10:08 am

“Or are all of the above issues overblown right-wing conspiracy?”

Yes.

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Steven H March 17, 2016 at 10:42 am

Cruz is a tyrant who staunchly defends “principles” which only a small minority of the population supports, doesn’t get along with any of his colleagues, and has economically crazy ideas about the economy like the gold standard and never raising the debt limit, neither of which makes sense to even the minimally educated observer.

Trump is a racist, liar, tyrant, and bully who wants to make America White again.

Hillary’s biggest problem is that she is closer to being a moderate Republican than either of the leading Republicans.

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Dynx March 18, 2016 at 4:23 am

Her biggest problem is that she is a criminal. Granted she has never been convicted but that’s because some animals are more equal than others.

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Steven H March 24, 2016 at 7:55 pm

Not convicted = not a criminal.

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James March 18, 2016 at 5:13 am

Interesting how you believe the media narrative on the two republicans but not on the democrat.

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Steven H March 18, 2016 at 11:54 am

James, it’s because there is no such thing as a single “media narrative”. There is a lot of information from multiple media sources and I actually research the data rather than believing a single narrative from a single source or family of sources.

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James March 18, 2016 at 12:17 pm

Lol. Is that right? Just a coincidence that you believe the negative narratives on the republicans but not the democrats. My apologies if it is just a coincidence.

Steven H March 18, 2016 at 12:33 pm

Not my fault that the Republicans are coincidentally so despicable, or that, of all the candidates that started out in this GOP race, the two that are leading are the least trusted and least admirable. And it’s not really a coincidence. It’s a result of the hate and distrust and class warfare that GOP has been fostering for years.

Steven H March 19, 2016 at 11:36 am

Also, James, the overall “media narrative” on Hillary is not so bad. The Benghazi/e-Mail Horrendous Scandal narrative is primarily from the “Fox/GOP Echo Chamber”, which is inherently not to be trusted. Even GOP-led investigations into Benghazi have cleared her of criminal or nefarious behavior. It’s the desperate politicians who just keep throwing mud that try to make things sound so bad.

You have to ask: Why has Benghazi spawned more investigations than 9/11 or the Kennedy assassination, or any of the multiple embassy attacks that occurred under Republican Presidents? Would anyone still be investigating Benghazi if there was not a political motive to take down Hillary? And why must American taxpayers continue to be charged for this unsubstantiated, endless series of investigations that all come to the same conclusions as the very first investigation called by Hillary herself: that there were mistakes made but no nefarious political machinations nor criminal behavior?

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Steven H March 19, 2016 at 11:44 am

Yet the “media narratives” on Trump and Cruz are simply lists of facts that need no investigation.

Trump promotes racism, fascism, and political violence. It is in his behavior and all of his speeches. He is the most un-American Presidential candidate in his behavior and principles, that I believe has ever existed, excepting perhaps Goldwater and George Wallace.

Cruz is an obstructionist that favors shutting down the government rather than raising the debt limit, and he believes in the gold standard. And most of his Congressional colleagues do not like him. That’s not a media narrative. That’s just the most visible surface of the man, evident from documented behavior and public knowledge. I’m sure there is much more to dislike once you get to know him.

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Peter March 18, 2016 at 9:27 am

https://research.stlouisfed.org/fred2/graph/?g=3K9Z
http://www.economics21.org/files/FedRevsMargTax_0.jpg

Interesting charts…. Federal receipts (taxes) have stayed stable relative to GDP, while marginal tax brackets have been quite volatile. It is a total myth to think jacking up the taxes on the top 1% is going to bring in significantly more bottom line revenue (relative to GDP) to the government. People who are angry at the “rigged system” or the rich are picking the wrong target.

The only way to fix this from the revenue side is to a) grow the economy or b) tax wealth. You cannot fix this with the political mantra of “raise income taxes on the wealthy”. I still maintain is that this will hurt the families in the $200k-$500k range significantly, which will affect jobs for the middle class – without truly impacting the super-rich, who will just re-position their assets in other ways. Some may suggest taxing wealth – which I think is wrong on so many levels – but at least this might actually work.

I continue to maintain that we focus on these three primary things:

#1 – Reducing Federal spending so that we can still support SS, welfare, unemployment and Medicare when interest rates rise.
#2 – Revamping our education system for today’s economy. This can be done in the schools but also with government-incentivized apprenticeships and corporate training programs. Get the corporate cash moving again.
#3 – Changing laws and taxes to encourage companies to keep jobs in the US.

Is this so unreasonable? Problem is nobody will ever get elected by running on #1. #2 doesn’t win mass votes either as it essentially passes the buck to the individual.

#3 is tricky. First of all, the mechanics of this are over the heads of most voters, so this isn’t really going to win votes. Even with an economics background, I would be crazy to try and say I understand the entire picture of trade laws, tariffs and international economics.

Plus, every politician says they want to do this on both sides (it really isn’t something that is debated) – it’s the HOW that is the problem. It is hard to argue when a company can make their products for $1 vs. $5 in the US to NOT move their factories to China. And we want to make it WORSE by raising minimum wage. Again, missing the larger point. The role the government can play here is one of taxes and incentives to encourage companies to keep jobs in America.

All these things can be debated and worked out by much smarter people than me – and those who have all the data and facts and a deeper understanding of these things. But the public is being led down a different path for political gain, which slows down productive dialogue and creates too much partisan us vs them divisions.

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Dynx March 18, 2016 at 2:40 pm

I’ve thought about a wealth tax but would have to oppose it on moral grounds, it would really be just confiscation of property ( but really isn’t that what income tax is? Only difference is if it reaches your bank account first or not). I don’t think its the answer but at least it’s an honest place to start. Let’s see if good old warren buffet is up for that, I think he’d suddenly be a lot less interested in solving inequality with that as the means. However just to expand on the idea it does make since in a way that it truly targets the wealthy and not just those with sudden maybe temporary income. If I’m a grad with 150k in student loans and my first month of a 6 figure salary I’m technically poorer than the poorest dweller in the gov. Projects. My net worth is more negative then they could ever dream of achieving is it really incumbent upon me to pay a large portion of my income to the gov before I reach the lofty goal of reaching absolute zero net worth? Democrats would say yes (and infarct are saying yes). Very absent these voices from the left is the realization that this tax scheme piles the poor and staying poor with the poor and working hard to not be poor with a minority of upper 20% wealth and upper 1% income but totally misses the top 1% by real accumulated wealth. Again, not saying it would be a good idea to tax wealth just saying that it would be an honest approach. Rather than the dishonest and completely misguided approach that the halfwits clamoring for Bernie and Hillary are blinded by.
Their fiscal policy is equal in ridiculousness to the absurd notion of a return to the gold standard proposed by some on the right. The difference between their supporters isn’t one of logic or sound reason the difference is emotional investment or ultrior motives. The end, again… Is division into camps and a false narrative of choice where the details and window dressing may change. You may get to smoke weed in a park, you may even get your birth control for free! But your odds of being able to achieve financial freedom are getting smaller, and smaller every year.

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Steven H March 19, 2016 at 11:04 am

Dynx,

I’m glad to see that we agree on the absurdity of the gold standard. I actually have my doubts about the practicality of a wealth tax, though I don’t really see a moral objection. (Collecting a tax is a lot more moral and honest than civil forfeiture which is rampant in the country and truly is just confiscation, but on extremely unethical grounds.)

I don’t really understand your following statement, however:
“the dishonest and completely misguided approach that the halfwits clamoring for Bernie and Hillary are blinded by”.
The approach of higher marginal income tax rates on millionaires and higher capital gains tax rates is nothing more than returning to an approach that worked very well in the nation’s most prosperous years. How is a legal tax, proven to work well, dishonest or misguided? Or do you mean something else?

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Dynx March 19, 2016 at 5:13 pm

As above I don’t think marginal income tax rates/increases are the end all be all of appropriate revenue collection but that alone certainly isn’t as rediculous as the gold standard.
Allowing increased size of portfolio caps for Fannie mae and Freddie mac, allowing them to back jumbo loans as she backed in 2008 so we can repeat the housing bubble is just about as rediculous. I’ll defined “risk fees” for banks rather than targeted bank reform as a targeted extortion mechanism to increase gov corruption. Numerous small unfounded/underfunded initiatives. That’s just hillary.
Bernie sanders is absurd on his face, I feel no further need to detail my criticism of him than I do trump.

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Steven H March 22, 2016 at 8:13 pm

“Three primary things”
Peter I agree with your three-pronged approach, except that you don’t necessarily have to shrink federal spending to accomplish the goals in #1 of keeping those programs solvent. Programs, benefits, taxes, may all need some reworking. I certainly agree that “The role the government can play here is one of taxes and incentives to encourage companies to keep jobs in America.”

And of course, that plan addresses government solvency and economic growth, but it does nothing to address high income disparity, which is still its own very big issue. We need some additional bullet points to address that one.

“People who are angry at the “rigged system” or the rich are picking the wrong target.”
Maybe you, personally, are the wrong target, Peter, but some portions of the rich are certainly the right target, as they do rig the system. Have you seen “The Big Short” or read very much about our corrupt banking system that screwed the country and gave bonuses to some of the very rich for doing it? There are a lot of suitable rich targets out there, quite worthy of people’s anger and resentment.

“It is a total myth to think jacking up the taxes on the top 1% is going to bring in significantly more bottom line revenue (relative to GDP) to the government.”
And yet the small recent tax increases on the 1% have already done just that. Brought our deficits down to about the same size as GDP growth. Pretty effective myth. A little more and we can be paying down the debt/gdp ratio.

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Dynx March 23, 2016 at 12:11 pm

The big short was entertaining but skipped over a large portion of the story. They neglected to mention that at their peak Fannie mae and Freddie Mac owned 40% of the subprime market. With market share at 40% it’s not believable to call them an idle bystander and they could be more accurately described as a market maker. So again, while the bankers certainly bear blame for their own doings the real story demonstrates quite clearly that gov oversite and regulation aren’t the key, they’re just as bad as the bankers. Giving them more money is no different than the gift to the banking industry from the taxpayers that allowed those big bonuses.
And your point on deficit to GDP would be good if we still weren’t at -2.5% and the ratio didn’t have so many moving parts. If you can directly link it to taxes on the 1% I’d be impressed. Please show your work.

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Steven H March 24, 2016 at 7:03 pm

Fannie and Freddie made mistakes, but they were followers, not leaders in the subprime market. Most of their loans were the less risky ones. However it is true that under better leadership, they could have served as a brake for the out-of-control private banks instead of contributing to the problem.

The magnitude of their role is disputed, but based on the various studies, it is unlikely that they were the primary cause of the mortgage crisis, and also unlikely that their role was minuscule. Thus my sort of middle-of-the-road statement above, backed by various analyses.

Some example info from the Wikipedia summary:
=====
Several studies by the Government Accountability Office (GAO), Harvard Joint Center for Housing Studies, the Federal Housing Finance Agency, and several academic institutions summarized by economist Mike Konczal of the Roosevelt Institute, indicate Fannie and Freddie were not to blame for the crisis.[263] A 2011 statistical comparisons of regions of the US which were subject to GSE regulations with regions that were not, done by the Federal Reserve, found that GSEs played no significant role in the subprime crisis.[264] In 2008, David Goldstein and Kevin G. Hall reported that more than 84 percent of the subprime mortgages came from private lending institutions in 2006, and the share of subprime loans insured by Fannie Mae and Freddie Mac decreased as the bubble got bigger (from a high of insuring 48 percent to insuring 24 percent of all subprime loans in 2006).[265] In 2008, another source found estimates by some analysts that Fannie’s share of the subprime mortgage-backed securities market dropped from a peak of 44% in 2003 to 22% in 2005, before rising to 33% in 2007.[260]

Insofar as Fannie and Freddie did purchase substandard loans, some analysts question whether government mandates for affordable housing were the motivation. In December 2011 the Securities and Exchange Commission charged the former Fannie Mae and Freddie Mac executives, accusing them of misleading investors about risks of subprime-mortgage loans and about the amount of subprime mortgage loans they held in portfolio.[271] According to one analyst, “The SEC’s facts paint a picture in which it wasn’t high-minded government mandates that did the GSEs wrong, but rather the monomaniacal focus of top management on marketshare. With marketshare came bonuses and with bonuses came risk-taking, understood or not.”[272] However, there is evidence suggesting that governmental housing policies were a motivational factor. Daniel H. Mudd, the former CEO of Fannie Mae, stated: “We were afraid that lenders would be selling products we weren’t buying and Congress would feel like we weren’t fulfilling our mission.” Another senior Fannie Mae executive stated: “Everybody understood that we were now buying loans that we would have previously rejected, and that the models were telling us that we were charging way too little, but our mandate was to stay relevant and to serve low-income borrowers. So that’s what we did.”[273]
=====

There is a lot of info out there, along with some analysts who swear that Fannie/Freddie were primary causes and others claiming they were of minor import. The truth is probably somewhere in the middle. But facts certainly point at many other failures in the banking system, most of which could have been avoided by not dismantling the bank regulations from the 40’s, and the Big Short did a pretty good job of covering quite a few of the causes, even if it did not address everything.

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Steven H March 24, 2016 at 7:14 pm

“the real story demonstrates quite clearly that gov oversite and regulation aren’t the key.

Actually, the story is that insufficient government oversight and regulation IS the key to understanding the mortgage crisis, and was the primary cause of system failure, from the inadequate oversight of Freddie/Fannie, the moral hazard of ratings agencies being financially bound to provide high ratings to the financial products, the insufficient funding and manning of the SEC, the moral hazards stemming from the dismantling of Glass-Steagall, the free-wheeling activities of the shadow banking system, etc, etc.

Greenspan thought that capitalism could regulate itself. He was clearly wrong and later said as much. Capitalism needs regulation. The banking system especially. There were reasons that those protections were put in place after the Great Depression, and it only makes sense that dismantling them would bring another disaster.

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Steven H March 24, 2016 at 7:40 pm

“And your point on deficit to GDP would be good if we still weren’t at -2.5% and the ratio didn’t have so many moving parts. If you can directly link it to taxes on the 1% I’d be impressed. Please show your work.”

Raising taxes increased revenue. Increased revenue reduces the deficit. Claims that tax increases would damage GDP growth did not prove true during Clinton, nor Obama. In each case raising taxes, along with spending constraints, resulted in a reduction of the deficit. It’s all pretty obvious how it works, isn’t it?

Also, you can see that our current tax burden on all quintiles is pretty light when compared historically, so it is difficult for anyone in the upper 1% to complain of burdensome taxation relative to past levels. (Yes, I remember the discussions of wage vs investments in upper 1%, but the overall historical rates are still low for even those upper wage earners.)

http://www.data360.org/temp/dsg475_500_350.jpg

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Steven H March 24, 2016 at 7:51 pm

Here’s another set of charts (1) with average tax rates for various earners, but it does not go to 2015, and (2) effective tax rates over time relative to a 1998 baseline. Even though the recent tax increases are not shown you get a really good perspective on how low taxes have been. Recall especially that the largest part of of post WW2 debt/gdp was built up when taxes fell in the 80’s and early 90’s under Reagan and Bush, and then also in the 2000s under Bush2. There is a clear and tight relationship between low tax rates and high deficits.

http://tax-tricks.blogspot.com/2009/06/historical-tax-rates.html

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Steven H March 24, 2016 at 8:35 pm

A drop in revenue from 19.7% GDP in 2000 to 14.5% in 2010 is far from stable. Your chart suffers from being zoomed out so far that it minimizes the deltas. Try this version.

https://research.stlouisfed.org/fred2/graph/?g=3K9Z

As you know, government revenue is a function of multiple variables, including:
– overall effective tax rates
– strength of the economy (GDP)

The top effective tax rate has more to do with the DISTRIBUTION of taxes among the quintiles than as a predictor of total revenue. However it is interesting to note that most of our post WW2 Debt/GDP increase has occurred when the upper tax rates were at their lowest levels under Reagan, Bush and Bush2. Those tax rates are clearly too low and unsustainable and therefore should not be repeated.

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Steven H March 24, 2016 at 8:38 pm

OK, my link reverted back to the wide time period. Try changing the plot to start at 1955 to get a clearer view of the deltas.

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Tiffany Sparkles March 26, 2016 at 10:26 am

Don’t worry…nobody read it anyway.

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Steven H March 26, 2016 at 9:00 pm

You did.

Tiffany Sparkles March 27, 2016 at 8:58 pm

I did?

Steven H March 28, 2016 at 10:07 pm

Tiffany, I was going to fuss at you for continuing to post this “nobody read it” comment, but last time it was Henry. Is Tiffany Sparkles an alias for Henry?

Regardless of whether you are he, I would recommend that you actually read and make some attempt to comprehend posts that you are replying to, and then add some intelligent content within any reply that you post. Trolling with obnoxious comments is rude and wastes everyone’s time.

Peter N March 24, 2016 at 9:36 pm

I’m back!

I am just checking in to see what non-sense Steven H is saying now. He still doesn’t get it. Steven H or his libtard friends don’t create jobs. They don’t create wealth. They have no clue let alone a plan.

I keep challenging Steven H to create a business, jobs and wealth but he hasn’t. Who is he or any of the other libtards to preach to anybody?

Creating wealth or value is the solution.

Look at the title of this long thread. Those that make 400K a year provide services or items that we all need. These people are in the 1% but Steven H seems to think they don’t deserve what they earn. Yes earn. No one forces you to pay or be paid but by agreement. The only exception is the the IRS that will force me to pay with a gun to my head.

Steven H still hasn’t figured out that slavery in the US is long gone except we are slaves to the IRS. If a person works for minimum wage it is because NO ONE ANYWHERE IS WILLING TO PAY HIM more! NO ONE. It only takes ONE person willing to pay a person more for that person to get paid more. ONLY ONE! The fact that so many are not getting paid what they think they are worth is not a zero sum game or any conspiracy. EVERY ONE AGREES. These people that are getting paid what they think they are worth are not getting paid because NO ONE, not even the libtards, thinks they are worth more. It only takes ONE person to think you are worth more.

Think about it Steven H. In only takes ONE person to think another is worth more. That is any one of your demonized rich bitches or any libtard. ANYONE! Why don’t the libtards pay each other better?
The answer goes back to the top of this post. The libtards don’t know how to create wealth, value, jobs or businesses.

No matter how Steven H wants to tax the rich the rich will always have more money. No matter how much Steven H wants to tax the rich the politician will use that money to BUY VOTES instead of leaving that money in the hands of those that know how to create wealth.

Mean while, my company has hired more people but I am scaling back. I can’t see paying the high taxes. I have more money than I can wisely spend and I value my time more than money.

Now about raising capital gains taxes. Do you fools know what that means? If capital gains taxes are 20% that means that the gov effectively owns 20% of my company. In my case it will be higher than 20%. Screw that.

The libtards and even most Republican politicians are idiots. There is NO distinction between capital gains between buying a stock and selling at a profit and taking a bigger risk to create a company that employees people, pays for their health insurance and most importantly, creates wealth and helps the balance of trade.

Steven H can’t understand the contempt I have for him and other libtards.

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Peter March 25, 2016 at 7:27 am

I just tire of blind partisan politics. Like arguing religion, there really is no point.

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Peter N March 31, 2016 at 9:43 pm

My point of view isn’t so much about politics more more on the the survival of the fittest or most adaptable. There will always be winners and losers and Steven H has admitted yet that the libtards are losers.

In a way the US gov has become its own religion. The US gov thinks the moral thing to do is to save those that would otherwise fail and I object. All we get is the demand for more welfare. I dare anybody to refute this.

The libtards buy votes with other people’s money. This can’t be refuted but the republicans aren’t much better which is why Trump is doing so well.

We are in a world of hurt guys. No one is mentioning how they will make people more productive nor are the mentioning how they will protect the US Constitution from all enemies foreign AND domestic. All the politicians are pandering the public except for Trump and I don’t think he has a clear stance on issues.

There are plenty of socialist countries with liberal politicians. I really think the US should be the last options for those that don’t want socialism and believe in a more rough and tumble society that respects the rights of all and doesn’t not impose it will on anybody. If you want socialism then move.

There is an asian man that owns a dry cleaner and washing machine service close to where I live. I got there some time to wash bedding that is too thick or heavy for my own washer. The owner of the dry cleaner can barely speak English but when I asked him if he owned the dry cleaner he said yes. I gave him a thumbs up which was understood with a smile. I have more respect for that guy than I do for Steven H and any of his libtard friends.

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Steven H April 2, 2016 at 7:00 am

Peter N: “The US gov thinks the moral thing to do is to save those that would otherwise fail and I object. …I dare anybody to refute this.”

I don’t refute this. I will simply remind you that this is a founding principle of this country.
“The great object should be to combat the evil: 1. By establishing a political equality among all. 2. By withholding unnecessary opportunities from a few, to increase the inequality of property, by an immoderate, and especially an unmerited, accumulation of riches. 3. By the silent operation of laws, which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigence towards a state of comfort.”
– James Madison

And regarding progressive vs flat taxation, and your previous objection to half not paying federal income taxes, that condition so abhorrent to you is also advocated by the founders:

“Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.”
-Sept. 28, 1785, letter from Thomas Jefferson to James Madison

====
Peter N: “I really think the US should be the last options for those that don’t want socialism and believe in a more rough and tumble society that respects the rights of all and doesn’t not impose it will on anybody.”

I think the US should be the best option for those that don’t want plutocracy and believe in a balanced and fair society where where all can strive to succeed, the rights of all are respected, and the rich are not given the power to impose their will and economic repression on everybody else.

If you want repressive authoritarian regimes where the rich enslave the poor, move somewhere else. That is not the principle this country was founded on.

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Peter April 5, 2016 at 10:39 am

Right, which is why we have progressive taxation and social welfare programs.

Steven H March 25, 2016 at 9:18 pm

Peter N,
You can stop prodding me to create wealth.
I have a salaried job, and I create wealth every day for myself and my company. The company that currently employees me pays me well for my talents. You act like only the business owner creates wealth, and that every individual earns exactly what he receives. The world is so much more complicated and intricate than your simplistic views. I really don’t understand your bitterness and contempt, but I do know that it is completely misdirected. Look up any historical chart of taxation levels and you will see that people making $250k+ in the US are taxed less and receiving more real wealth and income for their efforts than anybody in any country in any century in all of history on all of this planet. Count your blessings and stop being so bitter and so resentful of those who have been rewarded a bit less than you.

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Peter N April 3, 2016 at 7:44 pm

“You can stop prodding me to create wealth.
I have a salaried job, and I create wealth every day for myself and my company. ”

OK, but that is an environment that allows you to create wealth by you employer. Yet some how you resent his ability to make money from your efforts. What you have NO understanding is that you only exist because some one else has created the environment for you to exist.

I must I admit I would be lost if suddenly drop it the middle of Sudan.
There would be no one there to save me. Here I survive and do well because there is an infrastructure and environment but I have I paid for it. You do too because you do not get the full benefit of the wealth you produce because you did not pay for the environment in which you create wealth. What bothers me is they you don;t give the people that create the environment in which wealth is created and credit. You say they have have bonus income and the like.

Why can’t you acknowledge that there people that are infinitely smarter than you. They can and will create the environment for wealth generation only because it magnifies their capabilities. This will not happen if they are taxed so that making a profitable environment is not possible.

Honestly, there are few that match me at what I do. I have math and physic skills that are very good but not unique. What makes me unique is the experience and combination skills of many different areas and insight into how how things work.

When I stop working, and I have already cut back my hours, I will be one of two or three in the US, if there are that many and I would know who they are. I don’t see any replacements except from my own company which is an environment I have created.

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Peter April 5, 2016 at 10:36 am

Great point. Things like Tesla and Apple wouldn’t even exist were it not for smarter people than us. Fortunately, down the “corporate ladder” there are others that have skills like you do and get compensated quite well for it.

I sure wouldn’t want the person who answers my phone to make the same or more than me – and I certainly wouldn’t expect a Tesla employee to make the same as Elon Musk makes either.

If the company grows, I would also expect that Elon’s income and wealth increase at an almost exponential rate compared to the Tesla employee. And as my business grows, I would expect my pay to increase at a FAR faster rate than my secretary.

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Steven H April 7, 2016 at 10:09 pm

“that is an environment that allows you to create wealth by you employer. Yet some how you resent his ability to make money from your efforts.”
– No, I really don’t. My employer is extraordinarily generous in setting pay, benefit, and PTO policy. Unlike the typical large corporate employer (which i have also worked for in the past), I feel like employees in our company share in the success of the company more equitably.

“What you have NO understanding is that you only exist because some one else has created the environment for you to exist.”
– No I really do understand that. I also understand that my personality and skills are good for what I do, but are probably unsuitable for starting and running a company of my own.

“Why can’t you acknowledge that there people that are infinitely smarter than you?”
– I do.

“They can and will create the environment for wealth generation only because it magnifies their capabilities. This will not happen if they are taxed so that making a profitable environment is not possible.”
– I think we are far away from taxing at that rate that makes a profitable environment impossible.

Peter N, you think I do not understand how investment and capitalism works. I do understand. I want entrepreneurs to be motivated to start companies and invest in in vendors and their inventions, and to hire clever people to make their companies profitable. And i don’t mind that people get rich from a successful company.

The problem is a matter of degree. Take a working capitalism system. Now cut the salaries of the workers by 30% and give it to the managers to double, triple or quadruple their incomes. I can’t say what people “deserve”. But I can pretty much guarantee that that newer system of capitalism will not work as well as the previous one. Workers in the second system have less money to reinvest in the consumer economy, and managers and bankers have more money than they can spend wisely. The system is out of whack. And somebody needs to whack it.

So, rest assured that i understand how capitalism works, and i am all for it. But i also understand that it can get out of balance. Do you understand that part?

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Steven H April 7, 2016 at 10:26 pm

“I must I admit I would be lost if suddenly drop it the middle of Sudan.
There would be no one there to save me. Here I survive and do well because there is an infrastructure and environment but I have I paid for it. ”
– First, congratulations and thanks to you for recognizing and stating that businesses in the US thrive due to the environment that we all have created. You have paid for part of it, as have we all. But a whole lot of it was not paid for by you or other businessmen. The parents investing their life savings in their kid’s education have produced employees that you may hire and that you don’t have to fully train, because somebody else paid for that education.

“…but I have I paid for it. You do too because you do not get the full benefit of the wealth you produce because you did not pay for the environment in which you create wealth.”
Your sentence is inconsistent (I paid for the environment that creates wealth, but i didn’t …) but I know what you mean, and it is a remarkable statement. I do not get the full benefit of the wealth i produce. Why not? I would say that I (not me specifically, but as a representative of the salaried Americans) do not get full benefit because when the profits of the company double, the investors and company owners get more than double the income, but I (the worker) am told to be grateful that i still have a job that is not being shipped to China, and that maybe my raise will be 1 or 2% above inflation. And youu are telling me that’s OK and if i don’t like it, then start my own company.

I am saying that the rich can get richer, but if the country’s income doubles, that ON AVERAGE, everybody’s income should double. Any other system is unsustainable over time.

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Peter April 8, 2016 at 4:16 am

That is just not practical. If my friend with the bricklaying business expands and business booms and profits double, bricklayers shouldn’t go from $20/hour to $40/hour. Makes zero sense and just isn’t practical. Sure, it would be super cool to have the bricklayers have this new found wealth to “buy more goods” as you say, but this will never, ever happen. And to suggest it should be legislated is craziness. To try and create this situation by choking the business owner with taxes doesn’t work either. There would be less money for the workers anyhow as well as (and I will speak for myself personally) less motivation to grow the business under that environment.

Steven H April 9, 2016 at 7:49 pm

Peter,

I am a practical man and I see your point. A small business owner takes risks and the incomes of a company are volatile. I am talking about the macro-economics of the nation, not the micro-economics of individual small businesses. For every small business whose profits double in a small number of years, there are others which go belly-up. When a businessman hits success with a business after previous failures or a rocky start, it’s reasonable to believe that he has earned a big boost in income from that success.

In the larger picture, however, when the prosperity of the nation grows, all of its working citizens have earned a share of that growth; not in a precise percentage per every individual, but in a statistical sense. I understand the arguments about salaries of Americans competing with foreign manufacturing jobs. But there is an entire economy of other jobs here beyond the manufacturing sector. Why should they not prosper in proportion to this nation’s prosperity? They used to. I think they should still. Any other system is unsustainable.

Steven H April 9, 2016 at 8:07 pm

I should also mention that I take issue with the idea sometimes expressed in these discussions that equal percentage raises across quintiles nationally is somehow unfair to the upper incomes. Why shouldn’t the department manager’s salary raise faster than the secretary? The answer is that with equal percentage increases, richer people’s salaries DO raise faster. A 5% raise for $30K salary is only $1500, but a 5% raise for the $150K salary is $7500. The equal percentage always gives an advantage to the higher salary. We do not need to accelerate the rate on top of that advantage. There is no justification in my mind that the incomes of the very rich, in a national statistical sense, should rise at a higher percentage rate than the national average.

Steven H April 9, 2016 at 8:12 pm

Lastl, I am not talking about legislating wages (except the minimum wage). There are policy changes that can return negotiating power back to the middle class, however.

One big one would be to remove the incentives to keep people as part time instead of full time. The 30 hour rule needs to be changed to compel companies to pay proportionally for benefits below 30 hours. It’s crazy that we are motivating people to hire 4 part time workers rather than 3 full time, just so they can skip out on benefits.

Steven H March 25, 2016 at 9:04 pm

I’m not usually a fan of GOP opinion commentators in general or David Brooks in particular but he has an unusual take on Trumpism. Just curious what the conservatives on here think about it.

http://www.nytimes.com/2016/03/25/opinion/the-post-trump-era.html?_r=0

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Peter March 26, 2016 at 10:35 am

LOL – Just to be clear for the readers of this thread … and to defend myself and clarify a few positions…..

Steven H’s alleged “attack” on him further up the page was simple. I said consumer spending had been steadily rising. He disagreed. I posted the numbers – and nothing but the numbers. As I said, I wasn’t surprised by his reply.

And I also want to defend the assertion that I “backed off” of the critique of Hillary’s emails. I think what she did is embarrassingly careless at best and downright criminal at worst. In no way did I back off of my feelings about this.

What “fair enough” meant was – there is no point WHATSOEVER to arguing with someone who is blinded by the religion and faith of party politics. Facts, stats, anecdotal evidence, real life experiences….none if it really means anything to people like that unless it agrees with their point of view. That’s how I feel about Steven H (right or wrong) and why I do not engage in pointless discussions with him – or anyone else like that – any longer. It is an utter waste of time. But I will not be misrepresented.

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Peter March 27, 2016 at 7:56 am

I knew I shouldn’t have taken the bait. Completely missed my point and it just resulted in another rant. Won’t happen again.

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Steven H March 26, 2016 at 10:03 pm

All,

The “attack” I referenced was not the discussion about consumer discretionary spending, in which I posted multiple analyses by investors and financial writers who had no political bias, and Peter cherry picked a single chart that had a trend he liked as response.

The attack was here:

http://moneyning.com/career/who-actually-earns-400000-per-year/comment-page-12/#comment-1425496

And now peter doesn’t even show consistency in his own posts. He posts “fair enough” regarding my argument and now has changed his mind to say that what he really meant was ” I give up”. Any casual reader can see that was not what he expressed in his original post.

The really frustrating, recurring themes I have found in discussing economics or politics with certain (not all) conservatives such as Peter and Ken and James are:
They believe personal observation trumps statistical data or expert analysis.
If you present overwhelming expert analysis for an opposing opinion, they will present one chart or one supposed expert opinion that they agree with and claim the issue is therefore resolved on their side.
If they hear an argument that conflicts with their deeply held faiths and beliefs, they ignore or dismiss the arguments.
Ultimately they will accuse everyone else of the mindless inconsistencies and brick wall obstinance that they themselves loudly express.

Ken expressed an expert opinion on insurance policy comparisons but never answered my very relevant questions of his conclusions.
Ken quoted a bunch of fake quotes from founders and I called him out on it. He left this blog rather than admit an error.

James insisted I was absolutely wrong about the so called obamacare tax and that he believed it raised the 39.6 percent effective tax on multi million wages over 40 percent. I quoted articles indicating he was wrong. Cole, who sounds like he knows this subject and who falls more in the conservative camp, also said James assertion was wrong. James will never ever admit James is wrong, because it is apparently beyond his capacity and way below his ego to do so.

Peter, who likes to cast himself as the reasonable independent, still refuses to admit the most obvious and well understood economic facts about our economy:
– that you do not need to balance the budget to reduce debt/GDP; you only need to keep deficits less than GDP growth
– that you do not need to reduce raw dollar amount of the national debt if you reduce debt/GDP.

When Peter gets backed into a corner he just claims the opposing arguments are somehow political or religious or some such nonsense and he picks up his injured dignity and leaves.

Peter’s last paragraph above perfectly expresses my current disgust with him. He has taken his own faults and painted them on me. He has a religious fervor for his beliefs that prevents him from deviating from his faith. My arguments have been reasonable, but my patience is not infinite, and if Peter is going to go so far as to rewrite even his previous tepid acceptance of one of my arguments (and that’s what it was … Go read it yourself) rather than suffer the public apostasy of agreeing with me, then perhaps he is too far gone to ever be enlightened. Too bad.

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Steven H March 26, 2016 at 10:17 pm

Not sure if my link above is jumping to the right place. Here was the attack I referenced

Peter ————–
” … even the most obvious errors you have made in your argument that have been called out you have not listened to. People’s personal experiences (the insurance industry, Wall Street, taxes the 1% pay, small business owner experiences) are debunked because you read an article that says differently.
————

When I asked what those obvious errors are, Peter never responded. When I ask him to explain the obvious errors I point out in his arguments, he is silent, claiming I am somehow not worthy of his time. I have answered every question put to me, submitted more facts, statistics, expert articles, and logical arguments than any one else on these last few pages. But I guess there is no swaying the zealots.

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Peter March 27, 2016 at 10:51 am

“And if you are an objective observer with some knowledge of security clearances and procedures, you are seeing nothing that has been revealed so far that is out of the ordinary or of significant concern.”

I have to say that this has been very far from my experience. This concerns almost everyone I’ve talked to in that world.

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Steven H March 27, 2016 at 12:29 pm

Well, Peter, I can’t dispute your own experience. I can hypothesize that you probably know the opinions of more anti-Hillary than pro-Hillary people, but only you would have some insight into that possibility. Could that be a contributor to your experience in opinions you have received?

My experience has been that the opinion people have about the email server is almost completely determined by the opinion people had of Hillary before they ever heard about the email server. Those who already hated her still hate her and think the server and the emails are a big deal and those who liked her still like her and think the issue is moot. And those who had no previous opinion are concerned by the bad PR, often because they don’t really understand issues regarding classification. Which is of course the purpose of mudslinging, to cast doubt in the minds of swing voters.

I have tried, in posts that were probably too long, to contribute my own expert knowledge on this subject to the discussion. I certainly do not have enough information to prove Hillary innocent of all accusations, but I am pretty sure the reverse is also true: that the information released so far does not prove her guilty of anything criminal or nefarious. And that is my point.

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Steven H March 28, 2016 at 9:59 pm

Well, I guess there were a couple of other points also, that were just as important.
– Using the email server was legal and within policy when she did it.
– Using personal e-mail account for unclassified business was legal and not that unusual for Secretaries of State or other officials.
– Of the email that was on the server that was retroactively deemed classified, she was not the only official to have originated such data. And she was not the only SoS to have unclassified email retroactively classified.

So it just really seems strange and politically opportunist for Hillary’s detractors to make a big deal about Hillary doing something that is legal, within policy, and common to many other officials within and outside of her organization. It was slightly more unusual for her to maintain her own server and do ALL of her unclassified government business on a personal account. But being unusual, in and of itself, is not a criminal act.

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Steven H March 28, 2016 at 10:11 pm

Peter I am still interested to learn what “obvious errors” I have made in my arguments. I would be happy to correct any errors or clarify any points of misunderstanding if you will reveal the topics and issues you have in mind.

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Peter March 29, 2016 at 7:17 am

There is no point. Been there, done that a long time ago. I’ll leave others to debate you – no hard feelings at all, just not something I wish to engage in any longer.

Steven H March 31, 2016 at 8:41 pm

Well that is your choice , I suppose, but I must say it is uncharacteristically rude of you to effectively say that “you are wrong and you are so wrong that it is obvious and indisputable but I am not going to tell you what you are wrong about or allow you to defend your ideas.”

I can only presume in such a case that the issue is not so clear cut, and that I am probably right after all, for why would you walk away from an opportunity to express your correct ideas and defend them in this forum?

Peter April 1, 2016 at 7:25 am

Because I have done it already. It goes nowhere.

Steven H April 1, 2016 at 9:54 pm

Total cop out. You can’t win if you won’t play. Obviously your arguments must be too weak to be convincing.

Steven H March 28, 2016 at 10:24 pm

James,

I missed an opportunity to express appreciation for a point on which we agree, when you indicated “it sounds EXACTLY like an open letter to Ted Cruz – at least the way you described him (which I agree with by the way).” Despite the fact that you were attempting an insult to me in the post, I am happy to know we share the same dim view of Ted Cruz.

I would like to hope we share an equally dim view of Trump as well.

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James March 29, 2016 at 8:53 am

Ha – I was thinking about this thread and realized a few weeks ago how I have similar feelings reading your posts here as I do when Ted Cruz talks. You are so unbelievably similar – even though your ideologies couldn’t be more different.

Anytime there is a forum or debate, there are several types of people involved.

Type 1 – There are those that believe certain things and whose goal in the debate is to get those to believe what they believe (You). These things they believe are very often cut from a typical playbook (You & Ted share this). There is never a surprise – for instance, Ted Cruz isn’t going to be for medical marijuana.

Type 2 – Then there are those that are more exploratory, coming in without an agenda – but generally looking for solutions (Peter, MOR). I think many politicians are like this initially (Obama & McCain come to mind) but then get bought by a party platform and immediately become like “Type 1”.

Type 3 – There are still others who simply troll or insult (Peter N, Henry & Trump). They often have good points to make, but their comments have to be filtered out somewhat to glean the points they are making from the rhetoric and semantics of their statements. You have to be able to see through this which can be difficult.

The entire problem with our government – and why people from all walks of life are so frustrated (the 1%, the 99%, white people, minorities, Christians, immigrants, small business owners, veterans, etc.) is that our government is mostly made up of Type 1 personalities. Some come by this honestly – Ted Cruz by nature believes what he believes and thinks the right thing to do is stand his ground for his beliefs. Most come by it by money (Clinton, Bush, Obama, Romney) and a commitment to be the candidate the party wants.

—Personally Obama might not have a problem with legalizing poker for example…..but he has to be against it due to the people that financed his campaign being against it. Sheldon Adelson (owner of the Venetian casino) has spent millions lobbying to keep online gambling illegal – because it hurts his business. This is the same crap that made Obama lace the ACA with things that keep insurance companies happy. —

My point is this. I’m refreshed by Trump and Sanders not being financed by the same two party-line partisan rhetoric playbooks that you, MSNBC, Chris Matthews, Fox News, Drudge Report, Ted Cruz, Hannity, Beck, etc. all play to. It’s refreshing to see someone who may be left or right but also be open minded. But the big money that drives elections doesn’t allow this.

But you, Steven H, have no excuse. You aren’t being paid – you are being hoodwinked, bamboozled, etc. by a partisan media narrative that has blinded you to any free thought. You abhor the idea of being compared to Ted Cruz, but you are creating the same atmosphere on this thread that he does on the floor of congress. Do you think anyone believes they can open Ted’s mind to gay marriage? Do you think they even try? Ted will just come back with point after point and analyst after analyst showing how gay marriage is inappropriate, supporting his cause. This is what I mean about arguing like a lawyer – you have a side and you defend it.

Open dialogue is far more productive than people defending sides.

(And by the way – I don’t just come in here and “insult everyone” – I have only attacked you.)

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Steven H March 30, 2016 at 10:11 pm

What type are you James? I would claim you are a Type 1, never varying in your beliefs, never open to new ideas, and never ever ever admitting you are wrong even when proven so. On at least three subjects, just recalling first items that come to mind, you jumped on my posts to proclaim I did not know what I was talking about, and then when I (and sometimes others) conclusively counter your argument, you either shift the wording of your original statement or just ignore any further discussion. And you are much much worse about this than I ever have been even accused of being. The three subjects:

1) James: “People making $1m still pay more than 40% in Federal income taxes while half of the country pays nothing.”
James: “The top bracket is not 39.6 by the way. There are several federal surtaxes on top of this which can take the bracket even higher. The 3.8% Obamacare tax for example.”
James: “Wrong yet again. The 3.8% tax adds to all income for those in the 1%. Again you don’t know what you are talking about.”
— All 3 of these statements are factually and provably and blatantly incorrect (see previous posts for proofs) and yet you not only state them and triple down on them, you also feel the need to insult the people who DO know what they are talking about and you NEVER admit the errors. Yes I understand your broader point about taxation being more than 40% when you add other taxes. But that’s a different conversation. We were having a conversation about very specific math and you were WRONG and WRONG and WRONG again. That’s just item #1.

2) Debt/GDP
James: “… reframing the debt argument as debt/GDP is total and utter bull@#%*$. … There has been not ONE other person on here -even those that agree with you- that think the debate about the debt should be framed with some debt/GDP ratio. Or that think $19 trillion in debt and rising is OK due to this ratio.”
Actually, (a) the other liberal posters on previous pages, precisely agree with focussing on Debt/GDP. I would look up quotes, but I’m pretty sure you don’t really care. They have given up on you brick wall fiscal conservatives and don’t post anymore or they would still be actively backing me up. [MOR, where are you?] And (b) if you go back to October 1, 2015, I provided articles from Economist magazine, the IMF, Paul Krugman writing in The Guardian, and a research paper from George Washington Law School that all logically explain why paying down Debt/GDP is the right way to approach debt. You are WRONG again.

3) After I posted an extensive polite response to one of your posts, you replied:
===
[James:] I bailed out here – “In a market system, it is all up to negotiation”. Actually it is up to the supply/demand curve. Basic economics.
===
Your post was wrong in the sense of gross simplification of market economics, even to the level of omission of my perfectly valid point about negotiation, which IS a driver of the supply and demand curve as well as everything else about markets. Look it up. I did. Not to mention that you used your wrong-headed post as a lazy excuse to ignore the rest of my arguments.

….
And, James, I am endlessly amused by posters such as yourself who claim I am “bamboozled … by a partisan media narrative that has blinded you to any free thought”. This coming from a poster who seldom offers anything original except insults and provably wrong ideas and statements. You have been bamboozled by the GOP Media Echo Chamber and you don’t even realize it. I have, however, actively searched out a wide spectrum of information from multiple sources, and have questioned all of my own assertions. You find comfort with yourself and your misplaced ideas by mistakenly thinking that I am as ignorant as you are. Go look up some information. Actually read some articles you disagree with. Find articles from respected experts that back up (or disprove) your assertions before you go spouting off that others “don’t know what they are talking about.”

And for God’s sake, post something besides another bloody list of insults.

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Peter March 29, 2016 at 11:18 am

The more I think about how this thread has evolved, my three-pronged conclusion seems pretty reasonable and feasible, but with one addendum…..

#1 – Reducing Federal spending so that we can still support SS, welfare, unemployment and Medicare when interest rates rise. http://www.downsizinggovernment.org/plan-to-cut-federal-spending

#2 – Revamping our education system for today’s economy. This can be done in the schools but also with government-incentivized apprenticeships and corporate training programs.

#3 – Changing laws and taxes to encourage companies to keep jobs in the US. This is the most difficult as you are competing against countries who manipulate their currency and treat their poor FAR worse than we do – or are willing to do.

But let me add that NONE of this is possible without #4…….

#4 – Complete campaign finance reform.

What does it say about our nation when in 2012 both candidates topped $1 billion in campaign spending? And where do you think most of this money came from? James mentioned Sheldon Adelson – he was actually Romney’s top individual donor in 2012, giving him $25 million! I’m sorry, but if I was given $25m by someone to run for office I would be hard pressed to immediately turn around and pass legislation that ruins their business. Hillary’s top donor list is littered with the big Wall Street firms – why would we think for a moment she would go after them? And this is just the public information – with Super PACs you can’t always tell what is truly happening.

My point is this – James articulated in his last post that we have too many “debaters” in Congress and in our political system in general who aren’t truly problem-solving or negotiating…they are simply fighting for whatever their constituents want. However in this case, constituents doesn’t mean “the people at large” but instead means the people that financed their campaign.

Until this changes we are all just talking in circles and nothing will ever get done. Nothing to be gained as a nation in our corrupt two-party system. My hope is that Sanders and Trump both win their nominations and Gary Johnson gets some traction as a third-party candidate. Then we would have three people that the big money can not control. I don’t love Sanders or Trump personally, but it’s better than the corporate-shill-o’-the-week.

And I’m very sure that I don’t want to give these fools more money to “solve our problems” until we truly have compromise and problem solving in our government rather than dogma and BS left/right partisan spin.

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Steven H March 30, 2016 at 11:27 pm

That’s a good post, Peter. We absolutely agree about campaign finance reform. I will never understand how a majority of the Supreme Court persuaded themselves (or allowed themselves to be persuaded) that political money is “free speech” and not a dangerous corrupting influence. I would prefer not to think that Scalia et. al. were corrupted by such monetary influence themselves, but sometimes I wonder.

I also agree that number 3 is perhaps the most difficult on the list.

I would have virtually nothing to complain about in this post except for the link you provided to the particular list of methods for cutting spending. My quick tally of the 43 items on the list shows that about 22 (just over half) of them would directly pull money and benefits away from the poor, middle class, or retired. I didn’t add up the dollars, but I suspect that is over half of the dollars from the middle/poor/retired as well. In an age where the lower and middle classes are already struggling, it seems disingenuous to plan to make the poor even poorer NOW so that “we can still support SS, welfare, unemployment and Medicare when interest rates rise”.

When you posted this link earlier, I looked it over and refrained from responding because it seemed so tremendously partisan and one-sided in its disregard for the poor and its blind trust in privatization efficiencies. You indicated then that “this proposal is every bit as feasible as making people between $250k and $1 million in income carry the burden.”

Don’t you think that pushing all of the burden on the poor and middle class whose incomes have NOT advanced significantly is considerably less “feasible” than taxing the $250K+ earners whose incomes have advanced tremendously?

You have heard some of these stats before, but try to actually absorb these statements and not to shut me out, as this is a serious question. I will set it up as briefly as I can.

1) Using 2015 numbers, sum of all personal income was about $15.0T and Deficit was about $438B.

2) Assume that over the last 35 years, about 10% of all income has shifted from the lower 90% of earners (approx less than $100K) to the upper 1% (approx over $350K), increasing the income share of the 1% from 10% to about 20%. You may or may not actually agree this has happened, but for the purpose of this post, assume that it has. That 10% of 15.0T is $1500B in annual income that, under other economic conditions, might have gone to the lower 90%, but now go to the upper 1%.

3) The reasons WHY the income shift occurred are not important for this argument. It could be due to actions of either the lower or upper income group or due to market conditions or both. The important assumption is that it happened.

4) We want to pay down the deficit either in part or in whole. For the purposes of this argument, assume that we want to do something to pay off half or more of the deficit, or anywhere from $250B to the full $438B. We must either cut spending, with most of the potential spending cuts coming from benefits and tax breaks to the lower of the two income groups (90%), OR, tax increases which would fall primarily on the upper income group (1%).

5) Q: Under these assumptions, what is the justification for decreasing benefits to the lower income group, who have already suffered a $1500B loss, as opposed to pulling the whole amount of deficit payoff from the upper 1%, who have benefitted from a $1500B gain?

6) Q: Now if you want to object to the assumptions I have made here, what is the primary objection? (i.e which of these do you think is most false?):
a) That 10% of income has shifted from lower 90% to upper 1% earners.
b) That tax cuts would be a significant burden to the poor and middle class (90%).
c) That tax increases spread across upper 1% of earners has less relative impact on an individual basis than benefit cuts spread across the larger 90% of population of lower earners.
d) Other

Thank you for listening, and for any considerate reply.
New players may join at any time.

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Steven H March 30, 2016 at 11:38 pm

(b) was supposed to read “benefit cuts”, not “tax cuts”. Sorry for the error.

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Peter March 31, 2016 at 10:22 am

I would argue that the income shift you refer to is not important in this argument. It may matter in other debates – and matter to you – but not in my last post.

My proposals are for improving the economy at large for decades to come – and have nothing to do with correcting actual or perceived “wrongs”. That’s where we disagree.

An analogy would be enforcing equal hiring and education opportunities for minorities rather than a program where we actually hire MORE minorities to “even the score”, or because of a perception that “minorities need it most”.

Through years of debate and thought on here, the post above is what I just simply what I have concluded needs to be done to improve the economy for everyone and save our nation from insolvency. I could be wrong….just my opinion.

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Steven H March 31, 2016 at 3:33 pm

The suggestions you make are, in general, the appropriate steps to improve the economy. However, it may not surprise you that I believe that a #5 is just as important for the overall advancement and stability of the economy and is much more than “righting wrongs”.

#5 – Improve economic growth by rebalancing the distribution of income and wealth across the nation’s population, via laws and policies that favor small business over large business, progressive tax policies, advancement of unions and other labor protections, universal health care, affordable higher education, and living minimum wages.

The economy can not truly advance if large portions of it consist of banks and large businesses trying to coax more and more money away from people who are receiving less and less in wages each year. Consumer spending may increase at a regular rate (as per your linked chart) but DISCRETIONARY consumer spending per household has been declining for most of the lower quintiles (as per my linked analyses). This is an inevitable result of stagnating wages and spiraling health, education, and housing costs. High income Disparity leads to more severe economic panics and crashes such as those in 1929, 2000 and 2008. This trend must be stopped and reversed, not just to make a few people feel better, but to keep our economy strong, growing, and stable.

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Steven H April 1, 2016 at 9:48 pm

As I look over your list, Peter, I would also mention that “reducing federal spending” as per your #1, is also not important to your post or for improving the economy. Maintaining the social programs, as you also mention in #1, is important, but can be accomplished with a combination of approaches that may or may not involve a reduction in federal spending. Reducing federal spending is simply something important to you, and is not like your other points in their impact on the economy.

I would say that reduction of high income disparity is, however, an essential element to restoring and maintaining the long term health of the economy and is not just an ethical matter (though it is that also).

But of course, that is the heart of our disagreement.

For yourself or anyone else with a little intellectual curiosity, I strongly recommend this Morgan Stanley analysis I linked to earlier, for an impartial, apolitical assessment of income disparity and our economy.

http://www.morganstanleyfa.com/public/projectfiles/02386f9f-409c-4cc9-bc6b-13574637ec1d.pdf

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Peter April 4, 2016 at 6:52 am

Reducing Federal spending isn’t just “something important to me”. We have been really fortunate with interest rates as low as they have been. The interest on the debt is one of the largest pieces of the budget. If interest rates were to rise 1 or 2% (which WILL happen at some point), we may not be able to afford the other essential things the government provides. This gets even worse if we add more of these things – ACA, paying for college at the Federal level, etc. – to the budget. It is painful, however….and not primarily for lower income people. But the end result is inevitable – and the end result hurts the poor far more than it hurts the rich.

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Peter April 4, 2016 at 9:20 am

By the way – my wording wasn’t good…. The interest on the debt is a large piece of the budget. It certainly isn’t the largest with rates as low as they are. Health care and social security obligations make up the majority of it.

Steven H April 4, 2016 at 8:42 pm

Or stated another way … We agree that the deficits need to be reduced and that the national debt burden needs to be lessened (by some measure) so that the eventuality of rising interest rates will not overrun us. Mathematically, those goals can be accomplished completely by spending cuts, completely by tax rate increases, completely by economic growth, or by any of various ratios of combinations of the three. Controlling the debt is important to you and important to me. Economic growth is not truly expected to control the debt by itself, leaving two additional methods. We disagree between the priorities of those two methods of budget control and you mentioned only the one that is important to you, omitting the one that is not important or desirable to you. That’s what I meant.

I just think it would be more politically neutral in #1 to indicate that the budget needs to be controlled to reduce the debt burden, which everyone can agree with, rather than saying that federal spending must be reduced, which is a more partisan goal.

Just my opinion.

(And yes, my wording is vague, because “reducing the debt burden” also probably means different things to you and I, among options of reducing Debt/GDP [my choice], reducing real per capita debt, or reducing raw dollar debt.)

Steven H April 4, 2016 at 8:43 pm

And thanks for the wording clarification on interest.

Peter April 4, 2016 at 9:53 pm

I disagree that reducing federal spending is a partisan goal. Neither side wants to do this.

Steven H April 5, 2016 at 10:22 pm

Tea party republicans and others in the GOP most definitely want to reduce spending. They want to eliminate several federal departments and slash safety nets and privatize what they can’t eliminate. Perhaps they are politically impotent in attempts to accomplish these goals because the majority of Americans don’t agree with that draconian approach. But I don’t really understand why you would say GOP don’t WANT to cut spending.

Generally Democrats are more in favor of tax increases to fund the government and GOP prefers cutting spending and, paradoxically, in cutting taxes which always makes the debt bigger. So, yes, focusing only on cutting spending is a very partisan GOP approach. Addressing tax increases and spending controls together would be a bipartisan approach. Expressing the goal as controlling budget and reducing Debt/GDP would be neutral. IMHO.

Peter April 6, 2016 at 7:55 am

I’m curious which candidates you think want to cut spending. That is precisely why I haven’t voted Republican in quite some time….I haven’t been able to find a candidate willing to do this. Rand Paul is the only one of the original 11 who really ran on this.

I’m also curious which Republicans you think ACTUALLY cut spending. It certainly wasn’t Reagan or Bush.

Steven H April 6, 2016 at 11:20 pm

Ted Cruz is campaigning on cutting federal spending, and to a degree which I find unrealistic. Remember he almost single-handedly forced a govt shutdown over debt ceilings. Generally though, Republicans in Congress are much more ept at cutting Democrat president spending than GOP president spending. Gingrich held back Clinton and Boehner held back Obama. But a republican congress rolled over for GWB when he spent AND cut revenue. The problem with GOP presidents LATELY is that they push through big tax cuts that make budgeting pretty near impossible no matter how well spending is controlled.

Steven H April 9, 2016 at 9:06 pm

I don’t mean to sound like I am persuading you to vote for Cruz. I think he would be terrible for the country on many levels. I’m just surprised to hear you say that cutting federal spending is not a partisan issue. In this decade it is practically THE partisan issue.

Peter April 4, 2016 at 6:49 am

So basically Steven H and I agree that we should do 3 things to improve the economy…..

1. Campaign finance reform
2. Improve education system for modern times
3. Encourage keeping jobs domestically

I would guess even Peter N would agree with these. So if someone far left and far right can agree on these three things – why aren’t they happening?

The point of contention Steven H brings up is this….

— I think we should reduce spending to protect the lower income earners and the government support they rely on when interest rates inevitably rise.

— Steven H thinks we should rebalance the income and wealth in our nation.

We both view each other’s 4th point as much less important, if not insignificant.

What do others think?

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Peter N April 7, 2016 at 9:18 am


1. Campaign finance reform
2. Improve education system for modern times
3. Encourage keeping jobs domestically

I agree to a point.
1. I am not so sure campaign finance reform is necessary.
Jeb Bush raised millions and he didn’t get anywhere
Trump doesn’t need money because he has his own.

2. Free education will not work. There must be some return on “investment”. Getting a PhD degree in Theology does not work.
Trade schools like what Europe has is a partial solution. I have doubts about how good those private “colleges” are that are shown on TV. Even in the established universities there are a lot of useless courses taught and then there are engineering classes where the latest fad is taught but it has nothing to do with real knowledge like math and physics. Also, I have given presentations at colleges and universities. There are some professors that should refresh themselves or get real application knowledge.

3. Keeping jobs here domestically is a challenge because untrained or semi-skilled worker can be found over seas for cheaper. Also, corporate taxes overseas are lower so why create a manufacturing job here. There are only two reasons, infrastructure and transportation of goods.

This guys sums up how I feel. I think he is a little long winded and you must watch out for his sarcastic comments. The title is misleading but you will get it soon enough. He does address just about every point made on this thread so far.
https://www.youtube.com/watch?v=D0Yp1jUtcX8

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Steven H April 7, 2016 at 9:21 pm

Peter N,

I’m baffled by your negativity on these three points. Let me restate your position, not to make your points sound bad with my restatements (which would be rude), but to point out to you how they already sound to others (which I hope may be helpful to you).

1) There is no point in disallowing bribery to politicians because it is just not as effective as it used to be, at least not at the Presidential level, especially when you get really rich guys who run for office and effectively bribe themselves. Now the really rich folks with money to bribe have to be content to just bribe low level Congressmen. At least we can let them have that.

2) Free education is crazy and I don’t want to pay for it. Of course, it was almost free forty and fifty years ago with really low state tuitions, but that was before colleges figured out how they could bribe (ahem) PERSUADE politicians to cut loose the regulations and really boost tuition to bring in some bucks to administrators. And if parents are pouring all of their life savings and all they can borrow into their kid’s education, maybe they spend more time picking a good career. Probably not, but man isn’t that boosted tuition a real profit-booster? And it means we cut taxes and funding to the schools too! Isn’t it better to charge families their life savings for an education that may (or may not) get repaid with good jobs for their kids, rather than make states actually finance their state-run schools and cut funding to administrator salaries and (heaven forbid) cut back on the football program?

3) Laws to keep jobs here might inhibit the modern businessmen from using overseas slave labor to jack up profits and keep domestic pay low by constantly threatening to move more jobs overseas. This would be a real burden on the profits of corporations and the salaries of CEOs whose profits and income grow at far faster rates than GDP.

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Peter April 8, 2016 at 4:10 am

I didn’t mean to imply free education (I assume you mean college) for everyone – I agree that is foolish. What I meant was exactly what you were saying….CHANGING the education system so people learn applicable skills rather than knowing the symbolism in the Great Gatsby or how to bisect a triangle.

Totally agree that keeping jobs overseas is the hardest….

For campaign finance reform, i see your point about Jeb – but if he had won, he would have likely been puppeted by his big money donors – the same way Hillary will.

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Peter N April 8, 2016 at 4:10 pm

“1) There is no point in disallowing bribery to politicians because it is just not as effective as it used to be,”
There is a difference between lobbyist and campaigns.

Jeb Bush could not buy enough votes even with all the money he had.

I do think there needs to be some reforms in the lobbying. This is an area where we have NO control. There are no checks and balances.

I agree that colleges cost too much especially for what the students are getting. There is no reason the price of college education should go up so much but maybe it is supply and demand. Perhaps if there weren’t so many subsidies, that we pay for ,there wouldn’t be such high demand and prices. There is too much emphasis on fluffy non productive classes.

” Laws to keep jobs here might inhibit the modern businessmen from using overseas slave labor to jack up profits and keep domestic pay low by constantly threatening to move more jobs overseas. ”
We have a circuit boards made in Taiwan. Why? Because is cheaper and the service is excellent. We have people that have visited their plant.
We still have some circuit boards made in the US but not the high volume one.

Now, what law would you pass that would keep me from having the freedom to have my circuit boards made anywhere I want? The key word is freedom.

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Steven H April 9, 2016 at 8:25 pm

I agree with you on the need for lobbyist reform.
But Congress also does a lot of campaign fundraising. I just saw a news piece indicating fundraising takes 25% to 50% of the time of Congress men and women. And one guy was quoted that he won’t waste time calling people unless they are likely to give $1000 or more; which means he is spending all of his time schmoozing with the rich folks, listening to their concerns, sympathizing with their needs, and not with anyone else or their needs. This is a problem.

“Now, what law would you pass that would keep me from having the freedom to have my circuit boards made anywhere I want? The key word is freedom.”

Tax incentives to keep more jobs here. It might move the decision price point, and it might mean higher taxes on companies buying from overseas. I’m not an expert on trade policy, but there should be some method to improve our trade position, and not let the nation’s jobs and incomes hemorrhage to other countries.

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Steven H April 10, 2016 at 7:13 am

Peter N, I liked the comment you made that:
“I must I admit I would be lost if suddenly drop it the middle of Sudan.
There would be no one there to save me. Here I survive and do well because there is an infrastructure and environment …”

US citizens have all paid for and built the infrastructure of the United States that allows US companies to grow and profit. Yet outsourcing of jobs and taking advantage of low-cost overseas labor DAMAGES our economy. I can’t help but think that something is broken and needs to be fixed, and I am reticent to believe that the answer is to damage our own infrastructure even more by paying our own workers such low wages that they must live on food stamps. I’m not saying businessmen such as yourselves are at fault for seeking the lowest cost parts. What I am saying is that policy makers have set up some poor incentives in our economy and trade policies and that need to be fixed.

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Peter N April 11, 2016 at 3:38 pm

“US citizens have all paid for and built the infrastructure of the United States that allows US companies to grow and profit.”
Only the ones that paid taxes.

“Yet outsourcing of jobs and taking advantage of low-cost overseas labor DAMAGES our economy.”
It depends. A lot of things are much cheaper now than they were. TVs, computers, and other electronics are a bargain now. The kicker is that one must have money to take advantage of the bargains.

” I can’t help but think that something is broken and needs to be fixed”
Yes, but the politicians are unwilling to tell the people what they don’t want to hear. They prefer to buy votes with other people’s money.

“and I am reticent to believe that the answer is to damage our own infrastructure even more by paying our own workers such low wages that they must live on food stamps.”
What did people do before there were food stamps?
My grand mother had a garden during the depression. They didn’t go hungry and probably ate healthier.

“I’m not saying businessmen such as yourselves are at fault for seeking the lowest cost parts. What I am saying is that policy makers have set up some poor incentives in our economy and trade policies and that need to be fixed.”
Corporate taxes are too high so companies go over seas or do the inversion trick. My company is too small for that so we get stuck with the bill. The media seems to think corporations don’t pay taxes but they why do corporations want to leave?

You seem to want a perfect solution when there isn’t any. There will always be losers and winners.

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Steven H April 13, 2016 at 9:07 pm

– I agree there is not one perfect solution or magic bullet that will fix everything. The economy is complicated. People are flawed. There are unintended consequences that are difficult to predict. But that doesn’t mean we should sit content when conditions are getting worse and there are actions that make things a little better.

– I agree that there are things that are cheaper now and that – this is where you have hit the nail on the head – you have to have money to take advantage of that fact. Driving salaries so low that people can’t afford the stuff they themselves stock and sell at Walmart is a problem.

– I agree that people can often do more for themselves. But your grandmother had land on which to grow vegetables. An urban dweller has no land and no means to grow significant food quantities for a family. My mother lived on a farm in the dust bowl and their family grew there own vegetables also. Not everyone could do that then or now. What did people do then without food stamps and social security? More of them starved. That era is what taught us that the nation needs these social programs.

– Big corporations maneuver to pay the lowest taxes. That does not prove they are currently paying too much, but just that they can find someplace to pay less. Corporate tax rates can be reduced but then we also have to close the loopholes so that corporations paying little or nothing pay their part. And if revenue falls we have to raise individual rates to compensate. All of this is hard in the Grover Norquist political world.

“Politicians are unwilling to tell people what they don’t want to hear.” Exactly correct. What the nation probably needs to hear is that the nation’s roads and bridges need rebuilding, our education system needs revamping, our financial institutions need reforming, our social programs cannot be immediately cut until the economy is strengthened, and thus all of this will cost some money and so we need to raise taxes on the people most able to pay these bills. This is very hard for politicians to tell the people, especially since the people they need to tell are the same ones financing their campaigns.

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Peter N April 17, 2016 at 6:21 pm

“our social programs cannot be immediately cut until the economy is strengthened, ”
Why not? The social programs are only friction or inefficiency on the economy. Reduce the friction and the economy grow faster.

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Steven H April 18, 2016 at 3:01 pm

The social programs are “only friction on the economy” for the people who do not depend on these programs. Sure, if you don’t need food stamps to feed your family, then cutting food stamps helps YOUR economy by destroying THEIR economy.

We need to help EVERYONE’S economy. We do that by reducing the most severe frictions on the TOTAL economy that ultimately affect everybody: joblessness, poverty, poor education systems, poor trade policy and high income inequality.

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Peter N April 18, 2016 at 3:26 pm

“Sure, if you don’t need food stamps to feed your family, then cutting food stamps helps YOUR economy by destroying THEIR economy.”
They don’t have an economy. They are leaches.

“We need to help EVERYONE’S economy. We do that by reducing the most severe frictions on the TOTAL economy that ultimately affect everybody: joblessness, poverty, poor education systems, poor trade policy and high income inequality.”
Ever since Johnson’s great society poverty is getting worse, food stamp needs are growing. Why? There is NO fear of going hungry. If you subsidize something you will only get more of it.

“..joblessness, poverty”,
You are welcome to create jobs anytime.
“poor education systems”,
Poor teacher pay but also a lack of discipline in the class room is a major cause.
” poor trade policy”
Reduce taxes here and the jobs will come back
The $15/hr plan will not help.

” and high income inequality.””
This is a red herring. First you are talking about the 0.01%. Second, I bet they don’t have all their money hidden in mattresses. Much of the wealth you are complaining about is not liquid. Third do you really think the government knows how to spend the money better than those that made it? In my case I needed liquid money to buy the property for our new building.

Let’s say that all the wealth that the top 1% has disappeared. That would even things up but that isn’t what you seem to want. So is it really the disparity you don’t like or is that you want the wealth that isn’t yours. BTW, if all the wealth of the top 1% disappeared there would be a lot of unemployed and soon to be cold and hungry people around.

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Steven H April 18, 2016 at 9:06 pm

Peter N,
We are going around some old themes here, and I am not sure how productive that can be, but I think there at least a couple of points worth making.

– poor people as “leeches” – Paul Ryan recently had some interesting comments about this. After patiently listening to a poor mother explain how their family struggled to get by and how they had to rely on food stamps, he later gave a speech explaining how he regretted calling poor people “takers”, and that it was the wrong way to talk about a mom stuck in a poverty trap, trying to take care of her family. Poverty fell for decades and has increased again not because of the failure of the war on poverty, but it’s abandonment, and subsequent replacement with a war on the poor, too often waged by denigrating them as welfare queens, leeches and takers, rather than the struggling human beings they actually are. Your attitude is so close to that of Christmas Carol’s Scrooge. Like he, you have, as you said, more money than you can spend wisely, and yet you are offended that society has mercy to feed the poor. Take a cue from Ryan, and rethink your attitude toward humanity.

High income equality is not just about some super upper 0.01%. The mathematical curve is a smooth exponential one rising from the 90 percentile to the 99.99 percentile, and the curve equation has changed as I have explained many times. It is not true that rewards are same as always with just a few sports and industry giants having an enormous jump. Rewards have been taken from the lower 90% and given to the upper 10% with most going to upper 1 and .1%. Call it markets, call it globalization, call it what you want. 90 percent of Americans are working as hard as ever and getting less and 1% are working no harder than before but getting much more.

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Steven H April 18, 2016 at 9:16 pm

Do I think the government knows how to spend money better than those who made it? First of all, you and I disagree as to who all has claim on “making” that money. But, aside from that,when biggest corporations have hoards of wealth that they apparently have no idea how to invest, billionaires (!!!) have an unending passive income stream, and yet government of the people has infrastructure that needs repairing, and education system to be reworked, and debt derived from tax cuts to the same people and corporations that have more money than they can wisely spend or invest, then, yes. Of course the government can spend it better.

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Steven H April 18, 2016 at 9:47 pm

The idea that Peter N expresses above is one of the most destructive ideas in our economic discussions: that the needs of poor, and by extension, the middle class, can be ignored as long as policy broadly benefits the overall economy. So what if the poor are made poorer, the middle class wages do not rise, and roads and schools deteriorate, as long as the overall economy as experienced by the wealthiest people improves? This is an attitude I do not understand, and I would be accused of concocting such an argument as a straw man if Peter N did not express it so bluntly and plainly.

If we are going to improve this economy over time, we need to stick to the principles that we are founded on, including the respect and generosity that has been historically and rightfully afforded to people of all intelligences, capabilities, races, and religions. Of course hard work should be rewarded. But we do not need to beat down the people who have already been beaten down by circumstances we barely understand. And we need to return to the principle that a rising tide really should lift all boats, not just those on one side of the dam.

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Peter N April 19, 2016 at 10:07 am

The middle class can still buy things that they could not dream of 20 years or even 10 years ago.

You have no reply to my question about “what if the wealth of the top 1% disappeared?” Libtards can’t answer that. They can’t admit at it isn’t really the income or wealth inequality that bother them it is the fact that they don’t have it because……..wait for it……they are losers.

There is no war on poor. The poor are doing a good job of screwing up their own lives.

“– poor people as “leeches” – Paul Ryan recently had some interesting comments about this. After patiently listening to a poor mother explain how their family struggled to get by and how they had to rely on food stamps, he later gave a speech explaining how he regretted calling poor people “takers””
Paul Ryan was being honest…….. for a moment. He was telling people what they didn’t want to hear.

“If we are going to improve this economy over time, we need to stick to the principles that we are founded”
That wasn’t big government programs.

“Your attitude is so close to that of Christmas Carol’s Scrooge. ”
I prefer Jacob Marley who was rotten to the end. Scrooge copped out. So did the Grinch. Jacob Marley is my man.

” Rewards have been taken from the lower 90% and given to the upper 10% with most going to upper 1 and .1%.”
You are using your libtard language again. Again, how are rewards taken from the lower 90%? How can you take rewards from those lower 50% that don’t contribute?
Who gave me a reward?
I earned it over time a little at a time from many difference people and companies and by investing wisely.

I just got done paying taxes. I am pissed. Very pissed. I am forced at the threat of violence to support things and people I don’t want to support by the government.

” And we need to return to the principle that a rising tide really should lift all boats, not just those on one side of the dam.”
You haven’t faced the fact that not all boats float or can be patched so they do.

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Peter April 19, 2016 at 12:04 pm

It all comes down to the debate over who has claim to the money that was earned. If you insert into the debate that the wealth and income I have earned in the past is “on the table” as ill-gotten, undeserved, or “more than my fair share”, then the debate changes. It moves away from “What can we do going forward to improve the opportunities for all people” to “How can we even the score and recoup some of the money that has been given to so few”. These are two completely different debates.

What I have always been interested in talking about is the myriad of ways we can improve the lot in life for everyone. I have NO interest in looking or working backwards to try and undo some perceived injustice. Partially because I don’t think there was one and partially because I’m philosophically against the concept. Plus, this solves nothing. The problem will still exist.

The other fundamental argument is that the government knows better how to invest capital than corporate America or the public. The government doesn’t invest capital – they spend it. I don’t believe corporations are “hoarding cash” because they don’t know what to do with it – they are protecting themselves against economic turmoil, industry uncertainty and changes in laws and regulations. This is similar to what happened in Japan after their catastrophic financial crisis – it created a generation of scared citizens who won’t spend their money. Over time this will cycle and change just like everything else. But one constant we can always count on is that the government will spend whatever they bring in.

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Peter N April 19, 2016 at 2:19 pm

“It all comes down to the debate over who has claim to the money that was earned. If you insert into the debate that the wealth and income I have earned in the past is “on the table” as ill-gotten, undeserved, or “more than my fair share”, then the debate changes. It moves away from “What can we do going forward to improve the opportunities for all people” to “How can we even the score and recoup some of the money that has been given to so few”. These are two completely different debates.”

This shouldn’t even be a debate. It assumes that there is no personal property and we are serfs for the government that can take what ever it wants.

“What I have always been interested in talking about is the myriad of ways we can improve the lot in life for everyone.”

How about motivation? Now how do you motivate people that feel that the government owes them a living? You can’t. There are too many fat people on food stamps. I see them waddling around in the Walmarts and WinCos. Fear of hunger will motivate. We have tried the government owes everyone a living plan since the Johnson’s great society and it doesn’t work. The fear of hunger worked well in the past.

If you subsidize something you will only get more of it. No one has refuted that.
Politician buy votes with my tax money. No one has refuted that.
The libtards want more people on their social programs. They don’t want to fix the problem. If they did their constituency would be gone. No one has refuted that.
I can go on and on.

This isn’t what people want to hear but it is the truth.

I am still waiting to hear Steven’s response to the “what if the wealth of the top 1% disappeared?”

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Peter April 20, 2016 at 6:46 am

I agree it shouldn’t be a debate. But it is with people that have more of a socialist leaning who think the collective is more impactful than the individual. I’m just saying that I certainly don’t subscribe to the more socialist bend and am more interested in how we improve our society going forward rather than trying to take anything from anybody.

It is an interesting take that the problem could lie in motivating people. We have a pretty high standard of living for our poor relative to the rest of the world – but I do find it hard to believe that people would be content in that lifestyle. The education system is a huge problem here I think as I don’t think we are doing all we can to help these people find the path to success. And you may be right that this is by design – control the people by supporting them and keeping them in bondage. What you are questioning is whether either side truly wants to help the poor long-term- which I think is a completely valid question. Giving it lip service or increasing handouts doesn’t truly help the poor.

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Steven H April 20, 2016 at 9:15 am

Peter,

Let’s not distort the debate. I have never talked about reparations for past wrongs. I am talking about learning from the past. If, as history has clearly demonstrated, high income disparity creates unstable economics, more poverty, and wasted capital that gets placed in risky financial instruments rather than sound investment, then we need to address that problem. If the tax rate structure needs to be changed to address both high income disparity and federal debt, and it will then improve the economic stability of the country and the future for everyone in the country, then that solution should be on the table. That is improving society going forward. It has nothing to do with reparations for the past.

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Peter N April 20, 2016 at 7:17 pm

“high income disparity creates unstable economics, more poverty,”
How? People get high incomes because the provide something for it. Someone must think they are worth what they are getting paid. Now just suppose there is nobody qualified to be a doctor or any other much needed skill. Then where are we? Face it, you resent the fact that some people get paid more than others. It has nothing to do with the income disparity because if we all got paid the same I wouldn’t have worked 12-14 hours days to build my business.

” and wasted capital that gets placed in risky financial instruments rather than sound investment, then we need to address that problem. ”
What is wrong with you? Investment involves risk. I risked a lot building our building during the great depression. My 401K involves risk. I don’t stick my money in a mattress. Lots of small business owners take risks every day and these are the guys you want to penalize.
If there must be a reward for taking the risk.

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Peter April 21, 2016 at 7:51 am

This is always referenced when people refer to giving our economy back to the “real, hard-working Americans”. They don’t mean me when they say that, that’s for sure.

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Steven H April 20, 2016 at 9:22 am

Peter,

“It is an interesting take that the problem could lie in motivating people. We have a pretty high standard of living for our poor relative to the rest of the world – but I do find it hard to believe that people would be content in that lifestyle. The education system is a huge problem here I think as I don’t think we are doing all we can to help these people find the path to success.”

I agree with you that the vast majority of people really do want to escape poverty and many try really hard to overcome the obstacles. I find it a complete distortion of the life of poverty to suggest, as Peter N does, that it would be useful to create MORE poverty and starvation to motivate people, as if lack of motivation is the primary issue. I believe lack of opportunity is much more dominant, and the actions of retribution and punishment that Peter N favors are the problem, not the solution.

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Peter N April 20, 2016 at 10:23 am

“I agree with you that the vast majority of people really do want to escape poverty and many try really hard to overcome the obstacles. ”
This is BS. While people want to escape poverty there is little motivation to do so because they are fed, provided housing, and cell phones.

“I find it a complete distortion of the life of poverty to suggest, as Peter N does, that it would be useful to create MORE poverty and starvation to motivate people, as if lack of motivation is the primary issue.”
How do you create poverty?
There will always people living in “poverty” here because the definition keeps changing so there are people in poverty. This is the governments constituency. I bet you haven’t seen real poverty. I have been to the middle of no where India where people are literally dirt poor. They sleep on the dirt floor of their houses with walls made of stones and roofs made of thatches of banana branches. The banana branches won’t kill if they fall down during an earth quake. These people live the way they have always lived for centuries.

“I believe lack of opportunity is much more dominant”
Opportunity exists but one must be able to recognize it, be ready and willing to take advantage of it.

“and the actions of retribution and punishment that Peter N favors are the problem, not the solution.”
More libtard exaggerations . What retribution and punishment?

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Peter April 20, 2016 at 2:23 pm

I’ve been to Haiti, Southeast Asia….. poverty for the purposes of this discussion is relative. Absolute poverty is something very few Americans are anywhere near.

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Peter April 20, 2016 at 2:26 pm

And I’m not sure what retribution and punishment Peter N is favoring? Best I can tell, Steven H is the one who wants retribution and punishment for me and my 1% peers by raising our taxes even higher because “we can afford it”. And because we have earned “bonus income” that we don’t deserve, is more than our fair share, is off the backs of harder working people, etc. etc. etc. Surprised to see Steven H back off of his rhetoric which he has filled these pages with. Oh how I yearn for another voice to join this discussion.

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Steven H April 22, 2016 at 3:55 pm

“Fear of hunger will motivate. We have tried the government owes everyone a living plan since the Johnson’s great society and it doesn’t work. The fear of hunger worked well in the past.”

Sounds like punishment and retribution to me. Make em really starve! That’ll motivate them!

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Steven H April 20, 2016 at 9:32 am

Peter N,

Proudly taking the stance of a literary character that is basically a parody of heartless hatred and arrogance hardly enhances your position. By doing so, you become the ultimate straw man and a representation of the complete failure of your own arguments. Is that really the approach you want to take?

Peter N: ===
You have no reply to my question about “what if the wealth of the top 1% disappeared?”
===
It’s a ridiculous question with no relevance to anything that has been discussed. Why should anyone try to answer it?

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Peter N April 20, 2016 at 9:59 am

if the wealth of the top 1% disappeared people would be more ‘equal’. Isn’t that what you want? My point is that it isn’t what you want. What you really want is take wealth of the top 1%. The equality bit is just a libtard’s excuse to take other people’s wealth. Admit it.

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Peter April 20, 2016 at 2:22 pm

I actually agree with Peter N here. Steven H – this is absolutely what you want. Don’t back off of this now….. You absolutely want to even the score – no solution or angle anyone has come up with has completely satisfied you until you raise taxes on the 1% (AGAIN). At the end of the day, that is what satisfies you. All other solutions get met with arguments or “that would help but not solve the problem”.

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Steven H April 22, 2016 at 3:52 pm

First of all, I have never said I want “equality” or “evening” the score. If that’s what you think, you have REALLY not been paying attention.

The problem with the term “income inequality”, as I have previously mentioned, is that it implies people want income equality. I sometimes use this term because it is common, but my preferred term is high income disparity. Income disparity, or inequality is fine, and even necessary. High income disparity is not.

I will not be misrepresented here. I want a productive country, and it CANNOT be productive if almost all of the new income growth rewards ONLY 1% of the population.

I have been talking about this problem with some of you same posters for about two years now. Do you remember what I was predicting? That people were getting dissatisfied, that you cannot continue to abscond the country’s profits from the majority of the population and give it to the upper 1%, without there being political and social unrest? And what has happened? The GOP establishment with their cut taxes and suppress wages message has NONE of their preferred candidates in the race; we instead have a Populist Fascist leading the GOP polls, and a Democratic Socialist leading a credible race against Hillary, and its all being caused by the population in both parties revolting against not getting a reasonable piece of the (slowly) growing economic pie. Wake up. The problem is not me. The problem is not government being too big. The problem is not greedy lazy people trying to steal the bucks from the hardworking entrepreneurs. The problem is the financial and corporate interests stealing from everybody. And you really ought to turn your anger and dissatisfaction away from people like me who are trying to get you to see some facts, and turn it toward the economic titans within the 1% who are stealing from all of us.

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Peter April 22, 2016 at 7:12 pm

I agree with the vitriol vs the portion of the rich that control elections and run our nation. But it isn’t the majority of 1%- nor is it me. I also don’t view it as a blanket indictment of the 1% nor a republican/democrat issue. The remaining candidate who is most in bed with these “fat cats” is the very one you support.

Steven H April 25, 2016 at 7:32 pm

“I actually agree with Peter N here. Steven H – this is absolutely what you want. Don’t back off of this now….. You absolutely want to even the score”
I would agree with the two of you, but then we would all be wrong. I have told you what I want. A better, more productive economy, with everyone getting a proportional (not equal) part of the reward of that economic growth. 3% growth means that on average everyone should get a 3% boost.

“no solution or angle anyone has come up with has completely satisfied you until you raise taxes on the 1% (AGAIN)”
My belief, based on MATHEMATICAL assumptions and analysis, requires that we return to a higher tax rate (even after the last tax increases) on upper earners and a progressive system that increases rates at additional levels above $400K. Holding such a belief does not require me to hold animosity toward high earners, nor does it suggest I want to even scores or make all pay equal. I want to take a system that has been proven to be dysfunctional and make it functional — not by taking away what people HAVE, but by altering taxes in a more fair and balanced and sustainable manner on what they have not yet received.

If people feel they have a god-given right to be rewarded and taxed in a manner that damages the economy and the prosperity of most of the population of this country and the ability of the government to function, I am inclined to not have a whole lot of sympathy. The system is not working for most people and it needs to change. And I see no mathematical way to avoid added taxation of some portions of the upper 1% as part of that change.

You may disagree. You may not ascribe motivations to me which I do not have.

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Peter April 25, 2016 at 8:02 pm

“3% growth means that on average everyone should get a 3% boost”

This is not how ANY economy works. Nor is it realistic.

Steven H April 25, 2016 at 8:28 pm

It worked precisely that way from 1950 to 1980. On average across 1917 to 1980, it also worked that way (see business insider article in link further down).

So please explain to me how and under what conditions that does not work.

I would say that any other method based on higher percentage increases consistently going to upper incomes and lower percentage increases going to lower incomes, will result over time in increasing income disparity and eventual economic instability leading either to an economic crash or political revolt. I can cite mathematical formulas, historical examples and economic charts. I’ll explain how to build a nice spreadsheet proving my position if you like.

What do you have to back up your assertion?

Steven H April 20, 2016 at 10:24 am

The wealth of the 1% HAS disappeared. It mostly serves themselves or gets sent to offshore investments. It’s certainly not getting reinvested in the country or shared with the entire population. It sure ain’t trickling down. It’s invisible and might as well be gone.

I don’t want it disappeared. I also don’t want less inequality for the sake of some idealistic purity. I want the profits that ALL of this country has earned to be productively invested in its people and infrastructure. And that has not been happening with so much of the country’s wealth in the hands of the 1%.

Make no mistake: the 2008 economic crash involved a lot of players. But it was ultimately caused by high income disparity. The economics of this country depend on taking the nation’s capital and putting it where it can do some good.

Hint: That excludes credit default swaps, CEO golden parachutes, and hedge fund managers’ carried interest.

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Peter April 20, 2016 at 2:18 pm

I know my wealth is absolutely trickling down – as is the wealth in my community. It is hardly invisible.

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Peter N April 20, 2016 at 7:56 pm

“The wealth of the 1% HAS disappeared.”
No it hasn’t. I repeat, we don’t hide our money in mattresses. Look around downtown where-ever-you-are. Who owns those buildings? Who owns those companies? Like I asked before, what would the world be like if these businesses and buildings owned by the top 1% disappeared to make the top 1% equal with others.

“I don’t want it disappeared.”
YES, WE KNOW THAT! That is the point I have been making. You want it for yourself and other libtards. You won’t admit that you really want to be a communist and take the property.

So now after everyone is “equal” again how do you get people to work hard to “get ahead” if you pay them all the same? Look at Russia’s, “I pretend to work and they pretend to pay me” situation. That kills motivation.

People will still have the skills or lack of skills they had before so there will be rising inequality all over again. There will still be takers that produce nothing but more problems and more takers.

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Peter N April 21, 2016 at 10:22 am

I really want to see Steven H’s reply to this.

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Peter April 22, 2016 at 7:08 pm

You aren’t going to see it

Steven H April 25, 2016 at 6:49 pm

There is nothing said in that post that is worth a reply.

Steven H April 20, 2016 at 9:51 am

Peter N: If you subsidize something you will only get more of it.
== Agreed. So we need to stop subsidizing the economic waste and fraud in banking, investment, and large corporations.

Peter N: Politician buy votes with my tax money.
== And by giving away debt-fueling tax cuts to their friends and constituents.

Peter N: The [liberals] want more people on their social programs. They don’t want to fix the problem. If they did their constituency would be gone. == Ridiculous. Most liberals are educated and in middle class. Strangely, its the Republican Trump supporters who are largely uneducated and on social programs.

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Peter N April 29, 2016 at 8:30 pm

” So we need to stop subsidizing the economic waste and fraud in banking, investment, and large corporations.”
I agree but that is small stuff compared to the welfare state.

“And by giving away debt-fueling tax cuts to their friends and constituents.”
Tax cuts don’t cause debt. Spending causes debt. If there is no spending there will be no debt.

“Ridiculous. Most liberals are educated and in middle class. Strangely, its the Republican Trump supporters who are largely uneducated and on social programs.”
Prove it.

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Steven H April 20, 2016 at 10:13 am

Peter: “But one constant we can always count on is that the government will spend whatever they bring in.”

Let’s not propagate this ridiculous and deceptive statement, Peter. On a purely semantic level, it’s true. And why wouldn’t it be? Why would any government want to bring in revenue for which they had no purpose in their budget? Maybe a small rainy day fund, as some cities or states maintain. Or maybe paying down debt, but that is really spending as well, just for past purchases.

But the implication (and let me know if this is not what you meant) is that you should not increase taxes because the money will just get frittered away, spent willy-nilly, wasted.

On one hand, you want the government to be responsible with taxes and serving the needs of the country, but with statements like this you are just saying that it does not really matter how much money is given to the government, so let’s just give it as little as possible.

How about a different approach? Let’s have our elected legislators determine how much money is to be spent in a given year on programs and obligations to advance the country. Then let’s predict how much GDP growth there will likely be and determine how much revenue we need to keep the deficit at less than half of GDP growth. This shrinks the debt burden while keeping taxes manageable. Finally, let’s structure the progressive tax rates so that the tax burden falls most heavily on those who actually have the money to pay, while also leaving sufficient funds and tax incentives for profitable business investment and job creation.

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Peter N April 21, 2016 at 10:21 am

There is nothing deceptive about the other Peter’s comment about the government spending every dime it can get it hands on and even future dimes.

“Why would any government want to bring in revenue for which they had no purpose in their budget?”
Control and the ability to buy more votes.

“But the implication (and let me know if this is not what you meant) is that you should not increase taxes because the money will just get frittered away, spent willy-nilly, wasted.”
Yes, there are also sorts of government boondoggles.

“On one hand, you want the government to be responsible with taxes and serving the needs of the country, but with statements like this you are just saying that it does not really matter how much money is given to the government, so let’s just give it as little as possible.”
No, I wouldn’t go that far. Government should do what it is supposed to in a outlined in the US Constitution but no more. That should be left to the states and the people as stated in the 10th amendment. That means socialist states like Oregon can still have their health care program if they want ( it failed ).

“How about a different approach? Let’s have our elected legislators determine how much money is to be spent in a given year on programs and obligations to advance the country”
They are not interested in advancing the country and neither are you. They are only interested in staying in office and buying votes where ever they can.
I don’t see how giving money to non-productive people is advancing anything.
There is no ROI.
Advancing the country is done by individuals with good ideas and businesses that develop new technology. These are the very people you want to de-motivate.

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Steven H April 25, 2016 at 9:29 pm

You and I will never agree on this Peter N. But I have to point out that the founders provided Constitutional methods for us to modify and reinterpret the specifics of the Constitution. We have not abandoned or gone beyond the Constitution. In addition to amendments, legal interpretations via the Supreme Court allow us to adapt to changing times, precisely as the founders intended us to do. You and I each can cite examples where the current interpretations differ from our own beliefs. And yet, the current Government is completely Constitutional as long as we follow Supreme Court rulings, despite the variations in implementation over time.

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Steven H April 22, 2016 at 4:04 pm

I cannot continue to argue with people who think Americans are not really poor until they are shoeless, coatless, homeless and living on bread and water. I can no longer hope to educate the heathens who think that whatever money can be stolen from everybody else through economic and political force is “earned”. I have done my part to share information on this blog and put some facts up for discussion. I see now that the remaining posters here are impervious to facts. Perhaps someone else can come in and fight these battles. It just makes me tired to have these same ridiculous conversations with facts and data always being ignored.

Maybe I’ll come back when the conversation gets more intelligent.

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Peter April 22, 2016 at 7:07 pm

I have stolen nothing from anyone. Not through political or economic force or anything else other than hard work, talent and opportunity (yes some luck as you like to say). But 0% of my success is attributed to stealing.

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Steven H April 25, 2016 at 7:45 pm

I believe you. But whether you believe it or not, you have benefitted greatly, not only from the government dollars flowing around the DC area where you work, but from the vast change in the economic wage slope. So, while it may be a semantic stretch to call that slope change a “theft” (though it feels like theft to most Americans in the lower 4 quintiles), it is definitely the result of political and economic influence on the economy, in ADDITION to the globalization and market changes we have discussed. And while you may not feel you have influenced such political or economic force (which is debatable, because even our expression of opinions on this forum exhibits some political influence), you certainly have received economic benefit of those political and economic forces, and unless and until you recognize the toxicity of those forces, you bear some small bit of responsibility as, until that point, you are then more likely to be aiding than dispelling those economically damaging forces.

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Peter April 26, 2016 at 8:30 am

I totally recognize the toxic force of big money on politics – which is why I want someone other than Hillary to win the election.

And I promise you, my situation does FAR more good for the economy than bad. My political influence is almost zero, but my impact in my community through charity, hiring people and just general spending into the economy is much greater.

I also think it is a gross generalization to say that most in the lower 4 quintiles (260 million people, by the way – some of which make $100k/year) feel like they have been stolen from. You still talk like we are in the manufacturing age. There are so many jobs people choose where they know they will not ever be in the top 20% – and you know, many are fine with this. Policemen, teachers, administrative assistants, etc. Also, a lot of the people I know in those quintiles are either young and hope to rise to the top at some point or retired and intentionally not in the top 20%.

At the end of my life, I will have spend the majority of it in the bottom 80% – both in the beginning as I built my business and as I wind down my career. Not once have I felt cheated or stolen from. I control my own destiny. Sure there are some unfair practices and “rigging” of the game that happens on some level, but at the end of the day it doesn’t control me or determine my destiny.

That said, I do wish that our elections and politics were run more cleanly away from large dollar influences, which is why Trump, Sanders and Gary Johnson appeal to me way more than Clinton, Cruz or Obama. I would prefer my president not have a cozy relationship with Goldman Sachs for instance.

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Steven H April 26, 2016 at 9:45 pm

If you make $100k a year, you are in the middle of the top quintile, not in the lower 4 quintiles.

Steven H April 26, 2016 at 9:53 pm

Peter,

I don’t see how you think Trump is not influenced by big money. He is big money. He hobnobs with big money. He has spent his whole life with nothing but big money. I’m sure he has friends at every big bank and investment house. But even worse, he is a buffoon. I cannot imagine how any intelligent voter can support him. I understand how desperate blue collar voters cling to the hope that he can deliver on his ridiculous promises to help them. But when you have a man who proposes a tax plan that will add a trillion a year to debt and yet he promises to also eliminate the debt in 8 years, I would think that a finance man such as yourself would be concerned.

Peter April 27, 2016 at 5:54 am

As a “finance man” I have told you repeatedly that I’m concerned that NOBODY wants to do anything but add to our debt. Only Gary Johnson truly wants to reduce spending. If Sanders (for example) were to win and actually get the crap they are talking about passed (unlikely) he would run our deficit and debt up to astronomical levels.

But in reality, they all do. But we have been over this and I don’t care to retype or reread old posts. You think government is efficient and smart. I think they are irresponsible and self serving and run by a handful of big money power brokers.

Peter April 27, 2016 at 5:58 am

Top quintile starts around $115k

Steven H April 29, 2016 at 9:02 pm

I was mistaken on the quintile stat. Apologies. Should have looked it up instead of relying on memory.

Steven H April 25, 2016 at 8:17 pm

Here is an encapsulation of the problem in terms that I find appalling. I do noy understand how ANYone thinks this is OK for the economy unless they are only interested in their own little piece of the economy and don’t give a dam about anyone else (These first stats are from 2011, going only to 2008 but newer stats are even more dismal).

From 1917 to 1981, the upper 10% of all earners received 31% of all national economic gain.
From 1981 to 2008, the upper 10% received 96% of all economic gain, with only 4% of the gain going to lower 90%.
In the latter part of that period 1999-2008, all gains went to the upper 10%, while the incomes of the lower 90% declined.

http://www.businessinsider.com/income-inequality-charts-2011-10

Other sources indicate that 95% to 99% of all economic gains from 2009 to the present have gone not to the upper 10% but just to the upper 1%.

How can anyone think this is a good system? Sure its great if you are in the 1%. It’s tolerable for the upper 10%. But we are beginning to really pi55 off 90% of the country. Is it any wonder that people are willing to vote for a Democratic Socialist?

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Peter April 25, 2016 at 9:46 pm

Again for the thousandth time…. This would be a problem if a) there was no mobility (the same people remain in the 1% or bottom 20%) and b) if the overall quintiles or percentages didn’t move up at all. you talk about the 90% like they are a group like black people or women. They aren’t. Some of the 90% are yesterday’s 1% or tomorrow’s 1%.

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James April 26, 2016 at 8:20 am

Let me try to help. An analogy….there are 10 people in the world. One of them makes boatloads of money – more than the bottom half combined. You are assuming that for the last X years, the guy at the top has seen his income increase by a huge multiple, while the others have seen nominal increases (if any).

The reality is that over the past X years, the guy who was #1 in the beginning might now be 5th. Over the past X years, half of these people have been in the top 3 at some point and half have been in the bottom 3. Some have been in both. Sure, the top spot pays more than it used to, but at least a handful of these 10 individuals have seen huge gains in income due to their moving up from the bottom spot to the top 3. Others have fallen.

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Peter April 26, 2016 at 8:37 am

If I read this when I was 18-21 (assuming my goal was to make lots of money) I would have thought to myself – I’d better be darn sure I get in the top 10%. I certainly wouldn’t have felt stolen from or cheated – or defeated.

And I’d have a good chance to get there….. 56% of all Americans will spend at least one year in the top 10%. I like those odds.

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Steven H April 26, 2016 at 10:25 pm

You are very competitive, and apparently smart and skilled and industrious, the sort of person some call Type A. Not all people care to set their goal at being in the top 1, or 10 or 20%. Many people who are more moderately industrious just want to find a job that is reasonably rewarding financially and emotionally and at which they can be productive, whether that is teaching, laying pipelines, counseling students, or such. These people are necessary parts of the American workplace and deserve to do better than a have a stagnating wage in the midst of spiraling medical and education costs that rise far faster than inflation or their wages. Mobility to the top 10% is a meaningless theory to these people. This country needs shared prosperity for all. Not platitudes of theoretical mobility that only a few will realize.

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Peter April 27, 2016 at 5:55 am

And competitive smart skilled and industrious people should see their income increase exponentially when compared to those that are not. End of story.

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Peter N April 28, 2016 at 9:25 pm

Ditto++

Steven H April 26, 2016 at 9:40 pm

Mobility is a cop out answer. You are saying it does not matter that most people are getting cheated out of a balanced share of American prosperity because they might, at the end of their career, or due to an inheritance, have a 1 in 2 chance to spend one year in the top 10%. The fact is that most people will still spend most of their lives in the bottom 90% and they are still getting cheated. Only people who are so fortunate to spend most of their lives in the top quintile or top 10% could possibly think this is a good system. The truth still remains that most people are getting cheated by a fortunate minority.

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Steven H April 26, 2016 at 10:05 pm

Peter, those people who you noted as choosing careers that are unlikely to reach the top quintile, the teachers, policemen and admin assistants. These are the careers which used to receive pay increases commensurate with GDP increases, which by the way also used to be bigger than they have been in the last decade. These are the people you think it is okay to not reward in line with national increases in prosperity, but to give those increases, through policy and negotiating leverage, to financiers, investors and CEOs. And that is supposed to be fine because … Mobility!

That answer does not make sense to the people whose mobility will never take them to the upper 20, 10, or 1%. They would much rather have a pay raise, a better health care plan, and affordable college, than some empty promise of mobility.

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Peter April 27, 2016 at 7:03 am

And I never said anything like the line that starts “these are the people you think it is okay….” Everything after that is nonsense. There is that political prism you filter everything through again…..

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Peter April 27, 2016 at 5:57 am

I’m going to spend most of my life in the bottom 90 percent. Don’t feel cheated at all. Very few spend most of their lives in the top 10 percent. Almost all young people are in the bottom 90 and most retirees are as well. As well as many other people who don’t have high income careers. Mobility is THE most important factor and what separates us from old-world communist nations. We are a nation of great opportunity – all whining aside.

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Steven H April 27, 2016 at 4:46 pm

My point, Peter, is that you think mobility is so important that it negates the impact or importance of high income disparity. But for the vast majority of people who do not anticipate getting into the upper 10% or 1%, including those teachers, police, and admin assistants you mentioned, mobility into that range is a hypothetical that is meaningless. And it does not pay the bills.

If the previous stats I indicated are accurate (as I believe them to be), you have to advance into the top 10% (or lately, into the 1%) and stay there a while to start reaping the benefits of increases in national prosperity (GDP) in ADDITION to any gains from career arc. But most people will never see it. And they used to.

3% gain in GDP (or national income) should translate to a 3% boost for all quintiles. That is the only sustainable formula.

And the typical career arc of starting out as a poor student in a lower quintile, advancing to a career peak income, and then retiring back down a quintile or two has not changed over the decades, and heralding that as “mobility” just muddies the conversation. Career arcs are not the same as economic mobility as most economists discuss them. Starting as a pauper and becoming a millionaire … that counts. That is mobility. Moving from the top of one quintile to the bottom of the next … not so much.

(BTW, I have to look up some stats before I fully address your data in the next post. May not have time tonight but I will get to it.)

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Peter April 27, 2016 at 10:28 am

Just in case anyone is still here who is still pondering this objectively – take a look at the mean household income for each quintile from 1974-2014….

Bottom 20% – average annual increase of 3.7%
Second 20% – average annual increase of 3.8%
Middle 20% – average annual increase of 4.0%
Fourth 20% – average annual increase of 4.3%
Top 20% – average annual increase of 4.9%

Top 5% – average annual increase of 6.0%

If this is a crisis, I don’t see it. Considering mobility and opportunity is still widespread in our country, I would expect the top earners to have grown their income by a larger percentage – particularly considering the economic explosion of the information age, which made a lot of very bright people quite rich. Plus, many people who find themselves in the top 20% are brighter, more competitive, more motivated, higher skilled, etc. – one would expect their income to rise faster.

And as I mentioned a few posts ago, many of the top 20% in 2014 were in the bottom 20% in 1974. These are quintiles – not static blocks of people.

But the greater point is that we will always have the bottom 20% – we just want their income to rise with general inflation so that they can maintain a life in our country with basic needs. A 3%+ annual increase in income is very close to historic inflation – and we provide the bottom 20% with tremendous support via social programs and by zeroing out their Federal income taxes.

When you take taxes into account – and just look at the NET increase of each quintile’s income – I would argue that they likely look almost identical due to our progressive tax code.

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Steven H April 27, 2016 at 5:11 pm

Peter, I appreciate the data. I am presuming those stats are not inflation adjusted, and it does not address how those increases changed over time, or what the increase for the upper 1% is, BUT, there is still an important point that can be drawn from the stats you give.

As a finance guy you probably appreciate more than most the power of cumulative interest and how small annual rates build over time. So is that little bitty difference of 4% annual interest for the middle quintile and 6% for the upper 5 percentile group meaningful or just noise. Let’s see.

4% annual increases over 40 years gives a multiplier of 1.04 raised to 40th power or 4.80, meaning that income multiplied 4.8 times for the middle quintile over 40 years.

6% annual over 40 years is 1.06 to the 40th or a multiplier of 10.29, or more than twice the rate of increase of the middle quintile.

I would say that in itself is an issue, but it is really worse. Another site reference has stats and plots from 1967 to 2014, including inflation adjusted data. That shows an real income increase of middle quintile in that slightly larger time range of only 23.2% and a gain of 90.7% for the upper 5 percentile. That’s a 3.9x increase in income disparity and that is getting pretty serious.

Again that is just for the upper 5%, which masks the gains of the upper 1%.

That is (in case you are interested) a 1.63 percent REAL annual increase for the upper 5% and a 0.523% annual increase for the middle quintile. I wonder what it is for the upper 1% or 0.1%?

http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php

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Peter April 27, 2016 at 5:36 pm

It matters….but it is still much more minor than you let on. And you leave the most important part out …mobility. I don’t think the bottom performing portion of our society should receive higher increases than keeping up with inflation – do you? And yeah – compound interest is a huge factor – especially in wealth inequality. We all know that.

I’ve told you 80000000 times that you need to stay away from arguments about quintiles, the top 5% or even the top 1%. Your beef is with the top 0.1% at most. And I don’t totally disagree with you about there being disparity there – although I think it is for more reasons than the Democrat playbook thinks it is. You don’t have much of a case when it comes to quintiles particularly considering the massive mobility between them.

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Steven H April 28, 2016 at 6:49 am

I have to apologize for a math and logic error. The ratio between 90.7 and 23.2 is not the relevant ratio, and overstates the increase. I regret the error and should not have rushed my post.

However the original calculation showing a 2% delta in wage increase rates resulting in a ratio of 2.2x over 40 years is still valid and still a serious concern. I’ll have more on that after I look up the full statistics I originally intended to research.

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Peter April 27, 2016 at 5:42 pm

I will never ever agree philosophically with the thought that if the economy at large rises 3%, all people’s incomes should rise by the same. This is total and utter nonsense and impractical.

So, when incomes rose dramatically (on average) during the internet boom, should the ice cream man get the same kind of pay increase percentage wise? Should we start paying teachers more when this happens? Should the government mandate it?

The talented and hard working will continue to see their incomes rise at a more dramatic rate than society at large. That will be manifested in income disparity and in mobility. But it will happen. And you can’t stop it without socialism or flat-out confiscating more of their income and wealth.

But you know my opinion. We have been here before. And there is no point arguing about it.

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Steven H April 28, 2016 at 7:09 am

“The talented and hard working will continue to see their incomes rise at a more dramatic rate than society at large.”
Correct. And they do so by advancing to the next quintiles or percentile stage within the economic structure.

“I don’t think the bottom performing portion of our society should receive higher increases than keeping up with inflation – do you?”
‘Bottom-performing’ is a judgment call I can’t address. But low wage jobs should advance at roughly the same wage rates as high income jobs to keep the overall system stable. Part of the problem is that inflation is an imperfect economic indicator. Medical and college costs are advancing much faster than inflation, and low wage workers require these services for their families to achieve any kind of income mobility. By some arguments, the growth rate of the nation may be a better indicator of “inflation” than the official inflation measure. This is why it makes sense for all of society to grow at roughly the same rate.

“So, when incomes rose dramatically (on average) during the internet boom, should the ice cream man get the same kind of pay increase percentage wise?”
Approximately, yes.

If the quintiles advance wages at different rates, with higher quintiles at higher percentage rates, and lower quintiles at lower rates, income disparity eventually increases to infinity and the system falls apart. The only sustainable model is to advance all quintiles at the same rate. This is not opinion. It’s math. Far from being “utter nonsense and impractical”, it is a mathematical necessity for a stable system. This is actually a useful line of discussion because it can be discussed mathematically and with certainty without relying on politics or opinion. More on this later.

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Peter April 28, 2016 at 9:24 am

Bottom performing simply meant bottom quartile. I think you know that.

If the best performing people rise in income more dramatically by moving quintiles, then what happens when a large number of competitive and successful people rise at the same time? What if this is 30-40% of our population? If this happens, you then have income disparity as the top quintile starts to separate from the ones below it.

Of course, this isn’t hypothetical. It is what has happened in the last 20-30 years with the information age and internet explosion. And in no way shape or form is the ice cream man entitled to a similar pay raise. If anything, the ice cream man benefits indirectly due to all of the extra spending from the people that have made the money. This is why a maid in the Washington DC metro area can make more money than a maid in rural Mississippi.

And discuss all you want with “mathematics” as you say, but it just isn’t practical or realistic in practice. How do you pay the ice cream man more? He gets paid based on the ice cream he sells – and already probably pays no Federal income taxes. Will the government just be sending him checks every year?

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Steven H April 28, 2016 at 4:57 pm

Peter,

I think we need to distinguish between “bottom performing” and “low wage”. People can be low performers at their job, such that they get fired or demoted, or passed over for wage increases. You do not need to change the economic structure to handle these people. They simply move to a lower spot in the pecking order and someone better moves up. Similarly with hard workers, and smart productive people. They advance to a higher wage in a higher percentile. Everyone moves around in the national pecking order, establishing through market forces and competition who is worth more than the next guy. And everyone can advance or decline through such a system of economic mobility WITHOUT changing the overall income distribution.

So when you talk about a successful business entrepreneur advancing in salary at a higher rate than an admin assistant, that can and does happen within a stable economic system because the entrepreneur is moving up in pecking order while the admin assistant is not.

You say “If the best performing people rise in income more dramatically by moving quintiles, then what happens when a large number of competitive and successful people rise at the same time? What if this is 30-40% of our population? If this happens, you then have income disparity as the top quintile starts to separate from the ones below it. Of course, this isn’t hypothetical. It is what has happened in the last 20-30 years with the information age and internet explosion.”

It is a debatable point whether 20 or 30% of the population is now truly so much more worthy that they need to be rewarded at much higher RATES than everyone else. Science and technology has been advancing for centuries. That doesn’t mean that we leave the common workers without indoor plumbing while only a small percentage benefit from societal improvements.

We compete in a stable system to advance relative to others. This is normal. What is abnormal and unstable is to have the highest paid individuals feel like they require or deserve to advance their incomes at higher than average rates WITHOUT competing for a higher spot. This is income redistribution, and it leaves lower wage workers behind.

Besides, if we are leaving the lower wage population behind, that needs to be corrected just to keep society functioning well. It can be argued that the high costs of education and the stresses of poverty do in fact create traps where our poorer citizens do not have the tools and opportunities to climb the economic ladder, and that this creates a huge societal burden. It is much more of an issue than motivation. You cannot punish people who are already poor and disadvantaged with more poverty (starvation and hunger motivation a la Peter N, or fines for bad grades as he also has proposed). Rather than heaping excesses on the top, we would be better off for a whole lot of practical and economic reasons to feed that money back into the bottom rungs, not only as welfare to keep them fed but to improve education, housing and job opportunity programs to keep everyone advancing together.

But those are philosophical issues. Let’s get back to basic math in the next post.

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Peter N April 28, 2016 at 9:36 pm

“You cannot punish people who are already poor and disadvantaged with more poverty (starvation and hunger motivation a la Peter N, ”
What libtard BS. I don’t want to punish them. They punish themselves. I simply don’t want to pay for their mistakes.

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Steven H April 28, 2016 at 5:44 pm

Here are my basic mathematical assertions on income groups and inequality:

If you have any method of analyzing and dividing up the population via sorting and grouping by income, whether in quintiles, or in consistent percentile groups of various (or even unequal) sizes, the following is true:

1) A system in which all income groups have equal rates of income increase (or decline) has a stable and unchanging income distribution.
2) A system in which any one or more income groups has a consistently higher or lower rat of income increase (or decline) has a changing income distribution.
3) A system in which the highest income group has a consistently higher rate of income increase than other groups will result, over time, in that highest income group consuming ever higher shares of total system income.

For example, a simple spreadsheet model can be created in which there are 3 income groups: the upper 1% in income, the lower 90% and the middle 9%. Assume starting conditions similar to 1980, where the upper 1% had 11% of all income, the middle 9 had 22% of all income and the lower 90 had 67% of all income. Assume also that you neglect inflation by working with inflation adjusted dollars, and then use a realistic Real Per Capita economic growth of 2% (which is about the average over 1950-2007). Then assume that the high income growth rate is 4.7% (I’ll explain the rate selection in a moment) and the medium income growth rate is barely above system average at 2.2%, and the lower group gets the leftovers, which will be a rate less than the system average and which changes over time. This model mimics the actual income distribution change from 1980 to 2008 (without the economic hiccups), such that after 28 years, the high income group has more than doubled its income share from 11% to 23%, the middle income group has raised slightly from 22% to 23%, and the low income group share declined from 67% to 54%.

What happened next in the real world is that we had the Great Recession and wages and growth have stagnated. But what else happens in this model?

First of all, the lower 90 percentile incomes initially rise at a 1.5% annual rate (still higher than the 0 inflation), but this slows in 28 years to 0.8%. By year 42, the lower 90 now have only 42% of all income, and also go into wage decline, while the upper 1% have 33% of all income. By year 58, the upper 1% have half of all income and the lower 90 only has about 25%. By year 74, the lower 90% have no income whatsoever.

You can play with any percentages you like. But over time, if you consistently reward high earners with income increases higher than the real per capita growth rate of the economic system, the system will break.

So as I said: If the economy grows by X%, all income groups must rise by X% on average. Any other system is unstable.

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Cole April 28, 2016 at 8:36 pm

When you are considering “income” in your analyses, are you including realized cap gains and other portfolio income? If so, I absolutely do not agree with the starting point. There is obviously going to be an increasing income gap if you include portfolio income because those with a higher income to begin with are going to be able to save more and over time there will be a larger gap due to growing portfolio income. The only way to then keep the groups growing at the same percentage would be to either steal more wages or portfolio income from those who had higher wages to begin with. Even if incomes are the same to begin with, some will save more than others and any system that taxes (steals) from those who save more to balance it out seems crazy to me. You may disagree, but I think that is ridiculous.

Furthermore, if you are trying to wrap portfolios into the income discussion/analysis, then why only realized cap gains, interest, and dividends? Why not unrealized cap gains as they are in many cases much greater than all the other portfolio income categories (this would help your argument even more)? Also, in down market years, realized cap losses are capped at $3,000 for tax return purposes, so they are counted in up years, but not down when looking at many income inequality articles. I have seen quite a few analyses, charts, and data that start with tax return’s income as the definition of income and from my perspective the credibility of the study is automatically in question due to these flaws. Use wages only or I and many others will ignore much of the data as skewed. Even if you find data on wages to show inequality, I’m still in the Peter camp that the ice cream guy shouldn’t get the same percentage raise as the smarter, more motivated, and harder working. Best example to me is a sales guy and his assistant. Hypothetically a sales guy with $3mil of revenue makes some percentage of revenue and let’s call it 40%. His assistant makes $70k and he makes $1.2mil. He is exceptionally talented and increases revenue to $4mil. He now makes $1.6mil and the company is happy to pay because he is bringing in a ton of revenue. He makes 33% more, but there is no way his assistant is getting $23k raise to now make $93k. Why? Steven H, I get it, the sales guy needs the assistant or he can’t increase the revenue, but he can find a million other people to do the assistant’s job at $70k and be happy to earn it because that person’s skills, motivations, etc. are much easier to replace. At some point the assistant is going to be capped based on this, but the sales guy isn’t capped and shouldn’t be if he continues to increase revenue. If you would say that the assistant should now make $93k, then I don’t think it’s realistic that’s ever going to happen, and philosophically I don’t think it should happen. The assistant is overpaid if making $93k.

One further flaw related to a lot of these discussions is related to income of teachers, police officers and other government employees that Steven H refers to quite often. Remember they receive unbelievably generous defined benefit pensions. Many begin work in their 20s and retire in their 50s with a lifetime pension that they receive with no market risk at all. These types of pensions are largely dead in the private sector because companies do not want to bear the market risk, they shift it to the individual. But of course, none of the income inequality statistics or articles address these pensions (many of them valued in the millions if you present value them). Don’t get me wrong though, I appreciate all that teachers, police officers, and SOME other government employees do for us, but if you play it out over a lifetime, many of them do just fine (their set up is almost a “forced savings” – live not as good of a lifestyle now, but with the guarantee that you can live the same or better lifestyle while possibly retiring a lot earlier than most others – or they can double dip and get a pension and then go work somewhere else – a lot of options that most don’t have).

Sorry to dive into the Peter/Steven H discussion, but just wanted to note a couple of opinions and discussion points.

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Peter N April 28, 2016 at 9:56 pm

” Even if incomes are the same to begin with, some will save more than others and any system that taxes (steals) from those who save more to balance it out seems crazy to me. You may disagree, but I think that is ridiculous.”
This is true in my case. I have invested well. I will be in the top 20% from passive income when I retire.

Peter April 28, 2016 at 10:12 pm

Totally agree with everything you posted – thanks for adding to the discussion. and great point about Federal employees. Both the sales guy and assistant analogy and the realities of government pensions are things that are at the center of my world. Maybe that’s why I think like I do.

I can go on and on about all the things you mentioned about Federal and State employees benefits. The double dipping is a reality and one that can easily place a government worker in the 1%. Plus, they have health benefits they keep for life and a no risk money market fund in their 401k that pays long term interest rates!

Steven H April 29, 2016 at 1:24 pm

– Yes I include capital gains because that is income.
– I don’t include unrealized capital gains because that is not yet income

” There is obviously going to be an increasing income gap if you include portfolio income because those with a higher income to begin with are going to be able to save more and over time there will be a larger gap due to growing portfolio income.”
So you are proving my point: That excess capital and capital gains among high earners creates an unstable system that inevitably drives income disparity to infinity and breaks the system.

“The only way to then keep the groups growing at the same percentage would be to either steal more wages or portfolio income from those who had higher wages to begin with.”
If you are preventing the eventual collapse of the economic system (which will rob everyone of wealth), I hardly think that taking whatever measures necessary to correct and save the system are stealing. Appropriate methods might include tax incentives to improve job training and education, strengthened labor protections and policies, financial market regulation to prevent moral hazard. Some of these things were put in place in the 30’s and 40’s, and were later dismantled in the last several decades producing great economic damage. You may be dismayed to realize that appropriate solutions might also include higher taxation rates to capital and high incomes, and reasonable inheritance tax on wealthiest estates.

As for the sales guy and the assistant, I already addressed this. The sales guy is advancing his position relative to other people, moving up in the percentile ranks. The assistant is not, unless he/she is going above and beyond what other assistants accomplish, in which case she may get bonuses or wage increases. The assistant’s pay is not tied to some other individual’s advancement but is loosely tied to the net prosperity of the nation. Just because this sales guy is really good doesn’t mean I need to give all sales guys a raise, right? Similarly, we don’t need to give everyone in the upper 1% a raise at 2.3x the national economic growth just because some of them do very well. The fact that we do over-reward the rich while punishing the middle class and poor shows that the system is broken and unsustainable.

Cole April 29, 2016 at 5:58 pm

So Steven H, I guess you are arguing that if everyone’s earned wages increase equally, say by 3% per year, then that is what the system should be – everyone’s income is increased by the same percentage. And, for your system to work, then if everyone receives the 3% pay increase on earned income, then you would have to take 100% of the investment income (realized cap gains, interest, and dividends). That’s the dumbest thing I’ve ever heard and it’s hard for me to believe that if you say it out loud you could even really argue that is the right system.

Furthermore, your very matter of fact “– Yes I include capital gains because that is income.
– I don’t include unrealized capital gains because that is not yet income” is head scratching. This is simply a tax distinction. Make an argument based on wages or other earned income and I will listen, but including portfolio income just doesn’t make sense. As I said before, “even if incomes are the same to begin with, some will save more than others and any system that taxes (steals) from those who save more to balance it out seems crazy to me”. You would literally have to take ALL/100% of portfolio income to keep it balanced. Dumb – and I would just recommend clients invest in non interest, non dividend paying positions with very little portfolio turnover until retirement. Then into retirement, sell assets and realize gains to a point to keep you under whatever threshold the Socialists set. In essence, I could advise around these issues, but it shouldn’t be necessary.

Another example: I start a business and pay myself a salary of X and raise it by 3% per year. The business grows from a $1mil business to a $100million business. And based on your ridiculous assertions, if I sell, then you take the $99million of gains because I am only afforded a 3% pay increase on may salary of X. I wonder if maybe your emotions are getting the best of you here, because this is irrational.

Peter April 29, 2016 at 9:30 pm

Agreed. I think his idealism has talked him into a corner here. No chance he really believes this should be the case. He may WANT it to be the case….but it is based on a ludicrous principle. Every quintile should grow at same percentage…..and somehow mobility is irrelevant. Welcome to 1984 (the novel not the year)

Peter April 28, 2016 at 10:27 pm

So I will ask again. How will you ensure that the ice cream man same pay increase as everyone else? How will you force the sales guy Cole mentioned to pay his assistant more?

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Steven H April 29, 2016 at 1:02 pm

A properly balanced market will allow that to happen just as it did for 30 years from 1950-1980 when all quintiles rose together. I am merely pointing out to you the markers that show the markets are broken and must be fixed. I have shown you the mathematical proof that a system that consistently gives higher pay raises than system average to all high earners is an unbalanced and unsustainable system. There is no requirement that government manage or “ensure” that people get raises, merely that it recognizes and corrects the market inequities that throw it off-course and prevent that from occurring naturally.

Cole April 29, 2016 at 6:14 pm

There is no mathematical proof. If you are referring to the Business Insider article it’s laughable. Even the title, “Amazing Charts Show How 90% of the Country Has Gotten Shafted Over the Past 30 Years…” is clearly biased and has an agenda: Divisiveness. All of the charts in the article are correlated to the stock market – pull up a chart of the stock market over the same time periods and it will look almost identical. So if you are arguing that people who save should have all portfolio income taken away from them to keep income inequality balanced, then you have lost all credibility and there is no sense having a discussion with you.

It’s funny that the article we are all posting on discussed earned income in the $400k range which is roughly the top 1%, but the Business Insider article shows top 1% at $1.4 million because of portfolio income – definitely a way to infuriate certain people – if everyone stays on point, which is wages, then the media doesn’t get as many clicks, sell as many newspapers, or influence as many votes. I also love the time frames it uses: 1917 to 1981 and then 1981 to 2008. Although the article was written in 2011, it conveniently leaves out the 2008/2009 meltdown which would obviously look a little different since they are including portfolio income. The article is trash.

Last point/question: If realized cap gains are income, then isn’t it a little crazy that all the upside is income, but only $3,000 of the downside offsets income? Stupid – it’s just the accounting, but since you want to use it then again, you lose credibility because this is so asinine.

Peter April 29, 2016 at 9:32 pm

That is a good point, Cole. If we include portfolio income then what quintile does the businessman with a net $1 million loss fall?

Peter April 30, 2016 at 1:17 pm

Crickets….. :)

Steven H May 2, 2016 at 8:30 pm

Cole and Peter,
I am not talking about a fixed rate of wage increase for each individual. People are climbing and descending the economic ladders all the time. As the businessman builds his business, he is climbing the ladder and advancing his position and his income faster than others. As a business venture fails, the businessman’s income plummets. But STATISTICALLY, large groups such as a quintile, or even a 1% population group of sorted incomes should rise or fall at about the same average rate to maintain a stable income distribution.

Why is this so hard to understand? Have you never studied statistics?

Peter April 29, 2016 at 1:49 pm

Cole – I’ll let you tackle that stuff above.

Was just listening to an interesting interview today talking about what has been happening at Google for the last 10 years. The people were talking about the amazing ingenuity and work ethic of the people there – and the excitement of working for a company like that. Unbelievable growth and invention has happened there, as well as at Apple, Cisco, Facebook, Twitter, Microsoft, Oracle, etc. To hear people talk about working there and their experiences is really interesting.

It really cemented my point that we have an enormous divide between the pay a skilled, smart, highly motivated worker receives and someone who is just “looking to provide for themselves” or who lacks any skills, motivation or work ethic. (And honestly, you need all 3) There are amazing things happening in our country – not only in the information technology world but in science, alternative energy and biotech. Many multi-millionaires have been made from this great boom that has changed the lives of millions. The beautiful thing is that is not just a select few, but MANY people that have been a part of this. Just look around Silicon Valley, the DC area, even places like the Research Triangle in NC and the Pacific Northwest. These communities have exploded due to this growth.

Of course, this has created great wealth at the top. But it has also created thousands of unskilled service jobs as this wealth has been created. See, that is the key point – and one Peter N keeps trying to make – this wealth has been CREATED. The things that these companies are doing – Apple, Facebook, Tesla, etc. didn’t even EXIST 25 years ago. And we lead the world in the innovation and development of these types of products due to the ingenuity and talent of the American worker. This created wealth has increased the need for service jobs, the demand for restaurants, malls, dry cleaners, Uber, etc. etc. etc.

In a way, the ice cream man gets a raise when the super-successful get a raise. He sells more ice cream to the super-successful. Or maybe the people that renovated the basement of the super-successful guy makes more money now so he buys more ice cream. This so very obviously trickles down as many communities can clearly attest to.

The system works – and income disparity would take care of itself if we implemented the things I posted a while back. (better education for today’s world, incentives for jobs overseas – even tax cuts for small business owners)

I am sorry – I’m sure some will think I am insensitive – but it is hard for me to feel bad that an ice cream man hasn’t gotten the same pay raises as a computer programmer. Maybe if we focused on the process (education, jobs, etc.) rather than the endgame (wages, wealth) we might be able to bridge the gap.

The sales guy’s assistant’s wages are NOT loosely tied to the general economy at all! They are absolutely tied to the salesperson they work for! And the sales guy won’t need a raise if he is really good, he will make more money. As will the assistant. And no – if that sales guy is really good you certainly don’t need to give ALL sales people a raise. Which is exactly my point. A meritocracy has winners and losers.

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Peter April 29, 2016 at 1:57 pm

I’m sorry but this post shows a total lack of understanding of the economy….

“The sales guy is advancing his position relative to other people, moving up in the percentile ranks. The assistant is not, unless he/she is going above and beyond what other assistants accomplish, in which case she may get bonuses or wage increases.”

First of all, the sales guy took on a job that very often has no security. And it takes more skill to be successful as the sales guy than it does to be his/her assistant.

“The assistant’s pay is not tied to some other individual’s advancement but is loosely tied to the net prosperity of the nation.”

This might be the dumbest thing you have ever said. Clearly you have never worked in a sales environment.

“Similarly, we don’t need to give everyone in the upper 1% a raise at 2.3x the national economic growth just because some of them do very well.”

If they create or are fundamentally part of creating the internet, curing diseases, creating alternative energies, inventing things that make life more enjoyable and/or efficient, etc. then I really don’t care what they get paid. And if you sell 20 million of your product vs. someone else who sold 20,000 you should make 1000 times as much. Not sure what part of this you don’t understand.

“The fact that we do over-reward the rich while punishing the middle class and poor shows that the system is broken and unsustainable.”

More offensive judgmental talk. Nobody over-rewarded me when I became the top revenue generator in my office. I generated twice the revenue, I made twice as much money. And my assistant sure as hell didn’t get a 100% raise. She got about a 20% raise, making her the highest paid assistant in the office. If she doesn’t think that’s fair, she is welcome to quit and I’ll hire someone else for 75% of the salary.

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Steven H April 29, 2016 at 4:18 pm

You. Are. Not. Listening.

The economy is unstable if you reward high earners, as a group, with higher PERCENTAGE raises than the economic growth of the country. That is math. Not philosophy. Not politics. Not some weird liberal idea. Just provable, undeniable, and rather easy to understand math. If you do not understand this then you understand nothing about how this or any economy works.

I have observed from the tenor of this most recent conversation a rather disturbing disrespect of most Americans and glorification of high earners. Low wage earners are “low performers”. High earners are all creating the internet and saving humanity. That is wealth-aggrandizing propaganda worthy of an Ayn Rand novel, but not of an intelligent conversation.

Some people who are responsible for building the internet made a lot of money. Some did not. There are a lot of skilled programmers who did great work and don’t necessarily get paid all that much. There are a lot of high performing accountants, engineers, and managers involved. Maybe they get a windfall or maybe not. There are highly skilled people all up and down the economic ladder. They are not “low performing”. The good ones are most often performing at or above their pay level. Certainly not many of them make it into the 1%. They do not deserve the disparaging title of “low performing”, even if they empty wastebaskets and clean hotel rooms for a living. If they do a good job, they deserve respect, and a decent pay raise for doing their job well.

What we reward higher skill and higher value jobs with is a higher SALARY, not a higher rate increase. Any high rate increase should be a product of moving to a higher tier. It’s a side effect of moving up due to more experience in your career arc, a promotion, a new title, or even a recognition of being outstanding or best in your field. And the system is stable because when you move up, someone else somewhere has lost ground. If you have reached the pinnacle of your capabilities, then you have stabilized at your spot in the national pecking order. You have reached your appropriate salary. Any further increases should approximately be due to inflation and national prosperity growth. You do not deserve a higher RATE of salary increase just because you peaked out high on the ladder. You have a high salary or income. THAT is enough.

Any belief to the contrary is mathematically unsound, and a contributing source to the next economic crash.

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Steven H April 29, 2016 at 4:35 pm

Furthermore, it seems to absolutely preposterous that it is seen as somehow demeaning or disrespectful to suggest that the president of a stable established company (neither growing nor shrinking, maintaining market share, i.e stable in pecking order) and a competent manager in that company making 1/5 the salary should receive the same RATE of pay increase. Maybe the manager makes $100K and the president makes $500K. Maybe the established average pay raise determined by the accounting department for a given year is 4%. For the president, that is $20,000 dollars, but for the manager it is $4000 dollars. How is it disrespectful or inappropriate for the president, already at 5 times the income of the manager to receive 5 times the increase? IT IS 5 TIMES THE INCREASE! Why should the president get a higher RATE just because he is further up the ladder? Because his job is harder? That’s why his salary is higher. Why should the RATE of his salary increases be higher?

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Peter April 29, 2016 at 4:58 pm

Please … Someone else explain this to him.
Re-read the part about the sales guy and the assistant.

And nobody is demeaning anyone. Just referring to the percentages. You are the one passing judgment with words like over-reward. Have total respect for anyone that works. Not really the point.

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Cole April 29, 2016 at 6:25 pm

So the President should get a 0.8% pay increase, while the manager gets 4%, so they both receive $4,000. Really? So, if I invest $1mil in the stock market and my admin invests $10k and the market goes up 10%, then she gets $1,000 and I also only get $1,000, which is 1/10 of 1% to keep it fair? And I guess the other $99k that I should have made goes to the government? But if she sells and I don’t, I keep the full $100k growth because it is not “income” yet, according to you. Makes no sense.

By the way, none of the analyses address income inequality net of tax. Numbers would be a lot different if everyone took tax brackets into consideration, but again that’s too logical and unbiased. Come on, this is getting crazy and now I can see why everyone gets so frustrated.

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Steven H April 29, 2016 at 9:09 pm

Cole, reread what I said.
I repeatedly hear that high earners should get higher income rate increases than lower earners. I am arguing that they should get the same rate of increase, not the same amount of increase. The higher earners then get more money at that same rate and that is stable.

I don’t see how you misread my intent. Go back and read my last few posts and it should be clear.

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Cole April 29, 2016 at 10:25 pm

Steven H: You’re right I skimmed it the first time and just reread it. That’s definitely on me. Still curious though about the portfolio income issue I refer to a few posts above.

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Steven H April 29, 2016 at 9:17 pm

Again, concisely.
When the economy goes up X%, all quintiles should go up X% to keep the system stable. Not necessarily every single job, but an average across each major income grade such as a quintile. Otherwise you are redistributing income.

How is this unclear? How is it not mathematically obvious?

I never said that company presidents and lower level managers should get the same dollar raise. Sheesh.

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Peter April 29, 2016 at 9:25 pm

I understood you. And don’t agree that my assistant and I should have the same percentage raise. Nor should the ice cream man vs the computer programmer. Nor should the CEO vs the stock boy.

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Steven H May 3, 2016 at 6:26 am

Some CEOs should get pay cuts. Not every CEO is successful. Yet lately even the failures get pay raises and golden parachutes. That is where the system fails.

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Steven H April 29, 2016 at 4:52 pm

And the story about you and your assistant does not conflict in the least with anything I have said. You and your assistant outperformed others in your office and you moved up the pecking order and you got paid accordingly. Great. That’s how it supposed to work. And, in that scenario, if you continue to sell at the higher level, generating about the same phenomenal revenue each year, then you should continue to receive your higher salary and and about the same PERCENTAGE pay increase as everybody else who maintains their own sales rate. Which is of course a bigger MONEY increase for you because you are making more to begin with.

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Peter April 29, 2016 at 5:01 pm

My assistant didn’t do anything….. There are others in the office that could have worked hard and helped me like she did. It is me that made the difference, not the person who does the paperwork for me. And I don’t make a salary nor do I get “raises”. I earn income on revenue generated. I do however set the salary of my employees. And that is and will always be largely based on market rate and scarcity of skills. No matter how much this bothers you.

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Steven H April 29, 2016 at 9:22 pm

Well I don’t understand what your point is about the assistant. It seems irrelevant. You earned money by proving yourself better than others. She either earned her extra money by working harder than others to support you or she just rode your coat tails. I don’t see how that relates to this discussion.

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Peter April 29, 2016 at 9:27 pm

True. The real world doesn’t really relate to what you are talking about. I hear ya….

Steven H April 30, 2016 at 5:33 am

deflect. deflect. deflect. You are making no sense.

Peter April 30, 2016 at 1:14 pm

Me? My point is that my income should and always will rise faster than my assistant.

Steven H April 29, 2016 at 4:58 pm

Wealth has been created. Certainly. But it has not ALL been created by 1% of the population. And yet almost all the new wealth is going to just 1% of the population. That is the crux of the problem. And the reason that the economy will continue to fall short of its potential.

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Peter N April 30, 2016 at 3:57 pm

“Wealth has been created. Certainly. But it has not ALL been created by 1% of the population.” True, but workers are compensated. They don’t take risks. The people that supply the capital create the environment in which the workers earn money. Yes, the rewards go to those that take the risk.

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Peter N April 29, 2016 at 8:45 pm

“But it has not ALL been created by 1% of the population. ”
True, but the workers get paid for their contribution.

Carrier is moving a lot of jobs to Mexico leaving many without jobs but they have the skills to make air conditioners so why don’t the workers buy the plant and keep making air conditioners?

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Steven H April 29, 2016 at 9:04 pm

Maybe because most workers have no capital?

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Peter April 29, 2016 at 9:26 pm

Or the willingness to take risk.
Or the willingness to take no salary and base their income on the success of the company.
Or any idea how to run a company and manage people.

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Steven H April 30, 2016 at 5:38 am

Again: wealth aggrandization and disrespect. You: Low wage and middle class workers fall because they are lazy and unskilled. Me: Maybe it has something to do with the upper 1% sucking 25% of their income out of their paychecks? Sorry, there’s that judgmental thing again. Except my judgments are backed by statistics and yours are not.

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Peter April 30, 2016 at 1:16 pm

Not judgmental at all. What statement did I make that was wrong? Maybe to be fair I should add that they don’t have the desire to start a company. That’s fair…..but all 3 reasons I gave are totally valid reasons why the workers wouldn’t just buy the plant. Of course capital is a part of that as well, I’m certainly acknowledging that. No judgment just the truth. We are allowed to be critical of poor people the same way we are critical of rich people aren’t we? Nobody is immune.

Peter N April 30, 2016 at 3:59 pm

“. Me: Maybe it has something to do with the upper 1% sucking 25% of their income out of their paychecks? ”
This is the kind of BS can’t be justified.

Peter April 30, 2016 at 9:41 pm

Makes no sense. I must be sucking the income out of my assistants pocket. The 1% aren’t evil thieves by and large – they are successful people. Why should that constantly be shamed by you?

Peter N April 30, 2016 at 3:47 pm

This is non-sense.
Do you think I had a lot of money when I bought my share of my company?
I got paid 25% less. I paid about $27K for my share. I paid half up from and saved the rest over a year by living frugally to pay the rest. There is money capital and there is human capital that is skill and working long hours.
Now maybe they don’t have enough to buy a carrier plant outright but over time like I had to do. Employees often buy companies from their employers over time when the employer wants to retire.

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Peter April 30, 2016 at 9:43 pm

Happens all the time and often without much capital. But not everyone is willing to do what you did and take the risk. Which is fine…..nothing wrong with that at all. One of the best things about America is that we all have freedom of choice.

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Steven H May 2, 2016 at 9:37 pm

The real reason is probably because the workers with any capital realize they would be fighting a losing battle. They could not compete with the other companies moving manufacturing out of the country. The bad guy here is not the employer, but the trade policy.

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Peter May 2, 2016 at 9:57 pm

Except for the thousands of people who risk there lives to come here to start a deli, dry cleaners, or other small community business. There will always we be those willing to take the risk. And they will be rewarded at a far higher rate than those that don’t…..IF they succeed.

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Peter N May 3, 2016 at 11:45 pm

Ditto, I have mentioned before I have much more respect to the asian owner of a laundromat that Steven H. I mentioned even though he couldn’t understand much English I gave him a thumbs up which he understood with a smile.

Steven H, you haven’t earned any smiles. All you have earned is contempt.

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Steven H May 3, 2016 at 6:40 am

All of this back and forth is skirting the real issue. Of course people who take risks will only do so if there is chance of a big payoff. That’s the motivating force of capitalism. The point is that there are risk takers and entrepreneurs at every income tier. And there are successful people and slackers at every income tier. The repeated assertion that the lower 20, 50 or 90% are slackers who take no risk and that the upper 1% are all Creators and the salvation of mankind is BS. And yes I realize that I am exaggerating your statements and those of others but that is how your arguments sound. The 1% are receiving too dam much, and often for actions that are destroying rather than building this economy. The rest of the nation is mostly working their buts off but not receiving just reward. education and medical costs skyrocket. Young people graduate college with no job to go to. The rewards of being rich with a little capital to invest accelerate while the debts of the nation accumulate. And the interest of the debts and despair on most Americans fuel the prosperity of the rich.

Not everybody in the 1% is in the same situation, of course. There are admirable businessmen, scalliwags, and earnest financiers just trying for their slice of the pie and who have no idea what damage the financial industry has done and continues to do to this economy. But the motivations and character of the people involved is not the main concern. The problem is in the statistics which are irrefuatbale, dangerous, and frightening.

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Steven H May 2, 2016 at 8:19 pm

OK, I stepped away for a couple of days because the conversation was getting snarky again. Let’s all step back and recap.

I have asserted, and shown mathematically, that a consistent policy of rewarding all highest incomes (such as highest quintile or highest 5% or 1%) at a consistent rate of income increase which is higher than the overall rate of increase of the system will create greater and greater income disparity and the share of all income going to the upper group will increase until they have 50%, 70%, or even 90% or more of all income.

This math is not unique to finance or economics. Its easy to show this effect in any system, such as rainwater distributed to a system of lakes. If you distribute annual rainfall to each lake in volume proportional to the volume of each lake (a constant rate increase for each lake) then each lake grows at an equal rate. If you slightly increase the percentage rate increase of the rainfall feeding even the smallest lake relative to the others, then over time it becomes the largest lake. And also, clearly, if you feed all new rainfall into just one lake, it will rather quickly exceed the size of all others.

And yet, Peter, a financial guy, and Peter N, and engineer, both of whom should have adequate familiarity with basic math, see no problem with this. Despite the simple math of this model, Peter persists in insisting that rich people should always receive higher income increases than lower wage earners, whom he calls “low-performers”. This is just crazy.

Peter attempts to project individual experiences he has had or that he may imagine onto the larger system. This is a poor approach for system analysis. Individual examples can help us understand the system, but they can also be deceptive. In statistics, this is described as having too small of a statistical sample. Projecting results from a small statistical sample creates too much uncertainty to understand the larger system. It is like projecting a presidential election result by only talking to 5 voters. This is why studies and statistics which analyze and describe the overall system are so important to true understanding. This is why the economic research of Piketty and Saez is essential to understanding our economy.

I cannot answer questions about how an individual ice cream vendor might get paid or use Peter’s example of his assistant to either prove or disprove how an economic system should work. I can state that there is nothing inconsistent with my model and Peter’s examples. Various people within a stable system may advance their wages at differing rates, either because they are moving up or down the scale, or because they represent a noisy exception to the larger overall trend.

I will point out two weaknesses in my previously stated model:
1- No population would ever accept an eventual reduction of their income to zero. The system would fall apart once it was clear that most of the population was suffering from a falling income (not just a falling share of income) while a few people were still increasing income.
2- Before the system actually fell apart, the growth rate of the system would decline from various system inefficiencies, including the decline of consumer spending on anything except necessities, and the general loss of morale and motivation of the general population.

This is getting too long, but bear with me for one last point. Peter is adamant that high earners should always receive higher rates of income increase than the low earners. Call this Peter’s Theorem. Can my model be adjusted realistically to support his theorem? Let’s say that instead of setting the highest 1% of earners at a constant rate of income increase, we just assign them a fixed X percentage of any NEW income into the system, something akin to feeding X percent of rainfall into one of the lakes. That way the other earners never actually suffer a wage decline. Keeping the lake analogy, if Peter’s lake has 25% of all water to start and each lake receives a balanced proportion of rainfall, Peter’s lake will receive 25% of rainfall and will stay at a 25% share of water in the system. If his lake receives 50% of all rainfall then his lake will grow faster than the others and will eventually (asymptotically, for the mathematically inclined) reach about 50% share of all water. At that point his rate of increase will stabilize and match everyone else’s. Even when set on an initial unstable course, this system has stabilized to a constant rate increase for all, albeit with significant water redistribution.

So you see, with these assumptions, the system will attempt to balance out at a point where everyone increases at the same rate again. And though the lake system may be able to sustain one lake growing indefinitely relative to the others (if it receives all rainfall), a financial system cannot. Peter’s Theorem, when applied in a real mathematical world, results in unlimited growth of income shares to one segment of the population, and that is just not realistic or sustainable.

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Peter May 2, 2016 at 9:18 pm

“Peter is adamant that high earners should always receive higher rates of income increase than the low earners”

Nope. Replace always with sometimes.

In fact in my industry the newer people are definitely growing their income faster than mine percentage wise. Call it the law of large numbers. But of course this is merit based – which divides people into winners and losers again, which I know you don’t like.

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Steven H May 2, 2016 at 9:33 pm

“But of course this is merit based – which divides people into winners and losers again, which I know you don’t like.”
Never said i had a problem with that. I just don’t like winner-take-all.

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Steven H May 2, 2016 at 9:34 pm

Replace always with sometimes and then you can stabilize the system. But the percentage of “sometimes” must result in all quintiles rising at the same rate as averaged over time.

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Peter May 2, 2016 at 9:39 pm

We don’t have winner take all. But I do get almost half my income taken from me while others pay none. So I’m certainly not taking all.

And the system is stabilized. Last thing we need is the government manipulating the world business economy anyhow. China does enough of that for the whole world.

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Steven H May 2, 2016 at 9:40 pm

Peter,
So do you now see the point that a system is unstable and unsustainable if you increase one large economic group’s income rate of growth above the national average over an extended time?

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Peter May 2, 2016 at 9:51 pm

It really isn’t a valid question. By its very definition it is unsustainable which is why it doesn’t happen. I guess it all depends on your definition of “extended period of time”. And obviously we disagree on what should be done. Still doesn’t change the realities of the business world and how things really work. If you really want income equality, the government will have to get far more involved in day to day management of businesses and companies. Just confiscating more of their wealth and income and giving to the needy won’t fix it.

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Steven H May 2, 2016 at 9:26 pm

Cole,

I have not been trying to ignore you. Let me try to cover some of the questions I have not yet addressed.

1) My mathematical ‘proof’ was not any of the articles I linked. It was my post further up that began:
“Here are my basic mathematical assertions on income groups and inequality:”

2) I include capital gains because it is income. Not including capital gains in the analysis creates strange distortions in the math. Hedge fund managers have incomes typically designated as “carried interest” which is treated like capital gains. But it is really just salary. CEOs receive some compensation as stock options, which are later turned into income from the capital gains of the stock sales. Why is that not like a wage? Some investors may receive all of their income to finance their house, cars, education, and lifestyle from their investments. How is that not income? What is the practical difference?

The underlying assumption you re making is that people with capital can invest in the stock market which always has a return higher than wage increases will have. And this has been going on for so long that you treat that like a physical law that can never be violated and should not be questioned. Really? How stable is that system? How many economic downturns have arisen from the presumption that markets never go down, or not for long, or not by much? Of course capital gains must be included. The relatively low risks of capital and the stock market, along with the low taxation of gains over the last decades (despite the 2008 recession) are a big reason why the very real problem of high income disparity exists. You talk about the risks of investment but there is obviously a lot more risk in being middle class than there is in being rich. That’s a problem. Such a system will eventually collapse.

3) Why not include unrealized capital gains?
Because they are not yet income. No offense, but I don’t really understand how that is even a credible question. Profits and losses are all theoretical until realized. My house value want up $150,000 and then back down by $100,000 over the space of four years. It’s all funny money unless and until I actually sell.

4) The business insider income of 1.4 Million for the 1% does seem high at first look. It is about double what I have seen for the average wages of the upper 1%. Of course, the $400K you mention is the LOW boundary of the upper 1%, not an average. I think the discrepancy must be that capital gains are included in the business insider average, which is perfectly fair. I don’t have time tonight to look up the data from the Piketty/Saez charts, but I suspect the data is correct with capital gains. (Sanz typically provides data for both cases).

5) The business insider article provided data about 2-3 years old, probably because that is typically how long it takes to get good overall data on national incomes. Omission of the 2008-2010 decline from the 2011 article does not make the article “trash” or negate the statistics for the years covered. Also, titles of articles, no matter how sensationally written, do not negate the underlying statistics.

I’m probably leaving something out, but that’s all I have time for tonight.

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Steven H May 2, 2016 at 9:30 pm

Cole,

Also to restate a point I make further up, my statement about quintiles’ incomes rising at equal rates, or the 1% rising at the same rate as the lower 90%, should not in any way mean that i expect each individual to rise at only that rate. Individual rates of wage increase vary as they advance their career, as they rise relative to others in success and fortune, or as incomes fall and decline. The situations you described as absurd in your posts further up, are indeed absurd, and are neither required nor implied by the economic model I proposed.

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Peter May 2, 2016 at 9:47 pm

Your answer to #2 is insanity

And in #4 there is nothing fair about dividing people up from 400k up and using the “average”. As I have said repeatedly – those people are vital to our economy and you will crush them with taxes if you tax them at the rate of the $2m earner. You always say tax those that can afford it – in many communities, people making $100-400k are not necessarily “rich”.

I do have to say it again – when you get deep in these arguments your lack of understanding of economics puts us up against a brick wall. You do however have tremendous understanding of the writings and charts of Piketty / Saez though. Just not about the entire reality of world economics. So here is where I will let someone else battle from here on this thread.

You can’t dismiss countless anecdotes ( I hardly think an executive or sales person with an assistant is a “rarity”) with only liberal-derived charts or Piketty/Saez – or articles from disciples – as your “evidence”. Why won’t you open your eyes to the lives people are actually living. A lot of what you say makes sense if we were just dealing with numbers on a spreadsheet. But we aren’t. More complex than that.

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Peter May 2, 2016 at 9:54 pm

I do apologize for the last post. No point going down that road again. I suppose a simpler question is – does it concern you that you don’t have supporters on this thread after all these years? Have you even paused to rethink that you might be wrong?

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Steven H May 2, 2016 at 10:07 pm

Sure I worry about being wrong all the time. That’s why I keep looking up articles and rechecking my math, rather than relying on anecdotes and intuitions and emotional self-interest. After some vigorous research, I usually learn something new, but also find that my arguments are pretty much on the right path, mathematically and philosophically, and socially.

Two years ago, I pretty much predicted high levels of social unrest due to income inequality, and here we are in election season 2016 with exactly that result. I predicted economic instability if the path is not changed and now we have a slow recovery and corp[orate profits on track for 3rd straight quarter of decline.

I do get a few people cheering me on here. It would be nice to hear from MOR, and some of the old posters, but I imagine they are tired of all this head-banging and trying to persuade the unpersuadable. I just do this as a motivation to do more research and refine my knowledge on the subject.

So yes I worry about being wrong. And sometimes i wish i were. Unfortunately, I think I’m very much correct and there is still a bumpy road ahead.

Steven H May 2, 2016 at 9:56 pm

“Your answer to #2 is insanity.”
Insanity is thinking that the rich can keep getting richer at the rate they have been since 1980 without destroying the economy.

“And in #4 there is nothing fair about dividing people up from 400k up and using the “average”. ”
I am STATING an average because it is an accurate statistic. I never said that all of the 1% should be taxed at the same rate or that they have the same situation. And i am mostly talking about the need whittling down the outrageous incomes of people a lot richer than even you, not eliminating all bankers or investors. Of course they are essential to the economy. So is the middle class. Which one of those groups has more capital than they even can invest wisely. Even Peter made that statement about himself. The very rich are doing very well and the middle class/poor are struggling. I am getting really tired of people addressing all of their heartfelt sympathy to the poor downtrodden wealthiest people in the known universe, and ignoring the much more immediate plight of most of the nation.

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Steven H May 2, 2016 at 10:12 pm

“Even Peter N”, not Peter, made the statement that he had more money than he could spend wisely.

Sorry for the error.

Peter May 3, 2016 at 8:01 am

No, insanity is a gobbledy-gook analysis of stock options, capital gains and risk that made no fundamental sense. Cole addressed this a bit below.

Peter N May 12, 2016 at 10:53 pm

But it is my money to spend or will/gift to others. It is not yours or any body else’s. So fuck off and die libtard. On top of that I might need the money when the government defaults on the debt or issues so much currency that the dollar becomes worthless like Venezuelan money.
Steven H, you really don’t understand the contempt I have for people like you. You are worthless and can be replaced by other more agreeable people.
You create no wealth except in the environment that others that have created for you. Without these others you would be lost. The libtards would be lost.
I thought Steven H was gone.

I am very pissed that I pay 5 times more in taxes than it costs me to live each year. This is all due to libtards.

Cole May 3, 2016 at 1:23 am

Steven H:
I won’t leave these posts without at least expressing my frustration that anyone could think that including realized capital gains, but not realized capital losses (capped at $3k loss) makes sense when looking at income inequality. Furthermore, thinking that unrealized gains and losses are irrelevant is arbitrary and when you say that “they are income” when realized doesn’t make any sense. I completely disagree and don’t know why tax returns are the governing document for this discussion. This is totally arbitrary and I suspect that the only reason articles use realized instead of unrealized gains is that they are trackable on tax returns and unrealized gains are not (they don’t use losses because they are biased and it wouldn’t help with their point). Capital gains whether realized or unrealized are usually growth of investments and the fact that some investments have been sold is irrelevant and arbitrary. Most people agree that the market will continue to grow over the next 30 years. If so, it’s obvious that income inequality will increase and I’m still confused as to what your solution is other than simply taking all growth from those who invest – if all wage earners were to get 3% growth on salary, but higher earners invest and have portfolio income, then the gap will widen – so take the portfolio income to even it out? Side point, I also don’t understand why the net of tax income isn’t the starting point. If so, then technically the 1% needs to grow their wages more to stay even in growth because taxes take a lot more of their income. As you will see below, I’m exhausted and done and will let you have the last word – let me guess I don’t understand statistics (even though I was begged to teach statistics in college)?

Also, I have conceded multiple times that “carried interest” shouldn’t be taxed favorably and agree it should be taxed as wages. On the other hand, your understanding of executive compensation needs some refining. The vast majority of stock options for C-Suite executives are “Non-Qualified Stock Options” that are taxed as ordinary income and reported on the W2. There are some options called “Incentive Stock Options” (ISOs) that do have favorable long term capital gains tax treatment if holding periods are met, but they make up a nominal percentage of executive compensation.

I am leaving the discussion for good. The thing that’s funny is I agree with a lot of your positions, both practically and philosophically, but you lose credibility and my interest in continuing the discussion diminishes when you can’t concede ANYTHING because you are always right, even when we get into areas where I am an expert. The difference between you and me is that I know there is a perceived unfair inequality of income (regardless of what income you include) and I don’t need to do 100 hours of research to know it. I also know that with the civil unrest, we are going to have to address it and there will either be a breaking point and chaos, or we will elect a true leader someday to convince all there is a middle ground. There are truly persuasive arguments that the income inequality is unfair (both in the US and globally); however, there are many points on the other side of the argument that are valid and worth listening to, but you don’t seem to be able to do so. Overanalyzing the same perspective doesn’t add credibility to your argument. In fact, I would argue diminishing returns. Although you are undoubtedly a smart guy, I think your emotions or desire to win these arguments (or both) have blinded you to other perspectives and in turn hurt your credibility. I would encourage you to open your mind because you will be taken more seriously by others and much more persuasive. Go ahead and blast me and tell me why I just don’t get it, I’ll even read it without replying to ensure you get the last word on this.

Best of luck to all here going forward.

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Peter May 3, 2016 at 7:57 am

AMEN. Agree with your entire post, Cole. If you go back a couple of hundred posts you will see a similar post from me directed at Steven H. Very, very well said.

I even posted a three-point plan to try and improve the income inequality in our nation about a month ago (education reform, campaign finance reform and incentive to keep jobs in US). This is what we should be talking about – real solutions – but somehow we come back to income (and even sometimes wealth) taxes. Which is baffling since we already have a tremendously progressive system that taxes the rich much more heavily than the poor.

My other frustration that manifested itself is Steven H’s complete sensitivity to any criticism of the poor and any praise of the rich. I agree that bashing the poor or giving the rich the total credit for everything is ridiculous. But the poor do bear some responsibility in their plight. And the rich do deserve some credit for achieving the way they have. The fact that everyone’s plight – or society’s at large – is a direct result of “systems” or the government or mathematical tables is complete hogwash.

There is no doubt that Steven H doesn’t understand major parts of the economy, the business world and/or finance to be able to truly comprehend the mechanics of the situation. It is amazing – and a little sad – that when people come on here (Cole, Ken, me, etc.) who have had a life’s work in a particular field, he doesn’t listen to us.

This is the problem with our nation. Ted Cruz personifies this. Have an agenda, a platform, a philosophy (whatever you want to call it) and argue it like a lawyer. Stand your ground, concede nothing. The internet and obviously biased news media like MSNBC and Fox News has filled people’s heads with partisan storylines that speak to their emotions. And emotionally driven story lines are far more powerful than logical ones, particularly when most people haven’t devoted their lives to understanding the topics they are so passionate about.

Just listen to two people argue about some military conflict (let’s say Syria). What does the average American really know about that situation? I am in no way qualified to argue a military or intelligence strategy and wouldn’t dare to sit online and tell a general that “he doesn’t get it”.

Yet, Steven H tells people who have spent decades studying economics or finance or running businesses that they don’t know what they are talking about – all because it doesn’t line up with Piketty/Sanz or the left-wing agenda. The thing that he misses is that you and I (maybe not Peter N) are completely sympathetic to the struggling or we wouldn’t even be on here. We both WANT to help everyone have opportunity in this country – hence my 3-point suggestions. But his bull-headed, uninformed stance actually makes me so angry that I pull further away – this is what Cruz does to people and what we need to have OUT of our government and public discourse.

The bottom line is it hasn’t changed for 2-3 years, so I would not expect a miracle now. I’ll just keep popping in here every now and then to defend myself and amuse myself by banging my head against the wall until this thread dies. :)

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Steven H May 7, 2016 at 8:44 pm

I can’t leave this comment unanswered:
“Yet, Steven H tells people who have spent decades studying economics or finance or running businesses that they don’t know what they are talking about – all because it doesn’t line up with Piketty/Sanz or the left-wing agenda. ”
Who on here has spent decades studying macroeconomics? First, remember that finance is not economics. And second, I don’t claim to be an expert in macro economics but I have quoted many experts. If anyone here was an expert in macro and national economics, they certainly would not be advocating paying down the dollar debt. They would advocate keeping a small deficit and paying down debt over time. Or at least they would acknowledge this is a realistic approach.

No I haven’t heard any conservatives here with any expertise on macro or national economics. Just their own opinions. If they had such expertise they would not object so strongly to the advice and analysis of the actual experts that have been quoted and linked. They might critique the detailed points of those experts. But they would not just complain that they and I don’t understand the economy and don’t know what they are talking about.

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Peter May 3, 2016 at 1:25 pm

I will say you almost never see ISOs anymore. And a lot of mid-level employees get NSOs which when exercised, briefly launch them into the 1%. Many of these employees are not executives, but rank and file employees who take on a little risk by getting some compensation in the form of stock options. I do also agree that looking at net income inequality is probably a more accurate way to do things – and that business losses along with capital losses should also be included in the equation as well – and certainly this adds to the tremendous mobility that we have in this nation.

The whole bottom line is Steven H’s worldview revolves around the 1950’s when manufacturing and industry were the primary employers of people. He is thinking of a CEO of a company banking all the profits while the factory workers don’t get pay increases – which does still happen but is a small, small part of our economy (about 8% is manufacturing).

Nowadays our economy is made up more of small businesses, service jobs or jobs which require skilled labor. This is a whole different paradigm that doesn’t fit in the 1950’s manufacturing context.

The great problem we have of the next century is not income inequality – it is the global (unskilled) labor surplus. That’s where the focus needs to be. Taking more money from the rich and giving it to these people is not the solution – and simply paying them more (when there is already a huge surplus of people who can do their jobs – and most of these jobs are done overseas at FAR lower wages) isn’t going to work either.

We need to focus on training and educating this labor force so that as few as possible are left behind.

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Steven H May 3, 2016 at 8:10 pm

Cole,

“I won’t leave these posts without at least expressing my frustration that anyone could think that including realized capital gains, but not realized capital losses (capped at $3k loss) makes sense when looking at income inequality.”
I never said anything about realized capital losses. I don’t have a previously stated opinion on them because I have not considered them. I have no idea whether they are accounted for in the analyses I have seen or how much difference they would make. From a complete off the cuff consideration of an issue for which I have given little thought, I would say they should be accounted for just as gains are. So we have no argument here.

“Furthermore, thinking that unrealized gains and losses are irrelevant is arbitrary and when you say that “they are income” when realized doesn’t make any sense. … Capital gains whether realized or unrealized are usually growth of investments and the fact that some investments have been sold is irrelevant and arbitrary.”
Maybe I am missing something here. To the best of my knowledge, no one treats unrealized capital gains as income. If it makes sense to do so, perhaps it is in some published analyses. Why should this be considered income before it is realized? To my admittedly simplified view of the situation, money in my retirement fund is not income to me until I actually receive it in retirement. What do i care if it lost and gained money via the economic roller coaster in the meantime. I mean I would prefer that it just grow, but the end product when I cash out is all that I really see as income.

I do suspect that the traceability of tax returns is part of the issue, as you stated, but beyond that, unrealized gains and losses seem to me to be almost imaginary and do not seem to have any impact on the real economy. That is overstating perhaps, but at least it seems to have little impact on any analysis of incomes and spending, which is the topic at hand. Perhaps you could explain otherwise.

“Most people agree that the market will continue to grow over the next 30 years. If so, it’s obvious that income inequality will increase and I’m still confused as to what your solution is other than simply taking all growth from those who invest”.
That doesn’t sound like a reasonable solution. But before determining a solution, I would like to at least get some acknowledgment that there is a problem with increasing income disparity. You have been the only one to give even partial agreement on that point, and your statement is that the perception of income disparity is a problem rather than the disparity itself. Peter has offered solutions for improving the economy, but has not really been concerned that disparity itself is a problem. This both baffles and frustrates me how this problem can be so clear and yet still be ignored.

“Side point, I also don’t understand why the net of tax income isn’t the starting point.”
I presume you mean after-tax income? Are you saying that after-tax income should grow at equal rates rather than pre-tax? I believe after tax incomes for upper 0.1 % and perhaps for the overall 1% as well, are growing much faster than anyone else’s after-tax income over last several decades. I’m less certain about the growth rates post-2008 as most real incomes have declined.

But I will state that progressive taxation is an attempt to put friction on the growth rate of high incomes, presumably because it is perceived that that the more money you have, the easier it is to get more via investments or other means. Compensating for taxes in income to pay the wealthy more (which is what you seem to mean) just makes the economy less stable and the disparity problem even worse.

“let me guess I don’t understand statistics (even though I was begged to teach statistics in college)”
I don’t believe I pointed that accusation at you. And even with Peter and Peter N, the issue is not that I think they cannot understand the math. I am just baffled why they choose to ignore it.

“Also, I have conceded multiple times that “carried interest” shouldn’t be taxed favorably and agree it should be taxed as wages. ”
OK.

“On the other hand, your understanding of executive compensation needs some refining. The vast majority of stock options for C-Suite executives are “Non-Qualified Stock Options” that are taxed as ordinary income and reported on the W2. There are some options called “Incentive Stock Options” (ISOs) that do have favorable long term capital gains tax treatment if holding periods are met, but they make up a nominal percentage of executive compensation.”
Ok, I know a little more, now. Thanks.

“you can’t concede ANYTHING because you are always right, even when we get into areas where I am an expert.”
I get frustrated with Peter and Peter N and James because they have never conceded that anything i say is correct. They claim i don’t know what I am talking about even when I directly quote top economists in the field. Sorry if some of that frustration bled over on you.

“I know there is a perceived unfair inequality of income (regardless of what income you include) and I don’t need to do 100 hours of research to know it. I also know that with the civil unrest, we are going to have to address it and there will either be a breaking point and chaos, or we will elect a true leader someday to convince all there is a middle ground. There are truly persuasive arguments that the income inequality is unfair (both in the US and globally);”
Well said. Funny how Peter will agree with you on this but would have objected if I’d said it.

“however, there are many points on the other side of the argument that are valid and worth listening to, but you don’t seem to be able to do so”.
If I didn’t have to discuss ice cream men and why Peter must always make more than his assistant, maybe I could better listen to sound arguments.

“Although you are undoubtedly a smart guy, I think your emotions or desire to win these arguments (or both) have blinded you to other perspectives and in turn hurt your credibility. ”
That seems to be the norm here for some reason. There are multiple posters still posting on this page who never admit their own errors and will seldom if ever concede a lost point. Some others have left the blog rather than admit an error when pointed out. You have been somewhat of an exception. Peter is often quite reasonable but then fails to concede points on trivial yet obvious facts that he just does not like.

I’m actually sorry to lose your voice here, Cole. We disagree on points but I at least feel like you will listen most of the time. That has been rare from the fiscal conservatives on this forum.

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Steven H May 3, 2016 at 8:40 pm

This conversation seems to be coming to a close. Again. We are all frustrated and irritated. Certainly I don’t understand everything about the economy, but I do know this: National Debts are still high. Our government spending per GDP is one of the lowest of developed countries. Our taxes on the wealthy are less progressive than they used to be when we paid down Debt/GDP. Middle and lower class are struggling with stagnating wages and spiraling health and education costs, even as corporations and wealthiest citizens have hoards of unproductive capital. The nation needs to increase investment in education and infrastructure. Any impartial observer would take these facts and come to an obvious conclusion. Taxes need to be increased on the people who have prospered from past tax cuts and past prosperity and that money needs to be used to pay down National Debts and to invest in the country and it’s people to assure future prosperity.

This is a reasonable message. It is logical and simple. But its logic is seemingly countered by another truth:

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” – Upton Sinclair

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Peter May 4, 2016 at 9:57 am

Most of what I have been recommending actually reduces my pay. Just saying….. I am a benefactor of bloated government spending – as are many people in the DC area.

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Steven H May 7, 2016 at 8:30 pm

And tax increases I propose would likely affect me. I’m not looking out for my interests, but the country’s. And I never ignored anyone’s expertise on this blog. I just objected to their opinions. Just sayin.

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Steven H May 3, 2016 at 8:53 pm

Goodbye.

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James May 3, 2016 at 9:13 pm

Finally…..

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