Who Actually Earns $400,000 Per Year?

by Emily Guy Birken · 2,670 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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{ 2670 comments… read them below or add one }

Stevendad July 23, 2014 at 8:15 am

To all.
My issue with Walmart is that we subsidize them to the tune of $8.6 billion last numbers I saw. This is half of their profits. This is through benefits to employees paid by government programs. The same may go to Mom and Pop stores, but I’m not aware if the numbers. Regardless, it is unfair and a waste of valuable dollars. Of course, this does not include the support of the prices and revenues to the whole industry via SNAP. This is not a bad program, but it seems excessive that 1 in 7 people are on it. SNAP drives up prices for all of us, just as student loans feed tuition inflation. Simple economics, more money chasing limited goods. The really chilling aspect is the assault on freedoms that is being proposed in SNAP, that is controlling what we eat. The same us true if school lunches. I’m not sure how many million pounds if broccoli are thrown away because kids get it on their plates my daughter says no one eats it (and similar) in her 5th grade class.

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JB July 23, 2014 at 8:52 am

so if all those employees had jobs scattered across target, big lots, etc, being paid the same wage, they would still get gov’t help. it isn’t WM that is the issue, it is the fact they are cashiers or stockers and those aren’t high paying jobs. Again, Costco is a different model. Inventory is much smaller, the demographics of the buyer are different. Compare WM to Target for an apples to apples comparison. Not many bash Target, but I bet they are pretty similar in employee pay. A cashier isn’t worth being paid $20 an hour. The $9.00-$11.00 range is about what the Market deems to be an acceptable pay scale.

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JTM July 23, 2014 at 9:36 am

Costco is a different model, a model that values employees and is willing to pay $20/hr to a cashier in order to keep turnover low. It’s not just about who their customers are. WM on the other hand prefers high turnover to keep wages even lower. But, Costco isn’t the size of employer that WM is. When WM comes in to town, they are a standard bearer, they set prices/wages that the competition feels they must try to meet to survive. They drive down wages not just for their own employees, but for other local businesses causing more people to be pushed onto public support.

I’m not arguing all cashiers should be paid $20/hr, but the wage should be livable. Our government expenses for public support would go down if WM paid a reasonable wage instead of depending on government to make up the difference for them.

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Steven H July 23, 2014 at 7:36 pm

It is largely because of Wal-Mart that cashiers are paid so little. As the country’s largest employer, they set the standard. That and the minimum wage setting, which is about 20% lower in real dollars than it was 40 years ago.

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Steven H July 23, 2014 at 1:54 pm

Stevendad, you are on the right track. What sense does it make to subsidize a near-monopoly with government funds because the business pays only poverty wages? This is unsustainable and unfair to other businesses as well as to the employees. The fastest way to reduce the cost of the SNAP program is to compel a minimum wage and close the 30 hour benefit loophole. (A 20 hour part time worker should get half the benefits of a 40 hour full time worker.)

Peter and JB have never answered your basic common-sense point.

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Peter July 23, 2014 at 2:49 pm

I haven’t even been on here until about 10 minutes ago And you never addressed my very direct and succinct analogy about basketball player wages and my general point about you judging what is “too much income”.

What question did I duck?

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Steven H July 23, 2014 at 7:49 pm

OK, Peter, that’s a bit unfair of me, I don’t think you were asked directly, and it may have come up earlier before you joined the verbal mosh-pit on the previous page.

The issue is, as stevendad describes above, whether it makes sense to significantly raise wages at employers like Wal-Mart via a higher minimum wage, because in general, their employees are paid so little (and given minimal hours to avoid benefits) that they are eligible for, and really require, SNAP (food stamps) to feed their families. Stevendad’s argument, which I agree with, is that SNAP is basically a subsidy to Wal-Mart and employer’s like them. People would demand a higher wage from their employer, but they know they can get by with government assistance, so the employer gets workers on the cheap.

This is unfair to everybody except Wal-Mart.
– Workers are denied a fair wage and benefits
– Other businesses are disadvantaged because Wal-Mart employees are getting a government subsidy
– Taxpayers are left with the bill to subsidize Wal-Mart.

Proposed solutions:
Mine: Higher minimum wage, and fractional benefits (not zero benefits) for part-time workers to avoid he 30 hour loophole.
Srevendads: Fine Wal-Mart and those like them to recoup SNAP payments to their workers who are underpaid.

Agreement? Comments?

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Peter July 24, 2014 at 6:10 am

I don’t agree at all. I’m ok with the fractional benefits to part time workers you propose. But don’t agree with stevendad or think that higher minimum wage will necessary be the solution.

Steven H July 23, 2014 at 8:01 pm

I thought I covered the basketball question, but probably not completely, so I will do so here. You have been kind in answering my questions (despite our disagreements) so I should answer yours.

======
Peter: Should LeBron James give back all that “bonus” income that he is making? He will make about $21 million from playing basketball next season. For “historical” perspective, at the same age and point in his career Magic Johnson made about $2 milion. Clearly, in your philosophy LeBron is being overpaid.
Steve: No, he should not give it back. However, marginal tax rates should increase into higher incomes as they did in the 1960′s. Tax rates on such income might be quite high, 60% or so. However, high incomes that are not expected to continue for a lifetime (sports players especially, but anyone really) should be eligible to set aside money for later years to avoid taxation on full income. This is better tax policy and compels better personal finance policy for the players.

Peter: To play out your CEO hypothetical…. What if the Cleveland Cavaliers came to LeBron and said that they have decided to pay the “underpaid” vendors, ticket takers, and various other laborers that clean the arena a higher wage. They will be cutting a portion of his excess salary which he clearly doesn’t need to remain ‘rich’ and paying the workers a wage that reflects a more equal increase in pay to the days of Magic Johnson. What do you think LeBron would do? Wouldn’t he just go play for the Lakers where he can make $21 million? If the whole league adopted this philosophy, wouldn’t all the great players leave?
Steve:
1) Where would they go? Another country? Does anyone else pay like US does? They won’t for long if all US leagues cut salaries.
2) And other countries already have higher income tax rates, so raising taxes won’t compel them to go anywhere either.
3) And just for arguments’ sake, let’s say all of the current players in the league got disgusted and left. Don’t you think you could find a crop of new young basketball players to play for $500,000 a year instead of $21 million. I bet you could.

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Peter July 24, 2014 at 6:17 am

Your answer for different tax rates for athlete income is idealistic. Will never happen – just creates too much more gray area and loopholes that the “wealthy” you so abhor could expose.

To the second section…. This is the key point. They would go overseas where they initially would make less money. And yes, the current NBA could then happily find people to play for less money than LeBron. But the NBA would then see a significant downturn in business and the overseas leagues would see an uptick since they now have a better product. You could actually make the argument that the star athletes of today are UNDERPAID when it comes to the revenue that their professions generate and the reliance on them to provide a good product. I for one don’t feel comfortable undermining CEOs or sales people or whomever in the same way without understanding their specific impact on their businesses. And I’m sorry but the CEOs, athletes and sales people have an infinitely greater impact on the success of a company than the people that answer the phones or empty the trash cans.

To carry over to WalMart, Target, Costco, etc – this is a slightly different model. If Walmart underpays their cashiers and other workers, then they will go to other companies. This will create a better shopping experience than Walmart and people will be left with a) higher prices but better service, cleaner stores, etc vs b) lower prices and a lesser buying and shopping experience. We have this in all sorts of industries already.

But nobody should tell the NBA what they should pay LeBron James nor should anyone tell WalMart what they should pay a cashier.

Steven H July 25, 2014 at 4:21 pm

Peter,

Perhaps I was not clear. I was not advocating a special tax rate or tax code for athletes. I was advocating a highly progressive set of tax tables such as existed in the 60′s for everybody. And the rules to shield income until retirement or other non-income years would also be for everybody.

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Steven H July 25, 2014 at 4:27 pm

My solution allows any company or league to pay their players whatever they want. But very high incomes that are not shielded as retirement or similar income would be taxed at higher rates, just as they were in the 50′s, 60′s and early 70′s when we had a better economy, a stronger middle class, and a debt/GDP ratio that declined almost every year.

Repeat: I do not want to control people’s salaries. I want the economy to have a stable income slope curve. Those are different goals.

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Peter N July 25, 2014 at 5:14 pm
Peter N July 25, 2014 at 10:38 pm

What you don’t understand is that you are still limiting what a successful person can take home or keep. What give you or anybody the right?

Why don’t the liberals improve the lower 50% so they are worth more instead of trying to bring the successful down. You now they have been trying since LBJ and haven’t got anywhere. If you subsidize failure you will get more of it.

Normal Joe July 26, 2014 at 7:42 am

@Peter N – At what point does a successful person stop needing and then is just taking? Is it just because they are successful, that they feel entitled to get more, and more, and more? In order for society to function well there has to be boundaries of many kinds. Does one person define those boundaries, or are they better defined and, therefore owned, but many? When does one person’s ego progress from reasonable to unreasonable? These are all real world questions that need to be explored and we need to have the hard conversation to define a mutually agreeable landscape. If that is considered a fools errand, then the person that makes that conclusion deserves whatever shame and ridicule others feel is justifiable. I’m not in the top .1%, or 1%, or 10%. I am currently in the top 20%, but nothing is guaranteed. I’ve had good times (right now I consider myself very lucky) and bad. Fortunately I picked a profession that continues to grow and change, and I’ve had to change with it. But my experiences have taught me that intelligence, training, talent, and even knowing the right people is not always the ticket for success. Luck is a fickle partner and I worry about where we are going and why we are faltering. Make no mistake about it, one or two may enjoy tremendous riches from hard work and dedication, but forgetting your roots and the struggles experienced while climbing the ladder should engender respect for all who choose to make the climb. And I firmly believe that unrealistic expectations of those who feel entitled to hoard riches to the exclusion of the majority of their fellow citizens is strangling our economy by keeping too much of the wealth out of the engine that makes the economy run. The very thing that supports businesses and trades making success possible for more. If you are comfortable with the concept that some people deserve that extra dollar more that they don’t need to the detriment of your fellow citizens, then we have a basis for some violent disagreement.

Peter N July 26, 2014 at 8:24 am

“At what point does a successful person stop needing and then is just taking?”
This is what earns my contempt for liberals and it is easy to tell one from just the way they ask the question. It is flagrant in the media.

WTF is taking?
I don’t feel entitled. I earned what I got. It is all those social deficits that think they are entitled.

“When does one person’s ego progress from reasonable to unreasonable? ”
What makes you think this is an ego problem. I don’t live in a fancy place nor does Warren Buffet. I don’t drive a fancy car. It cost about 20K 10 years ago.

“who feel entitled to hoard riches to the exclusion of the majority of their fellow citizens is strangling our economy by keeping too much of the wealth out of the engine that makes the economy run”
You must think the rich hide their money under the mattress. Be real.
However, they ARE entitled to hoard, invest,spend their riches as they see fit. I think investing is the wisest choice. That does put capital back into the system. You are just to liberal to see it. So does spending it.
I own a business, having “hoarded” money came in handy during the recession. That “hoarded” money was necessary because it was difficult to get a loan and we want to continue to build our new building. Because of my “hoarded” money I was able to keep the construction crew working until we finally got a loan. The fact that I had already spent so much of my own “hoarded” money meant we already had over 25% invest so the bank was willing to come up with the other 75%.
The construction crew had a happy 2008 Christmas and New Year.

“If you are comfortable with the concept that some people deserve that extra dollar more that they don’t need to the detriment of your fellow citizens”
It is deserved if it is negotiated and earned.
You look at this as if it is a zero sum situation. Get this, some people create wealth. It is the liberals that just want to spread it around after the liberal bureaucracy takes its cut.

Normal Joe July 26, 2014 at 10:10 am

When you can only answer thoughtful questions with sterotypes and indignance, what is one supposed to think. I’ve not been disrespectful, but somehow that pushes your buttons to the point of resentment. That is the definition of entitlement and ego. That kind of thinking is exactly why we can’t have intelligent conversations and arrive at mutually beneficial solutions. The result of ideology trumping rational thought to the point of becoming dogma. Everyone deserves what they earn up until a point. This is a concept that founded our country, and periodically has to reassert itself due to the runaway greed of a few misguided people. I’m an independent with libertarian leanings while being a fiscal conservative and a social progressive. Pretty much middle of the road. But the extremists on both sides will label me as their nemesis. I will continue to repeat the wise words of Theodore Roosevelt “The welfare of each of us is dependent fundamentally upon the welfare of all of us, and therefore in public life that man is the best representative of each of us who seeks to do good to each by doing good to all; in other words, whose endeavor it is not to represent any special class and promote merely that class’s selfish interests, but to represent all true and honest men of all sections and all classes and to work for their interests by working for our common country.” A Square Deal, Speech to farmers at the New York State Agricultural Association, Syracuse, New York (7 September 1903)

Peter N July 26, 2014 at 12:33 pm

Normal Joe, people like you and Steven H want to impose on someone else’s freedom. That is what makes you evil. Since you can’t do it yourself you want a liberal party to fraud its way into power ( don’t argue with this statement. Remember you can keep your doctor? ) and then impose its will on everyone.

“That kind of thinking is exactly why we can’t have intelligent conversations and arrive at mutually beneficial solutions”
There aren’t any as long as you think others don’t deserve what they have earned and that they should forced to give up a lot of their money to others that don’t deserve it. It is that simple. The problem is yours.
Try to find a solution that doesn’t impose your will on me or restrict my freedom. Then we can talk.

Man-of-Reason July 26, 2014 at 1:22 pm

That’s a personal attack N, and undeserving I might add. Nobody’s taking away your liberty. Most all here are trying to figure out what’s best for this country and ALL Americans generally by looking at the successes and failures of the past. People who disagree with your world view are nor automatically “evil”.

Try here: http://www.nytimes.com/2014/07/25/opinion/paul-krugman-california-tax-left-coast-rising.html?hp&action=click&pgtype=Homepage&module=c-column-top-span-region&region=c-column-top-span-region&WT.nav=c-column-top-span-region&_r=1

Peter July 27, 2014 at 10:02 am

He isn’t wording things very nicely but I think he echoes the offensiveness of someone telling him he has “more than he needs” and he is somehow “hurting the majority” by “hoarding his wealth”. This is really, really stupid – and very inflammatory.

If my kids open a lemonade stand and sell 100 cups of lemonade, should I then show up and tell them they have to stop or keep selling and give the money to the other kids in the neighborhood? Should I tell them that they have enough already and now they are just being greedy? The American way is one of free enterprise and if you can sell more than everyone else, invent something, or perfect a special talent you should be compensated for it. I think it is just as much a detriment to society to limit this. But that’s just my worldview and it clearly differs from many others.

Peter N July 27, 2014 at 4:21 pm

I haven’t attacked anybody. It is I and others like me that have been attacked or do you liberals have short term memories? I am not trying to raise your taxes like you HAVE DONE to me.

Aspiekid July 27, 2014 at 5:19 pm

N,
Inflamitory statements such as “…impose on someone else’s freedom”, “…makes you evil”, “…liberal party to fraud its way into power”, “…kind of thinking is exactly why we can’t have intelligent conversations”, “forced to give up… money to others that don’t deserve it”‘ “…restrict my freedom.”

These are emotionally charged OPINIONS, not facts.

Peter N July 27, 2014 at 6:27 pm

“N,
Inflamitory statements such as “…impose on someone else’s freedom”, “…makes you evil”,
That is the problem, you don’t see it. You think you are do great things but you can’t do any of them without first taking from others. If I resist what then? Do you think they won’t come after me with guns?

“…liberal party to fraud its way into power”, “…kind of thinking is exactly why we can’t have intelligent conversations”
Obama did fraud his way to power. What is wrong with you? Can’t you remember if you like your doctor you can keep him if you like your health insurance you can keep it? I know I could’t keep our company health insurance because of Obama care.

How about the Bengazhi coverup?

How about buying votes with tax payer money when GM got bailed out. That cost about $50,000 per job. Buying votes with the taxes from libertarian or republican taxes is not right but that is exactly what happened.

, “forced to give up… money to others that don’t deserve it”‘ “…restrict my freedom.”
I am forced to play an extra 3.8% Obama care tax even though I supply health insurance to my employees too.

What is wrong with you guys? You ignore anything that doesn’t agree with your liberal views. You guys have refuted anything yet.

Normal Joe July 28, 2014 at 8:03 am

It is clear that some people just don’t seem get it that what they appear to believe and support just seems to be terribly short sighted, selfish, and offensive to many other people, but are offended when it is pointed out. They don’t even recognize their own indignant behavior when driving their heels in the ground and whining that they are the hated and oppressed. It is almost like watching two year old children in a sand box grabbing toys while uttering “Mine!” What we have is an ideological divide that may well take another depression, a real depression where everyone from top to bottom feels the pain followed by a global war demanding the blood, sweat, and tears of the entire country to resolve so that we can return to a society that recognized that every person’s contribution, regardless of how one values it, is worthy of support through poverty preventing wages, and embraces the betterment of all instead of “Me, Mine!”

JTM July 28, 2014 at 8:22 am

Peter N – You don’t see it either. You choose to ignore the evidence that you are also wrong. 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. Your view of calling people “social deficits” is quite derogatory and unnecessary, it shows your extreme bias. It’s a bit disgusting if you ask me. It also shows how entitled you feel, yes, wealthy people can feel just as, if not more, entitled than poor and it’s not any better. If you stop belittling others, maybe you would feel less attacked.

Liberal is no more a bad word than conservative. Communism is no more a bad word than capitalism. Just because you fear something or it represents a view opposite of yours doesn’t mean it is bad or wrong. Communism is an idea that is almost impossible to implement because there are always some people feel they deserve more. Pure capitalism without boundaries fails for the same reason. We need balance, we need opposing ideas, so that we can come up with the best solutions, solutions that work for more than just the top or bottom of society.

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. Many on here feel you have personally attacked others, but you for some reason can’t see it. This shows your arrogance and disregard for others thoughts. Sorry, you are no more right than those you oppose and your blatant dismissal of their ideas is the reason for their ire. BOTH of our political parties taking stances like yours, where there is no real discussion, just pushing of some silly, ideological extreme and then blaming everything on the other, is why we are where we are. Again, we need balance and discussion, and you are offering none, you prefer to name call instead. Others, with an opposing view on here, are no more bending in their ideology, but at least they don’t name call and offer up backing evidence and try to explain their point. What evidence do you have to back your views? Is there more to your argument other than people deserve whatever they can get for themselves and if you don’t have enough you are lazy?

JB July 23, 2014 at 10:01 am

I am tired of the term “livable wage”. What expenese should be included after food, rent and water/electricity. Are cell phones part of a livable wage? Does the person have to drive a car older than 7 years old? Do we limit how many times they go out to eat? If you don’t have a good income, you can’t expect to have the same stuff that people that make more money have. Again, if you have minimum skills, you don’t deserve a livable wage. Improve your life first.

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JTM July 23, 2014 at 10:35 am

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? What will other jobs pay once everyone is educated? Why shouldn’t employers pay a wage that doesn’t force a large share of their employees onto welfare? Why should we subsidize WM for Billions every year?

I get the whole self responsibility thing, but to belittle their work just feels like an attempt to be self important. Ultimately, these are jobs that need to be done and these are people working a job instead of trying to suck off the government teat or doing something illegal to earn a living.

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JB July 23, 2014 at 10:44 am

How do you define “hard work”. People that are doing manual labor “work hard”. Anyone else with an 8 to 5 job working inside have a different standard. Your skills at your job determine hard work. Brain surgery is skilled work. Hard as well. Being a cashier or AP clerk isn’t “hard”. It might suck being on your feel all day, but I have been a cashier in High School. Guess what, that wasn’t going to be my career. Again, if 1,000,000 people can do your job, the pay is going to be low. That is life and there is no real definition of a livable wage because it depends on where you live. A CEO might not be digging ditches, but the stress is higher than the janitor. Again, my wife has a highly skilled stressful job and is paid well for it. But less than 100 people in the country are doing what she does. Is $500 a month for rent enough or do people “deserve” to live in an apartment with granite counter tops for $1,000 a month?

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Steven H July 23, 2014 at 11:04 am

This is the welfare queen argument. You have no real basis for believing that poor people are living high on the hog at government expense, but you believe it to be the case anyway. Few if any people live the way you fantasize on poverty wages and government assistance. Poverty is hard and improving your life while being assaulted on all sides by the challenges of poverty are even harder. Yes, being a cashier/stocker can be hard if you are given only part-time jobs at 3 different companies at irregular hours and are trying to raise a family as well. Not to mention trying to get additional education to improve your lot.

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JTM July 23, 2014 at 11:27 am

You stick hard about the term livable wage and continue the trope that people who do these jobs don’t really work hard and just need education. I agree pay will be low, the question is how low is appropriate. One could argue the stress on the janitor is just as high, the difference is whom you are visible to, the janitor to the CEO and CEO is to the world. And yes, there might be 100 or less people in your wife’s position, but that doesn’t mean there aren’t others who could do her job.

Yet you ignore my questions:

Who will do these low level jobs once everyone is educated? What will high level jobs pay once everyone is educated? Why shouldn’t employers pay a wage that doesn’t force a large share of their employees onto welfare? Why should we subsidize WM for Billions every year?

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JB July 23, 2014 at 11:50 am

No, that is the point. If everyone can be a doctor, the wages for doctors are lower. Supply and Demand determine salaries. If WM puts out an ad and says they are paying $2 an hour to be a cashier and 1,000 people line up, the salary is in line with what people expect. If they put out the job is paying $7 an hour and nobody shows up, they will have to raise the salary in order to attract applicants. There are thousands of accountants in the world and the fact that there aren’t thousands that do what my wife does makes her more valuable, thus she is paid more. There are only 32 NFL football coaches and thousands of HS and college coaches. They aren’t all capable of being an NFL coach. But hey, why aren’t you a 2nd basemen for the Yankees making $15M a year? You must be able to hit a ball and throw to first base.

JTM July 23, 2014 at 2:46 pm

“If WM puts out an ad and says they are paying $2 an hour to be a cashier and 1,000 people line up, the salary is in line with what people expect.” That’s true if there are other jobs to compete against, there is a shortage of jobs and some will work for any amount just to have a job, yet people like you consider them worthless because they would rather work than find a way to get on welfare. Just because you can find someone to do the job for a certain wage doesn’t mean it is morally right to pay that wage. There are still people who would prefer slavery, of course there are others who prefer the current system because it’s better than slavery because there is even less accountability for the worker. Ultimately, we all pay for this through higher government expenditures on welfare to make up the difference.

Your wife’s position is very limited and she obviously has the right skills, but that doesn’t mean others couldn’t do her job, some of what got her the position was being in the right place at the right time to be noticed and possibly knowing the right person. There was a time she wouldn’t have even been considered just because she’s a woman. Part of what determines her pay though is its hierarchical level within the company, others in other departments at similar levels will also be at a similar pay level though the amount of work or level of qualifications may be different.

Likewise, being CEO doesn’t mean that person is the smartest or hardest working person in the company. Though, once one has had the title, they are part of a club that the members prefer to keep as limited as possible. There is a reason they call it the good old boys club, they want job security. Also, once one has had the title, people assume certain qualifications (true or not) and that person is more likely to find another CEO position even over someone who is otherwise better qualified.

Steven H July 24, 2014 at 1:49 am

I agree with JTM here. There is a point where supply and demand does not accurately reflect either value or just reward. If we, as a society, require a certain number of hotel rooms, and therefore a certain number of hotel maids, the value of that work to the hotel or hotel patron does not decline infinitely just because there are more people seeking the job. If society need people to do certain jobs, then society should pay at least some minimum level at a wage and condition that allows someone to house and feed herself.

Peter July 23, 2014 at 3:00 pm

Amen JB. And I actually agree with some of JTMs point of view here as well. It is all about scarcity – economics 101. This is why LeBron, brain surgeons, and sales people make so much money. Not many people can do their job. Almost anyone can be a toll booth collector or pick up trash. Nobody is saying that this isn’t “hard work” but when everyone can do it – it is going to be easy to find someone to do it for minimum wage. It is so insulting and belittling to tell a CEO making $20million that they aren’t working as hard as a construction worker. In case you haven’t noticed, jobs don’t pay on a scale related to how much you are on your feet or how tired it makes you. Jobs pay based on scarcity…..plain and simple.

And another thing…..whether we want to believe in welfare queens or a struggling underclass, the fact is indisputable that our poor live a far better lifestyle in America vs the rest of the world. http://www.forbes.com/sites/timworstall/2013/06/01/astonishing-numbers-americas-poor-still-live-better-than-most-of-the-rest-of-humanity/

Nobody owes you squat. Not your community, not your parents, not the government, not the rich. If you operate under that life philosophy and quit whining about everyone else and their situation you will find happiness much quicker. Not trying to convert anyone but I think this is a much better way to live life and I feel for those that are so enraptured and enraged by the perspective that the world is so “stacked against them”.

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JTM July 23, 2014 at 3:41 pm

“It is so insulting and belittling to tell a CEO making $20million that they aren’t working as hard as a construction worker.”
Sure, you can say that, but the reverse is true also. CEOs are not the gods they think they are and play each other up to be. They depend on everyone below them to do their job and do it well. Yes, not everyone can be a CEO, but there are plenty of them that don’t do their job well and could easily be replaced with someone better. They don’t all deserve their position through skills alone (I’ll omit CEOs who actually built the business they are running, they are a different class).

Sure, nobody owes me or anyone else squat, but the world is a better place when people treat others like people and not just some cog in a machine. Many wealthy complain about those in the lower classes feeling entitled, while they themselves show over and over they feel even more entitled because they supposedly create all the jobs and wealth(simply not true). Those at the top need to start thinking about about not just their company and it’s next quarter numbers. If they would, they would understand that we are all dependent on the lower classes being able to spend. Their companies will not survive if the money is cut too much at the lower levels, it all works its way up, always, trickle down is fools gold. The middle class entrepreneurs create huge numbers of jobs (not just the huge corps) and are generally dependent on the middle and lower classes, if these businesses do not have customers the larger companies eventually will not either.

This is not about jealousy or haves and have-nots, it’s simple economics, wealth is not created by building something everyone wants, it’s created by having customers that can actually purchase whatever you are selling at a price over your cost to create. No matter how good the product, if not enough people can afford your product, you will not make money.

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Peter July 23, 2014 at 4:17 pm

I actually agree with everything you are saying here. Literally every word.

Only thing I’d add is that while I can certainly accept that CEO’s are not the “gods they think they are”, nor is construction work or labor any more an “honest wage” or “hard day’s work” than a corporate executive, sales person or basketball player. Both sides play up their own position to be the ‘salt of the earth’ yet both are needed in a society.

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JTM July 23, 2014 at 4:52 pm

Peter – Whole-heartedly agreed.

Steven H July 23, 2014 at 8:16 pm

I agree with you here Peter, and JTM as well. I am particularly grateful to JTM for saying many of the things I have tried to say, but for saying them better.

Steven H July 23, 2014 at 8:17 pm

Very, very well-said. Kudos!

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JB July 23, 2014 at 11:55 am

Not everyone in the country will be educated. We can’t make every single person literate. You are right, even if everyone in the country could work, there aren’t enough jobs so those low paying jobs would go to those willing to do the work. Companies need to make a profit. Do you know the profit margins at every single WalMart? Some have gone out of business. Kmart went out of business. Circuit City went out of business and they weren’t paying $20 an hour. Again for the billionith time, your pay is determined by your skills. If WM got rid of all cashiers and went to automated kiosks, people wouldn’t like it, but I bet prices would get cheaper. Be careful what you wish for. Raising prices will cause companies to seek out alternatives. I don’t need a cashier at Burger King, I need someone to make the food. Even that can be automated. You cannot automate a plumber or electrician.

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JB July 23, 2014 at 11:57 am

I am tired of this discussion. Go start your own company and pay people $100 an hour for answering the phone and see how long your business lasts.

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Peter July 23, 2014 at 3:07 pm

LOL. Totally agree JB. It’s the whole perspective of living in idealistic thought vs reality. And they have every right to be upset about their own reality and perspective. I do respect that. But I don’t think shutting down WalMart, giving the bottom 20% pay raises or raising taxes on the rich are going to make this group happy.

Fact is in just the last decade we have repeatedly raised minimum wage, lowered taxes for 98% of Americans and raised taxes significantly on the wealthy. We have marginal and progressive tax rates. We have rules on monopolies. We have welfare, social security and now a national health care plan. But for the ideologue or victim it will never be enough. They will always find something to blame their circumstances on.

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JTM July 23, 2014 at 4:31 pm

Fact is, tax rates are still lower for virtually everyone since 2000, they are not significantly higher for anyone. Fact is, tax rates are still lower for 99.9% than a decade ago (2004) after the majority of the Bush (unpaid for) tax cuts. Fact is, tax rates are historically low for the wealthy and ultra wealthy while they are earning and holding an ever increasing share of the pie. I guess the wealthy will always find something to cry about in hopes to make congress feel sorry for them for a tax break.

You can look for yourself:
http://www.moneychimp.com/features/tax_brackets.htm

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Steven H July 23, 2014 at 8:35 pm

Hold on. I have to call you on some false arguments:
– “Fact is in just the last decade we have repeatedly raised minimum wage.”
No, it is now 20% lower in “real” adjusted dollars than when I started as a cashier in 1976.
– “lowered taxes for 98% of Americans”, but lowered wages and income shares even more for most of those Americans, and the vast majority of the tax cuts went to the fortunate few.
– “raised taxes significantly on the wealthy” — Effective tax rates on 1% in 1979: 35% ; 2003 to 2010: 30%. In 2013, after the tax increase, the effective rate on the 1% is estimated at 33.6%, still less than 1979.
– “We have marginal and progressive tax rates.”, but not nearly as progressive as we had in better, more prosperous decades. We have gotten LESS progressive.
– “We have rules on monopolies.” — which have been gutted in implementation since the mid-80′s. See my last article link to the Salon article near the bottom of the previous page of this blog. I would link again, but sometimes that blocks the post.
– “We have welfare, social security and now a national health care plan.” Yes we do. And all of it will be at risk if GOP gets back in control.

So, at the risk of being rude, let me restate your paragraph more accurately.

Fact is in just the last decade we have effectively lowered minimum wage, given huge tax cuts to the wealthiest Americans, and fought hard to keep taxes significantly lower on the wealthy. We have cut the progressivity of tax rates. We have gutted rules on monopolies. We have welfare, social security and now a national health care plan, but are working hard to eliminate those. But for the ideologue or victim it will never be enough. Despite outrageous good fortune, the rich will always find something to blame on everybody else.

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Steven H July 23, 2014 at 8:38 pm

Correction: My paragraph should start “Fact is, in the last 3 and a half decades” …

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Peter July 24, 2014 at 6:02 am

This doesn’t even deserve a response there is so much rhetoric and spin in here.

And please don’t forget – I’m not the one complaining. I do not have a major problem with the supposed income disparity situation – or at the very least do not think the government needs to (or can) fix it. I don’t think there is any evidence anywhere in my posts of blaming anything on anyone else.

Steven H July 24, 2014 at 6:49 pm

Peter,

– As if your paragraph didn’t have spin. Almost every “fact” you stated was incorrect or selectively spun. And now you say “I don’t think there is any evidence anywhere in my posts of blaming anything on anyone else.” when you had JUST finished saying “for the ideologue or victim it will never be enough. They [the poor] will always find something to blame their circumstances on.” If that’s not blame what the heck is it?

You are blaming people for making excuses when they have supposedly gotten all these advantages you list — when in fact those very same advantages — effectively LOWER minimum wage, LOWER taxes, LESS progressively in taxes, LOWER wage scales for most workers, LESS restrictions on monopolies — have actually been going to YOU and the people in your economic tier and YOU are the one blaming and complaining!

The duplicity is absolutely staggering!

Peter July 25, 2014 at 6:38 am

These are facts:
Fact is in just the last decade we have repeatedly raised minimum wage, lowered taxes for 98% of Americans and raised taxes significantly on the wealthy. We have marginal and progressive tax rates. We have rules on monopolies. We have welfare, social security and now a national health care plan.

JB July 23, 2014 at 3:13 pm

Again JTM, stop with the “right place, right time”. Many people don’t make it 24 years in the Big 4 firms without the skills needed. She is smart and talented and probably still underpaid. Next time go to H&R Block to have your taxes done and tell me how it works out for you if you have a complicated tax return. It wasn’t “luck” she passed the CPA exam. It wasn’t “knowing the right person” when Arthur Andersen spent their time recruiting at University of Houston. So STFU with all your assumptions of how people get jobs and that there is luck involved. Now I am wholly in favor of people networking and knowing people at companies, because that is a legitimate way to get a foot inside the door, but guess what, if you don’t perform, you get let go. having a Harvard degree gets you the contacts, but you still have to be able to do the work. Having a degree from SW Podunk U won’t stop you from becoming a CEO if that is your goal and you have the skills. Your 3rd job out of college, nobody cares where you got your degree. I guarantee your 401K you can’t do what my wife does. It does take a very technical person with skills to do the analytic work she does.

CEO’s don’t just appear from the mail room. it is a quaint idea that happens to 1 in 24,000,000 people. I do find it a tad hypocritical if Microsoft demands a college degree to work there when Mr. Gates never finished college, but guess what, he owns the company and he can set the rules. Follow them or fall behind. (experience should count for something).

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JTM July 23, 2014 at 4:10 pm

A bit testy aren’t we? You don’t know my qualifications. I don’t have her experience, but I have little doubt I could do your wife’s job if I had chosen to continue down that path, I was near the top of my class for my accounting degree and received scholarships because of that. I decided that I preferred computer programming more. It’s hard to deny that getting a position like that, since there are so few of them, is partially about “right place, right time”. I mean no offense to your wife, she’s obviously qualified, but what if the person in that position was similar in age and would have stayed in the position until retirement? Would she have held out in hope they retire early, were fired for some failure, or would she have moved on somewhere else for a chance to move up at one of the other few positions? Even if you have the skills, you are not guaranteed to get the position you want.

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Peter July 23, 2014 at 4:21 pm

But you didn’t do all those things.

And there are no guarantees we even wake up tomorrow – JB isn’t saying that. Frankly, manual laborers also benefit from the “right place right time” thing as well. To think luck plays such a huge role in one’s success is a cheap shot which is meant to belittle the accomplishments of the wealthy.

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JTM July 23, 2014 at 4:42 pm

I don’t think luck plays a huge role. Though it does have a role. I also believe people “create their own luck”. JB is the one putting my position as she was lucky, I am not. If I want to move up currently, I would need to take a different job as the position above me will be taken for years to come. I choose to stay where I’m at.

My point about JBs wife, is that the positions for her job are very limited, there is a need to be positioned properly when those positions become available to get them. Also, the pay rate of a position is also determined by its hierarchical position within a company and a companies peers, most positions at the same level pay similar it’s not just about scarcity of qualified applicants.

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Steven H July 23, 2014 at 8:48 pm

My philosophy:
Life is 1/3 hard work, 1/3 reliance on other people, and 1/3 luck.
Work hard to be ready when the luck comes along.
Always be grateful to the people you helped you get where you are. (Teachers, parents, mentors, bosses, friends.)
Always be appreciative of and generous to the people you rely on to keep you where you are and make your day more pleasant (employees, co-workers, bosses, associates, janitors, waiters and waitresses, hotel employees, anybody you meet).
Don’t judge people whose luck ran worse than yours did.

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Steven H July 23, 2014 at 8:50 pm

Correction: “people WHO helped you get where you are …”

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Peter July 24, 2014 at 6:04 am

Totally agree with all of that except the ratio of 1/3 luck, work and reliance. Wouldn’t dare try to quantify that as each persons experience is different.

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Ken July 24, 2014 at 10:02 am

In my experience, defeatism, negativity and entitlement attitudes are associated with poor long-term outcomes, and the most important determinants of how your life turns out, in the long run, are personal attitudes and behaviors.

If you believe that you can, or if you believe that you can’t, in either case, you’re right.

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Steven H July 24, 2014 at 6:52 pm

I can’t argue with you there, but I do have to have a little sympathy for the person who learned their negative attitude in difficult situations.

Steven H July 24, 2014 at 1:35 am

There is always hard work involved in getting and keeping a good job, but you should never discount the role of luck in anyone’s good fortune. Luck in developing a skill that matches a job that pays well. Luck that such a job and market persists long enough to maintain a career. Luck in encountering the right teachers and mentors to inspire you. Luck to not be struck down or suppressed with any number of accidents, maladies and illnesses. Even such basic luck as being born in a prosperous country in a prosperous century and to parents who provided DNA sufficient to enable an average or more capable than average brain.

There is always luck involved. To deny that is to assume that anybody can just “work harder” to pull themselves out of any situation. Which is a nice platitude but not always correct. Bad luck also serves to quash the success of very many who have worked diligently to achieve success but failed; very often due to circumstances well beyond their control.

“Making your own luck” just means to work hard to be ready if good luck comes your way. It does not really make luck, but just improves the odds.

Never be too proud of being lucky and never be too harsh on those who have had less luck. Don’t just make your own luck. Make somebody else’s too.

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Peter July 24, 2014 at 6:06 am

If luck was such a giant part of success then we are wasting our time with this debate. Just hope that the lottery wheel of good fortune spins onto you and be ready to seize the opportunity. Seems like a good plan.

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Steven H July 24, 2014 at 6:54 pm

I never said wait. I said work hard and be ready. My attitude about luck is just prevent myself from being arrogant about my fortunate position in life. Many other people are just as hard-working and deserving but have had less luck and opportunity.

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Peter July 24, 2014 at 9:19 pm

Of course…

JB July 23, 2014 at 5:10 pm

Sam Walton should have just stayed in Bentonville and never opened another store. But someone else would have done it.

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Steven H July 23, 2014 at 8:58 pm

Reagan shouldn’t have gutted rules on monopolies, and maybe the Wal-Marts of the world wouldn’t be so destructive to the economy.

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JB July 24, 2014 at 7:13 am

Good thing LeBron got lucky and was born tall.

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Peter July 24, 2014 at 7:43 am

LOL – and one of the big misconceptions of athletes is that hard work doesn’t play a role. There are an awful lot of people born tall!

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JB July 24, 2014 at 7:47 am

Exactly. Being tall didn’t work out for Manute Bol or Chuck Nevitt. Role players at best. The NBA is chock full of tall dudes that thought just being tall was enough to succeed.

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Peter July 24, 2014 at 7:58 am

And many, many more who don’t make the NBA.

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Steven H July 24, 2014 at 6:54 pm

Yep!

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Peter July 24, 2014 at 7:32 am

Thought I would digress and share a few real world examples…..

I am in the financial planning industry – this is an industry where you are basically a small-business owner and are forced to build your client base from the ground up. Literally one in about fifteen who try succeed as it is very difficult and does require quite a bit of hard work, good fortune and “who you know”. Those who succeed find themselves in the top half of the 1% income-wise.

Anyway, there is a bit of a crisis in our industry as many of the top advisors are aging and looking towards retirement. Many are looking for younger people to hire to train and mentor to transition their business. I go to meetings every year with the top advisors and hear the stories over and over again about how hard it is to find these people.

Now keep in mind, this is a job that could easily put you in the 1% income bracket. Plus, by coming in as a junior partner to an existing practice, you don’t have to go through the true hard part of this job which is finding clients (where the hard work, luck and who you know come into play). The client book is already established – you just have to work and service those people.

Why can’t we find anyone to take over our businesses? It is a combination of factors:

1) It’s hard to find someone who has the patience and long-term vision to make a lower income number (still far more than a WalMart cashier) for a number of years while the business transitions.

2) It’s hard to find someone who wants to work for someone else and do things the way they want them done.

3) It’s hard to find people who are qualified to do our jobs. If everyone could do it – the industry wouldn’t even exist as people would just manage their own money. The combination of people skills, work ethic, organizational habits and general knowledge and expertise is hard to find.

At least in my industry, there is a wide-open door to going from working in retail to being one of the .5% – without any reliance whatsoever on luck or personal contacts. Yet we can’t find anyone to walk through it.

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Steven H July 26, 2014 at 3:47 pm

Your hiring dilemma is rather astounding. The likely young candidates for your company are probably seeking jobs on Wall Street or even at law offices (I imagine lawyers would also be qualified to learn financial planning skills) and those careers also typically have lower pay and long hours at the career start. Your company sounds like it has more career opportunity and quicker capacity for income growth. I am only speculating, but could it be that your starting offer is just a little lower than the levels at these other opportunities?

I have heard complaints from job-seekers that the relatively new internet-resume trend encouragers hirers to collect and review a larger set of resumes in order to find the perfectly-qualified (on paper) candidate, but then the hirer wants to pay an average or bargain basement starting salary to that candidate. I am in no position to know your actual situation, but this is just something to consider.

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Peter July 26, 2014 at 8:32 pm

Law firms are a totally unrelated career path to the financial planning industry. But they do require long hours but normally that career path is better defined. The last paragraph is really off base …. Couldn’t be further from the truth in my real world example.

What I’m talking about is a problem across my industry – not specific to one persons (or firms) particular offer being too low. It’s not like there is a line of interested and qualified applicants. That’s the real problem. Or, a qualified candidate realizes they can make 20% more with a safer job without the upside.

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Peter July 24, 2014 at 7:42 am

Another example….

My father has been a hotel manager all of his life. Hotel and restaurant management are an interesting microcosm of our economy as they have the typical structure of upper management, department heads, and unskilled laborers. Even with unemployment upwards of 6% (and closer to 9% just a few years ago), my father continuously has “help wanted” signs and ads up in his hotel for jobs. Sure, these jobs are things like maids, busboys, bellhops, etc. but nobody wants them.

He has so many stories though of people that have taken these jobs, shown initiative and worked very hard – and quickly advanced up the ladder. The head of his housekeeping department was a maid in the beginning. The hotel’s lead engineer (who makes $100k) was a simple laborer. The food & beverage director was a former busboy, waiter and maitre’d.

The irony is – for years the hotel he ran was adjacent to a very poor neighborhood. Every day my father would drive through this neighborhood on his way home and see all of the people just sitting outside – many out of work – and have to ask himself why he can’t fill these jobs?

I get where someone might not take a job making minimum wage when they can get another job making more. But why is not having a job at all preferrable to making minimum wage?

The other point in this story (and in my first one) is that there are many paths to success that are out there. These are only two examples but I could add dozens more stories from friends and colleagues that have found that path to better their situation. The American dream still exists – I truly believe that there has been a culture shift in recent years where patience, long-term goal planning and work ethic has been replaced with instant gratification, bitterness and entitlement. Steven H’s (and others) perspective on income disparity and the like may have some validity, but it is bathed in this bitterness and entitlement epidemic.

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JTM July 24, 2014 at 8:39 am

Question, since many of the wealthy complain that the reason they complain about taxes is that they don’t feel the money is well spent. Why does so much money from the wealthy get spent on trying to change tax policy and reduce tax rates instead of trying to direct where the money gets spent?

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JB July 24, 2014 at 8:41 am

Because nobody can control the waste and fraud that goes through the system. How does anyone tell the IRS to tighten up controls? They only do it once it gets out the same person got 12 checks. Or the Pentagon has “misplaced” a few tanks. The GAO is so far behind, once they find a problem, the person that was in charge is probably gone.

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Peter July 24, 2014 at 8:56 am

I can only speak from personal experience but I don’t spend a penny of my money trying to change tax policy OR trying to direct where the money gets spent. Personally I think the whole political game is @#^&%@! and try to use my dollars to impact lives on a more immediate, personal and direct level rather than leave it in hands of politicians.

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Steven H July 26, 2014 at 3:25 pm

Realize that IRS, like other government regulatory agencies get their funding cut even as US populations and job complexity increases. IRS staffing has been cut 11% since 2010, and their funding adjusted for inflation (but not adjusted for US population) has been cut over 14%.

http://www.cbpp.org/cms/?fa=view&id=4156

By the way, the big IRS hiring increase for ObamaCare enforcement that the GOP wags were warning about? That was a complete canard and never happened.

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Peter July 24, 2014 at 9:04 am

Oh and I should clarify….. I don’t complain about taxes because the money is not well spent. I complain about the money not being well spent. Taxes – and even levied on a progressive scale such as what we have – are necessary. You won’t find me on here complaining about my taxes – but I will be offended and defend myself when I’m told I am “not paying my fair share” or that my income is just “bonus or surplus income” that I am somehow morally required to return.

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JTM July 24, 2014 at 10:22 am

I would agree with your statements, though there are many wealthy for whom it is only about their personal tax rates, there are more who feel as you. The problem is, those spending money are generally putting it towards tax reduction. Taxes are necessary to maintain society as we know it, the questions are what are necessary expenses and appropriate tax rates. We currently don’t pay enough taxes to cover expenses and that has been brought on by the ineffectiveness of both parties. I don’t feel we can grow our way out of this, we all need to pay in some way (reduced benefits, higher taxes) before things get even worse.

It’s been decades in evolving, but I feel the Bush tax cuts along with the welfare changes that increased spending (we can leave whether we should have had a trillion dollar war out of the discussion) have greatly put us in a very bad position. Clinton had a lot of help from tech boom, no wars, etc but the parties still negotiated at that time and I would consider that a huge help. Obama’s policies since Bush have done nothing to correct the poor choices during Bush and have only added to the deficits. I feel the current all or nothing stances of both parties are what is standing in the way of full economic recovery.

” but I will be offended and defend myself when I’m told I am “not paying my fair share” or that my income is just “bonus or surplus income” that I am somehow morally required to return.” – That is a fair enough statement. What is a fair share varies on who you talk to, everyone has an opinion, though I think it’s hard to argue that a progressive system of some sort isn’t required. As to income, I think people should be able to earn what they can, though CEO compensation seems to be out of control. CEOs have more control over their compensation than they are willing to admit and many use it as a badge of honor. As an investor, I really don’t like this.

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Peter July 24, 2014 at 10:42 am

Well said. Completely agree with your thoughts here.

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Stevendad July 24, 2014 at 9:15 am

I’m still not sure how anyone can support subsidizing Wal mart, McDonald’s, etc by freely giving benefits to employees. I propose they rebate dollar for dollar the net paid into Federal and state subsidies this allows lower min wage for students and workers who only work for extra cash, but encourages better pay for those who have family. Not perfect in all situations, but better. And FAIRER. Eventually, we will need less welfare and wealthfare as interest (to rich people and foreign interests) increasingly eats up the budget.

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Stevendad July 24, 2014 at 9:40 am

The pay for rare skills: music, acting or CEO (not surgeons) have gone way up over the past several years and those with common skills down. This is AGAIN due to globalization, automation and immigration combined with an ” I’m too good to do that” mentality have led to this. Home builders in my area can’t find American born to do roofing and framing despite reasonable pay rates. That would require working outside and hard.
Re: luck, work, contacts. They all affect success and you must do / have some of all. Michael Jordan never becomes great without a lot of work. He benefitted a lot from talent and some from others. Likely 60/30/10 from what I understand. His high school and college coaches largely held him back. He combatted this with hard work. There is pure luck, like a lottery winner. There is no pure talent or pure work. There is rare pure connections, ie trust babies. Working hard and making connections in your areas of talent are what you CAN control. It will require investment of time and often (deferred) money are required.

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Peter July 24, 2014 at 10:34 am

Very true Stevendad. My example above about the hotel business is more anecdotal evidence of this. It’s hard to think that people can’t have upward mobility when opportunities are going untaken.

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Peter N July 24, 2014 at 1:51 pm

“Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?”
Thomas Sowell

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JTM July 24, 2014 at 3:08 pm

What is your fair share to pay for what our government leaders have already promised to pay?

Taxes are not all about give and take, redistribution. To paint it as such is just silly. When you talk about actual welfare, you should not include social security or medicaid, as these are transfers from wealthy to poor. The link below shows all expenditures for 2014, you can see that all welfare (395B welfare + 308B medicaid) is $703B while defense and SS+Medicare are both much higher an growing fast. Only by eliminating all forms of welfare can we balance the budget, of course that would hurt a lot of families and many large corporations who depend on their spending.

The real problem is not welfare (though there is no arguing it could be reformed to work better), it’s our retirement programs people from all walks of life have been promised and paid into their whole lives, defense, and interest payments. Those are the real growth areas for expenses and they have nothing to do with redistribution of wealth. Defense can (and I believe should) be cut, we don’t need to continue to cowboy around the world. SS and medicare need to be somehow reigned in, but they realistically cannot be eliminated. Interest expense could have been avoided (less spending by liberals, less tax cuts in order to “starve the beast” by conservatives)

http://www.usgovernmentspending.com/us_welfare_spending_40.html

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Aspiekid July 24, 2014 at 6:50 pm

My boss thinks his fair share of my labor is 64% of the profit for his company which I account for. I used to get 75% of the net, but I have no input into what I think my share should be. It’s “either accept it, or there’s the door.” Employment in my specialty is difficult and quitting would most likely mean relocating for another like position, but I’m almost 50 with kids in High School and a wife well entrenched in her profession. He once made twice what I did, but now makes quintuple my wage plus tremendous appreciation of capital while my income hasn’t kept up with inflation. He says that because he’s worked hard and taken risks (he inherited the business from his father), he therefore believes that that’s his “fair share” of my labor or, “what I’ve worked for”.

Was that what Sowell was describing?

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Ken July 25, 2014 at 5:58 am

So let me paraphrase….. Your boss’ father took risks, put in boatloads of time and effort to make the business viable, and passed the benefits of that risk taking and work on to his son. And because of other life choices that you have made — wife, wife’s job, kids in high school, etc. — you’re unwilling to take the same risks or put that kind of time in yourself so that you can be the boss. Yet you protest that someone else is telling you how much you’re worth in compensation.

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Peter July 25, 2014 at 6:35 am

I do feel for you Aspiekid. Have many good friends in these situations and understand how frustrating it is….

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Ken July 25, 2014 at 7:29 am

Actually, I do, too, Aspikid. I also have friends and family who have not had raises in many years. It’s horrible.

Aspiekid July 26, 2014 at 3:46 am

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.

And yes Ken, I have never been able to take the risks associated with starting a company on my own. When I graduated from a top private college magna cum laude, life looked very bright, except that I had large debt from student loans and couldn’t afford to default. Therefore, I couldn’t raise and risk the capital needed for a startup and had to work for someone else. By the time I paid it all off, I was 33, and married with one child. Risk is for childless people who don’t have family expenses and have little to lose. (Jobs and Gates come to mind.)

We’ve made “union” and “labor” dirty words now through deliberate campaigns of negative propaganda by the “job creators”, the wealthy families who want more. The bottom 90% of wage earners lose, but the top 1% get more of the pie, especially the top .01%. The propaganda has even convinced most of the 90% that unions are bad un-American Commie institutions. Without negotiating leverage, my employer can increase his cut of what I earn for him from 25% to 64% and even reduce his hours while I must increase mine to make the same. Look around you. Corporations are making record profits while wages stagnate or even decrease in real dollar terms.

Steven H July 26, 2014 at 9:20 pm

Aspiekid, I totally agree with your defense of unions. The decline of strong unions has been a big contributor to the decline of wages for most Americans.

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Aspiekid July 27, 2014 at 5:05 pm

Thanks Steven H. You are absolutely correct.

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Ken July 25, 2014 at 6:16 am

Having said that, I would think it is not good business practice to not reward your employees at least enough to keep up with inflation… assuming they are performing their jobs appropriately. Loyalty works in both directions… or it should.

My point in the previous post was to say that we often contribute a sizeable amount to our own situations with our own choices and actions. But when making an argument that we want to sound compelling, we either don’t realize we have made a substantial contribution to the present situation, or we judiciously leave that part out to make ourselves appear more like a virtuous victim.

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Peter July 25, 2014 at 6:34 am

Very true. I made the career choices (sacrifices) I made early so that I would never be in that situation – with my pay or job role at the mercy of someone else.

That said, I totally agree with Ken. I have seen my income go up 4x in the last few years and I have certainly made sure that all of my employees have enjoyed handsome raises. But this made me think of an example…..

Lets use a (sort of) hypothetical – In 5 years, my pay jumped from $150k to $750k due to a rapidly expanding business. My two main support people were making $45k and $80k. Now with bonuses and raises they are making $75k and $125k and extremely happy. In fact the one making $125k is the highest paid support person in my entire office.

Yet Steven H and others might be quick to point out that my pay is up 400% and my assistants pay is up only 67%. Thus widening the income gap. Is this fair? Should I have done something different? Should my assistants be making $250k – twice as much as any support people in the industry?

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JB July 25, 2014 at 7:55 am

you have all the risk of the company. If revenues fall, whose pay will be cut first? If the company closes, everyone loses.

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JB July 25, 2014 at 6:54 am

Being in the gov’t sector (County) our salaries are mainly determined by the amount of taxes that come in. Many people haven’t received a raise in 4 years due to the budget. Our CFO doesn’t like across the board raises in general for a few reason, but allows the department heads to reward those that are productive. Now, in many jobs, it is hard to quantify productivity. I am basically an admin, but I can find ways to save the tax payers money by suggesting and implementing more efficient ways to accomplish our jobs. So if I were to find a process or piece of technology that saves the County taxpayers $500,000 a year, do I deserve part of that savings or am I doing my job?

I think go’vt gets bogged down in many things, but if you have the lower paid workers and they just do their job and don’t do anything to help, they might not get good raises. But as a Boss, I would want the ability to reward workers that come up with money saving ideas or processes with bonuses in checks. If our AP person puts 500 new vendors on ACH payment instead of writing a check, I should be able to reward that person since EFT payments are much cheaper than checks. They could have just kept cutting checks and not cared, but if I knew they came up with the implementation, they should be rewarded.
Some companies own the intellectual property a scientist invents and he doesn’t monetary benefit directly, but the guy that invented Post It notes should have gotten a huge raise, not necessarily ongoing royalties.

The purpose of this rant is that if you think you deserve a raise, what did you did you do to increase productivity/sales or decrease expenses to justify your raise? Again, not everyone is able to do this.

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Ken July 25, 2014 at 7:27 am

We’ve talked almost exclusively in these threads about the private sector and its alleged failings . For a moment I’d like to talk about the public sector, and in particular about public sector pensions.

Per the link below (among other sources), less than 50% of private sector large companies with 500+ employees offer traditional pensions anymore. Only about 8% of small businesses do. Yet every employee in federal, state and local government will have a pension when they retire, as long as they stay long enough to qualify.

http://money.usnews.com/money/blogs/planning-to-retire/2012/10/26/top-companies-continue-to-drop-pensions

So I have two questions: 1) Is is “fair” that public sector employees will have pensions, when half of us in the private sector who are paying for those pensions won’t? 2) Since I pay the taxes that pay those salaries and pensions, what is my “fair share” of those salaries and pensions?

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JB July 25, 2014 at 7:49 am

I will say as a public sector employee, in general, public sector employees are paid less than the equivalent private sector job and the carrot is the pensions. I started my public job late in life so I won’t have 30 years built up. But I won’t really need the pension, it will be bonus, but there are people around here that can’t conceive of leaving due to the great pension they will get when they retire.
We don’t get bonuses, or 401K match or automatic COLA raises. The froze many things around here during the recession and things have bounced back. I only can hope for a raise every 4 years or so and I will say our “CFO” has tried to offer a competitive wage to attract better people to gov’t service. My pension will guarantee a 7% return and I think I get a 225% match once I am eligible for retirement so if I have $100,000 in the pension (not likely) then the state puts in or has a calculation that makes it worth $325,000….
Now, there are pros and cons. I can say, Texas is a very fiscally conservative state and I am 99% sure my pension will be there unlike Detroit. The cons are no matter how well the market does, I get 7%. That is why I also contribute to my 457 plan. There are people around here that won’t get fired and they are milking their job until retirement age. I doubt I last here past the age of 60. I have things to do and places to see. My boss is retiring in 17 months and he will be 70.

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Ken July 25, 2014 at 8:01 am

While you seem to make less as a county (local) public employee, JB, most federal public sector employees are compensated better than their private sector counterparts.

http://finance.townhall.com/columnists/politicalcalculations/2013/07/29/total-compensation-us-government-employees-vs-the-private-sector-n1651097

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JB July 25, 2014 at 8:49 am

Which is why the Feds are 17T in debt and our county will be debt free, pay as you go in about 5 years. There is more waste and fraud on the National level.

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Man-of-Reason July 26, 2014 at 8:49 am

More waste and fraud than what? And how do you know and measure that?

JB July 26, 2014 at 9:08 am

The reports come out almost every day about money being sent to the wrong people, the military not knowing where their equipment is, people using the “corporate” credit card to throw large, unnecessary parties, travel first class, on and on. The money is our taxpayer money, not a company like Apple where they actually have to have budgets and tell the shareholders how they spend the money. The US gov’t has ZERO accountability to US Citizens.

JB July 26, 2014 at 9:09 am
JB July 26, 2014 at 9:10 am
JB July 26, 2014 at 9:11 am
Man-of-Reason July 26, 2014 at 9:37 am

When I was in my early twenties, the organization I worked for agreed to improve pension benefits so that employees got a little more when they retired. I went bullshit and complained bitterly because it meant taking an additional 2% out of my paycheck when I was just getting by as it was. I couldn’t even envision retiring, nor did I care. Over the next few years, however, I saw first hand how people who’d just retired, even at that higher level, were getting destroyed by the high inflation of the 70′s. Retirement considerations suddenly became much more important to me and I got involved.

Since then, I’ve negotiated labor contracts on both sides of the table, and one of the provisions I succeeded to include in one So. Cal. fire department contract was a provision for the city to match up to 5% of contributions to their 457 plan (like a 401k) in addition to their Cal PERS defined benefit plan. You see, 401k’s or 457′s were never supposed to be primary retirements, but only supplementary. In this case the need was to protect against inflation which is still a real threat.

The participation went from just a few firefighters participating, to all of the putting in 5%. They actually gave up a pay raise, but those in leadership within their association saw that they needed such a carrot to provide protection. In essence, it was forced contribution to their retirement since others would label them idiotic for not taking advantage of it. Of course, just like me, the newer guys bitched about not receiving their full raise, but over time, changed their tunes.

When I go back to California and run into these same once young guys, they thank me profusely, some having accumulated over a million dollars in addition to their CalPERS pension before retiring. Are you even more jealous now?

Man-of-Reason July 26, 2014 at 12:52 pm

There are estimates made by various partisan players, but CBO admits it can’t begin to get a handle on exact percentages of waste. However, the government does identify areas of highest risk, and rewarding corporate political donars with favorable tax treatment or no-bid contracts apprears to be most agregious. One site says, “The High-Risk List names 30 government areas that are vulnerable to waste, fraud, and abuse. Six areas, including Medicare, Department of Defense (DOD) Weapon System Acquisition, and Enforcement of Tax Laws have been designated high-risk areas since 1990.”

I wonder what level of waste and fraud would exist if we took away the incentive for politicians to reward political donations. Corporations in the U.S. pay the highest corporate tax rate in the world, unless of course, they legally bribe politicians with lobbying and campaign donations. That would take reenactment of campaign finance laws and the lowering of the corporate tax rate while eliminating loopholes. The politicians would never go for that, regardless of party. What a country!

Man-of-Reason July 26, 2014 at 8:46 am

If you follow the links to the actual CBO study, it’s really not so apparent the federal employees make more. Yes, when they compare the like educational levels as a total group, salaries are about the same, but benefits are greater chiefly due to defined benefit pension plans which so many corporations have abandoned for 401k’s. At the lower end the scale, high school grads, federal employees make more all around, while at the higher end requiring doctorates, they make less.

But even then, the CBO study admits that the comparisons are very difficult, especially the reasons why this occurs (aside from the fact that pensions have been reduced). It in no way can say that the federal employees wouldn’t make more in the private sector on average. Many positions, especially requiring only HS diplomas, are tested positions which means that only the top in those skills, abilities and potential get hired and the rest go back to the private sector. That makes a comparison more like apples and oranges, regardless of their attempts to even it out.

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JB July 25, 2014 at 7:41 am

this CEO improved Burger King from the brink.
finance.yahoo.com/news/burger-kings-33-old-ceo-185556018.html

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JB July 25, 2014 at 7:53 am

So let me say, I am “forced” to contribute to my pension, if I didn’t have the pension, would most still contribute to the 401K at 6% or more? What is the difference? Well, I don’t control the fund or what is invested in the pension. I would have more control over investments in my 401K. Which is better? It depends if you have the knowledge or the ability to want to monitor the investments. Many county employees are going to be just depending on their pensions.

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Stevendad July 26, 2014 at 4:31 pm

Random thoughts.
The NY Times is no longer credible. They are too liberal to see the world as it is.
Unions have in some ways destroyed themselves with greed. Ok for them to be greedy I guess. My very left leaning friend (Obama donor) stopped using them. Here’s why: they were getting a delivery on a $3 million project he was working on. There was a rake one the road, origin unknown. The driver would not pick up as not in his union contract. After several more union employees refused, an engineer finally picked it up. One hour times several thousand dollars an hour wasted for NOTHING.
Remember Steven H, your point of view is backed up with financial ruin, bullets and jail time. Who’s bullying who?

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Steven H July 26, 2014 at 7:00 pm

There is abuse in centralization of power. No denying that. Some unions abused their power and set unreasonable work rules. Monopolies abuse power. Large political donors abuse power. Big money and centralized power are magnets for corruption, always.

But more good was done than ill by unions. 40 hour work weeks were a big win. And unions have been the only practical way for workers to negotiate with management of big companies. The theory of markets setting proper worker value falls apart when company managers have all of the negotiating power. The decline of strong unions is one big reason (though not the only reason) why most Americans wages have been stagnant or declining for last 30 years just as companies and wealthiest have prospered at accelerated rate.

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Steven H July 26, 2014 at 8:37 pm

“The NY Times is no longer credible. They are too liberal to see the world as it is.”
In what way?
What news source do you consider most credible? I like CNN and BBC. Al Jazeera America is pretty good, too, oddly enough.

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Steven H July 26, 2014 at 6:31 pm

Interesting information.

There has been a lot of talk about tax rates on the “1%” but also assertions that the lowest threshold levels of the 1% are not really rich, as their incomes are “only” at the $390K level. I finally looked up some info on the effective tax rates of the upper 0.1% (bottom threshold of $1.9M in 2012) and how that group’s tax rates have changed over time. This report is from 2010 and uses data up to about 2007-2008. It’s the comparison to 50 years back that is interesting.


Between 1960 to 2004, the top 0.1 percent of U.S. taxpayers — the wealthiest one in one thousand — have seen the share of their income paid in total federal taxes drop from 60 to 33.6 percent.

In 2007, if the top 0.1 percent of taxpayers — Americans with incomes that averaged $7,126,395 — had paid total federal taxes at the same rate as the top 0.1 percent paid these taxes in 1960, the federal treasury would have collected an additional $281.2 billion in revenue.

Tax cuts for the wealthy between 2001-2008 cost the U.S. Treasury $700 billion, with all of these billions added directly to the national debt. Retaining these tax cuts will cost $826 billion over the next decade.

In 1960, the middle 20 percent of U.S. taxpayers paid 15.9 percent of their incomes in total federal taxes. That total included not just income taxes, but payroll and other federal taxes as well. These same Americans, according to the most recent figures, are now paying 16.1 percent of their incomes in total federal taxes.

Federal taxes, even after three decades of tax cuts for America’s most affluent, remain somewhat progressive. The higher the income, the higher the tax rate. But state and local taxes remain decidedly regressive. This offsets, to a significant extent, our residual federal tax progressivity. Taxpayers in America’s middle fifth paid 9.4 percent of their 2007 incomes in total state and local taxes. Top 1 percent taxpayers that year saw only 5.2 percent of their incomes go to state and local taxes.

http://biz570.com/economy/economy/poll-majority-favors-increased-taxes-on-wealthy-americans-1.720387/effective-federal-tax-rate-for-median-and-top-400-family-1955-2007-1.720389

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Peter July 26, 2014 at 8:34 pm

And your point is?

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Steven H July 26, 2014 at 8:56 pm

I have heard the claim that “no one actually paid those high marginal rates” in the pre-80′s. This article claims that upper 0.1% paid effective rate of 60%, and I had not looked up that info, nor seen it mentioned here. It was during a time period when the economy was thriving and the rich were still prosperous. So this is just information for the conversation.

I know you have said that you are less concerned with the past, and more interested in the future and where we go from here. But it is also important to know what has worked in the past and what has not. “Those who do not know history are doomed to repeat it.” Too much rhetoric has been in the conversation that is either overly idealistic (“Tax cuts pay for themselves!”) or fear-mongering (“Raising taxes will destroy business!”). In fact, when reasonable tax increases are put in place, as Clinton did, as Obama just did, as California did, debts are reduced and economies improve. As Kansas has learned, cutting taxes drastically just for idealistic or political reasons, without an actual plan, doesn’t improve the economy. It just bankrupts the government.

We need to plan for the future based on a knowledge of history, and what is practical for the future, and we need to get away from the idealistic hard lines, the propaganda, and the fear-mongering that our country has been obsessed with.

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Peter July 27, 2014 at 10:05 am

As long as you continue to think that the solution is to take more of my earnings either because “I have enough” or “I don’t deserve it” or “it is just bonus income”, it’s hard for me to engage with you.

German society worked pretty well in the 1930′s and 40′s as well and was wildly productive and innovative. That doesn’t mean that is a model that we should aspire to.

Plus if you believe that economies improve with reasonable tax increases, then isn’t that what we just did? Isn’t that enough? What will you do if that doesn’t solve the problem…

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Stevendad July 26, 2014 at 10:55 pm

NY Times recently fired their editor because she wished to tell the truth about their sex discrimination. They are blind to any faults if Obama. I watch them all, msnbc to fox.

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Peter July 27, 2014 at 10:07 am

I actually try to watch none of them. Most news is info-tainment rather than informative. Think it’s part of why we are so divisive and some (not all) people have such uninformed opinions on here and believe it so deeply to be true.

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JTM July 28, 2014 at 8:40 am

I agree, these shows are all divisive and often their “facts” are anything but. They don’t talk about real solutions, they push idealized ideologies that won’t work in the real world and try to rally the troops against the “other” side. What they don’t get, is there is no other side, we are in this together. Often the best results and ideas come through discussion of opposing views and compromise, not pushing some ideology for ideology’s sake.

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Stevendad July 26, 2014 at 11:08 pm

There wereany deductions and shelters (legal) in 1960′s. still about 2/3rds of “1%” pay alt min tax. It has not been changed in a very long time, only it’s lower limit changed by inflation. NO Bush tax cut for us.

Just a question. I postulate that the Fed keeping rates low is HURTING jobs by not giving Boomers who want to retire enough fixed income return to be confident in long term returns. Thus they keep jobs and clog up advancement for the younger. Also, as I sated before, the government competes with small business for loans due though borrowing rates. Thoughts?

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Peter July 27, 2014 at 10:12 am

As someone who works in the investment world, I can say that the last paragraph couldn’t be further from the truth. Lower interest rates are actually good for the economy. First, they help economic growth as borrowing is so cheap – this helps expansion, hiring and general business development while higher interest rates constrain it. Secondly, low interest rates boost risky returns like stock performance as more money flows into these assets. This actually helps retirees as their assets grow at a much higher percentage.

Also, remember that interest rates are only as high or low as they relate to inflation. With low interest rates, we have low inflation which helps consumers afford to live.

Most retirees who are still working and can’t afford a comfortable retirement are in this situation because of a lack of long-term planning. The American way of life is one of instant gratification and short-term consumption. A huge percentage of our working population doesn’t contribute to their company’s 401k plans – even though the company matches their contributions (i.e. doubles). Others are still working because people are healthier and still feel quite vital in their 60′s and don’t want to quit working at that point. I don’t think interest rates being low has anything to do with it – certainly not in the negative.

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Steven H July 27, 2014 at 8:14 pm

Stevendad, Roughly how does the alt min tax work these days? My understanding is that it is about 26% on the first 180K and 28% on amounts above that. But there is also an exemption amount of about 52K for individual or 81K for married filing jointly. (Figures are rounded.) But how does that exemption work? Does that effectively mean 0% on 1st $52K (single) and then 26% on the next $180K?

(I also understand that both regular and alt tax methods must be calculated and the higher is paid.)

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Alan July 27, 2014 at 3:50 pm

Both my gf and I earn well over 400k each. Moral of the story is this. Go to school, major in a marketable skill, start your own business.

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JB July 28, 2014 at 6:29 am

http://www.foxbusiness.com/industries/2014/07/01/lockheed-martin-to-freeze-us-pension-plan/?intcmp=obinsite

Here is my main issue with this. Lockheed should allow up to 50% of a person’s salary to be put into the 401K. 10% is too low for someone that has the ability to max out. You would have to make 170K to max out at 10%. My wife makes enough more than me that I did this at a previous company. I put 25% of my salary into our 401K so I could max out. One of my other companies maxed it out at 15% so I was not able to max out my 401K. If the gov’t wants people to maximize their savings, there should be a standard for companies. Most over 50 won’t be able to save 23.5K even if they wanted to due to a company restriction. What does the company care? It isn’t their money.

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Peter July 28, 2014 at 11:10 am

Agreed – and this is a company decision. IRS allows $17,500 with no percentage limits.

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Peter July 28, 2014 at 11:11 am

Actually just reread the article….looks like they are matching 10% of employee deferrals. So you can still put in 25% or more (maxed at $17,500) but only get 10% matched. Great deal actually.

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JB July 28, 2014 at 11:23 am

The IRS doesn’t care how you get to $17,500, but a company shouldn’t put barriers up either, Even a job making $100K wouldn’t be able to max out and that is easy making $100K.

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JB July 28, 2014 at 11:24 am

There are plenty of companies that won’t allow up to 25% of your pay to go into a 401K plan. I have worked at a few of them.

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Stevendad July 28, 2014 at 11:45 am

Steven H
I’m not an accountant, but here is what I’m told.
The exemption is only to see if you must pay, not an exemption as in regular system. You get to write off ONLY first mortgage and charity (limits apply). Then you pay $0.26 per dollar for every dollar starting at zero. For regular system u pay nothing for first $10k (these double for married filing jointly), 10% over $10k to next bracket, then each goes up. Meanwhile AMT is paying 26 cents on EVERY dollar and 28 cents for higher amounts, I believe $1 million. So you pay a flat rate all the way up from dollar zero and marginal tax rates are meaningless. Again, NO change in this for Bush tax cuts. It’s more, but simpler. I’d like to see all taxes paid this way, with less write offs and flatter rates.

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JB July 28, 2014 at 12:34 pm

But all those jobs at H&R Block and Jackson Hewitt would go away….we paid AMT a few years ago when we paid our property taxes in January and December trying to get a break. It didn’t happen. Won’t be doing it again.

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