Aside from the major hiccup the economy faced during the COVID-19 pandemic, the economy has been on a steady upward trajectory ever since years ago when we were talking about extending the Bush-era tax cuts. In case you don’t remember, we did end up keeping those cuts in place permanently for any individual making less than $400,000 per year, and for couples earning less than $450,000. Nowadays, those fortunate few who make more than that amount are paying a marginal rate of 35%.
But like I said, it’s been years since we passed the extension into law and I still don’t personally know anyone bringing home $400,000 per year. So who is actually paying that top tax rate these days? 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 the 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.
On the other hand, most presidents end up receiving so many requests for speaking engagements after they hold office that he or she will be set for life. They also get a pension equal to the salary of the head of an executive department (Executive Level I) would be paid. In 2020, that is $219,200.
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 careers. Plastic surgeons can make up to twice that amount.
Most people are completely okay with that though. After all, these people do a very, very important job.
3. CEOs and Founders
The median salary of a Chief Executive Officer (CEO) of a public company is over $700,000. These individuals are in charge of both short- and long-term profitability for their companies. CEOs generally have to know the industry inside and out (although there are certainly plenty of counter-examples), and need to have worked their way up over many years.
There are also plenty of CEOs from private companies who make quite a bit of money. The job can be stressful, but when you are the top dog, you reap the reward whenever your company does well.
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 few years.
5. Mortgage Loan Officers
This may be surprising to you because not many people think of this group of individuals as ones who can earn the big bucks. However, there are some loan officers, riding the wave of historic low rates, who are raking in the dough right now. After all, their salary is directly tied to commissions they earn as a percentage of the total loan amount they get approved for their clients. They work hard, often seven days a week in many cases due to unprecedented loan volume these days, but they are definitely getting rewarded for their hard work.
6. Speakers in Public Events
Before the pandemic, the good speakers were booking speaking engagements left and right. Not only do they speak at conferences, but they also have opportunities to speak to employees in their offices as well. Some people even write books that tie into their brand. They travel all over the country (and some all over the world), so clients are plentiful.
The pandemic has slowed business to a trickle, but these people will bounce back because everything will eventually go back to normal.
7. YouTubers
Can you see why your son or daughter would want to be a YouTuber yet? The popular video creators not only make $400,000 a year, but they can have earnings in the millions every year. The vast majority of people who try to make it big fail to amass a following, but many dream of the life of recording themselves play video games and earning the big bucks all the time. What they don’t realize is that those who earn millions not only have talent, but they also work extremely hard. If not, then they have a team of people who are behind all the videos that get produced. An entertaining video takes hours and hours of editing, but most people just see someone talk, have fun, and collect cash.
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 in between, the government estimates that raising the tax rate on this small group raise about $600 billion in new revenues a decade.
Not bad for a group that small.
What other professions that earn annual incomes of $400,000?
{ read the comments below or add one }
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I am self-employed, actually an employee of my LLC “S” Corporation. I am paid a salary from my business account, and pay 28% marginal rate on that income. I then pay both sides of payroll taxes to the tune of around 15%. That is up around 43% in income taxes plus payroll taxes.
Payroll taxes only count for the first 110,000 or so of income. So, those earning $400,000 are paying the same payroll taxes as myself. Plus, if they earn income as “investment income” their tax liability is what now…up to 18% (was 14% prior to 2013).
My 43% income taxes on my income of around $125,000 a year is the same as someone with an adjusted gross income of around $300,000 (if earned through investments).
Thanks Bush Tax Cuts!d
Idiot who wrote this article makes it sound like people making more than 400k are exceedingly rare. They are only the top 1% (not the top 1/10th of 1% like it almost suggests). That means if you are sitting at a stop light with 6 cars coming each direction and 2 people in each car there is a 50% chance one of them earns over 400k. If you are in a grocery store with 200 people in it there are probably a couple 400k earners in it. Go to a high school football game with 10,000 people watching and 100 of them earn over 400k.
So the tax on America’s richest equates to $600B. Based on total wages of $3 trillion? For all of you caught in the net of higher taxes, there is good news.
So don’t despair. When you or your help goes to by bread, milk and eggs, the staples, you still will be PAYING the same as someone making $20K per year!!!
Poverty in a free society can be driven by bad choices of individuals, but you really have to finger govt sponsorship of th0se choices. The idea of single parenting and govt sponsorship of the break up of marriage, with no-fault divorce, has caused generational poverty in America. Govt makes choosing the wrong thing extremely easy and desirable. And they hope you won’t wake up and ask any questions. Accepting money softens the impact of choosing not to accept responsibility for actions–the govt will step in to solve it all. It creates a mind-set of dependency in each succeeding generation. Star Parker, who was generationally poor (3 generations of women on welfare) has a lot to say about this as she runs CURE.)
Only politicians and those the politicians sponsor, benefit from govt-designed poverty. And it’s a lucrative business. Look at the multi-millionaires in politics who started out as poor people. Harry Reid is one. They want you to focus on BIG oil, so that you won’t ask how money falls from the trees into
the laps of Democrat politicians.
It was a spectacle they want you to forget, the representative had to
use the national guard to get to his inundated house to “rescue” the stash
out of his freezer…then they tried their hardest to deny that it had happened.
Then they distract you with calling Republicans racist, etc etc.
Salaried sales people can always figure what they will make year to year. Straight commission sales is where real money can be made, if you have the drive. My Dad went from a $5000 dollar a year job in 1955 to a 5% commission only, self employed job, as a manufacturer’s rep. In five years, after taking out a loan to get started, he built the territory to produce $5,000,000 a year in sales that lasted until he retired. Four to five days a week of travel over three states, but 5% of $5,000,000 was worth it for him.
How fair is it that all your income is taxed in the year it is earned, but if you loose capital, you can only claim $3000. a year. This is one screwed income tax system!
I am constantly surprised that this wasn’t adjusted during the crash in 09. We have had carryover losses for about 6 years.
Making close to $500k mark but still feel like a beggar compared to those around me in Alpine. $500k is what some here spend on a mistress.Most have half a dozen spread across the globe.
The problem is taxation on too high for us – but not for those making $5 million plus.
There are at least 100k plus people pulling in $5 mil income. That tax rate needs to be 35%. – 50% on CG./income/salary/stock –
The rich are the worst humans you will come across – there is reason for communism, french revolution, Mao’s existence.
Human greed is bigger than the universe.
The dumb republicans deserve what is coming to them – a complete destruction of the middle class. You will be peons and serfs to your new lords –
Thank holy pope I am immune from that – it is good to be a lil rich
Some people that work in Oil and Gas profession’s make over 400k, but the are by far not rich.
I hope the comments about the President were tongue in cheek.
For anyone who thinks there is no “advancement” after a President steps down from office, consider this:
Ex-President’s pension is currently $191,000 and always rising based on the current salary of senior cabinet members. Obama will receive this at age 54 or so … for life.
Then there’s the $100,000+ per speech angle.
Then there’s the $8M – $12M advance for memoirs angle.
Then there’s the legally paid trips to foreign nations such as Reagan’s trip to Japan where he made over $2M shortly after leaving office.
Then there’s the lifelong Secret Service option.
Being an Ex-President is about the cushiest advancement on earth.
Except for being an ex-congressman or senator. Over half the retired members of congress stick around The Town, becoming lobbyists and TV pundits and usually make many times more than the ex-presidents.
Please add farmers to this list. Most farmers in Iowa, Indiana and Illinois are super rich with incomes exceeding $400K, yet our government gives them welfare (subsidies) even in good years!
I will read through all the weekend’s comments later today, but initially I want to make one observation….
It is once again important to differentiate between the top 1% and the .01%. None of us in here are in the top .01% and whenever I defend the 1%, MOR and others begin using examples for the .01%. The fact is that 99% of the people in the top 1% DO pay extremely large amounts of taxes at significantly higher rates than the “middle class”.
The vitriol seems to be at the CEO-types who are in the .01%, not at someone making $500k-$1m, as those people typically do pay in the 30-40% range.
But here’s the problem….. if you cry “income inequality” and try and raise taxes, you can’t make any sort of real impact by taxing the .01% more. There just aren’t enough of them to bring real dollars into the system to “redistribute” to the masses. You have to attack the 1% and even beyond. In fact, you really have to go even deeper than that – raising taxes on those making as low as $100k if you truly want to make a bottom line impact.
At a time like this when I get my W2 and see that I paid over $200k in federal income taxes alone, I find it stupid and laughable that I didn’t “pay my fair share”. We should spend way more time debating where the enormous amounts of revenue already flowing into the government is being spent rather than telling our most successful citizens that they aren’t doing their part.
AMEN! The uber-rich will only be slightly effected and no amount of taxation on them will make any kind of impact. DC will only find new ways to spend that money than to pay down debt. If the last 6 years have shown anything, DC only wants to spend money while most had to cut back and pay down debt. DC could have improved their image by making sacrifices to their budgets to reflect most Americans, but they choose to keep spending more and more thinking it actually makes a difference.
“Do you think Hank Greenberg was happy when AIG shares went from $90 a share to $1? ”
No but it is justice. The problem with too many big companies is that the top paid officers have little stake in the performance whereas a small business person has almost everything tied up in the company of if he fails he fails big.
Ken, I really like your contributions. Do you ever read Thomas Sowell?
Hey Rebecca, My pastor just posted the following on Facebook, whadaya think?
“I want 1% of Jamie Dimon’s job. Pays $20 billion in fines last year and so gets a 74% raise to a cool $20 million for last year. Friends, the “too-big-to-fail” banks are our masters, their law-breaking CEOs the new untouchable pop stars, all at a time when millions of Americans face eviction due to the banks’ mortgage manipulations — and not one went to jail for it.”
MOR you pastor doesn’t really know what happened. Washinton Mutual and Bear Stearns were going out of business. If they did the gov would have to back up the deposits and didn’t want to do that so they brokered a deal with JPM Chase to buy these companies. As it turns out it was these companies that were the rotten apples not JPM itself. Then the gov has the balls to sure JPM because it now owns Washington Mutual, a deal they wanted to have happen. If JPM refused to buy then the gov would be on the hook. JPM got screwed.
I don’t read Thomas Sowell but i have seen some of his interviews.
“The fact that you, JB, Ken, PeterN, or anyone making less than you, pay much ”
I am not sure that I do make less. I could be paid $1 year and live of my investments easily. I am in the top 1% and that doesn’t count all the capital appreciation which can be significantly more.
Last year was a good year for the stock market so I got a huge dividend pay out in December but I don’t get the report until mid January but that is when the taxes on the dividends is due so I have a fine. There is a lot of people that will be in the same position. You can’t estimate this because the dividend pay out are not even from quarter to quarter. Fidelity says they can’t automatically take money out for taxes as the dividends are paid so I am screwed. Yes I know it is a good problem to have but the idiots that wrote the laws didn’t take high pay outs in december into account.
Now what is all this BS about the rich not paying more. I bet I paid a lot more than you MOR or ManCrunch. I can deduct my 401K contributions, investment expense, health savings account and depreciation off the company building, and property tax I think. This is rather standard stuff. There is no escape.
I will let the other Peter fact check MoR.
It’s not like the rich guy making $1,000,000 a year is saving a significant amount in taxes by maxing out his 401K at $17,500 a year or $22,500 if he is over 50. Christ, my wife company defers $28,500 a year into her profit sharing and that is on top of the $17,500 she puts away and she still paid about $80,000 in taxes. We have no way to “take Capital” out of the Accounting firm. There are no stock options, so stop with the “every CEO” knows how to game the system. You aren’t gaming the system when the system is set up in the way that it is. Great if that CEO can “only” be paid $400K and he can cash stock each month for living expenses. Do you think Hank Greenberg was happy when AIG shares went from $90 a share to $1? That was his risk of having the majority of his compensation in stock. I’m not saying he didn’t have money saved somewhere, but that is a huge hit to rebuild back from in your 80’s. Small businesses aren’t just going to go public and a company only has X dollars in revenue that can have payroll paid out of . You can’t pay yourself $10,000,000 a year if you revenues are only $5,000,000.
If JPM is making $20B a year in profits, I guarantee if Jaime Diamon took less money, it wouldn’t be going to the tellers in raises. Their skill level is a capped salary. Now many have to sell products and a few might be very good at it getting bonuses, but they will never be paid more than management or district managers or the executives. They can all be paid less and JPM can just buy back shares with that money or god forbid, open more branches. Labor costs shouldn’t exceed X % of the expenses.
JB,
Yes, you folks make too much to have as many deductions as those who’s AGIs are less, and you’re in the wrong professions and/or make too little to employ the tax avoidance schemes of those making much more. I certainly agree that you should be able to defer more income into retirement accounts, but remember, 401k’s and IRAs were only meant to supplement company pensions, especially to counter their erosion caused by inflation. They weren’t designed to be the sole retirement income, especially for the 1%. Remember that also before advocating the discontinuance of defined benefit plans for others.
By the way, no one here said, “EVERY CEO” that I recall. But many CEO’s of large corporations are very conspicuously being compensated so many times more than those who work for them. The average man cannot fathom anyone being worth so much aside from a Payton Manning who’s talent is on display each Sunday and well understood. However, they know that were Manning to cost the Broncos $20 billion, he’d be dumped in a flash, not given a 74% raise. Quarterbacks didn’t cause him to bail out any sports franchises either.
The average worker also realizes that money is distributed from the gross profits pie of a company according to the value derived. He realizes that it’s the executives of the corporation who get to define that “value” which has defined the labor movement in the U.S. During the 20th century. Now that Labor has been so greatly weakened, the corporate executives’ definitions prevail without much negotiation or discussion with workers. Although no one expects workers to make more than their bosses, to say that “Their skill level is a capped salary”, is nonsense. “Too much” and “too little” are relative opinions only. If Walmart wanted to grant significant pay and benefit raises to it’s low paid workers tomorrow, it could easily do so without affecting its prices. It chooses to buy back it’s stock instead because that enriches the major stockholders – themselves. “Let the worker bees eat cake.” The CEO get’s to decide what that X% is.
Free markets devolve into growing financial inequalities as the wealthy build their net worths faster than their employees can increase their wages from labor. The solution, according to research by a French economist, is for countries to install much more progressive tax policies, raising the top income tax brackets especially on the very wealthy. In the end however, he believes that to be hopeless and the goose that laid the golden eggs (the middle class consumer) will be eaten by the free market process.
For a preview, go here: http://www.nytimes.com/2014/01/29/opinion/capitalism-vs-democracy.html?action=click&contentCollection=Politics&module=MostEmailed&version=Full®ion=Marginalia&src=me&pgtype=article&_r=1
PeterN,
The pastor was once a Boston corporate attorney (and is a trust fund kid) who probably knows what happened, but that’s beside the point. What he’s saying is that those Wall Street criminals who were majorly responsible for the economic meltdown that American taxpayers were forced to bail out, have never been brought to justice. And now, Jamie Dimon, once the darling of Wall Street, had the stupidity to accept a 74% raise to what the American public considers an obscene $20 million dollar salary, even though he was responsible for wrongdoing at JPM which cost the company many billions in fines. There is a huge disconnect between the uber rich CEOs, their boards, and the average person.
In the end, the board rewarded Dimon for limiting the damage to ONLY $20 billion for a screwup of his own making. What?? Do you wonder why people might be a little or even a whole lot pissed off by such actions?
I agree that Dimon shouldn’t have bought WaMu and Bearn Sterns and left the gov with the disaster. I had over 300 share of JPM stock and sold it when the bad news started to surface last summer.
However, it wrong to portray him as the law breaker. It is the governments action of brokering a deal to buy WaMu and then go after JPM because they now own WaMu. I don’t think Dimon would have bought WaMu if he new the gov was going to be going after JPM
No matter what a CEO makes, the extra dollars in him making less won’t go to the average worker. They are paid based on their position and skill level. Again, an AP clerk will never make $150K a year no matter how little the CEO is paid. No worker will ever make more than the CEO. If he makes 40x or 400x, anyone that is a ‘worker’ understands it. Those that have the skills to move up do or find another company. I don’t have the skills to be a CEO and could care less what they make. It doesn’t affect my salary.
Thanks, Rebecca. 🙂 I know who Thomas Sowell is and have a read several of his columns over the years, but unfortunately not much more.
You will be Peter. When you finally sell your accumulated assets, you’ll be taxed at a 20% rate if you haven’t figured out how to convert your salary into capital gains or qualified dividends in the meantime. Those much wealthier than you have already figured that out and pay much less in taxes than you. Fairness does count and most consider that very unfair.
That’s actually not true. I’ll be living predominantly off of withdrawals from deferred comp vehicles like my 401k, which is taxed as ordinary income. But I also will have a much lower taxable income so will pay less in taxes because of that.
For example, If I make $750k and live off of $300k while raising my family, I am in an astronomical bracket. Whether I spend $750k or $300k, I still pay income taxes on it. When I retire, let’s assume I need $200k to maintain my lifestyle. That $200k will come from 401k withdrawals and taxed as ordinary income. But it will be in a lower bracket because my taxable income will be $200k instead of $750k.
I’m not sure what you think the wealthy are doing. There is no way to take income in the form of capital gains. You act like there is something for me to figure out here – but don’t you think I’ve tried? I work in financial planning so obviously I have explored this. There is no way I can take a high six-figure income from my job and “convert it into capital gains”. This just isn’t reality. I think what you are responding to is the rhetoric of the left that attacks the 0.001% that are living off of $100 million in trust funds. Sure, then you can just withdraw a high income and pay capital gains. And that is TOTALLY fair. But it also isn’t 99% of the wealthy’s reality.
There are very few people that can be paid $1 in salary and derive an income off of stock gains/dividends. Yes, Bill Gates, Buffet and a few others have millions of shares of stock and can sell once a month and meet the needs of their expenses. Not just any small business can go public and give yourself 10,000,000 shares of stock. That stock has to be purchase in the IPO. Let’s assume most of the rich do not have that many millions of shares at their disposal, but if you have been contributing to a 401K for 25 years you have built up a large number of shares in a mutual fund and that mutual fund might throw off $50K-$60K in reinvested gains that you can take in cash once you retire. You have to pay taxes on this money once you pull it out and it isn’t at capital gains rates. Even maxing out the 401K at $15K a year will only get you about $1.6 million of dollars at 30 YEARS….not many young people are maxing out their 401K and you can make up some of that with the over 50 catch up. It’s not like you can get to $20M by 401K alone. But again as in the above, you can make 750K and spend $1M, you are still taxed on AGI of the $750K and you are phased out of almost everything, so there aren’t many tax deductions you get. All you can do is buy muni funds or other tax efficient funds to minmize the churn in mutual funds. The gov’t is going to get their money and there will always be people on the low end and people on the high end. Taking money from the high end rarely helps anyone on the low end. If it did, why do we still have poor people on gov’t assistance?
Not everyone has the capability to be a CEO even if they have the means to go to college. Not everyone has the skills to play baseball even if they played everyday. People have different skills and unless you have the willingness to pick your self up out of the bottom, you just might be doomed to stay there. There are gov’t programs to increase your skills and education. Most don’t need an MBA to get into the upper middle class, but as I have said before, you choices in life are a major factor in where you end up on the spectrum.
Yes, a child from wealthy family can have a kid young and maybe they have the money for her to put the kid in daycare, but I would be interested in seeing a study of demographics of under 21 year olds that have kids without having a father around.
Again, how does taxing the wealthy more get a single woman off of food stamps if she isn’t willing to do something to make her life better?
The wealthy pay very little in taxes, both in historical terms and in terms of effective tax rates compared to the middle and upper middle classes. Yet, they own a very large chunk of the total capital and income in America. Taxes are revenue. Revenue pays for programs. Programs provide opportunities for single mothers to get education and job training. Education and job training results in meaningful employment. Employment gets people of food stamps. Therefore, taxing the wealthy more, especially in comparison to historical rates and relative to the rest of us, will get women off of food stamps.
Of course, if a woman doesn’t want to make a better life, it won’t work at all. So it’s only effective in 99% of such cases and not 100%. ‘Nuff said.
It’s not like the rich guy making $1,000,000 a year is saving a significant amount in taxes by maxing out his 401K at $17,500 a year or $22,500 if he is over 50. Christ, my wife company defers $28,500 a year into her profit sharing and that is on top of the $17,500 she puts away and she still paid about $80,000 in taxes. We have no way to “take Capital” out of the Accounting firm. There are no stock options, so stop with the “every CEO” knows how to game the system. You aren’t gaming the system when the system is set up in the way that it is. Great if that CEO can “only” be paid $400K and he can cash stock each month for living expenses. Do you think Hank Greenberg was happy when AIG shares went from $90 a share to $1? That was his risk of having the majority of his compensation in stock. I’m not saying he didn’t have money saved somewhere, but that is a huge hit to rebuild back from in your 80’s. Small businesses aren’t just going to go public and a company only has X dollars in revenue that can have payroll paid out of . You can’t pay yourself $10,000,000 a year if you revenues are only $5,000,000.
If JPM is making $20B a year in profits, I guarantee if Jaime Diamon took less money, it wouldn’t be going to the tellers in raises. Their skill level is a capped salary. Now many have to sell products and a few might be very good at it getting bonuses, but they will never be paid more than management or district managers or the executives. They can all be paid less and JPM can just buy back shares with that money or god forbid, open more branches. Labor costs shouldn’t exceed X % of the expenses.
Mancrunch –
Two questions for you on your recent post….
1. When you say “the wealthy pay very little in taxes”, do you mean the top 1%? Or the top .01%. It is just not true that the top 1% pays very little in taxes in terms of effective tax rates. This is political spin, not fact. http://taxfoundation.org/blog/chart-day-effective-tax-rates-income-category
2. What percentage of revenue do you think pays for a single mother’s education and job training? Take a peek at the Federal budget. That’s like saying our taxes go to fund things like PBS. Our taxes go primarily to defense, social programs like Medicare and social security, military and Fed worker retirement benefits, and interest on our debt. Not to help a single mom get a job.
Like all of us, I’m sure you’ve tried to minimize your taxes Peter, but you just don’t make enough or are in the right circumstance to manipulate the profits from your business so well as others who’s incomes are greater. You are obviously not the CEO who receives stock options, later converted to capital gains, or bonds paying qualified dividends. But many do, and also have offshore straw corporations in tax havens where they can channel their profits.
Romney has Bain Capital pay him mostly in qualified dividends and LT capital gains. (Oh, and once he dies, all that stock which has appreciated so much over the years, will have it’s basis recalculated so that if his kids sell immediately, they will pay no taxes.) Romney is typical of those in his income bracket, but many who make the same as you also take advantage of tax laws to pay much less to Uncle Sam.
I know of contractors who flip their residences after making improvements every two years. Factor in their spouse residing in another, and that’s an nontaxable capital gain every year. I have a friend who manufactured widgets in Ireland. The U.S. allows expats a large amount of income tax free, and Ireland doesn’t tax royalties. He simply paid himself in royalties on his patents and paid no taxes.
When you retire, live on your previously taxed normal savings while you first roll over your 401k to an IRA, and then convert some of that each year to a Roth. Such conversions create a taxable event but, so long as you are judicious, you can pay a minimum in taxes, and all later interest or gains from the Roth will be tax free.
The fact that you, JB, Ken, PeterN, or anyone making less than you, pay much more of an effective tax rate than those who’s income is so much greater is very hard to justify and has led the the income inequality that Americans are just beginning to notice. The wealthy are the business owners who set the wages for their employees and it’s human nature for them to overvalue their contribution in relationship to those employees. They are the “job creators” after all. Therefore, when it comes to a choice between maximizing gains for the shareholders or granting raises, who do you think wins out over the long term?
For an interesting preview of an explanation for this, go here: http://www.nytimes.com/2014/01/29/opinion/capitalism-vs-democracy.html?action=click&contentCollection=Politics&module=MostEmailed&version=Full®ion=Marginalia&src=me&pgtype=article&_r=0
MOR – we have had some great debate on here but I think the problem with the last post is that you – with all due respect – don’t totally understand how many of the mechanisms for tax reduction for the wealthy truly work. A few points:
1. You say I “don’t make enough or aren’t in the right business to manipulate my profits from my business”. The overwhelming majority of the 1% are in my shoes. Just look at the list of people this article mentions that make over $400k. A doctor or lawyer….an athlete or entertainer….a top sales rep….a small business owner……a politician….none of these are in the “right business”. Your perspective seems to come from the handful of highly publicized big shot CEO-types, not from the majority of the 1%. Every single one of my clients is in or near 1% for income, none of them have access to these sorts of things you think are so rampant.
2. Your analysis of Romney is also flawed. First of all, when he dies, the government will take more than HALF of his assets in the form of estate taxes. This is why basis steps up. Believe me, he would trade the stepped-up basis for no estate tax in a heartbeat. Most people aren’t in Romney’s situation! A heart surgeon making $500k doesn’t have the option to set up a shell company and funnel his income through in the form of long-term capital gains. This just doesn’t exist like you think it does.
3. I don’t see any problem with a builder building themselves a house and flipping it every two years with no capital gain. Spending money on improvements and then reselling is a risk and if they live there for 2 years it is their residence.
4. Again, with all due respect, your Roth conversion strategy for me makes no sense. Roth conversions cost just as much in taxes as regular withdrawals. Why would I convert my 401k to a Roth in retirement? If I did, I would pay much greater amounts in taxes up front for the benefit of tax-free growth. If I were to do this, it would make more sense to do it now or just contribute to a Roth 401k in the first place. There is ZERO chance I’m paying a “minimum in taxes” – judicious or not.
I’m not sure why but it just doesn’t bother me that people making more than me pay less in taxes. I have enough to worry about with my own life, career and children. Politically, I am way more concerned with the stupidity of the spending both internationally and on failed or failing entitlement programs. This is where I spend most of my time focusing – not on why Jamie Dimon didn’t pay more in income taxes.
The rich don’t pay LESS taxes. They pay an effective rate that is less, but 14% of a few hundred million is still a crap load more than 24% of 300K. The rich pay millions and millions in taxes are using the IRS Code book, manage the taxes paid. If you don’t like the system, pay your own lobbyist to fix it since you think every lobbyist is owned by a rich person.
and Romney will start paying $3M in taxes out of his IRA when he hits 70.5.
But the rich don’t even pay a lower effective tax rate (see the link I attached). That part isn’t even true.
The article does not mention the show business elite and sports stars (basketball, baseball and football) as classes of millionaires who routinely earn over $400M annually.
and the 3rd generation of these people generally blow all the money and become pretty useless.
Sometimes, some do. But I’ve known many who live off of trusts which they can’t access for draining, and are passed down from generation to generation ad infinitum. Most worked at something, but many retired very early (like at 40) to pursue hobbies like sailboat racing or other interests such as charities.
well since you generalize everything else, there are always exceptions.
Let’s see here. If you say that the 3rd generation of the wealthy blow all the money accumulate by their patriarch and become useless, that’s not generalizing. But, if MOR says that’s not always the case, he’s generalizing. Hmmmm.
I said ‘generally’ while you will state in absolutes.
You lost me JB.
soory, the reply was supposed to show up under another comment
My wife grew up upper poor/lower middle class, I grew up middle/middle class, both our parents got divorced. my wife sometimes had to eat dinner at a friends house her mom was so poor. She went to college, got a USEFUL accounting degree and moved her way up the food chain at the accounting firm. HARD WORK with ZERO LUCK is how she and many others do it. They were in the bottom 20%, maybe the bottom of the next bracket, but def grew up poor, but at the top of the bracket, but they never went on food stamps. We got married and learned to save more than we made. we could retire now, but 6-10 more years of working will guarantee us $100K a year in retirement income. Paris Hilton will never be asked to run the company. Most of the Waltons aren’t involved in the company business.
If she “risked” anything JB, then she was lucky the outcome was successful. That’s a given.
There is NO SUCH THING AS LUCK..stop using that word. How do you quantify luck? You are either motivated to work hard or motivated to sit on your ass. You don’t RISK applying for a job and being competent in your job. You might risk your job by embezzelment or sleeping with the boss, but some might just call that being opportunistic. Plenty of people get fired from their jobs. Did they have bad luck? Doubt it. They didn’t have the skills to be kept on. Is going to Vegas and betting on everything and winning 50% luck? why would winning 100% be luck. THERE IS NO SUCK THING AS LUCK.
“Luck” is away to deflect blame or credit away from yourself. If you find yourself struggling it’s easy to point to some event in your life and say “I was unlucky”. If you succeed you can always point to some event and say “that was lucky”. The reality is we all have ups and downs – special moments and opportunities, setbacks and hardships.
Real winners have long-term goals and persevere regardless – never letting the setbacks hold them back and not getting too exuberant or self-congratulatory when you have success.
Losers sit around and look at their lives and blame everything but themselves.
Luck from a business man’s point of view.
There may be some but not much. A president of a small engineering company we make industrial controls and compete internationally. We can’t compete everywhere and that is what keeps them in business. Were we do compete we win more than our fair share but we don’t win them all.
Luck is kind of a one shot way of looking at things but in reality we have many chances for a win. One would have to be very unlucky to always lose but face it, if you always lose you have a bad case of isuckatthisitis and should find something else to do.
When you do lose you have to evaluate why so you can improve your chances when competing for a win the next time. Why buy competitor’s products and our competitors buy ours to analyze for weaknesses. Sometimes our product is not quite as good for a particular application. No product is going to be best for every application but we can make our products to be best for more applications than the other guy. Even so we don’t win them all but as long as we win more than our fair share we are still doing well.
So if your chances of winning a project is only 33% you may say you got a bad break of you lost one project but if you competed on many projects the chances you will lose all of them are small to none unless you simply aren’t competitive.
One must hang in there and learn how to win. If you get your percentages up to 50% you are doing well. Sure each individual project may involve some luck but in the big scheme the market is fair. You have to win market share.
That’s not luck JB, at least not the kind of luck I spoke of. That’s simply a reward for producing a quality product at the lowest price. It’s competition.
Excuse me JB, I meant PeterN.
In the pursuit of wealth, you’ve taken “calculated” risks. For example, you may reduce the risk of failure from 50% down to 25% by accumulating certain knowledge or capital, but that doesn’t mean that circumstances beyond your control can’t wipe you out. As a matter of fact, many of you one percenters have cited your risk-taking as a reason that you deserve to be taxed less than the common laborers. However, you still believe that hard work and perseverance always triumphs and “luck” plays no role. That’s ego, not logic speaking.
We aren’t taxed less than the common laborers!!! I will pay upwards of 30-35% in taxes this year.
You will be Peter. When you finally sell your accumulated assets, you’ll be taxed at a 20% rate if you haven’t figured out how to convert your salary into capital gains or qualified dividends in the meantime. Those much wealthier than you have already figured that out and pay much less in taxes than you. Fairness does count and most consider that very unfair.
We’ve been talking around our personal beliefs concerning the roll of hard work in relation to success and I came across the following comment on another site. It was preceded by a Pew research poll which, among other things, showed that Republicans overwhelmingly believe that anyone can be successful so long as they work hard, while the Democrats overwhelmingly believe success has more to do with the opportunities afforded to those born to advantaged families. Here’s the conclusion of the poll:
“A child raised in the bottom fifth of the income scale through much of the southern United States has around a 5 percent chance of rising to the top fifth—4 percent in Atlanta and 4.3 percent in Charlotte—while a low-income child has a 9.6 percent chance of rising in Los Angeles and 11.2 percent in San Francisco. Do Republicans think poor kids in California are just twice as likely to be hardworking as poor kids in Georgia and North Carolina? Or might there be something else going on? Not to mention, even an 11.2 percent chance of going from low-income to high-income is pretty damn low if what we’re looking at is an issue of merit. Those numbers are in line with Pew’s earlier finding that 43 percent of Americans born in the bottom fifth of the income ladder never move up, and a full 70 percent never reach the middle. The “this is about advantages and inequality, not individual merit” hypothesis gains strength when you learn that rich kids with below-average test scores are more likely to graduate from college than poor kids with above-average test scores.
“Rich people are rich because they worked harder, my ass. This is a convenient belief if you’re wealthy, but in the vast majority of cases, reality it is not. And on that mistaken—and often self-interested—belief rests a long list of Republican policy positions that are increasing inequality and poverty, year by year by year.”
An even more of a reason if you are in the bottom 5th to finish HS and try and get into community college. HS graduates make twice as much as those that don’t and college graduates will make $1,000,000 over a lifetime than some one who drops out.
Totally agree with you MOR – it’s about a combination of opportunity and hard work – and frankly a number of other things like family structure and talent. But the solution isn’t for the rich to pay more taxes. Maybe it is the progressive tax system and entitlement system that is partially to blame for the problem.
One other factor not mentioned here. I would estimate that a large majority of the uber-rich – let’s say the top .01% (or even the top 1% if you want to go there) got there by taking chances with their careers. What I mean by this is – many of these folks got there by starting their own businesses (or having parents that did this), by investment (real estate, stocks, etc.), commission or stock-option incentivized jobs – or just by choosing a career that has a tremendous amount of risk to it (say, professional athlete, entertainment or politics).
Even a well-educated kid from a wealthy family may choose a perfectly fine career like management and work their way up to a $200k salary at some point. But they won’t be in the 1%.
It’s not like there are many careers out there that pay over $400k. Most of the testimonials in here have been from people who have their own businesses. That takes more than opportunity and hard work – it takes RISK.
Most people work hard. Some of those people have the good fortune to be in the right place at the right time, or exposed by chance to the right person or opportunity, or born into the right family. I don’t know if it’s true, but I did once read that 93% of those in the top 1% were born into families also in the top 1%. That would mean that the odds of attaining that level from below are very poor although it can be done, as some here have.
But even those from middle income homes now in top colleges who will beat the odds and graduate in a worthwhile major, will have debt enough so that they must accept a job working for someone else once out of college. They cannot take the risk that their entrepreneurial ideas and dreams will fail since they must pay back their loans. Only someone without children, or large debts and obligations can risk going it on his own. (Think of Bill Gates and Steve Jobs.) And that’s just the first obstacle.
If there are no family connections to help boost a business idea, then the fledgling entrepreneur must rely on identifying and recruiting those with capital to develop his ideas, or simply rely on chance meetings with honest angels. The latter is much more common. Then, assuming he’s a very wise businessman (or woman), he must avoid dishonest employees (I’ve seen everything from embezzlement to false accusations of rape.), family illnesses (especially mental), bitter divorces, or unforeseen economic downturns, all of which may cause him to take his eyes off the ball and expose his business to failure. Indeed, those are the risks.
Those risks are greatly reduced if family money backs up and provides a safety net for the young entrepreneur and he can risk more and will be more greatly rewarded in the end. But financial success takes money or luck – lots of it. Americans are not so upwardly mobile as they once were.
Everyone Accounting/Law Firm Partner in a Top 6 firm makes over $400K. Beginning Partners at the Big Four are in the $350K range. It is very hard to make Partner in law firms and accounting firms and most won’t be wililng to work 80-90 hours a week during busy season and 60 hours in non busy season. My wife’s boss makes over $800K, but he is top in his accounting field. Plenty of Professors in Private universites make that amount.
You have quoted that one stat before and while I don’t where this came from, if you think about it there is no way this is true. “93% of all those in the top 1% came from families in the top 1%”. I think this MAY be true for the top .01% (like the Waltons), but the top 1% includes people making $400k/year. In a metro area like DC or NY that is a wide number of people that all aren’t “trust fund babies”. In fact, I’m above that and my father never made more than $100k – as is the case with most of my friends, clients and coworkers above that amount.
Of course luck plays a role. But if a big piece of the pie chart that determines success is luck, then why have this conversation? You can’t legislate luck. You very clearly stated some of the very “risk” I was talking about in my prior point as well.
My main point if severe upward mobility – not going from making $50k to $100k (which I do think still is very possible), but becoming someone who makes over $400k/year takes luck, talent, opportunity, hard work, and a willingness to take some risk. None of this can be legislated or solved by our tax code. The only one we should be looking for the government’s assistance on is the “opportunity” portion – which can only be helped through the education system and tax incentives for corporations and small businesses to hire and train people.
“….But financial success takes money or luck – lots of it. Americans are not so upwardly mobile as they once were…..”
And here I think we see the basic divide in the conservative versus the liberal view of the world. The liberal view is that success comes from luck, already having money to begin with, and knowing people. The odds are stacked aginst you. So the solution is to “even the playing field” by taking money from the rich…. redistribution…..more or less the Robin Hood view of life.
The conservative view is that financial success takes mostly education, hard work, and delivering goods and services that other people are willing to pay for. Luck plays a part, and sure, if you have significant financial backing, no question that it helps. But neither luck nor money is a necessary precondition for success.
The conservaive view is that success has mostly to do with you, your attitudes, and your behavior. Yes, bad things happen to good people, and good things happen to bad poeple. People get divorced, have illnesses, and so forth. But in the long run, in the grand scheme of things, luck is not the driver for your life, on the whole. Your behavior and the choices you make are.
Financial success is about educating yourself beyond high school. It’s about working hard.. but perhaps not the 8 hour day that most people define as “working hard”. If you’re an entrepeneur, it’s something more like 14 hours a day, as some other poster mentioned…hours which most people try to avoid, but then turn around and describe the entrepeneur’s success as “luck”. It’s about the choices you make in your personal life, such as not consistently overspending when you do earn some money. It’s about not going out to eat frequently, or maybe at all. It about not getting pregnant (or impregnating someone) when you are 16 years old. It’s about saving for retirement instead of taking vacations. Foregoing immediate gratification in favor of longer-term goals.
In short, there are a range of behaviors which increase your chances of success, and there are a range of behaviors which decrease your chances of success. Choosing the ones which increase your chances of financial success tilt the odds in your favor.
Now… all that being said,…even if you do all of these things to increase your chances of success, you are still not likely to become one of top .00001 percent. And I personally would say that you don’t need to be. But what you can be, and what you are mjuch more likely to be, is financially “successful” by most people’s standards. You’ll become “lucky”.
Ignoring the short bus reference as beneath the level of most of this thread, I will respond later to posts from late last week and the weekend. Before doing that, however, I would like to make one short observation.
I find it interesting that the people who are most irritated by the “unfairness” in the tax code are not the people who are paying the most in taxes — people like Peter (self-identified top 1%), or myself (top 10%), and others. To the extent that we are being “screwed” by the current system you would think that we should be the ones complaining the loudest about unfair taxes, since we pay most in federal taxes both in percentage terms and (relative to the bottom 90%) in absolute dollar terms.
Rather, it’s those who aren’t paying in as much, those who are not in the top 10%, who are complaining the loudest. These of course are the same people who benefit the most from the taxes that the top tiers pay on their behalf.
I just find that notable and interesting.
Good points Peter. Giving kids opportunity can certainly cost money however. Many countries which are graded higher in upward mobility pay for education through graduate school. Without debt, their newly graduated have more freedom to choose a career path than our graduates. I also saw a program on TV yesterday where top companies are encouraged to mentor payed interns from disadvantaged families especially in the social skills necessary to survive in the corporate world. It’s very successful. The first example takes tax dollars while the second takes very little tax dollars. I’m sure you can think of many other ways to give all deserving kids opportunities to succeed so that the cream rises to the top (Merit).
Unfortunately, those who have money don’t especially want to pay for someone else’s child to get ahead so we hear all excuses such as, “If they fail, it’s because they don’t work hard.” or “… aren’t smart enough.” or … make poor life choices.” And then many complain that granting opportunities is merely a “redistribution of wealth”. In other words, “I’m all for giving all our kids opportunities to succeed, so long as I don’t have to pay for it.” You see, it is about the taxes we pay.
Ken – AWESOME post….. Well said. I think your post really does highlight the difference between the two perspectives. It’s not just the hard work and the risk – it’s the denying yourself instant gratification that most of the public wants no part of. Whether it’s financial planning, nutrition, relationships, building a business, whatever…. everyone wants it NOW. Building true wealth and upward mobility are about sacrificing for the later benefits – sometimes the benefits don’t even materialize until the next generation. But the majority either doesn’t want this, or doesn’t understand that this is how it works.
MOR – Again, I adamantly disagree that “those who have money don’t want to pay for someone else’s child”. I currently live in a county where 70% of the residents do not have children in the school system, yet we have one of the top 10 school systems in the whole country because the budget is so high. Year after year, the “wealthy” (my county is among the wealthiest in the nation) continue to vote to give the schools whatever it is that they need. This is largely funded by property taxes and local county taxes.
Our state taxes of course go proportionately across the state, which can also be used for education. Obviously, my county pays much more in state taxes than the rest of the state. One of my close family members lives in the same state but in a much poorer county. The school systems there aren’t as good as ours, but people keep voting down measures to improve them with local taxes. The richer counties subsidize this (i.e. redistribution of wealth), but it doesn’t improve.
I would go as far as to say the opposite of what you said. “Unfortunately, those who are in the middle and lower economic classes don’t want to pay for someone else’s child to get ahead”. The liberal view is that the 1% are a bunch of selfish people that only care for themselves. The facts just don’t back this up. It is those at the bottom that are more concerned with their own immediate self-gratification.
People don’t realize how much paying for your community’s schools helps the entire region.
Thanks, Peter. There’s a few other observations I’ll make as a response to several posts back in this chain. They have to do with greed, and with compassion. You can all get ready to start stoning me here in a minute.
To me, the liberal thinking of who should be labeled “greedy” seems to be exactly upside down. In the liberal view of the world, as evidenced by several posts in this thread, the “greedy” people are the ones who have earned their own money and who don’t want other people taking it from them. What’s interesting to note here is that the people wanting to take someone else’s money are never labeled as “greedy” for wanting to take money that isn’t theirs. No, it’s only the person who is having the money taken FROM them that are labeled as greedy. This seems to me to be exactly upside down, an Alice in Wonderland moment. The person taking someone else’s money ISN’T being greedy, but the victim who doesn’t want his money taken IS being greedy? Really?
If a private person were to approach you and take money from you that wasn’t theirs, that would typically be called theft. Or robbery. But if the government takes it from you, it’s called compassion. Obviously this is an overstatement for rhetorical purposes. I would submit, however, that whenever the government is involved, the interactive nature of compassion completely ceases.
One reason is because you are being compelled to give, rather than it being a free choice. Giving under compulsion is not compassion. It’s compliance.
Another is that this definition of compassion entirely ignores private giving as the more appropriate avenue for compassion. Americans are among the most compassionate and giving people on the planet. And to me, private giving is the centerpiece of compassion. You are engaged with the person or organization to whom you are giving. You develop feelings and attachments to them. They often express appreciation to you as an individual in return. You develop a relationship with one another, and so on.
It is exactly the opposite, of course, when government is involved. Do you ever see the person to whom your taxes are given after government takes your money? No. Do you develop a relationship with them as a result? No. Do they express gratitutde to you for having given your money to them? No. In fact, if anything, they express an attitude that the money was “free”, and that they “deserve” it and want more of it. Why did I “only” get this much? Where’s my cost of living adjustment? After a while, where government is Santa Claus giving away “free” stuff, there comes a tipping point. At some point the givers start asking themselves why they should be doing all of the giving when the takers aren’t really contributing. That’s when things beclome perilous. Are we there yet as a society? I personally think we are getting very close.
Now…. I would be the first to say that as a society we need to care for the people who are truly needy. But I would also say this number of truly needy is somewhere around 10% of the population, give or take, and where we are today is light years away from that. We’ve got way too many people on government assistance, and not enough people contributing.
Love it Ken…. As I have moved from barely surviving to being part of the vilified 1%, I can say that it has been a real eye opener to the mentality of my peers. I totally agree that the view is upside down, as I mentioned in my other response to MOR.
One analogy to consider…. We certainly need people to adopt children, take on foster kids, and volunteer at youth organizations to help society’s lost or abandoned youth. Can you imagine if this was done under a “compliance” program (to use your words)? Instead of kind people voluntarily adopting a child and loving it and raising it like their own, we forced every family with means to take on a child. How would this work?
Look, if you leave it up to the compassion of people – some people will not help out….obviously. But as we have seen after all sorts of disasters, by and large Americans are there for each other.
The “liberal view” is not that only “luck” is necessary for wealth, but that luck is a necessary ingredient. Almost every wealthy individual will attribute his good fortune to being lucky by whatever word he uses (good fortune, the grace of God, etc.). Many of the most wealthy have also “earned” even more wealth by changing government policies through campaign contributions and lobbyists, of which ALL of the 1% are the “lucky” beneficiaries. (I don’t think “by the grace of God” appropriate here, do you?)
Tax cuts and deregulation have dominated federal policy since the 1980s; during this time, inequality has spiraled out of control. If conservatives have nothing better to sell than more tax cuts and more deregulation, it’s no wonder that people are tuning in to what the other side has to say.
Income tax rates for the highest earners remain quite low, in historical terms, while earnings on capital gains — including some “gains” that look a lot like regular income — have been taxed at a measly 15 or 20 percent. Advocating that taxes be raised for the wealthy is not a personal attack on anyone; that includes you, Ken, JB, PeterN and Peter as well. It is a policy proposal. No, it wouldn’t solve all the government’s fiscal problems. But yes, it would provide significant revenue while making our tax scheme more progressive and, in the eyes of most people, more fair. And yes, fairness counts.
The 1%, especially the fabulously wealthy, need love too. But they’ll get more of it if they stop congratulating themselves for all their hard work and sacrifice, and realize that poor people work hard, too, sometimes at two or three jobs, and struggle to put food on the table.
Relax, Ken, they’re not coming for you. They’re waiting for non-special buses to take them to the grocery store.
See my previous response regarding references to short buses. These threads are not worthy of them, nor of ad hominem attacks.
Whenever I see income inequality mentioned, and how it has “spiraled out of control”, I wonder “Whose control?” and “Why should there be controls?” Isn’t that Big Brother kind of stuff? Should ubiquitous mediocrity be our goal?
When I hear the phrase “income inequality” I also notice that “inequality of value delivered”, and “inequality of contributions” are never mentioned. Intentionally, I think. If they were mentioned it would paint a very different picture, a more balanced picture, and people might then arrive at the “wrong” conclusions.
Are equalized outcomes irrespective of value and effort delivered a good thing? Of course not. Does the advent of the Information Age possibly have anything to do with the widening gap between the highest and the lowest? I think it does. Think of Gates, Bezos, Jobs, Zuckerberg, et al. These people are not just millionaires, but billionaires. Many many multi-millionaires whose names we don’t even recognize were also created during the Information Age tech boom. Does this perhaps have anything to do with the widening income inequality gap (i.e. the very same time frame that critics complain that the income gap has sprialed out of control) have anything to do with the widening gap between highest and lowest earned? I think it probably does. I think it is not only very possible, but very likely, that some people prepared themselves for the Information Age, and took advantage of it, while others did not, and got left in the technological and economic dust. You will not succeed as well in the Information Age if all you have are Industrial Age, low tech skills. The effects of the Information Age don’t explain everything, but they explain some things.
Oops. Obviously I reworded some things in my last post, and a first draft sentence or two didn’t get removed as it should have.
Sometimes you need to make your opportunities. Sometimes they come along and you have to be able to take advantage of them.
Starting a business is hard work. There were a lot of 14 hour days in the beginning. It takes a lot of care to avoid unforeseen difficulties. It has taken years to get where I am now and honestly I don’t work that hard now compared to when I was younger growing this company. The employees don’t work that hard either. They shouldn’t have to if one is good at planning and estimating.
I was not born into the top 40%. I had a college loan to pay off. I worked for another company before being given a chance ( I was laid off ) to do things my way. Being “laid off” was an opportunity. If I hadn’t been laid off I wonder if I would have gone the small startup company route.
““Rich people are rich because they worked harder, my ass”
I strongly disagree with this statement. I WORKED very hard to get where I am.
If you change the word worked to work then I would agree. I don’t work that hard now. I don’t need to.
I know a number of people who became successful because a layoff and little chance of reemployment forced them by desperation to form a company of their own. I love hearing of such things.
The commentator you quoted wasn’t saying that hard work doesn’t reward us, but that there are many people who work very hard long hours who are not rewarded to the same degree as the rich. By the way, I went to school with many kids from wealthy families and I saw no difference in the amount of work produced or the hours put in between them and other students. If anything, they had more opportunities to play in college that the rest. I’ve had and still have wealthy friends who certainly don’t work all that hard either. It’s in building wealth that takes hard work. Once arrived, most ease up.
Here’s how I see it. This country was built on small business and farming. It has revolutionized into large business and large farming operations, all in the name of making them run “more efficiently”.
Even though we may have different points of view politically, and business wise, I personally think the value system that I have always assumed was in place years ago is declining.
Before I sold my business, I had 60 employees. Of those amount, I wouldn’t have traded maybe 59 of them for anyone else. They were, and continue to be for the new owners, great employees. They worked hard. And I think that is the case all across this country, that the people that go to work everyday, punch in, and punch out, are wonderful people. Much like those that worked for me.
Then there are managers/owners out the that are equally as good for their employees, as are the employees are for them. They give them top wages, as much as they can afford, and give them benefits that are equally as good. It is these people, along with the dedicated and hard working employees that are the backbone to this economy.
But what has happened in the last 30 years or so is the decline of that partnership so to speak. Companies have gotten larger, and because of pressures to make as much profits as they can, they now don’t treat the worker with the same level of respect. And they probably don’t pay them what they can afford, but rather what the budget allows. In return, the employees no longer feel as loyal to “the cause” because we now have an attitude of get what you can and get the hell out. What’s led to this is management that abuses their power, and workers that abuse management. No different than the right ( republicans) and the left (democrats). No one any longer wants to put what’s best for the team at the forefront of the conversation but rather take what they can get and move on.
I am guessing the super majority of the people operate out of the middle. Some are probably pretty conservative on taxes and entitlements, others not so much. But we can all buy into we need a good education system, a military that can protect our country, a system to help those that really need it the most, and thousands of other ideas to many to list.
Then we sit behind a computer board, or an iPad key system, and because we don’t have to look into the eyes. Of those that participate in this forum, we just blast a way. I do believe we need a kinder and gentler country. I also believe we need to be able and sit down and iron out the issues. And if we can’t do that, then we say adious to the members of congress and start over. If they can’t fix and balance the budget, then we start over again. In other words, get this country back to where it needs to be to have earned respect? It can be done. The question is do we have the resolve for it?
For all our sakes David, I hope the answer is, “Yes!” Well said.
Very nice…. Agreed.
When I was in college, I worked at a tire manufacturing plant summers with all the “worker bees”. One summer, we all worked thirteen days straight before getting a Sunday off, and some even worked an overtime double shifts for extra overtime money. Many worked piece work, getting paid only for what they produced. It was dirty hard physical work and few of you desk jockeys (including me today) could do it. I could escape because I was a student and given somewhat preferred status since I could leave at the end of the summer. The rest were trapped because they were men who had families and responsibilities, and this was the best paying job they could get. They weren’t there for self actualization, but for the money. These “worker bees” worked very hard and, as most all Americans do, did much more that “the minimum to get by”.
The banburys were the dirtiest and most physically demanding jobs. It’s where the rubber begins, where the various compounds such as synthetic rubbers, oil, and lampblack (carbon powder) is measured and thrown on conveyers in 500 lb batches to be pushed down the throat of the banbury to be heated and mixed into a rubber. Batches ranged between one each 7 minutes to one every 2.5 minutes. The mezzanine banbury floor looked just like you’d imagine Hell. It was 120 degrees and coated with lampblack, and so is everyone up there. Only the very physically fit could work at the piecework pace required and all were big strong guys, usually younger. One guy wasn’t. Troy was in his late forties and reputed to have once worked at two competing rubber plants at the same time, 16 hours per day to earn more money. He was very big, not terribly bright, but also very good natured with an easy smile and laugh.
Roscoe was a mean little supervisor who constantly made sarcastic comments putting the workers down. He was arrogant and unhappy and it showed each day as he changed batch assignments and formulas for the banbury workers. We all said little to him even though we knew anyone of us up there could kick his ass. We all wanted to also, but we all needed the job. One night on graveyard shift, Roscoe made the mistake of making a demeaning, condescending comment to Troy. You know, like the condescending loser comments posted here. Troy simply grabbed Roscoe by the collar, backed him up to the rail over the main floor, put his fourteen inch knife used to cut the rubber compounds to Roscoe’s throat, and quietly said, “Don’t ever speak to me like that again.”
Although we all saw it, no one ever mentioned it again, least of all Roscoe, who stayed as far away from all of us as he could for quite a while afterwards. Troy deserved respect. Worker bees deserve respect. Perhaps many of us here also need a little “come to Jesus meeting” to really understand that also.
” Yes, the poor can’t save as much because they have less disposable income, ”
I agree but why? It is those bad choices you are talking about. Too many buy stuff on a loan or things they really don’t need. What I don’t like is that these people that make poor choices expect the rest of us to pay for their bad choices.
I live very modestly. I can buy a big house but then I would ask myself “do I own the house or does the house own me”.
“One of my best friends lives in Vancouver for the same reason, and he believes that the real mark of both Intelligence and value to mankind is measured in how much money each of us has. ”
I would agree with this except I know that many people that make a lot of money do not generate wealth. Society has a odd sense of what is valuable or what satisfies some need for immediate gratification or lasting value.
When I was in high school there were the ‘cool kids or the in crowd’. They didn’t have brain between them. I don’t have any pity for them.
MOR, there are ‘worker bees’. These are the ones the did the minimum to get by.
A new article
http://portal.kiplinger.com/article/taxes/T054-C000-S001-where-do-you-rank-as-a-taxpayer.html?rss_source=rss
BTW, what hasn’t been mentioned in the very long thread is that investments can go up much more than income especially in years like this last year. This increase in net worth is not taxed until sold. If one has $2M then the investments should have increased 20%-30% in value which is over $400K. It isn’t really ‘earned’ money but it is probably a better explanation of why the rich get richer.
Well, that is because we ARE talking about EARNED income and not gains in net worth. Yes, my portfolio increased tremendously last year, but that is because I manage to save and invest. Yes, the poor can’t save as much because they have less disposable income, but go back to the core reason why the poor are poor. Education and bad choices.
We moved from Portland across the Columbia River to Vancouver a while back because the taxes are much lower here. In Washington a business is taxed on it gross income but the rate is very low, about 1.55% to 2.15% depending on the type of income. This is not bad if your margins are high but I admit is isn’t good for retailers where the margins are very thin.
State and local taxes in Washington are the most regressive in the nation. While the bottom quintile pays about 18% of their incomes to taxes on average, the top 1 percentile pays 2.8%. Washingtonians had a chance to correct a little of that by passing a referendum a couple of years ago to put a small tax on income over (I think it was) a million dollars, but they voted it down.
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One of my best friends lives in Vancouver for the same reason, and he believes that the real mark of both Intelligence and value to mankind is measured in how much money each of us has. Therefore, he deserves to keep more of his money than the stupid “worker bees”. (Seriously, that’s how he’s referred to workers.)
Obamacare is stopping people from hiring. When you run a business with more than 50 employees you get fines and taxes, so businesses are holding their hiring to below 50, and also less than 30 hours.
This is because a business must maintain profitability enough to pay taxes to stay in business. If you don’t pay your taxes you will be forced to close your doors.
The govt is attacking business owners who are the main suppliers of jobs.
The govt cannot create jobs, it should get out of the business of driving businesses out of business. There is enough competition in the free market.
But the American govt is not only providing an uneven playing field, but is actually attacking businesses and non-profits–those they choose to destroy.
I will give you an example out of OR, which I live in Salem (the capitol) and am close enough to events here that I can testify to what I know.
The Democrats control OR. They passed a new way of taxing that taxes the process of manufacturing. The larger your business the more you get hurt. The tax is applied to the stuff of production, stuff that used to be viewed as what you SPENT money on. You used to be taxed on PROFIT. Now larger businesses are taxed on their EXPENSES too. Several businesses closed up shop immediately (layoffs by the hundreds), and those that could, passed the tax on to the next party in line. And so on clear down to the consumer–who pays more. That makes an OR business uncompetitive in the larger market place.
Nike, the largest business in OR, asked for a waiver or said they were leaving.
The governor called a special session and gave them a waiver. The rest have packed, or are packing.
The Democrats are Detroiting Oregon.
You express yourself quite well David. I agree with much of what you say, and like you, am a practicing Christian who is very active in that community. However, my faith, and my politics are totally separate issues which are never in conflict. Religion is based on faith while politics is (or should be) based on reason and logic. Too many times in history and indeed, even today, religion and Man’s emotional attachment to his faith is used to gain wealth and power by the unscrupulous. Why else would 19 Muslims choose to die by killing thousands on 9/11/01. JC is right about that and just as we need to respect Rebecca’s opinion, we need to respect JC’s also.
Religious discussion, especially the preaching, has no place in this forum if we want to seriously explore taxation through civil discourse. Bantering hot-button words like Communist, Marxist, atheist, etc. only distracts and clouds reason and logic. They say that when you get angry, your IQ decreases 30 points – anger make you stupid! Speaking for me, I believe it’s true. Regardless, Rebecca and others on this site have claimed that the U.S. was founded on Christianity and the Bible and JC responded to that. I came across the following recently:
The United States is not a Christian nation, and the Bible is not the cornerstone of our law. Don’t take my word for it. Let these Founding Fathers speak for themselves:
John Adams: “The government of the United States of America is not in any sense founded on the Christian religion.” (Treaty of Tripoli, 1797)
Thomas Jefferson: “Christianity neither is, nor ever was, a part of the common law.” (Letter to Dr. Thomas Cooper, February 10, 1814)
James Madison: “The civil government … functions with complete success … by the total separation of the Church from the State.” (Writings, 8:432, 1819)
George Washington: “If I could conceive that the general government might ever be so administered as to render the liberty of conscience insecure, I beg you will be persuaded, that no one would be more zealous than myself to establish effectual barriers against the horrors of spiritual tyranny, and every species of religious persecution.” (Letter to the United Baptist Chamber of Virginia, May 1789)
You can find a multitude of similar quotes from these men and most others who signed the Declaration of Independence and/or formulated the United States Constitution. These are hardly the words of men who believed that America should be a Christian nation governed by the Bible, as a disturbingly growing number of fundamentalist Christians like to claim.
Let’s get back to a fact based discussion and leave the “faith” at home.
Well said, MOR.
You make fun of Rebecca for her beliefs, then what flows off your fingertips typing your response is garbage. You talk as if you were with man as he “evolved” and created a God because if his lack of knowledge. Talk about nonsense, you authored the most non-sensical thoughts so far. I believe in the same Lord Jesus Christ as Rebecca, but for the sake of discussion on this board, that’s not what the topic is about.
I am not as good as most posters on here in saying what I believe. I don’t use our language as well as most, so bear with me as I try and make a few points. This one topic, and the discussions that have followed, in my opinion spell out what’s wrong with our country. The are those so far left, there are those so far right, then there is still the vast majority in the middle. The issue is that the middle ground is not debated, nor is it part of the news delivery system. What we hear from the print and TV side is the far left garbage. What is discussed on the radio for the most part, is the far right side. When in reality, if we could have a process that lets us negotiate from the facts, and what this country needs at this moment in time to succeed, then we could move forward.
When I said a couple of months ago, that I was selling my business because of all the government intervention, regulation, and high taxation, I was beat up like a red headed step child with the exception of a couple that understand. Since I have sold out, completed the transaction, I can now watch my successor with a great deal of satisfaction knowing I did the right thing. His new company just got their health insurance renewal bid, and it is up a meager 42%. That’s mind blowing. No one can pay that, especially year after year. In addition, the tax rate for an investor in that company is now 39.6%, ObamaCare tax of 3.8%, and state tax of 8.96%. That’s over 50% tax. That’s utterly ridiculous. No one is going to take a chance on investing in companies, even ones with a rich history, knowing that faces them.
Then, as the buyer of my company went to get a permit to add on the facility, the state Department of Natural Resources told him that he would first have to have an archeological study done. WTF? Like the ground was an ancient burial grounds. It is highway frontage farm ground, but the state DNR got the law through a liberal state government, and now he has to spend around $8000-10,000 dollars to make the DNR happy. Are you fricking kissing me? How insane is that. 20 years ago that same ground had farm equipment rolling across it producing corn and soybeans, and had done so for 125 years plus. That’s the kind of BS that needs to stop, and stop now.
I for one do t buy everything the right says or does myself. The right needs to be concerned about workers health and rights, as long as its fair for both sides. People need to get paid fairly for what they do, and we need to get back to a point that allows for families to be able to make it on one income if they elect to raise their kids, and not spend so much time and money on day care and babysitters. I do believe that’s a large reason we have as much divorce as we do, but again, it is only my belief. We need to fund education in an appropriate manner to get us back on track with world standards. Not only do we need more money, we also need some manner to critique our educators. I’m personally sick of the left having control of our kids in the state university systems. I don’t want left, I don’t want right…I want educators. Teaching, not editorializing.
Then the issue of taxes, and who pays them. I have no issue with a progressive tax system that is FAIR. This today is not fair, and never will be. I don’t want to hear about links to this and that, it’s just common sense when you take away the money from the general public and give it to the government, that’s money that is going to be pissed away and not spent in the economy. Also, if someone is on welfare, and I will tell you I have no qualms with helping people that need help, then if they get money or food stamps, they need to work for that. If someone collects $1500 in whatever, then they owe the “government” 150 hours of work time. Maybe on projects like cleaning up neighborhoods, mowing parks, whatever the local need is, make the rule simple. If you recieve money, and you are capable of working, you work for at assistance. I have absolutely no issue with that whatsoever.
But as is stated in my last post, I would have people come to my business and “apply” for a job. When I said that indeed I was hiring, they would almost fall out of their chairs getting out of my office because a job was the last thing they wanted. What they wanted was a signature and the right to continue collecting. That’s crap. Now, the argument on the left in my opinion, bears some credibility as well. And that is tax fraud and cheating on those that earn income. I know for a fact that many business people “expense out” personal expenses on company money. Things like gas, restaurant expenses, and others like that. That is wrong as well. They are every bit as guilty as the guy that cheats the welfare system. The logic they use is I’m getting screwed anyway, so I’ll screw the government back. I was never tempted to cheat like that, but I do know that it happens regularly.
So now we have the ingredients for class warfare. The wealthier people get pissed off at the people that are lazy and don’t want to work. And rightfully so. The lower class people get pissed at the rich, because they screw over the system as well. And rightfully so. What this country needs is leadership, strong leadership from the center. That can be a patriot and pull the two sides together wth the exception being he extremist from both the right and left. If we don’t get this fixed soon, we are heading to a point where the government is going to own us. And other than the totally uneducated that is dependent on government for living, the vast majority of the people don’t want to be ruled by government. But the feeling we have now is of helplessness. No one feels they can change anything and make a difference. I believe that’s a very dangerous position to be in. We the people are very vulnerable right now.
In closing, I am with Rebecca in that this country was founded with a strong belief in God. I happen to believe in the same God she does, but we are a country of people tolerant of other religions. I personally believe they are worshipping the wrong God, but I won’t interfere, I will just try and educate if I can. We also are a nation of separation of church and state….to a point. Our currency for as long as I am aware of has had the words…IN GOD WE TRUST. When our country has been attacked, or put in a vulnerable position, we have had times of prayer. We need more times of prayer. We have a great nation, but we could lose it. I would ask that all sides work together to fix this mess once and for all. People far smarter than me need to organize and facilitate,but in my opinion it has to be done.
Strange you would attack me as “spouting nonsense” as I agree with almost everything you have posted on here.
Maybe it’s just because I believe – as I think MOR does in his reply as well – that Christianity or religion of any kind has no place in this discussion. This discussion is about taxes, economics and the fiscal structure of our nation.
What nonsense did I spew? And forgive me if your comments were meant for another…. I’m confused.
Very well said Peter.
Although we think we are earning money with our work,
it’s actually just paper or on a debit card attached to
your bank. The value behind that elusive idea is gone.
When Germany asked for its gold back and recently was
given generic gold, the question remains, “Is there any
gold to back up the value of the paper?” It appears
Germany’s gold no longer exists and may have been
sold for paper currency many times over. The govt
has never permitted an audit of the Fed. We function
without knowledge. We are led to “B E L I E V E”…
Meanwhile, it’s tax season, and my husband already
has people lining up to get their “unearned credit”
which translates into “refunds” of money they never
had taken out of their paychecks. They eagerly await
what the government “owes” them. Is this what you
are going to go to work and pay taxes to support?
We must stop the insane practices our govt has
instituted. Benjamin Franklin said that only
a moral and religious people can self-govern.
The moral framework that teaches us to not defraud
our fellowman is said most succinctly by Jesus Christ,
“Love the LORD your God with all your heart, mind,
strength and love your neighbor as you love yourself.”
Making everyone believe the govt owes them, and
that businesspeople owe the govt so that it can do
“charity” work, is insane for our nation. Marxism
never works. It destroys the very fabric of the
concept of what creates wealth.
what is generic gold? Gold is gold.
Marxism/Socialism does work Rebecca, just look at ants, termites and bees. 🙂
LOL. Good stuff…. None of this matters then. All we have to do is love a lord god and we’ll all be fine. Whew.
Buried in this nonsense is one valid point which is the value of the dollar. If we keep issuing all of this debt to pay for every pet program of the politicians we will eventually devalue the dollar so that the “paper” she speaks of will be worth much less. Then inflation will start and we will all suffer – particularly the poor, whose systems of entitlements will actually backfire and bankrupt the system.
It isn’t even CLOSE to Marxism, though. In fact Marxism doesn’t have anything to do with what you are talking about or anything we are talking about. Marxism by definition is just a criticism (and a somewhat valid one at that) of capitalism. If you mean communism, that also doesn’t make sense. One of the fundamentals of communism is that nobody owns anything privately and the government owns everything.
Socialism seems more appropriate in these debates – as socialism is a system where property, production and corporations are basically controlled by government but run by “social control” – somewhat equally among the people.
None of this has anything to do with our tax code. The propaganda from the right just loves to throw the words when attacking the left (particularly Obama) but few know what they mean.
If we think that Marxism/Communism/Socialism means even distribution of wealth regardless of your contribution to society (which is what I think most think it means), then we already have a system in place that does that – the debate is just … to what extent? We have higher tax rates on the rich, estate taxes, limits on social security benefits, etc. We also have almost half of the population not paying income taxes, social programs and entitlements that are free to those that can’t afford it, etc.
It really makes it hard to have a conversation when someone’s head is so full of one-sided nonsense that any move to try and adjust the system results in people screaming “Socialist!!!!”.
It used to be you could only get a refund of money you
had paid in. Now you can get a “refund” of money you
never paid in. “Refunds” can be $8000 of money you
never earned. With all the money a person can get
from the work of others, there’s no actual desire
on the part of generational welfare people to get
a job. I posted a lot of examples and links, but don’t
see that, so someone must have erased it–
Get unearned refunds disgusts me too. My mother said “the world does not owe you a living”. It doesn’t but the government seems to think so.
The democrats buy votes this way.
BTW, lottery winners make $400K or more but only once. What is interesting is how much of the money they get to keep.
Where does winning the lottery come into this? We are talking jobs, not luck of the draw contests. Why is it interesting they get to keep half the money? The gov’t should have a national lottery to help pay the debt since the poor are the biggest players of the lottery. Then you can complain about even more taxation on the poor. the lottery is a stupid tax on the poor.
Playing the lottery is voluntary. One is FREE to play or not play. I have never played.
If I were running things I would abolish the lottery and put severe restraints on commercial gambling.
WHY?
Because gambling doesn’t create wealth. It simply moves it around.
I would place an emphasis on activities that create wealth. That is products we can export.
I just looked at my company’s marketing data. Exports are 40% of our business. The US needs more companies like ours because we keep the jobs here and reduce the trade deficit.
My bitch is with all the damn liberals that can’t do the same but want to regulate my business.
The latest craze is making sure all of the metal used in our products is not illegal for some reason. How are we supposed to know? We don’t buy metals directly. The damn liberals are going to ruin us all.
Look up ‘War Diamonds’ or “Blood Diamonds’ these are supposedly illegal. Now this craze has gone to metals.
Just read an article on gambling addictions of those over 65. It’s like 12% of seniors are addicted and have lost most all they’ve saved. One of the examples was the widow of the founder of Jack-in-the-Box fast food restaurant chain. She went through all her wealth and then embezzled from a charity, set up by her husband, in order to continue gambling. I’m with you on banning gambling. It warps our culture by promising something for nothing.
However, to blame “liberals” by claiming they are the regulators while conservatives are the productive job producers is simply nuts. I know many conservatives who have jobs enforcing regulations as well as many liberals who own or manage businesses. You paint with way to broad a brush.
Texas has no casinos. People drive to Lake Charles or Shreveport or fly to Vegas. You can”t eliminate addictions by controlling what adults can do. You can lose all your money buying Beenie babies or baseball cards. People are addicted to many things. The percentage is very small of those that lose everything
Vegas would disagree that gambling is just moving money around. Eating at McDonald’s doesn’t do any more or less. Thousands of people have jobs in Vegas. Hotels, Shows, shopping. I can blow hundreds of dollars playing poker with friends. That is a pure redistribution of wealth. Nobody was getting paid to take my money
“Vegas would disagree that gambling is just moving money around.”
What wealth does gambling produce?
“Eating at McDonald’s doesn’t do any more or less. ”
At least it feeds people for a couple hours.
Airline make money, Hotels make money, restaurants make money, retail stores make money, taxi drivers make money, bars make money. the dealers get paid for working. Construction workers make money when they build a new casino. Vegas almost imploded in 2008 when people quit going there to gamble and the housing market crashed when the market got out of control. I don’t think it is a horribly sustainable economy, but as long as stupid people part with their money, others will make money from it.
Yes, JB, but they are service jobs. We make industrial controls that make other companies industrial controls more productive. My customers may then sell their machines to end manufacturers. The point is that something is being created that will last.
What is your problem with service jobs? Doesn’t some “service company” have to “service” your controls when they break? Are they beneath you? Your company would be nothing without service jobs. Service companies keep industry and this country up and running.
I, for one, do not believe in legislation solely for the purpose of ‘protecting people from themselves’. There are millions of people every day that gamble and don’t bankrupt themselves. Just like the millions of people drink but all aren’t alcoholics. Or the millions of people eat but don’t become obese. Or the millions of people that own guns that have never fired them.
The real travesty is that a great deal of the gambling revenues (the “vig” if you will) is being collected by other countries (particularly in the Caribbean), American Indians and illegal sources. These funds could be taxed and used to help balance the budget on a state and Federal level.
People aren’t going to stop gambling even if you “ban” it. You just send it underground and put the funds in other hands.
And I agree – service jobs are exactly the kinds of jobs we need! What’s wrong with those? If you talk about adding 10 million jobs, we aren’t adding 10 million CEOs or rocket scientists or doctors. The majority of these jobs in the past were industrial and in today’s world they will mostly be service jobs. Not sure why that is being belittled.
http://ctj.org/images/2013/wp2013c3hq.jpg is a link to the think tank, Citizens for Tax Justice that does very credible research and publishes results that are used by both parties in congress. (Look in Wikipedia) here’s the latest on overall taxes paid on average:
Fed Taxes. State & Local. Total
Lowest 20%. 6.4%. 12.4%. 18.8%
Middle 20%. 15.4%. 11.2%. 26.6%
Top 1% 24.3%. 8.7%. 33.0%
The top .01% totals something like 16.5% (anyone have the exact figure?).
The statistics you cite, I highly doubt the veracity of.
You say the site is credible, but my husband does taxes
for a living. His clientele reflect a wide range of American
experience, and the lowest tax bracket is actually
getting back money individuals didn’t pay in. Thousands back
that individuals didn’t pay. That category isn’t even mentioned
in your post.
When a person is “refunded” money they didn’t pay in,
it’s called redistribution of wealth. Someone else worked for
that money, it was extracted from THAT person, and then given
to someone else.
“From each according to their ability, to each according to his need”
is pure Marxism.
And the NEED will always far out-pace the ABILITY. “Need”
is based on envy and greed.
Of course, all Americans want to help the truly needy. But we are
FAR AWAY from THAT concept in government.
He is probably including all taxation – including property taxes and payroll taxes. Part of the reason for this is that payroll taxes hit the poorer at a higher percentage (partially due to the fact they are capped).
Property taxes are also much lower for the .01%. Say property taxes are at 1% of value. If you make $100k, you may live in a $250k house and pay $2500 in taxes. This is a 2.5% tax relative to income. Someone making $400k may live in a $1m house, which would also result in a 2.5% tax relative to income. However, someone making $40 million a year doesn’t usually live in a $100 million house to result in the same percentage taxation.
The main debate has been income taxes on this page though which is why you were not trusting his numbers.
If you are going to generalize and stereotype, then rich people have multiple houses, paying taxes on multiple houses. You don’t need a $100M house when you can have 3 $25M dollar houses. The hedge fund dude put his condo on the market for $98,000.000 and he probably makes more than $40,000,000 a year. We make $375K and live in a $300K house. You can’t generalize. Most millionaires live below their means. Read The Millionaire Next Door.
Ok sorry for generalizing then. Not sure how we talk about this without generalizing…… Just saying that payroll and property tax hit the poorer people as a greater percentage of income than the rich. N
Poor people live in housing that isn’t exactly high end. Property taxes aren’t out of line with where they live. A millionaire can live below their means, but even if you consider a poor person not being able to live above their means, the property taxes are probably inline with what they make. IF they get gov’t subsidizing housing, then their burden is even less. If you make $30,000 a year, you aren’t living in a $1,200 a month apartment.
Stop theorizing JB and do the research. Even studies by conservative think tanks that many contest as “flawed” show the bottom 20% of Americans paying 14% of income in ALL taxes. And they also show that the more income a family has, the less percentage of that income is paid in property, sales, payroll, gasoline, and excise taxes, generally speaking. The progressive offsets are state and federal income taxes, and in some states like Washington, state and local taxes are so regressive that the lowest quintile pays a greater percentage in taxes than Bill Gates. Those are simply facts.
Actually the majority of people in the bottom 20% don’t pay property tax at all. I know in my state that is the case, as it is in every state I’ve lived in. Of course, that may not be true everywhere….
The bottom 20% get about 98% of all gov’t entitlements. When you get free rent and EIC, I doubt they pay much in taxes. Now, getting a refund doesn’t mean you paid zero taxes, but getting a refund in excess of what was paid is wrong. A person should at least get a refund to pay zero taxes, not make money off of the gov’t.
100K travel expense? LOLOLOLOLOL
How does QE3 get me to buy a new phone or a new suit? QE3 isn’t handed out to consumers. Bonds are issues and Hedge funds and institutions buy the bonds.
http://www.policymic.com/articles/14687/what-is-qe3-quantitative-easing-explained-in-simple-terms
“We haven’t had decades of reducing taxes on the middle class.”
In 1985, 16% of all Federal tax filers paid zero income tax.
In 2012, 47% of all Federal tax filers paid zero income tax.
So 31% of our population has received the best tax cut of all – elimination of income tax altogether.
True enough. And in 2001, 25% paid no federal income tax, while after the Bush tax cuts, 35% paid no income tax. And that rose to 47% when unemployment, underemployment and the 8% loss of spending power to the CPI decreased the middle class’ income pushing more into the no-tax zone. Remember however, that those who no longer pay income tax, 1) Would rather they made enough so as to pay, 2) Didn’t ask for the reduction in 2002 and 2003, but were the recipients of a gift meant to buy their vote for the 2004 election, and 3) Are very hard working Americans for the most part who pay a disproportionate percentage of property, sales, payroll, excise, and all various other government taxes and fees.
Look Peter, you’re a decent guy. The 47% really don’t deserve your enmity and many pay a greater percentage in overall taxes than the top .01%. The lowest fifth pays, on average, 17.8% of income in taxes on wages that neither of us could live on comfortably. The 1% pay less than 30% on average and the 0.01% pay even less. This leads me to the following.
You don’t make enough to employ the tax schemes and attorneys to limit your tax burden to less than 15%, but Buffett, Romney, and Gates do. How those who make so much more than you yet pay so much less in taxes doesn’t piss you off about loop holes, tax schemes, and “accidental” tax breaks (all of which congress doesn’t appear able to correct) for the wealthy, is beyond me. Why do you pay more than 50% while those guys pay less than 15% and yet you still think that’s fair? Perhaps you can enlighten me.
The most egregious unfairness of our terrible tax system is
when people who have not paid anything at all then make
back money they never earned or paid in. This CAN be in the form
of a tax “refund,” or it can be food stamps they get because
they “deserve” it, or it can be welfare applied generationally
that corrupts the character of entire groups of people so
that they come to believe they are “owed” a living by the
government and by others in their communities.
Star Parker runs CURE. She used to be,
by her testimony, the inheritor of her family’s GENERATIONAL
position of “welfare queen.” After she became a Christian,
she broke free of the system with the help of her pastor.
This whole nightmare has been the dream of communists.
The “progressive” tax system is actually the most “regressive”
of all. People expecting the govt to do something for them
is exactly the opposite of the early ideas that led Americans
to believe we had responsibility for our fellow man and
nation. Now, only corporations are taught that THEY
have a huge responsibility, working families are taught
that THEY have SOME responsibility, but as soon as you
become unemployed you lose ALL responsibility, and
under this president and party, you actually gain the RIGHT
to unending access to other peoples’ money. Food Stamps
run in the streets like water, and totally healthy people
EXPECT them. Generations have never lived in ANY
OTHER CONDITION and don’t know HOW to WORK.
They believe that if anyone wants them to WORK, that
person is SINNING against them and their RIGHTS.
As Obama (a Marxist by ideology) closes down industry
after industry, and grows the size of govt, we are having
fewer and fewer people support the gargantuan beast of
govt. that everyone has come to expect will ALWAYS
BE THERE FOR THEM (a god that provides everything
they need to survive).
Now entire generations going back to when it was
first started, have been raised without a father in the home.
The men are cycled through as boyfriends. Child abuse
is so common as to be thought of as normal behavior for
a man. (Some of the people who helped dream this system up
had the gall to call it The Negro Project. The Negro Project
is much farther reaching than just the “welfare” system
though. Margaret Sanger, (D) said, “we don’t want word
to get out that what we are actually trying to do is eliminate
the negro population.” Her ideas animate the Democrats today,
many of whom have never heard of The Negro Project.”)
The Constitution had to be amended for the graduated
tax to be legal, and it was promised that it would never
go above 1%. (The process of getting that amendment was
fraudulent, so many people do not recognize the validity
of that amendment.) The promises were broken immediately.
Before the graduated income tax, Americans owned
our own schools. We owned our own forests. We owned
our own state governments. We owned
our own everything and were the ones creating everything.
People worked. People expected to work or not eat.
A dollar was valuable enough to be a man’s wage for the day.
It’s the socialists who got this started. Ideas have consequences.
Ideas that teach people to function on lies corrupt liberty.
We are taught in our govt schools to revere GOVERNMENT.
At the same time we are taught that authority should be
questioned and fought. Legitimate forms of authority
that help maintain the original concept of liberty are
despised by communists. LOCAL SHERIFFS elected
by their own community. LOCAL police that serve the
city they are in, LOCAL county commissioners,
LOCAL city councils–all are under attack from the Federal
govt. Communists hate ANY AUTHORITY
except their own. When they finally come to complete
power and bring us into their utopian dream of one world
govt, people will be killed for questioning authority. And
who will be those who question the most? The middle
class small business owner who has spent his whole life
building his own family business.
This has been done many times around the world.
Communists have a pattern they follow more religiously
than many Christians follow Christ.
Mandela’s speeches reflect the devotion Marxists
are required to give. They purport to be atheist,
but their god is the elusive utopian government they
ever seek, but never find.
As I said previously, “You just can’t trust the people that your neighbors elect to make correct decisions Rebecca. Your priorities are much more sensible of course because you understand what God really wants, unlike those Commies.”
You said, “Ideas that teach people to function on lies corrupt liberty.” A very good and true sentiment. And yet you ignore the truth placed in front of you to perpetuate your own lies, choosing to believe whatever narrative you think best fits your ideology regardless of the truth. When anyone corrects your lies with well resourced documentation, you simply ignore them and repeat the lie later in your rants. Until you stop regurgitating idiots like Barton and his ilk, you have no credibility at all. God gave you a mind with which to reason. Use it.
Wow – a lot to address here.
First paragraph – There is no need to defend anyone who pays no income tax. I’m certainly not the one on here vilifying them – just dealing in the facts. You just made the statement in an earlier post that we haven’t had decades of reducing taxes on the middle class. I’m proving you wrong with the facts. No judgment there – and in all of my posts you will not find me suggesting raising taxes on the lower incomes.
Your second paragraph is just not true and has no facts to support it.
The final paragraph is a great question. Why doesn’t it make me mad that the uber-rich who make much more than me sometimes pay much lower taxes then me? The first point is that I honestly don’t care what other people are doing – just like it doesn’t bother me to know someone is paying no income tax, it doesn’t bother me to know that Romney paid 15%. I really don’t worry about “fair” in my worldview – like I tell my teenage daughters, there is no such thing as “fair” and if you spend your life worrying about it you miss the point entirely.
The reason why they pay much less than me in taxes is simple. I’m in my peak earning years. Almost all of my income is from my earnings. Most of my investments are in retirement plans. I am currently building a significant nest egg in other investments that will presumably generate a nice income for me down the road. As every year goes by, I have more disposable income and more income generated from my investments. The investment income is taxed at a very low rate (cap gains and dividends). As my income rises, I give more and more of my extra disposable income to charity. Hopefully, as my wealth grows, I’ll find myself with less of a tax burden over time.
It’s political rhetoric to talk about “tax schemes” and “loopholes” as the reason why the .01% pay 15% while the rest of the 1% is paying 30-50%. Tax-free bonds, charitable deductions and capital gains and dividends aren’t “tax schemes”.
GRAT shelters: The accidental tax break for America’s wealthiest, is definitely the result of a cunning lawyer reinterpreting a tax law in a way that was never intended. So far, America has lost more than 100 billion dollars. To me, that is a scheme. I don’t necessarily blame the wealthy for using any legal means to reduce taxes however, but such unintended consequences should have been fixed soon after discovered except that those with the money keep the politicians from doing so for fear of reduced campaign contribution. That’s corruption and I do blame those who buy our legislators that way, whet herb the wealthy or their syncophants.
As far as my second paragraph that you claim has no basis in fact, here is a credible reference you can check to back up what I’ve quoted: http://ctj.org/images/2013/wp2013c3hq.jpg
It’s not exactly the same, but very close, and for 2013. Mine was from another source or previous year, but no matter, it’s fact.
Yes,, income taxes have been cut on the federal, and reduced or even eliminated in many states run by Republican recently. But that doesn’t mean those at the bottom, or even in the middle get a reduction in overall taxation. As states cut progressive income taxes, the make up the revenue in regressive sales taxes and fees. That shifts the tax burden from the wealthy to the poor and middle class. The same happens when the state cuts revenue or services which must be picked up by local governments which rely on regressive property taxes. I read just recently that Washington State leads the country in such regressive tax policies so the the top 1% pays just 2.8% in state and local taxes while the lowest quintile pays almost 18%.
Therefore, I very much stick by by initial statement that we haven’t had decades of reducing taxes on the middle class at all. Just the opposite. Indeed, if you believe the conservative cry of the wealthy being victimized by “class warfare”, you’ve really got to wonder just who declared war on whom.
The chart you attached includes all taxes including payroll, property tax, etc. You initially said that the bottom 47% pays 17% income tax on wages. That was incorrect.
There are 9 states with no personal income tax – Florida, Alaska, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Wyoming and Washington. All of these have had no income tax for quite some time.
The payroll tax has been one of the main taxes to stick it to the middle class. And frankly this is one of the most frustrating because it pays for the flawed public assistance systems that are supposed to help the middle class the most.
Peter,
I said, “The lowest fifth pays, on average, 17.8% of income in taxes on wages that neither of us could live on comfortably.” – not the “bottom 47%” but the lowest quintile. You do point out what a difference a comma makes however. I didn’t mean “17.8% income taxes on wages” and that’s not what I said either, but “… 17% OF income IN taxes, on wages that neither of us could live on comfortably.” Note the added comma.
When states propose eliminating or reducing their progressive income tax, it sounds very good at first. Upon deeper inspection however, it simply means revenue must be raised through other means such as sales, excise, gasoline, fees and property taxes. That means those who can afford taxes most pay less, while those who can afford them least, pay more.
When I see posts which contain phrases like “fair share of taxes” or “affecting those least able to afford it”, the first thing that comes to mind for me is that embedded in these descriptions are the value judgments of the poster. I also then quickly add that value judgments are in the eye of the beholder.
One such value judgment, for example, is that one’s tax burden should be based on “affordability”. That’s certainly the progressive view, of course. Those most able to pay taxes should pay them. The conservative counter-argument to that, on the other hand, is that progressive taxation based on “affordability” means that people who didn’t earn the money are voting it out of the wallets of people who did.
In my own case, I lean on the conservative side of thing, although I have to say that a lot of the posts here from the liberal side have been good, and have made me think. It’s been fun watching the action. lol
Carry on!
We haven’t had decades of reducing taxes on the middle class. We’ve simply shifted the tax burden from the wealthy to the middle class. For example, President Reagan “reformed” income taxes, yet, by the time he left office, the middles class actually paid a few percentage points more in taxes while the super rich received a 126% increase in take home income as the top tax rates plunged from 70% to 28%. Even the Bush tax cuts gave much more to the 1% than the other 99%. Over that time, 95% of all production increases and resulting wealth went to the wealthy, and over the last decade, the middle class has lost 8% in spending power.
It has nothing to do with social programs, except that they proved a God-send to the elderly and disabled because they kept them from abject poverty during such a destructive downturn. They did what they were intended to do.
The moral hazard created by government incentives not to work or by incentives for industry, especially the banks and Wall Street to take disproportionate risks because they are “too big to fail” must be constantly reassessed and adjusted. There are many checks and safeguards preventing welfare fraud, even though you may think it’s rampant, but we’ve been unsuccessful at reforming the banks with something like Glas-Stegal, in spite of Dodd-Frank. Banks and brokerages, so well as many industrial giants like GM are still too big to fail.
The results of such failures, as you’ve seen, create tremendously greater consequences for you and me than some unemployed engineer who applies for a job at a 50% pay cut, hoping he won’t be hired so that he can continue his search for an engineering job. He only applied because the unemployment office requires home to prove he’s had a minimum number of applications and interviews so that they can give him his weekly check of $345 (which doesn’t pay his mortgage, but’s better than $0. You, of course, not knowing his background, condemn him for not being serious about applying for your job and assume he’s only trying to live off of the rest of us.
Regardless, he’s under tremendous scrutiny and regulated thoroughly in his quest for employment. If anyone figures out how to game the system, and there are always a few, they become first page news when caught so that we all believe it’s more rampant than reality. Business execs who get caught, settle quietly out of court, their companies sometimes paying fines yet disavowing any wrongdoing, so that the public rarely hears of the much greater cost to all of us that they perpetrate.
I’m not defending anyone for such misdeeds, but asking that everyone take a very good look at all facts and then put the problems in perspective.
“It has nothing to do with social programs, except that they proved a God-send to the elderly and disabled because they kept them from abject poverty during such a destructive downturn. They did what they were intended to do.”
Nobody is denying the wonderful benefit of the various social programs. We need them and they do save people that would otherwise be in very dire straits. But when you have 1.5 people paying into to Social Security for every one taking out – and this number is falling rapidly – it is a system that is ABSOLUTELY going to fail.
EVERY decision must be a cost vs. benefit analysis – or at least factor into it somehow. Nobody is denying the benefit, nor am I blaming the abusers for ruining the system. I’m just saying that they are mathematically doomed systems. If I’m a restaurant owner, I’d love to open 5 more restaurants to expand my business. But if the other 5 all lose money perpetually and one day I have to go completely out of business, I wouldn’t do it. I’m all for helping those that struggle. But if the cost is bankrupting the country then it will all be for nothing.
We are only doomed if congress fails to be responsible and act by raising payroll taxes. Once the boomers are gone, the system and the math will begin to make sense again – unless people start living to 110. No bankrupting is necessary so long as our legislators are more interested in the well being of Americans rather than their own reelections. 67 % of retirees live on less than twice their Social Security income. A third live on SS alone. Maintaining it is vital to them.
There is just no evidence to support this – that the system will be fine “once the boomers are gone”. Social security is a much easier fix. Retirement age shouldn’t be at 66/67 (or 62 for early retirees) with people living well into their late 80’s. It should be 70 at least.
And your stat about many retirees living on little more than social security speaks to another problem. People don’t want to sacrifice today for the future. It’s a horrendous financial plan to expect to live off of social security primarily. The problem is though that the boomers are the first generation to retire without a pension – meaning that it is their responsibility entirely to save for retirement. Not surprisingly, many did a poor job. All of the data shows us that the next generation is much more serious about saving for retirement, so people should be more self-sufficient.
But to say that the problem goes away with the boomers is a little bit idealistic. I do think it may get better although if it depends on legislators and the president being more interested in the well being of Americans vs getting reelected, I’m not optimistic!
Wait a second…you want payroll taxes to be increased? Nothing would hurt the lower/middle classes more. Explain….
You know, a lot of this rhetoric has focused on this premise (and I think fairly so to some degree)…
“Decades of reducing taxes hasn’t helped the middle class or upward mobility. It has simply widened the income inequality in our country.”
Why is nobody saying this, though?
“60 years of Social Security, Medicare, welfare, unemployment and other social programs have done nothing to improve the quality of life of the middle class or create upward mobility. In fact, the gap has widened during the era of these programs”
Why is just as simple to say that something as narrow as our Federal tax rates are to blame for the situation. Could it be that feeding the beast from the bottom is just as foolhardy as feeding the beast from the top? We clearly have a problem at the bottom when people are willing to stay on unemployment rather than accept offered jobs (like David H has referenced). And staying on unemployment is the fastest way to kill your own personal upward mobility.
You just can’t trust the people that your neighbors elect to make correct decisions Rebecca. Your priorities are much more sensible of course because you understand what God really wants, unlike those Commies.
100 billion is chump change to the gov’t. Maybe much of this money will get donated or spent on goods and services. It will certainly get wasted in the hands of the govt.
Let’s see. 100b will reduce the national debt or extend benefits to the unemployed, but that’s much less important than making sure that a child who has never earned it, becomes fabulously wealthy so that she can afford caviar facials because Daddy promoted the socially beneficial pastime of gambling. It that about right JB?
or maybe they build a hospital or donate the money to cancer research. Why be such a pantywaste about something you will never know anything about. The gov’t wastes 100B without thinking about it with a 17T deficit. It would reduce the national debt by less than .5%. They could save that by just cutting waste from the budget on many wasteful programs. Nobody forces you to visit Vegas, but we are all forced to watch our taxpayer dollars go down the sewer.
If it doesn’t matter because you think 100 billion is simply chump change that the government wastes without missing, then why should any of us pay taxes? According to your twisted logic, the $2,100 I just paid in sales tax for my new car is simply the government imposing a penalty on my success. Besides, I’m doing society a favor by retiring that eyesore I had been driving, so I should have to pay them also. How ungrateful!!!
Can you see where that line of thinking leads? (And, currently, 100b could make a huge difference. Only a quarter of that could extend unemployment benefits to those who are the long term unemployed which may prevent another economic downturn.)
The 17T the gov’t has spent doesn’t seem to be doing much. UE is paid for by companies. My FIT doesn’t pay for UE or for teachers or SS. It goes toward paying Congress, the Military and tons of pet projects.
In this case JB, over the course of three decades, the 17 trillion was borrowed and spent to directly benefit the 1%. Most went to line the pockets of the .01%, but all in that demographic won, including you. A vast majority of Americans lost and now are faced with paying it all back, since those one percenters disavow any responsibility except for being the “job creators” for which the rest of us should be eternally grateful and just shut up.
No, the majority of it has been spent in the last 10 years on wars in the Middle and corporate welfare that helped the unions not lose jobs, which is really just keeping some companies from declaring bankruptcy, which they did ultimately. The poor just need to realize they need more skills, which the gov’t will pay for or forever be victimized by people like you. How exactly did Bill Gates benefit by gov’t over spending?
Get your facts straight people. Most of the spending has been for social programs.
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png
And what do we get for all that spending on social programs? More people dependent on social programs. Just look at the growth in the food stamp program.
It is not relevant how Adelson made his living. And it is offensive to mock his children. Part of why I work so hard to accumulate wealth is to help my children (and future generations) have better lives for themselves. This isn’t an original idea. In fact, it is the very definition of the American dream.
“In this case JB, over the course of three decades, the 17 trillion was borrowed and spent to directly benefit the 1%. Most went to line the pockets of the .01%, but all in that demographic won, including you. A vast majority of Americans lost and now are faced with paying it all back, since those one percenters disavow any responsibility except for being the “job creators” for which the rest of us should be eternally grateful and just shut up.”
Wow – people really just don’t get it. The 17 trillion was borrowed and spent to help the .01%? HOW???? And the vast majority of Americans are paying it back? HOW???? Do you mean the 45% or so of Americans that pay NO income taxes? Do you mean the ever-increasing number of Americans using food stamps, welfare, unemployment, etc.?
Here is another example of how those liberals are attacking the wealthy with hateful messages: http://www.washingtonpost.com/business/grat-shelters-an-accidental-tax-break-for-americas-wealthiest/2013/12/27/936bffc8-6c05-11e3-a523-fe73f0ff6b8d_story.html?wpisrc=nl_headlines
I actually do this for a living (financial planning) and am aware of these trusts. I also feel that the estate tax is the most unjustifiable of all of the taxes we pay. Why should someone have to give half of their estate to the government when they die? Honestly, how crazy is that…..
Nonetheless, these trusts have been around for years and aren’t as simple as the article makes them sound. There is some sacrifice involved in gifting strategies as you are limited to how you fund them and you do lose control of the assets. But regardless, if people understood them they would see that the real winners here are the attorneys that draw them up and the insurance companies, as insurance products are often the vehicles that fund them.
Just another example of a convoluted game that involves attorneys, insurance companies, and financial planners like myself all making money working around supposedly “noble” government rules to avoid a completely unjust tax.
How about we just eliminate the estate tax? It amounts for about 1% of all tax revenues anyhow. We won’t eliminate it because of all the aforementioned benefactors.
Same thing goes for the ACA….. the winners aren’t the public or even the government – it’s private industries.
The AMT was started because of 29 “rich” people. When will the gov’t learn it is easier to tax 300M people than worry about the other 1M people that are smart enough to avoid taxes. These guys just follow the law to avoid taxes. We would all do it if we had the resources.
“Regulations” is meaningless, unless you analyze the nature of each regulation.
Was the regulation passed to create a level playing field and benefit all citizens, or was it created to punish some, double tax some, make it easier to drive some out of business, or create an environment where fraud is easy to commit at the expense of taxpayers. The presence or absence of regulations is relative to its purpose. When Clinton and the Democrats led the way to remove the separation between the local bank and the stock market, and also created the Community Reinvestment Act, expanded and enhanced Fannie and Freddie, then Obama sued banks to force them into making loans they would not have made to people unable to repay, without that governmental pressure, it was detrimental to everyone except a few Democrats who made off like bandits. Bush and others tried to pry open Fannie to do an audit, but the Democrats protected it. Then the economy collapsed and the taxpayers were on the hook. This was manipulation for the benefit of the Democrat
Party, and the “regulations” and “deregulations” were not for the benefit of citizens.
What I have observed is that those who choose to do evil can get into govt
and use its force to hurt others for their own benefit. The Jim Crow laws
were this way. “Regulations” that benefited Democrats and hurt Republicans
and also specifically black Republicans, gave those who used the power the advantage of money at the expense of everyone else.
In the same way, Obamacare is going to make some Democrats very wealthy and destroy the middle class and Republicans. Obamacare is pure evil. It will destroy millions of lives. The regulations created for this law destroy individual property, including the property of our own bodies, so it is slavery. Being in the pro-life information vein, I am very aware of all the pain and death govt “health-care” has brought to the world. People from Canada had an out by coming over the border to get prompt care, but in most countries they just die. Only the “connected” political people get care. Those who are the “enemy” of the controlling party die. I am always shocked when people who purport to hate big business always want the monopoly of govt. Free businesses that grow big don’t keep police forces or armies, nor has a single one ever slaughtered thousands or even millions. Governments have done it over and over, but there’s not a peep out of those who supposedly hate “big” monopolies.
They are convinced by those who taught them to love govt, that it’s more efficient. State schools indoctrinate such love of the power of government and don’t teach students all the times the power of govt has destroyed huge numbers of people. Democrat schools teach us that Americans are evil in how we treated native Americans. But most of the wrongs have been done by the government! The Wounded Knee massacre was done AFTER the govt generals had given the order to disarm the people, others bungled their orders, surrounded the people, a gun went off, and the military men began to do what they thought necessary to regain order. They killed all the Indians, and also many of themselves. Others were relieved of property or food supply or life in various govt actions designed to bring them into submission to the govt. They are still highly CONTROLLED by govt in all their decision making. Their health care is paid for by govt, and there is NO WAY
we would like to have the lack of quality they get. But, Obamacare is the vehicle to accomplish all that. It is not merciful. It is force. Its regulations did not solve one problem already created by govt in the delivery of healthcare, and creates many more problems. Only a person raised by govt, and lacking information about the evil govt has done, could believe that govt exists “for the good of the people.” Our founders believed govt was evil. They warned us about the very institution they formed–that those who hold office could grasp power and hurt people. Govt attracts people who want power. WHEN WILL WE LISTEN?
Alaxkid,
Rather than put me on the defensive, let me put you there. I have told you what I have done. In addition to my own taxes, this year alone I put in to the US coffers $276,000 in FICA for my employees. I say I because I am a sub-S.
I’m sick of defending myself against people like you. Now your turn. Tell me exactly what have you put into making this a better country? If not money, how Bout community service? Or how about donations to the local level? Or are you one of those that have come to my business, asked for a job, and when you found out I had one for you, you run away? Tell me just how fricking productive to society you are. I’m curious as hell. And don’t lie.
I have not attacked you David, regardless of Peter N’s comment. You should feel that your ideas are being challenged, but not feel anger and on the defensive – this is civil discourse after all. Being challenged is what I hope you and others do for me too, for it’s only in such circumstances that I get to see issues the way others might, and justify my reasoning or abandon it through these revelations.
I too have sacrificed much, know what 16 hour workdays are like, and have felt the bitterness of failure so well as the sweetness of success. I am very fortunate to have never collected unemployment, or any other assistance, and have a considerable income and net worth, though not in the 1% – but enough so that I’m secure for life. Therefore, I can give back to this community and society much more than most. And I do. We’ve both been lucky. But that’s not the issue here at all. It’s not about what a great guy either of us is or how much you or I contribute to FICA, or whether my employees have better retirement plan. It’s about the greater concept of IDEAS, and especially about a fair and just America.
“Small people talk about other people. Average people talk about things. Great people talk about ideas.” – (Author: Unknown) Let’s be great and discuss ideas.
Happy New Year to you all!
You accused David H of quitting and giving up.
Then you dodged David’s questions.
Not at all Peter N. He threatened to give up and what I said was, “Instead, realize that change creates opportunities for the creative capitalist. Give up and drink the cup of bitterness, or take advantage of the changes and drink in the sweet smell of succeed. Your choice.” My intent was to encourage him to continue which I think was evident to all but you.
Love the perspective of David H – someone who has experienced the impact of these awful policies firsthand. The abuse of the systems like workers’ comp, unemployment, medicare, etc. is a very, very serious problem. The problem is that we are reluctant to “attack” the “without”. It feels morally reprehensible to attack someone who is living off a very meager income through welfare, unemployment, etc. Much easier it is to blast the proverbial CEO who is deducting gas for his private plane.
However, I find it offensive to attack someone like David H who is simply relaying his experience. David (and myself) are not the “elite” making $20m a year with private planes and Cayman island accounts (at least I don’t THINK David is!). But we are those that have sacrificed greatly both financially and personally to build successful businesses that have beared fruit both for ourselves and families, employees and our communities. From our perspective, the government keeps increasing their “cut” without giving us anything in return for it.
The problem is with this whole rhetoric is the only people who it seems OK to openly attack is the super-rich. And taxing them heavier doesn’t solve anything – it’s miniscule to the bottom line. (I’ve written up the math on this earlier) The only way to fix this is to rapidly increase taxes either across the board or at much lower levels (say, $100k/year) OR decrease spending and waste.
A system that raises taxes on the successful members of our society so that people can game the unemployment system or welfare or Medicare is not only stupid and offensive – it is wrong.
And, from 1981 to 2009, when the government kept REDUCING its “cut” from you, what did you give to the government in return?
Why does it have to be giving the government? What is wrong with creating jobs for all those people. In my case I did notice the increase in the pay check in 1981. I saved my money so I could buy 1/3 of the company I know own 1/2 of and the company has grew from 3 to about 25 people. 40% of our business is export. This is EXACTLY what this country needs. That brings money in. Flippin burgers for other to eat does not create wealth. It just shuffles money around within the economy but doesn’t add to it.
Meanwhile the products we sell make our customers more productive so they can generate more that may be consumed internally or sold externally.
Why do you think the government should be involved? That is the problem.
Agree – that was one of the more illogical things I’ve read on here. If the government reduces my taxes, I am somehow obligated to give the government something in return?
Also agree. Just pointing out the illogic of, “From our perspective, the government keeps increasing their “cut” without giving us anything in return for it.” The reality is that taxes for those at the top have gone up and down over three decades, but mostly down. Business relies on effective governance which cannot happen with the tremendous increase in national debt we’ve experienced since the Reagan Administration.
Although our national expenses are at a very high level due to the current need to help those adversely affected by this economy, our contributions in taxes are at an all time low in recent history. Yet, to radically reduce spending or increase taxes across the board would plunge us back into recession. Raising taxes on the one percent is least likely to have a deleterious outcome. At this time, it’s the only choice, and of course, as the economy strengthens, other choices become sensible, but not now.
Considering the benefit of the business stimulus of such deficit spending received by the 1%, it’s also not unfair. That is NOT an attack on the wealthy, just good economic sense.
I think that’s where we disagree. Raising taxes on the 1% vs. the .1% is a very different thing. I do believe that raising taxes on the 1% would have a small effect on the economy, as many of these people are small business owners and some of our highest spending consumers. That said, that is hard to know exactly and we can certainly agree to disagree there. What isn’t disputable is the absolute miniscule effect this would have.
For 2013, the government expects to collect 1.6 trillion in income tax revenue. The top 1% will pay about 30% of this, or $500 billion. They are paying at an average 35% tax rate. Increase this by 10% across the board – pushing them to a 45% tax rate and you get another $50 billion in tax revenue.
In 2013 our budget deficit was around $1 trillion. Raising the top 1%’s taxes by 10% would decrease it by 5%. The interesting thing is, we have already hit the top 1% with tax increases of close to this in 2013. It would amount to close to a 20% increase over two years. And still, barely have an impact between the spending and the revenues.
Furthermore, it would hit the people making $300k-$500k the hardest. Raising their taxes by close to 20% over two years absolutely impacts the economy as many of these people live in more expensive areas like the DC area, California and New York and will not only not only reduce hiring of people in their businesses but also cut other home employment jobs like contractors, maids, yard services, etc.
The people that everyone wants to raise taxes on – and vilify – are people like Romney, Adelson, Buffett, Gates, etc. Problem is it doesn’t impact the deficit unless we completely rape them with 80% tax rates.
And by the way … the economy HAS strengthened. We have now seen growth in 16 of the last 17 quarters. At what point will you feel like the economy has strengthened and it will be ok to cut spending and we can entertain “other choices” other than nailing the 1%?
And make no mistake – what has helped the 1% the most in the last 5 years is primarily that debt is cheap (for growth of business) and that the stock market is up 150% in 4 years.
How date Alaxkid and JC attack David H? I am a small business owner too. Alaxkid and JC have no idea what they are talking about. They think they are owed a job, a living and more. The law of nature is the survival of the fittest. You will lose in the end when everything goes to hell.
Meanwhile, like David H I have provided health care to my employees. The quality is such that it meet the Obama care standards. My employees have 3X the amount in their 40K over the standard. Yet I would sell out too if I got the right price. David H will get screwed because the gov effectively owns more than 50 percent of his business because of taxes. My company is a regular corporation so the gov will only get 20% of the proceed but that is up 5% from last year.
Alaxkid, let me address some of the things you bring up. You’re correct in that my ultimate success will come, or not come, as a result of competing against others in my industry. However, where you are wrong, is by saying that government can’t put you out of business. I will take you back to the very early 80’s, and a wonderful humanitarian named Jimmy Carter slapped a grain embargo on the Russians. That embargo set off a 10 year period of time where agriculture went through a depression of greater magnitude than the depression of the 30’s.
Then fast forward to the mid 2000’s, and came the invention or creation of a product called ethanol. For the most part, the ethanol this country uses comes from grain, specifically corn. Many states, and some federal institutions such as the AG Department, mandated that vehicles use ethanol based products, whether it was the 90/10 blend of gas/ethanol, or the 85/15 blend of ethanol/gas. It doesn’t matter what your political beliefs are whether ethanol is right or wrong, those government actions created a level of unprecedented wealth in the AG economy the past 6 years. Maybe the only sector hurt in this period was the livestock producer, as his feed costs skyrocketed. But overall, ethanol has created substantial net worth gains for almost anyone involved in agriculture.
Now we are at today, and there is debate on the Hill to remove the 5 cents/gallon credit for ethanol, and to actually no longer mandate the use of ethanol. This one action alone will send the agriculture section into immediate financial tailspin, and farm incomes will plummet as fast as they did in the 80’s. the only thing that will keep it from being a total disaster is that most farmers don’t owe as much against their assets as they did in the 80’s, and interest rates are low compared to 18% in 1980-1982.
So this industry rises and falls with the action and laws of government. So I ask you this question. Farmers have to compete against other farmers to succeed. They need growth like any other business entity to continue growth, which means a certain percentage of the people are put out of business. Knowing this, and if you were a farmer that owned 1000 acres of ground ( small farmer), and the value of that ground was $12,500/ acre, knowing full well what was coming as a result of GOVERNMENT ACTION, and knowing full well that land values could drop to $5000/acre or less, would you sell today, and take the $12,500,000 for the land and retire, or would you be creative like you suggest I be, and risk that knowing you could lose $7,500,000 in equity the next 10 years?
So while I admire your approach that you just change operations to remain competitive, it isn’t always that easy. In my case, I will admit that even though we grew in sales, the percentage of sales going to the bottom line dwindled, so if sales were going to drop, kit just isn’t as easy as some suggest whee you just ask and get more, the economy doesn’t work that way. People buy from low cost retailers such as WalMart, but then bitch when they don’t get service.
I will not apologize for my actions, and nor should you criticize me until you have walked in my shoes, and thousands like me in small business. Government regulation and taxation is choking this economy. This health care mandate is the absolute biggest screw up government has ever done. The had to be solutions less costly then this, but this is what you get when you no longer have patriots serving our country,but rather lawyers that not only survive, but thrive, on splitting the population. Liberalism is bad, but I also blame the right as well. If it were me, I would say one term of everyone. The only way you can run again is if the budget is balanced. And if you balance the budget, you then get a raise.
Pardon this lengthy response, but I didn’t have time to shorten it.
The United States has been on a deregulating and tax reduction binge since Reagan was president. Even Clinton bought into deregulation, if not lower taxes, but Bush II more than made up for that. Deregulation of the financial sector and Wall Street, a reduction in taxes for the wealthy, along with the Fed’s policies of low interest rates, created the bubble that burst into the Great Recession and a national debt that precluded normal actions for dealing with it. Yes, some regulation was reimposed, but nowhere near that which existed previously and certainly not enough to prevent another calamity like 2008.
Your assumption that because regulations and taxes are bothersome and you could make more money without them, ignores the facts that both are necessary in the long term for your economic health as well as everyone else’s. When the middle class looses consumer protections, government services, and tax burdens shift from the wealthy to the middle class, their living standards decrease. Since the U.S. economy is 70% driven by consumer spending, and the middle class has lost 8% spending power over the last decade, the economy has slowed to a crawl and everyone loses. Well, not everyone. The 1% has quadrupled their incomes and net worths during that time due to favorable legislation, but such increases are unsustainable and even the wealthy will eventually lose as demand for their products and services decrease.
The jury is out on healthcare. Of course, a single payer system like Medicare, makes much more logical sense, is simpler, is much less expensive, and provides much greater customer service. Every other first world democracy has implemented such a system with excellent results as determined by their own citizens. But the screams of “socialism!”, “communism!”, “Marxism!”, etc. prevented political consideration of such a logical system, and instead, the Democrats resurrected this inane market based pander to insurance companies originally proposed by the Heritage Foundation for the Republican Party in the mid 90’s. Although a Republican proposal to counter Hillarycare, and desired at the time to garner bipartisan support, the Democrats were astounded to watch as the Republicans disavowed any part of their own health plan and bitterly denounced it in town meetings with idiotic claims such as, “Death Panels”. It’s here now, so let’s make the best of it.
“Patriots”? The right wing cheapens the term by claiming that only those who believe like they do are all “patriots”, while those who don’t, especially those lawyers in congress, and the president himself, are not. The sacrifices of the original patriots are ignored and forgotten by these self congratulatory claims to be patriots. The true patriots in the Republican Party may be those who’ve been labelled “RINO’s” because they advocate pragmatic compromise to accomplish improvements necessary for the well being of all Americans, even knowing that the monied PACs will target them for defeat in primaries. At least, that’s about as close as anyone comes. The first real patriot was James Otis, Jr. who in 1766 coined the term, “Taxation without representation is tyranny!” Considered the “Firebrand of the Revolution”, he was eventually confronted by Tories in a pub, and beaten with a cane about the head. He never recovered. He was a lawyer. So was John Adams and a vast majority of our founding patriots.
So far as competing farmers are concerned, at the end of the day, some will survive and expand while producing crops more economically, while some will lose and sell their land to those more successful. That will be accelerated by political events – including the War of 1812 which devastated New England when congress passed an embargo on trade with England. Regardless, those farmers and businesses that survived were strengthened and more efficient in the end because they were better able to compete, regardless of the government actions. Any unanticipated event, government caused or not, can adversely affect some while advantaging others depending on how each responds to it. You are correct that agriculture will be depressed should ethanol no longer be required, but those farmers who anticipate and plan for such an event will win while those who don’t will lose their farms to the winners.
There are multiple “facts” I’d like to contest in your reply to David H….
“Since the U.S. economy is 70% driven by consumer spending, and the middle class has lost 8% spending power over the last decade, the economy has slowed to a crawl and everyone loses.”
The economy has slowed to a crawl as COROPORATE spending has grinded to a halt. Consumer spending only decreased in 2008. Other than that year, people still spend more each year than the year before – year after year. Even if they finance it with debt.
“The 1% has quadrupled their incomes and net worths during that time due to favorable legislation”
Actually, it is the top 0.1% you are referring to. The top 1% has not quadrupled their incomes over the last decade. This is ridiculous.
And finally, the last part about Medicare and then farming is missing the point. First, nobody is decrying Medicare or even the ACA. We are complaining because they don’t work as they are currently structured. They are absolutely drawn up to be bankrupt many years down the road unless we have massive GDP growth. They are unsustainable in a slow-growth economy with an aging population. The farming comments are interesting, but the future of our nation’s growth won’t come from farming. It will come from technology, energy, and other “new era” industries.
Corporate spending responds to consumer demand. It slows when people stop buying their goods and services. Government stimulus and the Fed’s QE’s pump money into the economy to make up for week consumer demand which buoys the economy until it recovers (hopefully). Although Bernanke has said he thinks it’s time to ease off the Fed’s QE stimulus, you’ll notice that the easing will be very, very slow. This economy is still fragile and will reman so for quite some time, perhaps another five years. Meanwhile, any sudden moves like decreasing spending or raising taxes on the middle class too greatly can send the bus over the cliff again. It all must be done very slowly and deliberately according to nonpartisan economists.
You are probably right that only the very top of the 1% quadrupled their capital and incomes over the last decade, but I have read anywhere from 85% to 400% which, although far apart, still means that the 1% has benefitted greatly during that time regardless.
I think Alaxkid was using the farmer as an example of how business must compete and weather obstacles whether government imposed or not, but it’s the competition that will decide the fate of each business more than anything else. His point is well taken generally. However, your point about doing the math and acting to save Social Security and Medicare is very well taken also. It’s so unfortunate that partisan politicians have become so intolerant that legislators cannot compromise for the good of us all, and make the necessary changes to the system to prevent the adjustments from becoming so much more painful at a later date. If Reagan and O’Neil could do it thirty years ago, there is no reason it can’t be done again today.
Very true…. This is one of the most inept administrations (at compromise) we have ever seen – and the one before it was awful as well.
What is amazing is that consumer spending hasn’t slown down EVER. Check this out – http://www.data360.org/dsg.aspx?Data_Set_Group_Id=2039&count=all
In economic theory, it makes sense that an economic slowdown would result in lower consumer spending. However, even in the ugliness of 2008-2009, it only slowed about 1% or so. Then it keeps on trucking up.
(somehow my work “posted” all by itself so here’s the rest.)
the people who had escaped the tyranny of the English king on the Mayflower
for religious freedom, placed value on adult, believer conversion with a willing
spirit. They had Bibles, Geneva Bibles–not the King James ones they had been
forced by law to purchase in England if they didnt want to get thrown in prison
for treason–and they read their Bibles. The Bible is a precious
book, and its message sets people free. Tyrants try to control or limit access
to its message. Because of its message of hope in God’s goodness, American revolutionaries engaged in limited warfare, honorable acts, and were more interested in “talking it out with the king of England.” They didn’t engage in “wiping their enemy off the battlefield.” Under George Washington’s leadership
they chose some amazing things. They chose to give up power they had just risked their lives to acquire. Their character had been shaped by the world view of the Bible. Their battlecry in the revolution
was, “We have no King but Jesus.” It was not, “the good win over the evil.” America was the first country in the world to be established with Jesus as the King of individual hearts. They put the very words of God on our
Liberty Bell, “Proclaim liberty throughout the land, unto all the inhabitants
thereof…” This shaped the American idea that we are free to choose God’s way, and we are free to walk away, but if we walk away from our King Jesus, we will reap the hand of the law.
This only worked when our laws were shaped by the Bible. Communist world
view that has been at war with our nation since around 1900, does not seek morality, it seeks power. It is at war with Christianity. Obama has sued companies, states, cities, military personnel, and anyone who stands up against him. He has used the power of the government against everybody. He is re-shaping the military away from any Christian worldview. It’s like we are blind-sided because we keep expecting him to act like we “know” presidents act, but we are viewing someone with a Marxist world view.
As a pro-life person, I have followed court cases for many years, and there was a huge outcry in the law when activist judges reached outside of American law, clear back to Roman law, where dads had unlimited power to kill any member of the family for any reason, to find reason to kill babies in the womb. It was the first time American judges had reached outside of American law in a decision. Now judges look to european law, or wherever they want in making their decisions, and legislators
are clueless about what America was based on. Marxist world view is creating chaos, as they intend to do. Everything this WH occupant is doing is what has already been done in other countries by Marxists–they just had a difficult time doing it here because of the ingenious governmental system created years ago, which most Americans participated in. We knew how to self-govern ourselves, and our communities. Communists have infiltrated our entire system, perverting it, and perverting the people of the US. They have purposely dimmed our understanding, so that we no longer look to Jesus Christ as the perfect King, shaping our hearts to His Way. We must “study to show ourselves APPROVED UNTO GOD” and make God’s way our way, so that the good guys will be CREATED in the next generation, and so that we will become the good guys, knowing good from evil, but choosing the good.
George Washington said, “Arbitrary power is built on the ruins of liberty abused to licentiousness.” God says, “My people perish for lack of knowledge.”
When reading the Bible, it’s obvious that it can happen in one generation–just like we are seeing today–the young people of the 60s led to believe they can “make the world a better place outside of God’s way” and those people now in control of our nation. “Licentiousness” is “giving yourself permission.” It’s the “just do it” leftist activism without restraint, just knowing within yourself that you are the deliverance of “the people.” Marxists set out to shape the world, believing that THEY are the pinnacle of evolution, the most enlightened, and the most EVERYTHING. They don’t care that it has never worked,–it will under their guidance. In a way, they don’t even care if it works, they just don’t like what is built.
They are built on ENVY. Envy says, “I don’t have it, and if I can’t have it, you can’t have it either.” By pitting everyone against each other so that we choose to destroy each other, we are working out on a large scale what Margaret Sanger (D) brought to the KKK. Sanger wanted to destroy morality, and she was a “think-tank” socialist, and eugenicist. She told KKK people to stop lynching, and start inserting themselves into places of power so they could shape society in such a way that black people would voluntarily self-destruct.
Perversion of character causes us to make choices that ultimately self-destruct.
The Democrat media achieved a high level of control early on, but Reagan escaped death at their hands, and wrote eight executive orders that included freeing radio from “the fairness doctrine.” (Communists always call stuff the exact opposite of what it actually is. If a communist calls it something, just think about it the opposite way. The ACA is actually The Unaffordable Uncaring Destruction of the Healthcare system so many have sacrificed their lives to build. It also has a huge amount of tyranny built in that we have not quite wrapped our arms around.) We have been invaded by an unfriendly power and given what appears to be a Trojan Horse.
Will we be beguiled by it? Or will we leave it outside the gates and stand up for ourselves? Will we allow muslims to acquire seats of power as our founders warned us to NEVER allow, or will we believe the multicultural gibberish that has enveloped us since the 60s? Will we reacquaint ourselves with our God and savior, Jesus Christ, or will we fail at liberty in this generation while we are over-run by licentiousness and arbitrary power?
Like someone else quoted here, “you value the truth, it’s only the fact that you ignore.” Where do you find your revisions of history? Such revisionism would be laughable if I did know that many extremist “Christians” believe this crap as an article of faith. You are vastly in the minority of Christians however, and you give us all a nut-job image. Stop it!
Half the people on the Mayflower were secular and didn’t belong to the Pilgrim church. Those that did, didn’t come to America for religious freedom at all. They simply wanted to establish a colony where only those who believed just as they did and formed that covenant could live. Professing to be a Quaker could get you hanged, and some were – not a real tolerant bunch, were they. That changed over the next century and a half, especially as fewer people in succeeding generations joined the church.
As far as a Revolutionary battle cry being, “No king but Jesus!”, that’s simply a revisionist myth with no historical underpinning. No historian ever recorded such a battle cry and such a claim never appeared until the late 20th century. The claim is a fraud perpetrated to justify your most fundamental fraudulent claim that the U.S. was founded as a Christian nation. Look up actual facts on this here:
http://fakehistory.wordpress.com/2010/05/12/“no-king-but-jesus”-and-the-american-revolution/
Oh, right, facts don’t matter, do they Rebecca? “You have every right to your opinion, but not to the facts.”
Thank you for sharing your wonderful description of what we have known
in America. America is a special exceptional place for many reasons, but
the underlying character of Americans, that has known that “good wins
and evil loses” is a perversion of a Biblical worldview. Originally America
became a nation after the work of preachers across the land led the people
to repentance. Unlike the European Roman Catholic forced conversion
method, where the chieftain would be fought in battle, and then accept
the “church” for his people, as a condition of surrender,
I have only posted on here twice. In review, I own a business that is Sub-S, and over the years, I have taken the profits to grow the company, add employment, build new facilities,etc. In addition, I have invested in two other local companies where I live, to give them capital and help them with management, and assist them in running a business. In time, we truthfully have all done well. My company grew from 9 employees to now 60. Sales went from $4M to this year over $100M. Profits are fine, not exceptional, but I believe that’s why we continue to grow, is that our customers know we aren’t greedy.
Of my 60 employees, I have 6 that make $100K or more per year, and another 12 that make $80K or more. Most of my staff earn well over $50,000 per year. I give them what I believe is a generous 401K, a good health plan, and plenty of time off. I love my employees for the most part. They helped me build the business. My customer satisfaction ratings are high. ( in the industry we are in, our customers are polled and we are compared to our peers).
Starting this year, not only have my taxes gone up from 35 to 39.6%, I also have to pay an additional 3.8% in ObamaCare taxes on the companies I helped save, and eventually built up plus the higher rate of in one tax. That makes it 43.8% federally, and I live in a state where the tax rate is now 9%. When I started business, it was 6%. That means now I pay over 50% in income tax on my investments, plus I pay the same as everyone else on salary such as FICA, and the rest.
In November I recieved my health insurance renewal rate. The company sent out a regional staff person to explain why out premiums have gone up 55%. Right, wrong, or indifferent, it was entirely blamed on ObamaCare. My company had paid $400,000 annually for premiums for our employees, no now they wanted in excess of $600,000 for slightly less coverage. And to top it off, our employees usage of the plan had dropped for 3 straight years in both claims and dollars.
So before my close, let me give you a little background. I grew up in an upper middle income family, so I never knew when I was young what it was like to be without. I admit that. I also went to college for 4 years at a state university on an athletic scholarship, so I earned my way through college. In the off season, I worked delivering furniture for a local retailer, and did that all four years of college.
I worked for 10 years before I bought my current business I own and described above in 1989. I did literally work for about 16-18 hours a day for 3years, backed off to 14 or so the next ten. The remaining years probably a fair number would be 60 hours a week, as I had managers I trusted, and we were established. My wife stayed at home to raise out kids, and I went 2 years without any income or salary. So even though I was raised in a family that did ok, I never had anyone behind me to watch my butt. Many times I thought we might fail,but we didn’t, and I owe that to my employees.
I read everyone’s post on here, and I will say in my opinion that most people have legitimate arguments, except for a few that just like to argue. I have seen many cases where management has abused or at minimum taken advantage of their employees. And I have seen where many businessman have advantages(if they take them) such as free gas or things like that. That’s wrong. My employees don’t get free gas because they have no way to deduct it. And I know many business people that do it, or buy things through their business for themselves personally in the name of “we are entitled to it because we get screwed otherwise”. That’s wrong, at least in my opinion it is.
However, all that being said, employees have or the u employed work force have abusede the system big time. I would hate to tell you the number of bogus work comp clims we’ve had. Or the number of people that come to my office seeking employment that really don’t want it but just want my signature that they tried, so their benefits continue. The minute I say I have work for them, they leave. That is also abuse,and that’s what the business people on here are saying. They are sick and tired of paying for the abuse.
So here’s my close. It’s obvious under this administration that there is going to be more of the same. Higher taxes, higher health care costs, skyrocketing workers compensation costs….higher everything. It is no longer worth the risk I assume and pay over 50% in taxes, plus 55% more health care costs, and so on. So I gave my employees a heads up in October that I will be selling the company, along with all the others I have invested in and helped grow,because it is no longer worth the risk. I gave them a fantastic “exit” bonus, plenty of time to find other work, and now the new owner of my company will have a fraction of what used to be, and just about zero chance of making enough to pay for the company. I look for it to close within the year.
I have made a argument there is abuse everywhere, and I understand why each side doesn’t trust the other in business, and that’s because everyone let it get that
way. This administration is absolutely HORRIBLE when it comes down to business. The are thousands of examples like me going on, and it just isn’t right. That’s what’s wrong with our country. Damned near everyone cheats the system and has an attitude of entitlement.
Lastly, I am glad I no longer worry about workers comp insurance, or health insurance premiums. Or deal with people sponging off the system. Or those with wealth screwing over the system. I guess I’m not made for cheating. I grew up being taught cheaters lose. I have plenty now for me and my kids,but it didn’t have to end this way. And it shouldn’t have. But these lieing and thieving bastards we have in Washington have crippled this country, and made everyone (rich or poor) think of how they can screw our own country.
Thank God for the service people that defend our country. At least they still have nobility. May God bless you wherever you are.
I admire your accomplishments, which are the stuff of the American Dream. However, you don’t compete against the government. You compete against other businesses which provide the same services or products. Your success will be determined by how well you do that, especially how you adjust to changing circumstances, not by what you are taxed or your health insurance premiums. The government can’t put you out of business, only your competition can, so stop blaming the government for your failures. That’s simply Econ 101.
Instead, realize that change creates opportunities for the creative capitalist. Give up and drink the cup of bitterness, or take advantage of the changes and drink in the sweet smell of succeed. Your choice.
http://www.foxnews.com/us/2013/12/16/many-private-college-presidents-make-more-than-1-million-report-says/?intcmp=latestnews
Any very successful entrepreneur who owns their own profitable company in a sub chapter S tax disposition….will make that kind of money because company profit is passed through to them as personal income for tax purposes….and regardless if they receive the money or not…they pay tax on the company profit.
This is the sector of business who most benefited from the Bush programs including Sec 179 deductions ( now sunset) And the sector of business most damaged by the current issues with no credit… poor economy and disastrous Obamacare…….
http://wtop.com/289/3520988/1-in-5-in-US-reaches-affluence
An interesting perspective on upward mobility. It’s important to remember how politicized this debate is – on both sides. Which is why I agree with John’s comment above.
Why do you care what other people make? These people are paying a lot more taxes than you and also give a lot to charity. If money is a priority of yours then stop being bitter and start getting better at what you do; if it is not, then you shouldn’t worry because you will probably live a happier life.
Most also pay much more in property taxes as well as Income Taxes.
If your United Way does not support abortion in any way, it
is a breath of fresh air blowing into my heart. Thank you.
You have also been most kind in your writing.
George Washington:
I do recommend and assign Thursday to be devoted by
the people to the service of that great and glorious Being
Who is the beneficient author of all good…that we may
then unite in rendering unto Him our sincere and humble
thanks for His kind care and protection of the people of
this country.
October 3, 1789
Well Rebecca, I hate to disappoint you, but my employer is a United Way. So I have to dispel two of your misconceptions.
1) There are over 1200 United Ways in North America. They are each autonomous from one another, but do pay dues to the United Way Worldwide in order to use the logo and take advantage of group purchasing plans, settle territorial disputes and other mundane things. That said, my UW does not fund abortions nor even Planned Parenthood. We have a competitive bidding process to determine who gets funded. Planned Parenthood has not prevailed in our process to date. Many UWs, ours among them, fund programs, not agencies. We could, but do not presently fund a teen abstinence program that the local Planned Parenthood might have. But we require agencies to show objective evidence of their program outcomes and outputs. If they cannot, then they receive no funding. All that said, because United Way also works to pass through donor advised dollars, we cannot refuse to pass along donor advised dollars to any registered 501(c)3 agency that is also compliant with the Patriot Act anti-terrorism statutes.
2) The workplace giving component should never be coercive. UW employees themselves are not coercive and instead are allowed to present to organizations that invite them in. United Ways do not and cannot force themselves into an employer any more than they can “force” themselves into a football game or high school or a courtroom. Usually executives at such companies have some connection to charitable giving and most often through United Way. That could go back generations in family owned organizations when United Way was the only game in town through the first 70 or so years of it’s existence. In any case, the United Way makes it possible for people who are so inclined to contribute large sums of money through an employer’s payroll deduction/withholding system. It is far easier for millions of people to give $1, $2, $5, $10 even $100 per paycheck over 26 or 52 pay periods than it is to write a check for $2600 or $5200 or to use a credit card. Does the employer note who gives what? Yes, if the person chooses to pledge via payroll deduction, but not otherwise. Is the “big boss” coercive? Maybe, but that is neither endorsed nor condoned by any United Way anywhere. From the employer’s perspective, the “big boss” often feels that s/he is paying the employee a salary and expects that employee to give something back. Sure many people give back through church, but many people will tell the employer “I gave at the church” without having done so. But even then, that church plate helps to pay salaries and keep the lights on.
Anyway, there are other similar fundraising federations such as Catholic Charities, America’s Charities, EarthShare, numerous if not 50 state SEFA (state employee federated appeal) and CFC (combined Federal campaign) that all operate similarly to United Way. But it is always United Way that gets held up as the poster child for “bloated” executive pay. Here is the thing with that. My boss is ultimately responsible to his board of directors for the $25 million this UW raises. He should be able to draw a $200k salary for that level of responsibility. If he was in the for-profit sector at a medium size business with $25 million in sales, his salary would be in that $400k territory that this article addresses.
So that is my story and I am sticking with it.
Thank you for your very informative post. I really appreciate it when people reply in a respectful way, not just with name-calling and derision. You have obviously worked with people a lot–however, I consider work-place giving to be coercive, no matter who engages in it. A person who employs someone should not in any way be involved in expecting his employee to “give something back.” It’s extortion with a smile.
One of the really important aspects of giving charitably, (by definition, giving with love) is that it actually be done with love. Giving should be voluntary, out of concern for your neighbor, and because you desire to effect real change in that person’s life. It should not be tied to anyone’s workplace “helping” them to give.
I will check about why I have in my memory banks that United Way is on my “do not support” list. It has been years since I put it there. I know it concerned abortion, but I can’t remember any specifics. My primary
organization through which I volunteer, is Right to Life and other pro-life efforts.
For sure do your own research. Don’t take my word alone. I will not name my particular United Way, and the one you may have tucked away regarding abortion may very well fund that activity based on what their board of directors and majority of their donors have decided. However, my UW likewise passes many thousands of donor advised dollars to Right To Life, both nationally and locally. I chimed in so as to make sure you understand that all UWs do not operate the same as compared with franchise operations like Burger King or for that matter American Red Cross.
As to your point about charitable giving driven by neighborly concern or love, I would argue that many charitable donations, whether through United Way, a church, direct mail, etc, are in fact done with neighborly concern in mind. Don’t confuse the payment mechanism – payroll deduction – with something sinister on the part of the employer, the United Way, or the donor. That would be like saying that giving to a charity on my credit card is equally sinister because my credit card company is in the loop too.
I don’t know the history to cite it, but I believe it was a minister and a rabbi in Denver that came up with the idea of payroll deduction back in the late 1800’s / early 1900’s in Denver as an easy way to enable many small contributions add up to big contributions. I believe the original concept was known as Community Chest, which eventually became United Way.
Best.
You can always determine the overhead ratios for charities from sites like Charity Navigator. I am a CIO at a charity. I will never make half the salary this article discusses, let alone $400k or more. Yet, I always hear that I and my colleagues “make too much” as the first reason why someone will not contribute. As if the accounting software, office productivity software, hardware, security systems, strategic plans, heat, light, power, water, fundraising expenses, advertising expenses, office building mortgage and all the people who take care of all of that will procure it all for free and spend 40 hour weeks doing it for free.
In many ways, charities are no different than government, except that charities do not have the power to reach into your pocket to take what they need and charities often deliver better results than government and can prove it because they know where every penny is going and how it is achieving its mission.
As a fiscal conservative I have often petitioned executive management at my charity to work toward reducing or eliminating government bureaucracies that purport to do the same work my organization does because of the duplicate service and that we deliver better results. But exec management is fearful of doing that because it doesn’t want to run up against the government unions and their childish tactics.
Check the salaries of the CEOs of your favorite charities. March of Dimes CEO makes over $600k, the boy scouts ceo makes 900k, united way ceo makes more than a million per year from your charity dollars…
Charities are businesses as well. It would be impossible to find anyone to staff them for “free.” Considering the United Way takes in $4 billion per year, the CEO job probably warrants that kind of salary.
The only issue I have with the large charities is to make sure that the percentage of money going to where it needs to go is high. I hate when admin takes up more than 25% of the budget.
I think a major reason why intellectuals tend to move towards collectivism is that the collectivist answer is a simple one. If there’s something wrong, pass a law and do something about it.”
— Milton Friedman
(1912-2006) Nobel Prize-winning economist
The list seems to have overlooked “Business Operators and Owners”.
No folks, you don’t have to work in a structured socialist organization or profession to make 400K +.
So why aren’t all of you earning $400K a year? The FED keeps printing money so the stock market keeps going up and up and up. Right now it seems you can’t lose. The real trick is know when to sell or move to safer assets.
This reminds of a toy that one of my friends got when I was a kid. It was called Time Bomb. It was a black round bomb looking device made of plastic. The top of the ‘bomb’ was red cap and it would be twisted to get a timer running. Then the kids would stand in a circle and throw the bomb to each other. If you held the bomb or the bomb was thrown to you when it went off you were out. Play continued until there were two people and one of those would lose. This toy wouldn’t be politically correct now, duh.
‘Investing’ now is similar. You don’t want to be holding most stocks or ANY BONDS when the FED bomb goes off.
I cringe. Capital gains taxes have gone up. I am stuck between taxes and the market. If the market doesn’t go down more than 20% then I am better off holding and riding it out. If the marketing goes down more than 20% then I should sell and pay the 20% capital gains tax and hope I can buy at the bottom.
The other option is to do just that. Buy puts or sell in the money covered calls. This way I don’t need to sell my stocks and mutual funds before the market crash and pay taxes on the gains. The trick is know when the FED time bomb is going to go off. There are way do get around most things.
BTW, I agree with Rebecca. Governments rule using force if need be to impose its will on the people. The main goal of any government is to stay in power. Everything else is secondary. The government we have today is much different from the government of the founders. The founders would cry.
I don’t make 400K, A) My skills aren’t worth 400K B) (my wife makes 300K, but she is a partner in a Big 4 accounting firm) I work for the taxpayer, so I would be killed if I made that kind of money. I don’t think anyone in our County makes 400K and we are the 3rd largest county in the country.
http://www.examiner.com/article/tina-turner-will-expatriate-for-swiss-citizenship
Interesting, these guys have that option because they already have their money overseas. I wonder where they go.
http://news.yahoo.com/more-taxpayers-abandoning-u-181500097.html
We go to a different circle of hell – one reserved for American ex-pats!
Tina Turner is the latest celebrity. She has been in Switzerland for the last 20 years.
I have seen first-hand how many people taxes hurt. Govt is force
and closes you down if they say you owe them. They are not
merciful. When taxes are used frivolously it hurts even more,
and when people get into power who spend more than we have
and then start printing money out of thin air, then I know it’s
time for us to begin to repent to God for allowing those people
to establish fraudulent power. They are thieves. Stealing value
for which paper money is a representation.
Our founders dedicated our country to God, and we have frequently
prayed for His blessing. We have instituted more goodness in the world
when we obey Him, and we work terrible things when we don’t. God
has given us a great responsibility and we must act on it, or we will
lose everything. We must begin to identify the mind-set that has been
pressed onto us, and begin to walk as free men and women in the freedom
God intends us to walk in. We have God-given rights that no government
can take away. Our Constitution listed some of those rights, but you will learn
more about them by reading the Bible. The first is that we do not have the
right to take an innocent human life, hence, the right to life. We do not have
the right to sexual activity outside of marriage, hence, all children are protected from unwanted sexual advance. all are protected from rape, etc. God’s law limits evil actions and therefore teaches us to protect the rights of others.
Since govt is force, and evil men get into govt, it is the duty of the people to
stop the use of force to work evil. Hence, that is our freedom.
Duty toward others and freedom are always tied together in the Bible. Duty to
God is the first, and that defines all others. We need to “change our minds”
otherwise known as repentance. If we come to God, He will not be slack in
His promises. Unlike others.
Blessings upon your heads!
One example of how we are taxed where we didn’t used to be and which we have all come to accept as normal no matter how bad the results: people in the local communities used to be in charge of their own schools, and used to hire their own teachers to teach their children what they wanted them taught.
They paid by banding together money, usually young teachers took them up on what they were offering, and the teacher was directly responsible to the parents and the children.
Without getting into all the details (you can get that from various books which detail the history), various communist people who wanted to create a uniform,
controlled, state-focused education began to exert their influence. They created the National and state teachers unions and where they could, forced all teachers to submit to their schools to become teachers, and forced all teachers to join their union as a prerequisite for teaching. In Oregon, ALL
teachers must have a masters degree, for ALL positions. This creates a high bar, a GREAT DEAL OF UNNECESSARY EXPENSE, and many years of being subjected to courses that are designed to produce the type of mindset that the communists desire, the mindset that educating children is very difficult, and only professionals can do it. The mindset that all others who educate children, NO MATTER HOW SUCCESSFUL THEY ARE, IN THEIR RESULTS, it’s inferior to the state system.
The schools are tied to Federal money and everyone bows to the mandates of the Federal govt so they can receive THEIR OWN MONEY BACK INTO THEIR OWN COMMUNITIES, but WITH STRINGS ATTACHED. More and more mandates accompany this money. Especially now, with Common Core, we are being promised a monitor in every classroom to make sure everyone is doing it just like the Federal govt says. This is pure tyranny.
I could examine hundreds of topics about the very poor results that have been the result of the rise of communist philosophy, but will only mention one.
The 21st Century Education Act, in Oregon, created group grading. Students are in charge of other students in their group of 5, to be sure that those students are performing like they want them to. It totally demotivates students in their projects, and more time is spent in trying to force demotivated students to do something they see no reason to do because they will just get a grade from other’s work, than in getting to study all the material
they never get to. When this system first came in, I called my son’s teacher
and wanted a text book so I could help my son because he was extremely frustrated and not learning. I was told that he could not bring home a book because that would give him an UNFAIR ADVANTAGE over the other students
in his group. I said that geometry was what he was in the class to learn, and was told that geometry was not the main thing he was supposed to learn in the class, that the main point of the system was to learn interpersonal interaction.
As parents we fought this in the state legislature, and continue to fight it, but the destruction in students has been severe over many years. The grades students are receiving DO NOT REFLECT THEIR ACTUAL ACQUISITION OF KNOWLEDGE. As parents this has been very frustrating, and is difficult to
get the new parents who subject their children to the system to realize it CAN BE DIFFERENT AND USED TO BE BETTER!!! The Common Core coming out now at a national level, is more of the same direction, with the same forcing of states to now accept a TOTALLY UNCONSTITUTIONAL USURPATION of our right to educate our own children.
Every year we have fought for our right to home educate our own children.
Every year the unions try to take away more rights and lock us down into their total control of everything.
Once they get total control, THE MONEY DOES NOT GO TO THE CLASSROOM ANY LONGER (see the DC school system for how horrible it can become)–but to all sorts of other govt takeovers. Then they blame their poor results on the Republicans, their favorite whipping dog.
Little by little, all our money is being used to have the govt take over everything.
That is what it means to be progressive–to progressively take over. It’s actually regressive to our liberty.
PS–The first year outcome-based education was in force, the entire student body of the pilot school signed on to a suit against the state of OR, detailing the lack of education they were receiving. The state of Oregon DISMISSED
the case.
The sex-industry is coming into our schools through various avenues and
corrupting young people so they can destroy our children. The pedophile Alfred Kinsey did the “research” years ago to put the “science” into the govt
effort to sexualize our children. And in Oregon if we speak up we are being told we are hateful ingrates. We are being told
that the state is “protecting” the children. Those who desire to bring prurient
influence are being given a red carpet. I will address this issue in another post, as I consider the moral corruption of children through our tax dollars a HUGE problem.
Rooseveldt said, “To educate a man without morals is to educate a menace to society.” Our school systems are creating the menace we all suffer from.
I have not posted for months but I am saddened that we have to continue this dialogue. Sadly David H there are readers who will say that you are lying, or that you didn’t earn what you have, etc… Amazing that 10 percent pay 70+ plus of all FIT and then we have to read the comments that “Rich People Don’t pay taxes” or “Rich People have all the loopholes.” Congrats to you on your success, which I am sure comes from hard work and investment in yourself and your business.
I have only chimed in once on this topic, but after meeting yesterday with my accountant, I felt compelled to come back and get something off my chest that I think most people have no clue about.
A little back ground, I started my own business back in 1989 in the Midwest, and started with 7 employees and $2M in annual sales. Today, we have nearly $100M in sales, 70 full time employees with a full array of benefits, and another 6-10 part time staffers. My salary is $250,000 plus whatever my company makes I have to report as well. We are a Sub S corporation. I have no intention of disclosing our earnings, but they are good. In 2012 my wife and I gave away $250,000 ( well over 10%) to charity, church, and university foundations. We give with pride, and almost always do it anonymously. Those gifts have always been deductible.
In addition to my business, I have invested in different business ventures over the past 25 years that have also grown and provide good income. So on the surface, if you look at our situation, most would say we have it made. And I have no complaints till now.
In my meeting with my accountant, I found out exactly how much more tax we are going to have to pay. Although I don’t think the rate change to 39.6% is fair, I knew that was coming. It affects me quite substantially. Can I afford it? Yes, and if the extra money was going to reduce our debt, I wouldn’t complain at all. But all it does is feed this growing governments appetite for spending money foolishly. But if that wasn’t bad enough, I found out the Obama tax of 3.8% on income from business you don’t work directly in (like the ones I have invested in that have grown and provide jobs) is going to cost me another $75,000. Again, many will say well…”you can afford it, after all look at how much you are making”. And that argument MIGHT hold water if the companies involved paid out all the earnings, but like most business people know and understand, you can’t pay out all earnings, you need to retain quite a bit to grow and meet federal banking rules. So the companies I am involved in do well, have good earnings, but don’t pay enough dividends to pay my tax, so now I have to take money out of my pocket to do that.
All of the above sucks, but then I found out because my wife and I are so called “high income” people, Obamas team introduced and passed the AGI rule. That stands for adjusted gross income. And what they do is add up all your income, subtract the $450,000 base amount, and multiply it times a percentage and whatever number that comes up to be is the amount of CHARITABLE GIVING THAT CAN’T BE DEDUCTED from your taxes.
So now comes the end sum of this game. When you account the tax rate from 35% to 39.6%, and Obama Care Tax of 3.8%, and the amount of deductions lost from the AGI rule, instead of giving $250,000 to charity this year, we are going to give $32,000. In addition, two of the business’s that I own but don’t manage, which started with 12 employees, now having 27 employees and an average income of $65,000 for each one of those jobs, has had to let go 3 positions, put on a hiring freeze, and put the company’s up for sale. I don’t care whether you are Republican or Democrat and are a reasonable person, not someone dependent on government assistance their whole life, this isn’t right. It sucks, and it’s wrong.
And one last thing. At my business, I had my HR manager keep track since January 1st the number of people looking for jobs at my business. We had over the course of the year 22 people seek employment ( live in a small town rural America), and every time we indicated we had interest in hiring them, 16 of them said they really weren’t looking for work, but needed a signature to show proof they were out looking for work. 6 people truly wanted a job, 16 didn’t. That’s wrong, and to me, that sums up exactly where we are today.
AMEN. Thank you for posting this. So many great points in here and I don’t believe that many people who think that the current tax system is unfair (meaning that you and I don’t pay enough) totally understand the reality of the situation.
You know, it is often said that two things drive true success – inspiration and desparation. It sounds to me like the current policies are cutting both off at the knees.
Nope, to sum up exactly where we are today, you need to go to the top of the crimenogenic food chain, not the bottom…
https://www.youtube.com/watch?v=B4xEYSUQsZg
I own a successful company too. I have the same complaints as David H. In some cases I must pay taxes on money I haven’t seen yet because the profits get lock up in things that must be bought. What really ticks me off is what David H mentioned. Not only am I paying for the health care of 27, coincidence, people but now I must pay the Obama Care Tax of 3.8%.
A lot of us so called ‘rich’ don’t have a lot of free money to spend willy nilly. It is invested in buildings and capital equipment etc and these make more money. However, there is little incentive now days when you consider the risks.
I could have retired years ago but haven’t because I wouldn’t know what to do with myself but now I see little incentive to keep working or investing.
Now the question is are the employees willing to buy me out given they will be hit with the same burdens. Will I have to sell for less because of these burdens.
I will have to pay more taxes. The rate went up from 15% to 20%. That means the government effectively has a lien of 20% on my company without taking any risk or making a contribution. BS on that.
The tax code is socialist ideology to put money into the hands of govt
to act as a redistributionist agency. But govt is run by sinful people,
a concept our founders shaped our the Constitution around. They broke
power into many small pieces and limited the amount of time any one person
could exercise the power. The concept of a Federal govt is unique; it was
supposed to be a very limited entity for the common defense and to make
sure commerce could happen evenly among the states. All other powers
belong to individual states, according to the Constitution. The Bill of Rights
was added to guarantee that the Federal govt would not get the idea that
it could usurp authority from the states. The local sheriff is one of the
strong authorities of our govt. Being elected by the people of the county, he
is like the governor of that county. The Federal govt and all the charlatans
that assume they can turn it into a national govt, dictating to each citizen
and dictating to states, are outside of their Constitutional rights.
We need to begin to exercise our Constitutional rights, and quit feeding on
the Federal spigot. We can elect people to represent us at the Federal level
who will close out the gargantuan beast it has become, and allow the people who inhabit each state to enjoy liberty again. Every law they have made
to enslave us to their profligate spending can be undone if we will just not
bow to the media which elects the horrendous politicians who have
brought us to this point. We must learn to act as free men and women.
Peter, I think you hit the nail on the head. The tax code is screwed up and it favors the rich and the poor. The poor get credits the rich don’t get and the rich get deductions the poor don’t get. I can’t contribute to a Roth IRA and I don’t get an earned income credit or student loan deductions. All I can do is buy munis and give money to charity at this point. I could re-mortgage my house or buy a bigger property to pay more taxes, but that is a silly reason to have a bigger tax deduction. I still maintain that with the lower interest rates, many people who thought they would be getting a mortgage deduction are not. The rates are so low and the amount of house that has to be bought is over about $250K and it depends on the state you live in.
This article is terribly misleading. Many people earn that amount and more. But …. there aren’t a lot of people earning $2M+ (consistently), and it is also a myth that everyone over $400K gets away with tax evasion. It’s quite the opposite. Writers use freak examples like Warren Buffet and Mitt Romney as example of those who get away with lower taxes – again it’s misleading. My wife and I receive about $750K per year on investment income. When I was young and didn’t have anything, I never had such dislike of the people earning that kind of money. I don’t know why people today are so obsessed with what they assume is wealthy. If they were wealthy, you would see them living just like us and everyone else.
Either way, the tax schedules do not accurately reflect what you get taxed at that income level. Usually the AMT (Alternative Minimum Tax) snags you and you pay far more than any standard tax calculation. You are not allowed state and local taxes as a deduction, etc. I’d say that in 2013 my wife and I will pay about 55% of earnings in taxes. Remember, lots of us (We’re in California) live in tax hungry states that can take up to 14% or more (marginal rate). I won’t say it’s bad – but what you’re left with does not go nearly as far as what you think it would do. We all have to save for a “rainy day” as well as retirement. Yes, we get to live a little better than most, but we don’t get a new Ferrari each year, not even a Mercedes. What it usually means is that you have enough money to make a good life for yourself, but give the bulk of the remainder to your kids and grandkids, etc. – so they can go to college worry free (or close). Trust me, it is not a ticket to Nirvana! The bottom line is that if people spent more time trying to improve their earnings, they would likely be better off that wasting that time being annoyed at everyone who is “wealthy”. Wealthy is an elusive term – and does not really mean what writes like the one here talk about.
Totally agree. I’m right there with you and I don’t live a life of caviar and limousines. I think the current president is somewhat to blame for this – feeding into the “dislike” for the wealthy. The politicians just aren’t clear – they give the impression that people making $400k/year are the “wealthy” but then constantly cite examples of those making 5-10 times that. The lifestyle of those between $250k and $1million isn’t quite the way it’s portrayed -and it is also a group that usually pays a very high tax rate.
And I sure don’t understand the dislike of the wealthy. Someone like the Kardashians – or Buffett, Romney, etc. would look at you and I as “average people” – not rich people. It’s all relative. I certainly don’t hate people that make far more than me and don’t understand why I would.
Because politicians need someone to blame for the “poor” people’s lot in life. they need to point out it isn’t ‘fair’ that others make more money than they do. Their effective rate might be less, but in actual dollars, 1 Warren Buffet pays the taxes of many hundreds of thousands of poor people. WB lives modestly, donates 98% of his money to charity, or will. What is not to admire in this man? Yes, the secretary pays an effective rate of 25% and WB pays 14%, but the secretary isn’t putting of her money to risk, WB is. The secretary is an employee, not the CEO of the company.
The idea that most poor and middle class people (or liberals, progressives, Democrats, etc., etc.) hate the rich is a canard meant to create a strong defensive emotional reaction to oppose progressive taxation as a “redistribution of wealth”. It is part of the playbook of the far right who’s M.O. is to first claim to be the victims of the “liberals” and yet morally superior and righteous in the good fight at the same time. Becoming wealthy through self made means is the “American way” which every (almost) American shares and admires. I have never heard the president or any politician say anything different or hateful because of someone’s wealth.
Because someone believes that it’s fair if the wealthy pay a greater percentage of their incomes in taxes than those less well off, has nothing whatsoever to do with their feelings of like or dislike of the individual, and it certainly creates less pain than increasing taxes or cutting food stamps to the poor family. For 100 years, the United States has had a progressive income tax system, but when Romney or Buffet pay 14% while their secretaries pay 25% of their incomes in FIT, most Americans believe that to be very wrong, even while admiring the success of both men.
Oh, and Peter, you’re right about $400K not being wealthy while those in that ballpark pay significantly more in income taxes than those in the $20+million income bracket. That too is viewed by most to also be very unfair. For some of you to justify lower taxes because of risk or because they are “job creators”, or somehow more deserving is absolute rubbish akin to the “Devine Right of Kings”. I thought we did away with that a long time ago, didn’t we?
Oh, and JB, Buffet makes twice more than the hundreds of thousands of poor people you mentioned combined.
I do think we should avoid using words like “fair” and “wrong”. You’re never going to convince me that unless I pay an extra few percentage points of income tax that somehow it’s unfair or wrong.
The problem I have isn’t that we need to have the middle class growing as well as the rich. The problem I have is those that think the solution is in income taxation.
You could make an argument that income inequality is “unfair” or “wrong”. I don’t know if I agree with you on that, but that’s at least a decent debate. I have a hard time buying that a 36% top tax rate is unfair and wrong but a 39.6% tax rate is fair and just.
The other thing we’re all well aware of is that effective tax rates are different than income tax marginal brackets. For instance, if I give a great deal to charity and have all of my money in tax-free bonds – my effective tax rate is going to be incredibly low. For example –
Say I make $200k/year. I then have $5 million in municipal bonds, generating $150k/year in income, tax free. I am self-employed so I max out my retirement plan via a SEP-IRA. Then, I give $50k/year to charity. My total income is actually $350k. However, I only pay taxes on about $100k. Based on the marginal brackets, I would pay about $20k in taxes depending on other deductions (like my mortgage). Therefore, I earned $350k and payed $20k in taxes, for an effective tax rate of 5.71%.
How is this “wrong” or “unfair”? This is just an example – obviously zeroes can be added to show what happens to the uber-rich’s effective tax rate. Is it unfair I get tax-free income from munis which help finance community and state development projects? Is it unfair I get deductions for charitable giving? The whole concept of fair and unfair via the tax system is crap. If we all agree that we should have a growing middle class, it’s certainly not “fair” that we just take more money from the wealthy and give to the poor. We must do it through growing the economy properly, funding education, and other legislation such as minimum wage laws, etc. – not by simply raising tax rates on a select few.
The point being made is whether the progressive income tax is “fair” in the minds of most Americans. For the last century the answer has been yes.
When you rob Peter to pay Paul, you can always count on Paul’s support.
And a progressive tax system is what we already have. That’s not the debate. The debate is whether it is fair “enough”.
Then we are again debating “too much” or “too little”. The only way to determine that is in comparison to something. The basic questions then are:
1) Is a secretary’s effective tax rate of 25% too much or too little compared to her boss’s rate of 14% (not counting charitable or muni bond deductions) on a $40,000,000 income? and
2) Has the decrease in the progressiveness of the tax code over the past 40 years contributed in a major way to the national debt, while substantially increasing the incomes of the top 1%? …and
3) Has the decrease in progressiveness in taxes also had a major impact on the decrease in the middle class’ living standards?
Basic questions could also include:
1) When progressive taxation punishes success, is that a good thing or a bad thing for society? If the government takes 70% of whatever you make, how do you incent people to strive to achieve beyond that point?
2) Where is the line between compassion for the poor, versus compassion for those who are paying for the benefits received by the poor? Where is the line between creating a compassionate caring society, versus individuals reaping the consequences of their own life choices?
3) How did the transition from the industrial age to the information age affect disparity in incomes between the richest and the poorest? What part of the decline in the middle class standard of living is due to the middle class not retooling themselves with information age skills?
There is no middle class anymore…
https://www.youtube.com/watch?v=hJa5pfcKM3c
How is it that the most morally questionable and expensive spending- that to the war and banking industries*- goes forever unspoken of in all these talks of economics, morality and moral hazard… like Lord Voldemort or something?
*Even without the $27 trillion reward for the most rampant crime spree ever, (financing a leveraged buyout of the country, as Catherine Austin Fitts calls it, below) the banking industry will always be the biggest welfare queen, simply by being given the power to loan money itself into existence. All money.
The “defense” budget is $1 trillion/ year. The DOD “lost” over $3 trillion…
http://www.youtube.com/watch?v=oUlQ7vElqqo
http://www.scoop.co.nz/stories/HL0605/S00345.htm
Buffet doesn’t have a $40,000,000 income. His pays himself $100,000 and he collects his dividends on his stock holdings and on his capital gains when he sells stock. Either way, HE started the company and has most of the risk. Most CEOs don’t pay a secretary $1M a year, although she might have some stock. I think some of the EAs at Microsoft had enough stock to retire as millionaires. Nobody ever talks about those people.
I didn’t say that Buffet makes $40 million in wages, JB. Were he to do so, he’d pay more than his secretary in income tax. But I said $40,000,000 in INCOME, which includes his dividends and capital gains taxed at a much lower rate.
Interesting, but can any of us really say surprising? I mean, I think I could have called a few of these. Fortunately, they’re not as simple to obtain as we would like them to be. I don’t think I’ll be becoming president anytime soon.
…And speaking of a policy of fraud and theft being in place longer than “never”, how many of it’s contracts with Native American nations did the US commit fraud on, while pontificating about the sanctity of them in its CONstitution? While making treaties “Supreme Law” (as opposed to the changeable, statutory laws made UNDER the Constitution) along with the Constitution itself?
Why don’t those who love romanticizing “founding principles” give credit to the Iriquois “Constitution”- a foundation of the US Constitution? Not only that, they probably imagine the US Constitution was made DESPITE Native American nations, rather than BECAUSE of them.
I could go on about the CON in Constitution, and how it’s perpetuated to this day but… I needs me some candy! Happy corporate, paganistic Halloween!…
Hello Kevo–thank you for your thoughts. It may seem at times that those of us who say that Constitution should be followed, may be romanticizing the Constitution…but our founders took as their beginning basis for the Constitution, the Biblical idea that all men practice evil. This is hardly a romantic idea. It is difficult to get men to acknowledge that they themselves are evil. This is a characteristic of all mankind, and the break up into small doses of power that the Constitution was supposed to create, was supposed to deliver to any one man a limited amount of power, and a limited time to use it. It was a new concept in world nations and tribes. If you can name for me a group that functioned in that concept I would be interested, because I have been under the impression that this was why it has been called the first “civil” government. Their first attempt broke power up too much, having the president only hold a one year term, and they were meeting together to create something new within a few short years. The Constitution included the concept that it could be amended by various means. They knew that the Constitution was not going to meet all needs for all time and would need to be changed.
But, the main documents I am aware of that they drew from were the Constitutions of the 13 states, where the people were experimenting with the new concept of self-governance. By the time the Constitution was drawn up the northern states had fought the battles in their own legislatures to eliminate slavery, and the southern states hadn’t, so when the delegates assembled the northern delegates were frustrated in their attempts to create a federal Constitution which eliminated all slavery. They had to compromise with the southern slavers and created a delegate for 3/5 of the people in slavery, not wanting there to be an incentive to breed slaves and have delegates who would vote to expand slavery. This led to the later war between the states.
(The concept of a federal govt instead of a national one has been very corrupted by recent communists, who desire centralized, top-down decision making, with everyone beholden to the govt for everything. The nationalization of 1/6 of the economy, and student loans with the passage of Obamatax has been a huge set-back to liberty. Most people have never read the bill and believe it when the Democrats say it is an AFFORDABLE,
system that will deliver health care to people, but it actually creates many new agencies full of bureaucrats who will have life and death decisions over us. Tyranny in a word. All an unconstitutional power grab that will ultimately destroy federalism.)
I know that at one point the delegates wanted to crown George Washington king, and he declined.
The Constitution is the agreed upon contract that creates a government with limited powers, and Article 5 gives the states the power to recreate it if it gets out of bounds in seeking power over the lives of people.
Of course people who have been in power have done heinous things according to the amount of honor and character the people possess. People in power have varying amounts of such. The Bible speaks to this…When the king is righteous the people rejoice…” When we have people in power who don’t believe there is such a thing as a lie, who lie so easily they have no concept that others can discern their lies, when they lie about their lies, well that’s a good indication that there are many more things going on that will hurt people.
Our Constitution includes restrictions on heaping titles on themselves…something power grabbers like to do. In Congo, Mobutu kept taking new names sometimes a couple of times a year. His list of names was LONG. And he liked to dress in leopard skin and look like an emperor.
All this is forbidden by the Constitution in an attempt to keep men sane about their fallen, sinful state and aware that they are supposed to serve the people.
A very interesting DVD or book is America in Black and White, which lists actions and the votes, and who voted how to create that action. It would be interesting to make a DVD about actions involving the Indian population and what votes created what action.
I was unaware that any tribes had any written language to create a Constitution. Verbal agreements have always existed between, and in tribal groups. The English “common law” was unwritten, agreed upon ideas, but our founders were trying to create a new concept, that of written, set-in-stone God-given rights that all citizens could enjoy. In the Constitution there are exemptions for Indian tribes “not taxed”. As now the govt is ignoring property rights of individuals, seizing property and giving it to others, govt officials often step outside the bounds of decency and restraint the founders intended, as land and possessions incite greed in their hearts.
At least our founders identified this characteristic (because of their Bible reading) and warned us to watch out for it. Then they fell into power hunger too. One of the things they were dealing with was trying to prevent further European incursion into America, and by taking control of the land they achieved thwarting England, France, and other nations, like Russia from further establishment of power in North America.
By saying CONstitution do you mean that people have done poorly in being truthful, and have used the Constitution against groups? Yes, that is sadly so. But still it is the agreed upon basis of our govt and changes need to be by agreement. Right now there are MANY actions being taken that are arbitrary and unagreed to, which gives us no guideline to follow, and allows officials to do whatever they choose, to whomever–licentiousness.
I love George Washington’s statement, Arbitrary power is built on the ruins of liberty ABUSED by licentiousness.
We must all acknowledge God’s assessment of us, that we are of a fallen nature, if we would lead others well.
(Bakongo Chiefs in Congo used to sit on a human slave, to demonstrate their power, along with other actions that would make them look and act powerful, such as burying a slave alive with each tribal member that died.
Slavery has been endemic among mankind, and an unending evil that our founders were attempting to stamp out under their jurisdiction.)
By ignoring our borders we are allowing many people into the US who are re-instituting slavery, and very little is being done to stop it. The slave trade/sexual trafficking is not being prosecuted under Obama. Slavery
is endemic with those in Islam, and the cartels are basically a slavery of individuals, having power of life and death over them–and extorting people. Mob activity. Again we see that our founders were correct in agreeing with the Bible that mankind is evil.
Speaking of wasted and gone money, and the media playing along… Has anyone seen a followup story on the missing TRILLIONS announced September 10, 2001?
http://solari.com/archive/missing_money/
“THE MONEY BEING PRINTED OUT OF THIN AIR, 85 Billion per month,
puts USA in a dangerous situation in which he is flooding the world and the states with money that has no economy or value behind it. This can only happen a short time and then everything will collapse. Any fancy names cannot hide the fact that this is what dictators do to enrich themselves at the expense of their people–driving them into poverty and death. The United States of America has never had the policy of printing money this way and defrauding our states and peoples of the world.
The media is in thick with him, and has covered up for him…”
I agree with Rebecca. The US is “defrauding… peoples of the world”.
That policy has been there a bit longer than “never” though. Since right after WWII, when the $ got reserve currency status. After which, Fed Chairman Ruml said “taxes for revenue are obsolete”*. It became about that money printing, and she was right to mention the WHOLE WORLD first because that’s the bottom-line of it: 85% of dollars are outside the USA, so the inflation she didn’t identify by name, but suggested would cause “everything to collapse” is being exported… diluted throughout the globe to that tune…
So the rest of the world has been paying 85% of our bills**, (beyond that obsolete tax revenue) and that is the lens to see things thru, beyond the Left/Right, good-cop/bad-cop routine.
* Reiterated by our Dear Leader Reagan’s Grace commission report saying ALL the tax money was “wasted…gone”. (I wonder why he didn’t implement any of the reforms his own commission indicated?)
** Reiterated by Dick (“Deficits don’t matter”) Cheney, whose actions in representing “fiscally disciplined” CONservatives, suggest they think 15% is too high! We should only be paying 5%, as that percentage of world population.
Come to McLean Virginia. You may not find a family that makes under $400,000. I don’t think I know one.
At least Rolando is aware of his situation.
http://espn.go.com/nfl/story/_/id/9892094/rolando-mcclain-trying-get-life-together-tuscaloosa
and there is only so much upward mobility in the world. If 1% are the rich, and 15% are the poor, there is a large space in between to be upwardly mobile, but you have to have the foresight to see that maybe building cars wont’ get you a million dollars, but it can get you a nice vacation each year and a bass boat. A friend of mine is black, he married his girlfriend, they are both accountants at an oil company. They make over $100K a year. they have a 4,000 sq ft house in the burbs and he has said his friends growing up have called him a sellout. A sellout to what? To having a better life? To getting through college as the first in his family? Personally, I think the house is way to big for the two of them, but that was their choice. They will have a kid that will have a two parent household out in the burbs in that environment where gangs don’t run the streets.
Exactly. This is how upward mobility works. Their children will be starting from a much better place than they were. It may take generations to go from the 15% (poor) to the 1% but it can happen. Not sure how you can help this with legislation.
Oh, and legalizing drugs would eliminate the opportunity for these kids to make six figures in their neighborhoods. Just saying….
If by “the opportunity… to make six figures…” you’re referring to prison costing more than Princeton, you’re right. But the millions of “these kids” are on the wrong side of the dividend equation in that industry.
Something occurred to me the other day when thinking about this topic that I thought I would share….
Too often the debate about “income inequality” seems to result in vilifying the rich or making it basically about increasing taxes on the wealthy. Using phrases like “paying your fair share” tends to put off the wealthy – as it should – and oversimplifies the problem.
What people really want – I hope – is equal opportunity. It’s not really about equal income, but just the opportunity to take care of your family and even increase your income or lifestyle over your lifetime or over generations. This is what America has always had – just looking at the myriad of stories of immigrants who came to our country with pennies and developed successful businesses, put their children through American colleges and basically participated in the American dream.
If the problem truly lies in opportunity, then one of the most glaring examples of inequality continues to be in our schools. We all live in communities of varying diversity and wealth – and all of us with children know there are varying degrees of education quality across socioeconomic demographics. This is one of the BIGGEST factors in income mobility – the ability to educate our youth so that they can get the jobs that will pay them more and contribute to society in a way that helps everyone. Some kids grow up in communities where they just don’t have a chance.
So how about instead of the constant refrain of “raise taxes on the RICH!” we focus as a nation on redirecting our spending in a more equal fashion. Maybe if we subsidize the school system more than we do to help create a more equal launching pad we will create more opportunity for people.
Simply making it a revenue side issue is too myopic and misses the forest for the trees. I really don’t think most thoughtful people in this forum want income inequality by reducing what the 1% earns – but rather by increasing what the 99% earns.
Throwing more money at schools don’t help. There are bad kids in the best school districts and smart kids in the poor districts. It all comes down to how involved you are in the kids life and who they hang around. Every kid can get a HS diploma and there are ways to get to college, even community college, you have to have the desire and motivation. you can’t force motivation onto people or bribe them with money to get good grades. Paying a teacher $100,000 doesn’t keep kids from dropping out of school. the home life situation creates the problems.
Great point. So then how do you improve the playing field? How do you set it up so that the smart, motivated kid in the poorer school and home environment can have the same opportunity to succeed? Or do you believe this opportunity already exists?
I guess what I’m saying is that income equality isn’t about making Warren Buffett and his secretary’s salaries more “equitable”. It’s about every single person in this country having the opportunity to succeed if they have the drive and motivation. What we don’t want is talented, motivated and hard working individuals unable to either survive or have upward mobility.
I don’t know that it will ever be equal, but at least most kids have a chance. It is hard if a single mom is working two jobs and can’t watch the kids, but having the neighborhood rec center of after school programs only go so far as well. Clarence Thomas came from dirt poor Georgia, but had a strong family. If you really want to boil it down, having kids young or being unprepared to have kids or be married is probably one cause. Again, kids with two parents can still become hazards to society, but the stats would probably show two parent households have higher graduation rates in the family. There is a societal reason why Asian kids do better in school and Jewish culture puts a strong emphasis on education. It just isn’t like this in the black or Hispanic cultures. Can it change? Sure, but it will take a generation or tow. When a kid can make a ton of money on the streets selling drugs, why go to school? They are short sighted and probably don’t plan to live to be 40. That is a culture change. Bill Cosby can only talk about it so much. Oprah isn’t willing to talk truth about the black culture. Who else is there? The rappers and athletes show the bling lifestyles that the kids want to emulate.
You are on the right track Peter. Almost all Americans simply want an equal opportunity for themselves and their children. They want rewards based on merit, but see that that’s really not the case as so many now achieve based on who they are related to or know rather than what they know and can accomplish. Yes of course, “who said life was fair?” But we could certainly be a whole lot more fair as a society, and we once were. Upward mobility in the U.S. has been limited more and more to a great extent since the 1970’s as international studies have shown.
Education is probably the greatest equalizer of all, but achieving equal education and advancing those who merit a higher education is anything but simple. For a child to achieve a good education, he must have good teachers (which takes money), supportive parents to steer him, and a supportive community, especially of his peers, which values education.
Since all three are necessary, simply throwing money at the problem has little impact. But in conjunction with the other two, it provides good teachers and administrators who need the extra incentive to work in challenging districts. It also lowers class size, which is the greatest predictor of effective learning.
Parents must value education and almost all, even the poorest, want their children to achieve a good one. The problem, especially in poor neighborhoods, is that the parents themselves have less education than their counterparts in the suburbs, and simply do not know what a good education looks like or how to guide their children in that direction. These parents also work very hard outside the home making ends meet and have less time with their kids, regardless of the stereotypes put forth in right wing media. A recent study which looked at the pressures on the working poor, determined that the constant stresses and worries of making ends meet is equivalent of sleep deprivation, and causes a reduction in IQ of 13 points on average. Perhaps that may explain some of the stupid decisions we sometimes read about in news accounts. These stresses also transfer to the children and reduce their abilities to learn.
The community must also support its children. When the prevailing attitude of the community and especially a child’s peers is that he must join a gang for protection and that he probably won’t see 21 regardless, his need and desire for education tanks. When all his friends drop out of school, so does he. It’s his culture, formed by the norms of his neighborhood. Yes, we all see someone occasionally overcome this environment and achieve a higher education, but the reason we do is that it’s so unusual, it makes news. And even when these kids are accepted to college now days, many, many drop out before two years, not because they can’t do the work, but because they realize the tremendous debt they’ve incurred cannot be paid back if they continue. Again, they have little financial guidance and are easy prey for usurious student lenders who know they must be paid back, even after bankruptcy.
As you say, this should be a priority since wasting so many minds in this global economic environment definitely puts America at a competitive disadvantage. To overcome this inequity and educate those who’ve proved their merit will take money however, something the wealthy are loath to support. Why should they? Their children will have no problems and besides, why give their kids more competition for college admissions or corporate promotion?
In Washington State today, the bottom 20% spends 16.8% of their incomes on state and local taxes. that percentage reduces all the way down so that the top 1% pays 2.8%. Although Washington tops the list, all states and foreign countries have become much more regressive with their taxes since the ’60s. No wonder the poorest among us are so stressed over making ends meet and why the middle class has seen its living standards decrease while the stock market reaches all time highs as does productivity.
Are we picking on the poor rich people if we notice these things and want to go back to a more progressive system which provided more equal opportunity and worked toward meritocracy? Even the wealthy merited what they achieved and prospered.
I was with you until this….. “To overcome this inequity and educate those who’ve proved their merit will take money however, something the wealthy are loath to support.”
The wealthy already pay a tremendous amount of taxes – both individually and percentage-wise – as has been well documented throughout this discussion. I think if the wealthy were told that there would be a surtax which would go directly to the education and support of our youth, you’d find more support. (And certainly less “loathing”) I completely resent – and am frankly offended when I hear people say – that all that the wealthy want to do is what benefits themselves. I live in a very wealthy community and can tell you first hand that is the furthest thing from the truth. As I moved up the economic ladder I have actually seen more charity and more giving people. Not saying that’s the way every wealthy person is – but that is no more a fair stereotype than someone saying that people in the bottom 20% are lazy or don’t work hard.
And certainly, the fact that residents of Washington state in the top 1% pay 2.8% and the bottom pays 16.8% isn’t what I mean. That could obviously be improved. I do know that the three states I lived in do not have that situation.
The point I was making with the comment about the wealthy being “loath to support” greater taxes to educate the poor and middle class was this. Humans have a natural tendency to concentrate on those issues which affect them and ignore or even oppose those which don’t. The wealthy are no exception and most, in my experience, are indeed more and more defensive about sharing their good fortunes with others. That’s not to say that most don’t contribute to charity or that there aren’t many wealthy individuals who would support equal education to some degree, but the recent trend has been for people to share less with the community and justify that if they make more than the other guy, they deserve it – all of it. The wealthy people that I know, can be wonderful people who are absolutely ignorant about the conditions of the working poor, the bottom 20%. They’ve never known any as friends, and they generally don’t especially want to connect the dots. They don’t really care either since they have no concept of how big those problems really are, and how they affect real people. There are exceptions of course.
What does “tremendous” mean? like “too big” or “too little” such words must be relative to something. “Tremendous” relative to the bottom half of Americans? Tremendous relative to their accumulated net worths? … to their incomes? … to their historical rates? What I was saying is that the tax codes for the U.S., its states, as well as most all western democracies, have become much more regressive over the past forty years even while the total share of wealth accumulated by those at the top has increased tremendously. However, the wealthy nowhere near pay the income tax rates that they once did during the 40’s, 50’s, 60’s, or 70’s, when the middle class was rising in income as well as being upward mobility. Merit took you much farther then than it does today. The wealthy pay “tremendously” less than they once did.
Don’t think I don’t understand the wealthy and their merit because I know no one from money. I am very familiar with wealthy friends so well as all others. I lived for 21 years in Newport Beach, CA, on Lido Isle, attended USC in a fraternity with the kids of the very very wealthy families, yet also played college BB with kids from the ghettos of Compton and Watts. My professional career brought me into intimate contact with all types and classes of people, so please don’t think I’m unfamiliar with the problems we all face. I do not intend to say that the actions of the rich are any less moral than others at all, nor are they doing any less than others for what they believe is to the benefit of their families. They just have more political clout which has translated into greater wealth for themselves, sometimes at the expense of others. We as a society must decide whether that is the greatest benefit to the well being of everyone however, and adjust accordingly.
I live in SW Washington. My company and I use to be in Portland, OR but we moved to Washington to reduce taxes on both the company and ourselves. Now we employ about 25 people that don’t have to clog traffic to go across the bridges on the Columbia river. So what is wrong with that? You can’t simply raise taxes on people and think there won’t be consequences.
About education. Parents are significant. So are friends and the activities they do. I could add and subtract with borrow and carry in the first grade. I learned watching my mother balance a check book. I learned to do long division in the second grade. I was showing a young high school kid that was painting our house my base ball cards and I wanted to know how to compute baseball averages. This didn’t take money and it gave me a huge advantage over my classmates.
Today kids buy iPads and other tech toys. Most are users, but there will be some that learn how to program these new devices. These people will learn a lot about how to make what is inside work and even how they work. The users will not. Basically, there are creators and users. Guess who gets the money? The point is that a lot of learning can be done outside of class. One must have the desire to learn. Those that have the desired will learn no matter what.
I am blessed or cursed with an excellent memory.
25th and Skidmore will mean something to someone that reads this thread. Think back 47-50 years.
“…No monetary policy alone can end the depression. It would take fiscal policy as well. On way to do it would be to make the Federal tax structure as progressive as it was in 1969. Today the wealthiest 3% of the people pay 50% of the federal taxes and the other 97% pay the other 50%. The marginal propensity to consume of the top 3% is around 0.4 while for the other 97% it is probably about 0.98. If taxes on the top 3% were increased by 50% and those on the bottom 97% were reduced by 50%, it would initially be revenue neutral. However, it would ultimately increase GDP by about 3% and reduce the unemployment rate to around 5%. That change in relative tax burdens would bring the degree of progressivity in the tax structure back to where it was in 1969
Another way to end the depression would be massive tax cuts for the middle class. The 10% and 15% Federal tax brackets could be temporarily reduced to zero. For married taxpayers this would exempt all income below $72,500 from taxation. This would be a $9,982 tax cut for all couples with taxable incomes of $72,500 or more and less for others with less taxable incomes. Additionally, all personal payroll taxes could be suspended. As with the recently eliminated 2% payroll tax cut, the treasury would make the trust funds whole. This would put $6,120 in the pockets of a household that had $80,000 in wages. These steps would provide a total of about $15,000 to the typical middleclass family. It would increase the deficit. However, with the current levels of interest rates and the actual profits made by issuing t-bills at negative rates, the long-term costs will be less than they were in WWII as a percentage of GDP.
When Obama was campaigning for president he called for a $1,000 middle class tax-cut. On the day he took office the correct amount to end the depression was probably close to $15,000. Congress passed an $800 middle class tax-cut as part of the stimulus package. …”
http://seekingalpha.com/article/1543642
Did you know that most Christians believe in evolution and the scientific data indicating that the universe is billions of years old, Rebecca. Their faith is not at odds with science at all. God gave them intellect and logic to use to better humankind, not to deny and obstruct the advancement of knowledge.
“…It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increased savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich and onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers…”
http://seekingalpha.com/article/1543642
A little long but an excellent article. Thanks.
I too had noticed that the top income tax rates on the wealthy had dropped greatly before the Great Depression just as they had before the Great Recession, but didn’t know if it was coincidence. This professor ties it together nicely, but I hope he’s wrong. Otherwise, we’ll be in this painful economic malaise for many years to come.
Some interesting things in this article….
A few counterpoints to add, however. A “depression” is defined in economic terms as a recession that lasts more than 2 years OR where we see a decline in GDP of over 10%.
First let’s look at the length: By this definition, there was no depression in 2008-2009. We had 4 consecutive quarters of GDP decline – but since then, GDP has grown every single quarter but one. 15 out of the last 16 quarters. The Great Depression saw 17 consecutive quarters of GDP declining.
Next, let’s look at depth of the GDP decline. During the Great Depression, GDP dropped by 33% over a 4-year period. Over the 4 quarters that encompassed the GDP decline in 2008-2009, we lost about 15% of GDP. So by these terms, we were in a depression, albeit a much milder one and certainly a much shorter one.
To insist that we are still in a depression is certainly not true by anyone’s definition of depression. How we can be in a depression with four straight years of economic growth is beyond me. Frankly, I think many of the very valid points he makes about the social programs like welfare and unemployment are alot of the reason why this depression was so short-lived, and why we were able to recover so fast.
This kind of thinking is why a lot of people have had their money out of the stock market during the last 5 years and missed the 140% gain that the stock market has seen since March 2009. It’s a shame.
One point he brings up which is interesting is why corporate taxes are so low and payroll taxes are so high. If you run the numbers on this, you’ll see that actually increasing the corporate tax rate marginally does much more for the bottom line than marginally increasing taxes on the 1%. But no politician wants to talk about this since corporations help them get elected.
“…The key difference between a recession and a depression is that a recession can be ended by monetary policy alone.
If every few years you got the flu and now you had a strep throat it would be incorrect and possibly dangerous to think that you just had a bad case of the flu this year. Over the last hundred years there have been numerous recessions but only two depressions, the depression of 1929-1941 and the depression that began in 2007. The symptoms of strep throat and scarlet fever may be similar to that of the flu or common cold. However, causes of the former are the streptococcus bacteria while influenza is viral. Hence, strep throat and scarlet fever require antibiotics which are useless against viruses. Likewise, believing that the depression that started in 2007 is just a severe recession is quite dangerous to both investors and policy makers. As long as many policy makers appear not to realize the distinctions between recessions and depressions, investors ignore those distinctions at their peril.
The effects of the 2007 depression are much less severe than the 1929-41 depression because of safety-net benefits now provided. Consider the horrendous, though not uncommon situation of a household in 1932 comprised of elderly grandparents being supported by their working-age children with young children of their own, when the breadwinners became unemployed. The 1932 family would be destitute. Today the grandparents would have social security and Medicare benefits. Their working-age children could now collect unemployment benefits for up to 99 weeks. Additionally, the entire family could also be eligible for food stamps, Medicaid, rent subsidies, heating fuel subsidies, free school lunches and other benefits. The 1932 family might also have had a bank account in one of the many banks that failed and lost their savings. Today, Federal Deposit Insurance protects such bank accounts. You might say we are now in a depression with benefits.
The difference between a depression and a severe recession are not just semantic. Recessions occur when the Federal Reserve raises interest rates in an effort to slow down an overheated economy. Most importantly, recessions end when the Fed lowers interest rates. In a recession the pent-up demand for housing and durable goods means that monetary policy alone can cure the recession. Just as antibiotics can be effective against bacterial infections but not against viruses, monetary policy alone cannot end a depression. Furthermore, modest fiscal stimulus and the automatic stabilizers that can hasten the end of recessions cannot end a depression. There can be ups and downs in the unemployment rate during a depression. However, the unemployment rate remains elevated. It was 14.5% in 1940 and 9.7% in 1941….”
http://seekingalpha.com/article/1543642
It wasn’t a depression in 2007 and most of it was caused by the housing bubble. Better lending practices and it probably wouldn’t have been as bad. Everyone got greedy. There are many more people now than in 1929, the economy is different and we are a global economy. It is hard to compare the eras with one being dependent on newspapers and radio and slow information and now with instantaneous information about everything. There will be another recession. it could start next year if people quit buying cars and houses and stopped going out to eat for a few months. Many restaurants have razor thin margins and can’t go a few months without customers. If everyone cooked at home, the grocery stores would be making money and McD/Subway and chili’s would be laying off workers.
The definition of “depression” aside, what I found interesting was the explanation of production getting ahead of middle class income, which in real terms, had been declining. We’ve all been taught that it was the main reason for the Great Depression, but I haven’t seen that in any other explanation of the other recessions since that time. Not just the United States, but all first world countries have been moving more and more toward regressive taxation and also competing for international corporate immigrants by reducing corporate taxes. The middle class and poor must then make up the difference which reduces consumption for the goods produced by the corporations.
Every state has been moving toward regressive taxation for many years now. Washington State is now the most regressive in terms of state and local taxes. I just read yesterday that the bottom 20% of Washingtonians pay 16.8% of income in state and local taxes, while the top 1% average 2.8%. These sorts of inequities can not be justified, especially since everyone from the very bottom to the top loses when production is reduced for lack of a market. Of course the bottom 20% and the very poor will suffer from any economic downturn much more that the 1%.
What is also interesting about the Depression is that what made it so severe and last even longer was not only the lack of “stopgaps” but also the fact that they raised taxes in the middle of it. Fortunately, we didn’t do that. Of course, now that we are 4 years deep into the recovery, the economy could stomach it much better if that is what they do decide to do.
You make a good point Peter. In 1937 with fiscal conservatives in control of Congress, they surmised that the time had come to apply austerity in order to pay back the stimulus spending which had taken place during the previous five years of the Roosevelt administration. They both raised taxers AND cut spending. This actually created a second, or “double dip” depression, which was remedied only by WWII.
Are you sure that now is the time to do the same? Ben Bernanke, a student of the Great Depression, and a fiscal conservative, doesn’t think so according to his actions.
No, I don’t think now is the time to raise taxes significantly more than we already have. The latest tax law changes have already raised taxes, although much of the increase goes directly to other spending (ACA). Plus, with the improved economy, tax receipts will rise anyway.
I continue to feel as though the real work lies in the spending side. Of course, our spending should drop anyhow with the winding down of the wars in the Middle East.
You raise taxes or cut spending and they both impact the economy and help reduce the debt. But it is a balancing act. My worry is that we do see increased revenues and don’t reduce the debt. Then, the next time we go through an extended recession and/or see inflation or higher interest rates (which are more and more likely because of the devaluation of the dollar), we won’t be able to “patch” things together like we did in 2008-2009 and much more dire circumstances result.
Greetings Peter,
I am way on your side when it comes to separating faith and religion from reason and science. They are very separate, and in my world, do not conflict. Your diatribe condemning the echo chamber of the extremes in talk radio, TV, internet, and partisan news that only agrees with the consumer’s point of view so that he doesn’t have to think, was excellent also. And, I’ve been enjoying your exchanges with Aspiekid almost as much as ours. (I’ll bet he actually is a kid too.) However, you may be interpreting what he says as too extreme when it may not be.
He speaks exclusively to the economy and cites facts from solid sources, and that, I’m sure, you can appreciate. Yes, the 70% remark, is his opinion, but listen to what he’s saying to back it up and he may be correct that the problem is overwhelmingly instituted by a change in ideology of one party. He is saying that something very unusual has happened over the last thirty five years, something that has never happened before in American history, and unless we understand exactly how we got here, we may never be able to find our way out of this mess.
Completely agree with you here, MOR. Well said. There is no question that a sea change in our government and how they operate has occurred – and I think the last 35 years is probably a pretty close estimate. It’s going to take the political suicide of someone – or the sacrifice of almost everyone – to change our course.
One of the problems with this whole debate is this….
If I were to argue about the existence of God with a devout Christian – there would be no point. The Christian would “believe what they believe” and talk about their faith. Facts and logic aren’t really the point – it’s just a bit of a supernatural belief that there is no point trying to sway.
The same thing goes for you, Aspiekid. You have decided in your mind that Republicans are to blame for the majority (70% I believe you estimate) of the economic mess. It doesn’t really matter what I say. Man-of-Reason and I have had some good debates, and while I do see a little bit of a “lean” from MOR, he appears to be a deductive thinker who tries to see both sides. If you believe as it seems that Republicans are primarily to blame, then you should keep voting Democrat across the board and get them even further out of power. There really isn’t any more point in debating, really.
What I was referring to in the way of “stimulus” was QE3. However, you can’t take Obama’s presidency and credit him for any good outcomes and blame the ‘stonewalling of the Republican Congress (it was a Democratic Congress for the first 2 years by the way) for anything bad. If you think Obama is that perfect and that Congress is that insidious, there really isn’t anything I can say to change your mind.
The one thing I would think both sides can agree on is this – the last two administrations have been disasters, particularly from a fiscal standpoint. Part of the problem in my opinion is that both have been very divisive administrations. Looking back at Clinton/Gingrich, Reagan/O’Neill and most administrations prior to this and you’ll see people with varying ideologies working together. For whatever reason, the last two presidents haven’t been good at this at all. Say what you will about Reagan or Clinton, but they were master negotiators – smart, reasonable men who would have a dialogue. Until we can have this dialogue at the highest level with the leaders and lawmakers of our nation we’ll continue to spiral downward as a country.
Which brings me back to my point…. It’s important that we as citizens quit lapping up the pablum from talk radio, internet, cable news/entertainment channels, etc. and try and think for ourselves. The great thing about the internet is that the data is all laid out for us as public record. You can look at the budgets, tax receipts, etc. dating back 100 years and see for yourself. The sooner we can remove politics from this equation the sooner we can actually fix this problem. Otherwise we have bullheaded idealogues from both sides just sitting with their arms folded doing nothing.
It isnt a taxing problem, its a spending problem with the gov’t. The bottom 50% pay in 2.5% of tax revenue yet take 60% of gov’t spend. Thats a problem. So is foreign spending (handouts)
JB, that’s right. But with the power of president he has sued, and sued, private organizations, private businesses, states, people of the law, and people in government of the United States of America. He has used his power against the people of the United States in every way he can. When he closed the gulf to drilling, judges told him it wasn’t legal to do that, and the three scientists whose names he fraudulently applied to the paperwork to close it down, vociferously claimed none of them had actually signed it.
He has closed down industry after industry, along with the help of Democrats
nationwide. In OR Democrats just got done closing mining. Soon Kitzhaber intends to call a special session to pass the Columbia River Crossing, which has a myriad of reasons to not pass, one of which is that it will tie up ALL the proceeds that normally would repair our roads for 20 years, plus Washington doesn’t want to do it so they will not carry half the cost in the BILLIONS because it MUST have light rail to please the Democrats.
So, evidence-wise, Democrats are dedicated to the over-whelming of America through internal attack on our system.
In OR this last year they were taking old OR law and inserting “shall serve at the pleasure of the governor” which will force the bureaucrats to serve the governor instead of Oregonians.
This is why I have been trying to alert people to the destructive past of the Democrat Party, which was the force to give southern society Jim Crow law
and night riders, (which killed about 3000 black people, 2000 white, all Republicans which stood up for their freedom in some way to attract attention from the tyrants).
George Washington rightfully said, Govt is not eloquent, not reason, it is force
and like fire, is a dangerous servant and a fearsome master.
Specifically, Obama has very troublesome allegiances to the Muslim Brotherhood and is gun-running and supplying money to war against Christians in Egypt, Syria, and Kenya. His gun-running to Mexican cartels
has also killed many, and are continuing to kill many.
THE MONEY BEING PRINTED OUT OF THIN AIR, 85 Billion per month,
puts USA in a dangerous situation in which he is flooding the world and the states with money that has no economy or value behind it. This can only happen a short time and then everything will collapse. Any fancy names cannot hide the fact that this is what dictators do to enrich themselves at the expense of their people–driving them into poverty and death. The United States of America has never had the policy of printing money this way and defrauding our states and peoples of the world.
The media is in thick with him, and has covered up for him.
The Democrat governor of Hawaii has finally been pressed into confessing that there IS NO birth certificate, which is what a county clerk told the world right away. A little late…
He sued as a community organizer and lawyer for ACORN, not as State Senator or US Senator or President. Check out these links for more information:
http://www.thegatewaypundit.com/2011/09/obama-administration-sues-17-banks/
http://www.godlikeproductions.com/forum1/message2388305/pg1
Ken, you never mentioned Obama suing banks back in the 1990s, to force them to comply with the Community Reinvestment Act. The govt was wanting private industry to do things that were not in the best interest of their investors, and Obama was busy forcing them to. Later he voluntarily gave up his law license…I’m not sure why,
but have read that is what lawyers do when they want to escape investigation.
His wife gave hers up too.
The Democrats were protecting Fannie and Freddie and never allowing any of the investigations that the Republicans wanted to do to see if things were above-board. Meanwhile they were giving themselves bonuses from Fannie consisting of $80-100 million per year. (It’s just taxpayer money).
The way I remember the Reagan years was him always fighting the Democrats and them HATING him. They even tried to kill him. Reagan tried very hard to get to have line-item veto for the wasteful junk the Democrats always put into the budget. The Supreme Court blocked that. Of course the Dems thought the Supreme Court was great on this point.
The media cover up for the Democrats, own them, and the media and Democrat Party people are very intermarried and intertwined. They move from media to government assignment without batting an eye–and of course,
like Reagan said, “they know so much that isn’t so…” Breitbart was beginning to break into their bubble when he was murdered.
The reason I said your analysis on the last 30 years was one-sided is for the very reasons you cite for the expanding chasm of policital ideology. While you position yourself as being an objective centrist in your comments, the examples you cite are universally critical of conservatives, with specific examples, while being silent towards specific example that liberals and their policies or actions have made to the poor economy.
An example is Starve the Beast. For the entire duration of Reagan’s presidency there was a Democratic majority in the House. In some years it was an overwhelming majority, byt as many as 70 members if memory serves me correctly. You have characterized STB as a conservatives-only reason for a significant amount of the deficit (i.e. reduction in tax recipts).
In reality the “Reagan” 1981 tax cuts, presumably an example of STB, had to have Democratic party complicity in order to pass. They did. This is something you never mention, choosing instead to implicitly blame Republicans for increasing the deficit due to STB-related passing of the tax cut. Interestingly, after the 1981 tax cut, from fiscal yewar 1981 to fiscal year 1989, gross tax receipts of the federal government more than doubled. Which interestingly then calls into question wherether STB was a real strategy they intended to follow, or just political gamesmanship to convince the conservative portion of the general public, with no intention of using the increase in receipts to descrease the size of government.Conversely you could say that things like the Strategic Defense Initative (SDI, or “Star Wars”) were priority spending and “couldn’t” be reduced. As SDI and the arms race in general turned out to be a key element of the fall of the Soviet Union, which is to say their economy and communist way of life sucked and they couldn’t keep up, there’s something to be said for having financed SDI. However, that does not explain the rest of the Reagan-era deficits. Which then, as I said, causes you to call into questoin the STB strategy.
You also never mentioned that in the last 30 years the Democratic party has never offered any serious plan for entitlement reform…entitlements now consuming (not sure of the exact numbers here) roughly half of our federal budget, with both SS and Medicare headed for insolvency within 25 years. And while I don’t think that short-term budget negotiations are the most fruitful place to resolve long-term taxing and spending issues, as we’ve witnessed lately, Democrats have rarely (never?) wanted to talk about reducing entitlements, nor bringing spending under control, either one. They always say that it will be on the table “in the future”, but they never bring it up after that. Kind of llike Lucy promising to keep the football steady fort Charlie Brown the next time he kicks it. Honest, Charlie Brown, next time we really will talk about entitielment reform. Republicans don’t ever want to talk about reducing Defense spending, so they are not blameless, either.
As far as the rest of the deficit… there are almost too many issues to list. One that leaps to mind, though, is the 2008 financial crisis. This, again, is one where I think there is enough blame to go around on both sides of the aisle, although I have rarely ever seen liberals admit to their complicity in it….
The roots of the 2008 financial crisis lie in the 1977 Community Reinvestment Act, passed of course under the Carter presidency. There was renewed interest in this in the 1990s under Clinton, presumably to enahnce his “legacy”. Not sure. At any rate, the goal of the CRA was to allow more underprivileged (I would say “unqualified”) applicants the chance to own homes. As it turns out these were homes they couldn’t afford, hence my use of hte term “unqualified”. The 1999 repeal of the Glass-Steagall Act, effectively removing the separation between investment banks and depository banks in the United States, was also a key element in the financial crisis. It was passed during the Clinton presidency. Banks were pressured by the federal government to make loans to people who couldn’t afford them. And while many of these practices started or increased under Clinton, they continued under Bush 43, with only a few mild warnings from Bush 43 and others of his administration. Barney Frank and Christopher Dodd were the respective heads of their House and Senate finance committees, respectively, during this time, and were essentially asleep at the wheel. Dodd and Frank eventually crafted a 2010 law, which passed, which closed the barn door after the horses had been stolen.
All of this combined — the creation and eventual bursting of the housing bubble, , the financial crisis, along with a global recession — helped fuel the 2008-2012 world-wide recession. Interestingly, in my opinion, only George W. Bush has ever been singled out as a villain in all of this, since he was president when the recession hit. Liberals beat on this relentlessly, rarely understanding or being able to articulate any of what I have just written. Not saying you are one of these, Aspiekid, because I think you are smart enough and probaly do understand this. Yet you didn’t mention any of these things I listed as causes for the current ecnomic crisis, and never mentioned Democratic party or liberal complicity in these. Instead you specifically implicated conservatives, via your mentioning of STB, your mentioning only Republican presidencies but not Democratic Congesses, and so on, which is why I say that you were one-sided in your original posts.
So there you go. Guess I’ll quit now.
Very well said…particularly regarding the banking crisis. Our whole government was complicit in that mess – and the genesis of the problem lied in both a liberal desire to help the less fortunate own homes and the conservative greed to make as much money as possible doing so by repackaging and reselling these bad mortgages.
I always think of the classic TV show “The Wire” when these debates are ongoing – in this respect: The major problem with the whole system overall is that everyone who is elected, appointed or hired to do a job is only concerned with advancing their own careers and improving their perceived “legacy”. This is not productive to real change, improving the system or overall process, or benefitting the health of our nation long-term. This structure of civilization is why most major empires rise and fall – and honestly I don’t know that there is much to do about it.
It is laughable for people from either side of the aisle to think that the other side is entirely (or even predominantly) to blame. It’s just a different day, a different charade. Many of these politicians are from a law background anyway – which means that they are capable of arguing either side…whichever side suits their personal, career or party needs at the time.
Look at John Kerry’s rhetoric during the recent Syria crisis. The liberals loved to tear down Dick Cheney as a warmongering maniac, yet if I made a list of quotes from Cheney before the Iraq/Afghanistan invasions and Kerry’s quotes in the last few months, you’d be hard pressed to distinguish them.
To the original topic at hand…. my major problem is that NOBODY is trying to fix the economic issues of our country. Raising taxes on those that make $400k/year barely makes an actual dent – only a political one. Real entitlement reform, spending cuts, and simplification of the tax code are what is truly needed to keep us from going off the financial rails – but that would certainly ruin the career of whoever actually did this.
A simple tax code isn’t going to generate more taxes. It would probably generate less. How about if you make less than 40K, you just don’t have FIT taken out of your check and you don’t have to file a return, or it will be pretty easy. They could also raise the standard deduction so less people have to worry about itemizing. They can still limit the mortgage deduction to the middle class. Keep the charity deduction, but a bunch of other stuff can go away. I am curious to see the numbers on mortgage deductions with the low interest rates and if people realize they won’t get the deduction on a 150K house with a 3% interest rate. At some point people will just get used to the new system. People used to be able to deduct credit card interest and auto interest. People kept buying cars and keeping balances on credit cards.
Good point. I would put simplification of the tax code as the most minor of the three things I said would need to happen. The fact that about 2/3 of our budget goes to SS, medicare and other promises and entitlements certainly begs that we need to reform those programs first. The scary thing is that interest on our debt is less than 10% of the Federal budget now with record low interest rates. This will go up at some point and THAT is when we will really be hurting.
Of course then we will not only have to fund SS and Medicare but the ACA as well. The government is dancing around the issue because the major reform it would take to fix this is beyond the “cojones” of any mainstream democrat or republican I’ve come across.
You make some excellent points Ken. Yes, democrats voted for those tax cuts too. The Democratic party, especially at that time, had many very conservative members and was much more fractious than the Republicans and actually still is. Will Rodgers once said, “I belong to no organized political party. I’m a Democrat.” The point is, however, that the idea came from the neocons, and Reagan lead the way. I doubt that many in congress knew there was any long term ideology behind the deficit spending, and the term, Starve-the-Beast, wasn’t coined until 1985. I also believe that Clinton’s signing of the repeal of the Glass-Steagall Act was a major screw up and contributed to the many deregulations of those that that once held Wall Street and the bankers in check. Even though it passed through a Republican Congress, Clinton bears the blame.
I once read a very thorough non-partisan analysis of whose was to blame for the Great Recession (I think in Foreign Policy magazine) and surprisingly, Bush wasn’t the #1 culprit. It was Greenspan. The Fed policies which lowered long term interest rates contributed greatly to the housing bubble that burst and led to the Great Recession. There were many people mentioned, especially on Wall Street, in the Cabinet, and Congress, but Barney Frank and the Community Reinvestment Act was not. That is simply a canard to deflect blame from the right. You see, the defaults on the subprime loans were mainly because the greedy lenders and their agents gave loans to unqualified applicants, packaged them and sold these dangerous instruments to unsuspecting pension funds and foreign governments before the defaults began. That was Wall Street and the bankers crime, not the CRA. But of course, some bankers may say, “But the gov’ment made me do it!”, – NOT! They had guidelines for their loans, and they broke the rules out of greed.
As far as entitlement reform, neither party has offered a serious plan. Have you noticed that no one will say exactly what he wants to cut? No details are ever mentioned. That’s because they all know that to do so would be political suicide, since the other party would make Swift Boat fodder by claiming they are out to take food and medicine from your sweet loving mom.
There are many thing I believe the Democrats are wrong about, and they are not above total reproach for what’s has happened to our economy as you and I have mentioned. But I place 70% of the blame on the tax cutting, industry deregulating, government shrinking, war mongering, ideologies adopted by the Republicans over the last 35 years. However, it was the last four and especially the last two years that my anger at their idiocy has peaked. Here’s why:
A new study conducted by Macroeconomic Advisors, a non-partisan consulting firm, and commissioned by longtime Republican deficit hawk Pete Peterson (no liberal), says that if not for the “fiscal crises” created by Congress over the past two years, another 2 million Americans would have jobs. The unemployment rate would have dropped below 6.7%, and the growth in GDP would be about 4%, instead of 2.5%. A robust recovery would finally be under way.
The study found that Congress’s fiscal-cliff and debt ceiling emergencies have unsettled markets and employers, kept consumers cautious and paralized the entire system with uncertainty. The 5% annual cut in federal spending, forced by the sequester, the economists found, has been too drastic and has retarded growth. America’s economy, in other words, is being actively sabotaged. Such self destructive behavior is anything but conservative: Without such uncertainty, vigorous growth would flood the Treasury with tax dollars and shrink the deficit.
We owe this all to a small group of angry zealots who have hijacked responsible leadership, and to the fear of these crazies and their wealthy benefactors by mainstream Republicans who know better, but value their elected positions more than doing what is right for America. I see no Democratic complicity in this. (For more, see the Oct 25 issue of THE WEEK magazine.)
Just had to jump in here on one point. I love the idea that the Republicans are “government shrinking”. I actually live in the DC area and have for 20 years. For about half of those years we have had a republican president and for the majority, a Republican congress. I can’t even remember the last time the government “shrunk”. This is laughable. Both sides and both branches have done nothing but inflate the size of government year after year after year. Republicans may say they want to shrink the government, but there is no evidence in quite some time that they have done so – they don’t do it because it is bad politics as I said above.
Similarly there is this impression that Obama wants to grow the middle class – or even further- create more income equality and opportunity. Yet he has overseen and approved more unnecessary economic stimulus to fatten the wallets of the rich and create more debt for our country than the prior administration. Why? Because it makes the economic growth during his tenure look better so he can have that on his résumé.
The core problem is that they are all the same – Frank, Obama, Bush, Kerry, Reagan, whomever you want to name. What we need is a renegade of sorts who isn’t concerned with the reputation, legacy, popularity or accolades with the office – but more concerned with helping America.
Render unto Caesar that which Caesar does best, and unto Joe Plumber, that which a Plumber does best. There are some things best left to capital markets and some best left to government. Corporations are best at making profit for their shareholders and government is most concerned with the welfare of its citizens (or sat least it should be).
Example:
Pfizer, the last and greatest drug company in developing antibiotics, has decided to discontinue research into any more “miracle drugs” at a time when drug resistant bacteria are killing more and more people. It’s just not as lucrative as the development of drugs for chronic diseases they reason. You see, antibiotics are taken for a couple of weeks and then discontinued, while drugs for high cholesterol or diabetes are taken for a lifetime, assuring longer term profits. Profits are paramount to corporations. Therefore, for the well being of its citizenry, the government will most probably advance research to find new antibiotics which will cost billions but can combat these deadly infections.
You are very correct that Republicans as well as Democrats do not shrink the government. As a matter of fact, spending has increased more under Republican presidents that Democratic presidents. But perhaps that’s because doing so isn’t in the best interests of Americans. Maybe “Frank, Obama, Bush, Kerry, Reagan, whomever you want to name” aren’t a core problem at all, but realize the reality of the situation and what’s best for Americans regardless of their campaign noise. Maybe “shrinking the government” sounds good during heated campaign rhetoric, but the fact is that the checks and balances placed upon government by the constitution are working to balance government’s size to “exactly right”.
Who told you that government was too big anyway? Too big compared to what?
MOR – to answer your last question….
Aspiekid….
“But I place 70% of the blame on the tax cutting, industry deregulating, government shrinking, war mongering, ideologies adopted by the Republicans over the last 35 years.”
Very clever Peter – You too Kid.
Oh, I just had to respond to your comment on Reaganomics also Ken.
The argument that the near-doubling of revenues during Reagan’s two terms proves the value of tax cuts is an old argument. It’s also extremely flawed. At 99.6 percent, revenues did nearly double during the 80s. However, they had likewise doubled during EVERY SINGLE DECADE SINCE THE GREAT DEPRESSION! They went up 502.4% during the 40’s, 134.5% during the 50’s, 108.5% during the 60’s, and 168.2% during the 70’s. At 96.2 percent, they nearly doubled in the 90s as well. Hence, claiming that the Reagan tax cuts caused the doubling of revenues is like a rooster claiming credit for the dawn.
Furthermore, the receipts from individual income taxes (the only receipts directly affected by the tax cuts) went up only 91.3 percent during the 80’s. Meanwhile, receipts from Social Insurance, which is directly affected by the FICA tax rate, went up 140.8 percent. This large increase was largely due to the fact that the FICA tax rate went up 25% from 6.13 to 7.65 percent of payroll. Hence, the claim that the doubling of TOTAL revenues proves the effectiveness of tax cuts is including revenues which resulted from a tax hike to prove the effectiveness of a tax cut. This seems like the height of hypocrisy.
Hence, what evidence there is suggests there to be a correlation between lower taxes and LOWER revenues, not HIGHER revenues as suggested by supply-siders. There may well be valid arguments in favor of tax cuts. But higher tax revenues does not appear to be one of them.
The real measure of Reaganomics however, was the record increases in the national debt which increased 58% during Reagan’s first term and 44% during his second (adjusted for inflation). To put that in perspective, No presidential term since WWII saw any more than single digit increases or decreases with Carter’s term seeing a 7% decrease.
Uh…the debt grew 60% in Obama’s first term and up over 25% in both of Bush’s two terms.
And why do you need to adjust percentage statistics for inflation? Lol….. Come on now.
Your too smart to not know the answer to that. Shame on you for baiting Aspiekid. But for those who may not know, the raw dollar amounts are adjusted for inflation and then the percentages are figured.
Here’s from another post on this site back in March which checks out to be correct:
“Your point that Republican presidents spend more than Democratic presidents has merit. As evidence, ignore the reported budget deficits since they can be manipulated, and look at the increase in national debt by presidential term instead.
“From Truman to Carter the national debt fluctuated up and down (mostly down) by not more than 7% in any presidents term. Using the beginning and ending debt, adjusted for inflation, for each term, we get:
1977-81……….Carter……………-6.6%?
1981-85……….Reagan…………+57%?
1985-89……….Reagan…………+41%?
1989-93……….BushI…………..+38%?
1993-97……….Clinton…………+16%?
1997-2001…….Clinton………..-3.2%?
2001-05…….…Bush II……….+22%?
2005-09……….Bush II………+42%
2009-13……….Obama……….+55% (Wrong estimate)
“Both Reagan and Obama were faced with recessions during their first terms and both knew that austerity rather than stimulus would deepen and prolong the recessions and unemployment. Unfortunately, the Great Recession needed much more stimulus than originally anticipated, but by the time the depth of it was discovered, the Republicans dug in and obstructed any more spending hoping Obama would be blamed for the economy and lose the 2012 election.”
Obama’s total was a guestimate since his final budget year hadn’t ended. When the final tally for Obama’s budgets and spending came in September 30, 2013, his increase, unadjusted for inflation, was 41% – not 60%. On October 1, 2009, the total national debt was $11,920,519,164,319.42, and on September 30, 2013, that debt was $16,738,183,526,697.32
( click http://www.treasurydirect.gov/NP/debt/search?startMonth=10&startDay=01&startYear=2009&endMonth=09&endDay=30&endYear=2013 )
I totally disagree that the “Great Recession needed more stimulus than originally anticipated”. The economy has been on sound footing for at least 6-7 quarters, yet we continue to feed the stimulus. You could argue at what point we should have stopped this exactly, but you’ll be hard pressed to find an economist that thinks that we should still be stimulating the economy in this way.
Oh and since you quote GDP in prior posts…. one of the big measures of the “danger zone” of spending vs. receipts is the “debt as a percentage of GDP” statistic. Most economists feel as though 40-60% of GDP is a reasonable debt level….. we have been in that range basically for 20 years. Since 2008, that percentage has risen each year – and we are now upwards of 100%. This should be setting off alarms, as getting this number back down is crucial. Yet we continue to issue more debt to stimulate the economy with hot air.
This is crazy dangerous – but most people don’t understand this. The irony is that it is helping the 1% a lot more than it is decreasing unemployment or helping those that are struggling. In other words, it is a huge mistake all around that may cost us for decades. It’s way past time to stop the stimulus and quit running up our debt. It will slow down the economy and can be done carefully – but it must start soon or we will be in big trouble long term.
The Recovery Act, was an economic stimulus package signed into law on February 17, 2009, less than a month after Obama was inaugurated. According to a March 2009 Industry Survey of and by the National Association of Business Economists, 70.6% of their economists who had reviewed the fiscal stimulus enacted in February 2009 projected it would have modest to strong impact in shortening the recession, with 29.4% anticipating little or no impact. However, it would be many months before the enormity of the Great Recession would be grasped by economists or the administration. By that time further stimulus to match the depth of the recession was impossible to pass over Republican opposition.
In 2011, the Department of Commerce revised some of its previous estimates. Economist Dean Baker commented: “[T]he revised data … showed that the economy was plunging even more rapidly than we had previously recognised in the two quarters following the collapse of Lehman. Yet, the plunge stopped in the second quarter of 2009 — just as the stimulus came on line. This was followed by respectable growth over the next four quarters. Growth then weakened again as the impact of the stimulus began to fade at the end of 2010 and the start of this year. In other words, the growth pattern shown by the revised data sure makes it appear that the stimulus worked. The main problem would seem to be that the stimulus was not big enough and it wasn’t left in place long enough to lift the economy to anywhere near potential output.” [“US debt deal: how Washington lost the plot”, The Guardian (London), August 1, 2011]
Stimulus works by advancing GDP during a recession and inevitably suppressing GDP some years later when growth is stronger and the economy can handle the small (0.1%-0.3% est.) decrease. The American Jobs Act was the informal name for a pair of bills proposed by Obama in a nationally televised address to a joint session of Congress on September 8, 2011. It would have again stimulated the economy by focusing on job creation during what turned out to be a sluggish recovery made more so by initially underestimating the stimulus needed to match the recession. Unfortunately, this was one year before the presidential election and granting any success to the president was deemed politically unwise for the Republicans. Therefore, the Senate couldn’t gain the 60 votes necessary to overcome the threat of filibuster, while the house was now firmly in control of the Republicans since the 2010 elections. All efforts to further stimulate the economy failed. Therefore, the recovery is very slow, and the economy fragile.
You are correct to worry about the tremendous national debt and its effect on future GDP. Yet, nothing can be done until we see stronger growth to support greater reductions in the deficits which have come down from 1.4 trillion dollars in 2009 to a projected 600 billion dollars for this next fiscal year. If austerity is enacted too soon, we could have a repeat of the 1937 lapse back into recession or face what Greece is going through with the IMF/EU imposed austerity measures from which it suffers.
Simply refer to my post yesterday about the independent study by Macroeconomic Advisors which concluded that the 5% annual cut in federal spending, forced by the sequester. The economists found that it’s been too drastic and contributed to retarding growth and increasing unemployment, instead of a having robust recovery under way. By now, I’m sure most of Congress understands the economics of all this, and yet plays political games in denial, hoping to gain political advantage. There is no simple path Peter. It’s all tenuous, complicated, and somewhat crazy.
Here are the unalderated numbers….
http://www.skymachines.com/US-National-Debt-Per-Capita-Percent-of-GDP-and-by-Presidental-Term.htm
This is not a Republican or a Democrat problem.
Peter, when you look at the “unadulterated numbers” on your site, go to the “per capita increases/decreases in national debt” (adjusted for inflation). Then, do the math.
These numbers go from January to December while federal budgets go from October 1, through September 30, so there may be small inaccuracies (prob.not more than +-0.2%). However, corresponding to the budgets for the presidential terms shows these increases/decreases in the National Debt:
Carter -7.5% (one term)
Reagan +60.4%
Bush I +32% (one term)
Clinton -29%
Bush II +66%
Obama +32% (interpolated to 4 year term from first 3 years data)
Per capita changes adjusted for inflation is actually a more accurate and luminary determinate than either increases in nation debt adjusted for inflation, or national debt to GDP ratio since it isn’t affected by population increases, inflation, GDP fluctuations, or unemployment swings like the other methods of comparison.
The take away is that something very unusual is happening during the last three Republican presidencies that has never happened before, especially with the fiscally conservative Republican presidents and Congresses prior to them. These stats were gleaned from the site you chose, so perhaps you can explain why they so lopsidedly expose the Republicans.
I agree – debt per capita is a good number to use as it does take into account population growth. And obviously the economic environment at the time certainly affects things as well – deficits do tend to grow in times of recession and war. But nonetheless, I’m not sure how you pulled down the stats you used.
I looked the chart at the bottom and the column titled “debt per capita”. Here is how the national debt increased during each presidential term.
Carter +36%
Reagan 1st +72%
Reagan 2nd +55%
Bush 1st +49%
Bush 2nd +22%
Clinton 1st +22%
Clinton 2nd – FLAT
GWB 1st – +29%
GWB 2nd +35%
Obama 1st + 48%
Seems pretty steady to me. Our debt does grow more during times of war and/or recession, and only Clinton really showed a propensity to balance the budget – partially due to his lighter foreign policy (which I love), partially due to an absolute BOOM in the economy, and partially due to the fact that he was a great negotiator and worked with both sides well.
The thing that makes no sense to me is why Obama is running up such big debt numbers. We don’t need the stimulus any longer and the wars are supposedly winding down. Hopefully his 2nd term looks more like Clinton’s second term.
I should clarify…my numbers are how the national debt per capita increased during each term. 5th column from the left on the bottom chart.
My first reaction was, “How could I be so far off?” so I went back to the website. Those figures you use are from the debt per capita column on the site I believe, but that doesn’t take a few very important things into consideration.
First, Presidents are responsible for their own budgets starting October 1, nine months after inauguration, and ending September 30, nine months after the next president is inaugurated. The site used the calendar year instead, and so, to be more accurate, I used December 31 of the inauguration year (Nat Debt lags spending a little anyway). At most, therefore the figures are one fiscal quarter off rather than three.
Second, the figures they cite, do not account for inflation. During the ’70s, for example, inflation was sky high and therefore all, and somewhat more of the increase they attribute to Carter, is due to inflation and is not a per capita increase in real dollar terms at all (“real dollar” means adjusted for inflation).
Finally, they do not account for wage increases and especially decreases in real dollar terms. Therefore, when wages lag as they have this decade, debt per capita goes up, but that isn’t reflected in their numbers. However, with the data they provide, we can take all those considerations into account and provide a semi-accurate picture of what’s really happening.
Here’s an example:
On 12/31/2001, debt as a % of per capita income was 91%.
On 12/31/2005, four years later, it was 110%, 19 percentage points higher.
From grammar school arithematic we know that 19/91 = .209 = 21%
Therefore, The National Debt increased 21% during GW Bush’s 1st term.
12/30/2005 = 110%, 12/30/2009 = 151. Therefore the increase was 37% in his 2nd term and a total of 66% overall.
To be truly accurate, you must adjust all figures to inflation using the U.S.Bureau of Labor Statistics website, but the above method is fairly close. And, the increases are anything but steady. Alarm bells should be sounding and I amazed that more of you haven sounded them when seeing such differences. Look at my previous chart and the differences between the parties jump out at you.
So far as Obama’s debt, he can neither raise taxes on the majority of Americans, nor cut spending significantly without jeopardizing the recovery. Obama’s stimulus was passed a month after he was inaugurated. It was half spending increases and half tax cuts, and it worked to staunch the tremendous job loss and downward spiral of the economy. He hasn’t been able to get any other through Congress. The quantitative easing you believe to be the president’s attempt to stimulate, isn’t his at all. He has no control over that. It’s Federal Reserve Board policy, and the Fed is independent of the president or Congress. Obama, unlike the last three Republicans, has not increased spending, and has slowly brought the annual deficit down from the 2009 high of $1.4 trillion (Bush’s budget) to an estimated $600+ billion this fiscal year.
But don’t take my word for this. Please research these facts yourself. Unless we agree on common facts, we will never find common solutions.
BTW, Aspiekid, I have been employed in the private insurance industry for more than 30 years, and hold several professional insurance designations — CPCU, ChFC, and FLMI in particular. I also hold degrees in accounting and applied computer science.
I’m not saying I know everything there is to know about the insurance industry, but I do know quite a bit more than the average consumer about how things work, and….perhaps more importantly…. how they don’t. So it’s probably not a good idea to make denigrating comments like your previous “echo chamber”. It’s also the reason why I initially responded to the Medicare/ insurance part of your comments rather than the others.
You’re obviously very bright an educated. Then I’m sure that you know that the federal government allowed private competition in the Medicare marketplace in thew ’70s, allowing private insurers to compete for Medicare customers. The reasoning went that, through competition, prices would decline, but that’s never happened. I do stand corrected however since what I previously said about the difference in costs was from older reports. More current reports show that in 2011, the government paid ten percent more to companies providing Medicate Advantage plans compared to the cost of Traditional Medicare. (If that’s because of the economy of size as you illustrated, so be it.)
As far as my comment about the “echo chamber”, let me be more specific. If you only listen to, read and watch that media which reflects your point of view and belief set, then you live in an echo chamber. If you only read the NY Times, Washington Post and watch MSNBC, then you live in a liberal echo chamber. And if you only listen to Rush Limbaugh, read the Wall Street Journal, and watch Fox News, you are living in a very conservative echo chamber. When I hear people only expressing the opinions and talking points reflected by one side or the other, then I must assume they choose to live in an echo chamber and not be bothered by differences of opinion.
Being extremely bright doesn’t exclude anyone from choosing to live this way. I just read an article about an interview with SC Justice Scalia who says the liberal media is too shrill, which upsets him, and therefore he never reads the Times or Post or anything but conservative media and listens to conservative talk radio. My opinion is that it’s a benefit to understand where all parties are coming from, especially for those who make judgements affecting millions. Such echo chambers are the reason for the expanding chasm of political ideologies and the inability to compromise or see ourselves as others see us.
Now, you have accused me of “about as one-sided an “analysis” of the last 30 years as I think anyone could conjure up.” If you think so, then be specific. Research the facts and tell us why I’m wrong about the Starve-the-Beast ideology, or the reasons behind Fitch’s threatened downgrade. Show me an independent non-partisan study of wasteful spending that says it’s greater in government than private industry. And then tell me why you think both political parties are equally to blame for the lunacy of the last few years which has decreased our GDP by half and cost two million jobs.
Wow, this is about as one-sided an “analysis” of the last 30 years as I think anyone could conjure up. There are a number of things wrong with it, including but not limited to the explanations for conservative behavior, the attribution of very specific examples of faults on the right, tempered only by vague, non-specific admissions of the fault of the left. Pretty clever.
But out of all of this the one item that caught my eye is a favorite canard of the left — that Medicare is more efficient that private industry in delivering insurance services. Nothing could be further from the truth. What the left dscribes as “efficiency” is actually a false artifact of poor statistical analysis, at best. At worst, it is an intentional lie.
Here an aanalogy: Suppose you have $100 in your checking account, and I had $100 in my checking account, and we both had those at the same bank. And then let’s suppose the bank charges an administraive fee of $10 a month on each checking account it has. If you divide your $10 charge by your balance, you get an administraitve overhead fee percentage of $10 / $1000, or 1%. If you divide my $10 charge by my balance of $100, though, you get an administrative overhead pecentage of 10% — ten times the rate of yours.
Now, the question is this — Was the bank any MORE efficient in managing your account than it was mine? Or conversely, was it any LESS efficient in managing my account than it was in managing yours? The obvious answer to these questions is no, of course not.
This is exactly how liberals arrive at the incorect (and I think, intentionally dishonest) conclusion that Medicare is “more efficient” than private industry. They divide administrative costs by account balances, two items which are almost entirely unrelated to one another, to arrive at the conclusion that Medicare is handled “more efficiently”.
I think you meant, “…you have $1,00(0) in your checking account.” But your analogy is not how actually I arrived at my conclusion. I did it two ways.
First, I simply noticed that Medicare offers private insurance options to cover roughly what the government provides recipients with some variations. The private plans cost 15% to 30 % more than basic Medicare. Where most private insurance companies need at least 15% in administrative overhead, Medicare needs only 3%, and corporations also need profit to pay their stockholders, bringing the total up another 15% in some cases.
Secondly, my family has both Medicare and a very good Blue Cross/Blue Shield policy so that I can compare efficiency. Hearing the horror stories about Medicare, my father very reluctantly relinquished BX/BS as his primary policy and accepted it. To his surprise, it was easier, payed more, and was much more hassle free.
BX/BS is much less efficient and their employees, much less knowledgeable. My mom, a retire insurance adjuster who is expert at reading insurance contracts, constantly fights with BX/BS to get them to pay what their contract (face sheet) says, and the folder is always at least an inch thick (she and I still have it as primary coverage). When I once asked her how thick the Medicare folder was, she said she had no Medicare folder and that the only time she calls them is to straighten out BX/BS screw ups when they are my father’s secondary insurance to my Medicare.
I do not really know for certain why Medicare is so much better at providing this service, but my mom’s educated guess is that the federal employees are payed more and have better benefits than BX/BS employees, and therefore attract more intelligent and experienced people who serve much longer terms which, in the long run, saves them (and you and me) much money.
However, my comment about Medicare was an obscure aside. Why don’t you address the actual issues of what I said about the National Debt and who ran it up under the Starve the Beast ideology, or the causes of the Fitch Downgrade in the U.S. credit rating, or whether “wasteful spending”, is really a significant issue, and whether both political parties are equally to blame for the lunacy of the last few weeks or even the last thirty five years.
Your reasoning as to why anyone would disagree with you and the echo chamber you choose to live in with only like minded conservatives couldn’t be any more mythical.
It’s a shame this great debate (pages earlier) has deteriorated into the same one-sided rhetoric and noise that gridlocks our government, media and politics. So tired….
You include many things in your post marc. Let’s see where we agree and differ.
National Debt:
We racked up this tremendous debt deliberately through a neocon philosophy called “Starve the Beast” which started with Reagan. The neocons noticed that in 1978, Calif Prop 13 was passed which provided property tax relief without corresponding spending cuts or substitute revenue, and STB ideology was formed. If the gradual shrinking of local governments and school districts could be achieved this way, why not federal government? In one of Reagan’s first TV addresses he brought out a chart and explained, that Congress, like a kid, if you reduce his allowance (taxes), he will be forced to spend less. So Reagan reduced taxes, especially on the wealthy from 70% top marginal rate finally to 28%. This increased the uber-rich’s take home pay 140%. However, the middle class saw little tax relief by the time Reagan left office.
He also increased the national debt by the largest percentages (adjusted for inflation) outside of wartime than any president to that date or since. You see, unlike your kids, Congress has a credit card. Although once the absolute abhorrence of fiscal conservatives, the unbalanced budgets created no public backlash for such debt increase and the neocons were now entrenched. Starve the Beast to shrink the government to a size where it would “fit into a bathtub and then drown it” was their goal. To do that, they acknowledged that they had to create a fiscal debt crisis of sufficient proportion that the U.S. would have no choice but to cut spending and thereby reduce the “gov’ment”.
Bush I followed suit with tremendous increases in National Debt, even though at one point he succumbed to his more responsible fiscal conservative nature and raise a little tax. The neocons were enraged! Clinton won the ’92 election as a result. Clinton’s first term saw a reduction in the percentage increase in debt from 38% to 13%. More importantly, he was able to pass legislation in 1993 to increase taxes back to the top rate of 39.6% while cutting spending – without ONE Republican vote. That legislation caused his second term to see the first actual budget surplus since Carter, and it was anticipated to eliminate all National Debt by now if not screwed with. But you know what happened, don’t you marc?
Bush II just had to surround himself with neocons like Rove, Cheney, and Rumsfeld, and again pursued Starve the Beast. He first cut taxes in 2002 and 2003, passed an unfunded Medicare drug benefit for seniors and the disabled, and started two wars without any thought as to how we would pay for them – all through a totally Republican Congress. The fiscal conservatives, if there were any, said nothing. (Now, of course, these hypocritical bastards all say they abhor such a burden on our children. Really?) W’s 2009 budget, which passed 4 months before Obama took office, created the greatest deficit ever in our history.
Obama inherited a total mess. However, deficits have been reduced from somewhere around $1.3 trillion in 2009 to I believe about $600 billion next year. Recovery from the Great Recession has been extremely slow as you know, and any sudden knee jerk cut in spending or tax increase (except on the top 1%) threatens to throw the economy back into recession according to most main stream economists. Witness the agreement of all members of Congress and economists when thinks such as “fiscal cliff”, or “government shutdown” come up, and those reductions are nowhere near your proposed half trillion dollar cut. I agree that the deficit must be reduced along with the National Debt and have been saying so for many many years. So when you scold me for my advocating policies which may cause a Fitch downgrade of the U.S, Credit rating, you are really blind to the actual cause.
Fitch Downgrade:
The threatened downgrade has two reasons. First, a National Debt so great that gives the government and the Federal Reserve few tools to deal with economic stress. And second, The Tea Party idiots, supported by the Republican leadership in the House, shut down the government and then threatened to default on the U.S. debt. The actions of holding America’s credit hostage in order to defund Obamacare is inexcusable in my opinion, regardless of whether the ACA is good or the work of the Devil.
Wasteful Spending:
Every organization has wasteful spending and the government is no exception. However, what is wasteful to you, may not be to others. For example, you may not need or agree with Head Start. But many think it’s a much needed program. You may be the farmer who thinks crop subsidies are necessary, but the Head Start mother may not. We will always be looking at ways to economize in government as well as private corporations do. What we need to focus on is that we have effective systems in place to do that. Simply harping on “government waste” without identifying what is wasteful (mainly because the complainers don’t really know), is moronic.
What services are unnecessary? Identify them so we all will know of what you speak. I will agree that any services which can be more economically provided by the private sector should be, and ditto for the government. (Did you know that Medicare provides insurance more economically than private insurance companies?)
Everyone’s to Blame?:
Really? That’s just an intellectually lazy copout marc. Look at the above facts. You may want the Dems to equally share the blame for the lunacy of the past few days or years, or for the decrease in the middle classes living standards, but that’s clearly not the case. The Republican Party, Fox, Limbaugh, et.al., and their money raising extremist supporters are behind all of this. I’m not saying the Democrats are blameless. They didn’t stand up to the political pressure when they needed to say “no” at times, but this was clearly engineered by Republicans and now the Tea Party. To understand how we can solve problems, we must first understand the problem.
I can see the Aspiekid is a flaming liberal and thinks nothing of spending OPM.
Get this. Spending will be ‘roped in’ someday it is just a matter of when and how much it will hurt. We can try to reduce the deficit now or wait for the crash. It is clear Obama has his foot on the spending pedal and is just hoping he is not still driving then the car go out of control.
It is clear that we can’t tax our way out of this. In my case I will simply stop working. In the future it will be harder to get a business started because of the rules and regulations and this is only part of what is hampering growth.
The other part is that unskilled labor is going to be cheaper over seas now the Obama Care is active. There will be a bigger push to automate more and more so more and more unskilled jobs will be replaced.
This is the truth. The lower 13.7%, true unemployment rate’ aren’t worth hiring. It is their fault for not being worth hiring. Their skill levels are too low and the government makes the price of hiring them too high. It is the government’s fault for making people too costly to hire.
http://www.bls.gov/news.release/empsit.t15.htm
So Aspiekid, how do you make those bottom 13.7% profitable?
Meanwhile the gov is robbing from all of us with inflation. I know the cost of food is going up quickly, more quickly than the government will admit just like they don’t admit to 13.7% unemployment.
Aspiekid, you know that this spending is causing inflation. It is relatively under control now but look at the prices in the grocery store. They are constantly rising and every eats.
How and when are you going to stop the deficit spending that is causing inflation?
I know there will be NO solutions without pain and there may be no solution.
Meanwhile the insanity continues. The market goes up and I have more money, for now.
Aspiekid, what are you going to do when the crash comes? You can’t tax me more. I will simply take my ball and go home.
Well Peter N, I don’t consider myself a “flamer” but I proudly were the title, “liberal”. As JFK said, “It is, I believe, the faith in our fellow citizens as individuals and as people that lies at the heart of the liberal faith. For liberalism is not so much a party creed or set of fixed platform promises as it is an attitude of mind and heart, a faith in man’s ability through the experiences of his reason and judgment to increase for himself and his fellow men the amount of justice and freedom and brotherhood which all human life deserves.”
“I believe also in the United States of America, in the promise that it contains and has contained throughout our history of producing a society so abundant and creative and so free and responsible that it cannot only fulfill the aspirations of its citizens, but serve equally well as a beacon for all mankind. I do not believe in a superstate. I see no magic in tax dollars which are sent to Washington and then returned. I abhor the waste and incompetence of large-scale federal bureaucracies in this administration as well as in others. I do not favor state compulsion when voluntary individual effort can do the job and do it well. But I believe in a government which acts, which exercises its full powers and full responsibilities. Government is an art and a precious obligation; and when it has a job to do, I believe it should do it. And this requires not only great ends but that we propose concrete means of achieving them.”
We all worry about inflation but so far, it hasn’t happened. But that doesn’t mean that in the near future, it won’t be used to reduce the National Debt with which we are so greatly burdened. The Federal Reserve holds the keys to that, not the president nor congress. You are also correct that there are no solutions without pain. Either we cut services and entitlements, which will decrease standards of living for many, especially the poor and elderly, or we raise revenue, which will probably negatively affect the wealthy and upper middle class the greatest (the 1%).
However, it’s just not that simple as you gun totin’, freedom lovin’, Obama hatin’, tea sippers want to frame it. Decrease out-of-pocket income on the poorest in our society and our GDP suffers the most. And that reduction graduates up the the most affluent where taxation or reduced services (or tax breaks) hardly has an affect on the GDP. The point is that until economic growth is strong again, raising revenue from or cutting services to the poor and middle class will suppress the economy so that we can never get to the sustainable growth necessary to actually raise revenue and decrease spending as actually needed.
As I said to Ken however, why don’t you address the actual issues of what I said about the National Debt and who ran it up under the Starve the Beast ideology, or the causes of the Fitch Downgrade in the U.S. credit rating, or whether “wasteful spending”, is really a significant issue, and whether both political parties are equally to blame for the lunacy of the last few weeks or even the last thirty five years. Your silence on these issues is deafening.
Liberals alway talk about GDP.
We should be talking about creating wealth. That includes inventing, building and manufacturing things. Even growing things. Shuffling dollars around by taking from one and giving to another doesn’t create wealth.
A large part of the GDP is government spending but the government doesn’t create wealth, it just consumes it.
When this concept sinks in then you will begin to understand the depth of the problem. A lot of the unemployed are unemployed because no one thinks they can create wealth with these unemployed. Meanwhile these unemployed consume and increase the GDP.
The GDP is a bad indicator for what makes a healthy economy. The government could control everything and its spending would be counted in the GDP.
You again are not defining the problems of how the country’s economics deteriorated to this point, what it may do to our credit rating, and what steps we must prioritize to climb out of this hole. We are speaking past one another. You’ve only spewed forth generalizations of supply side talking points, much of which is incorrect. Let me give just one small example.
You and the “Gov’ment is evil” folks say, “government doesn’t create wealth, it just consumes it.” Then consider this:
In 1957, a city was incorporated in southeast LA county. Chief among it’s founders were business owners and citizens who wanted to provide better fire and water services in order to lower their insurance rates. It was a highly industrial city with oil and chemical refineries and manufacturers of everything from Sunshine Crackers to Zeneith TV’s and it’s 9 sq. mi. had been protected by only one LA County FD station.
From 1958 to the present, the city built four stations, purchased, consolidated and greatly upgraded the five private water companies and improved its insurance rating from an 8 to a 2 overall, saving the residents and businesses in the city many time more that the cost of their upgraded Fire and Public Works (Water) Departments. They pay their employees some of the top wages in the country and get some of the most talented people. Because of that, they have been tremendously innovative and progressive, and at the forefront of the many positive changes to that service over the years.
All employers create wealth PeterN, whether public or private. In this case, it took citizens, banding together into what we call municipal “government” in order to purchase and upgrade 5 small and extremely inefficient private water companies and improve to a class 1 water system for the purpose of increasing the wealth, not only of its government employees, but also all its businesses and citizens. Combined with a larger fire department of highly skilled and innovative people which proved more effective in reducing losses, and everyone wins – everyone, including the customers of those businesses are a little richer.
But, I really don’t think a debate on supply side economics is productive in understanding our present problems or how to correct them. Again, why don’t you address the actual issues of what I said about the National Debt and who ran it up under the Starve the Beast ideology, or the causes of the Fitch Downgrade in the U.S. credit rating, or whether “wasteful spending”, is really a significant issue, and whether both political parties are equally to blame for the lunacy of the last few weeks or even the last thirty five years. Until we all can understand where we are and what lead us to this place, we will not be able to chart a course out of this hole. Your silence on these issues is again deafening.
The beast to be starved here is The Beast, according to Christian Dominionist theology. They want a debt default to create worldwide panic, their version of Helter-Skelter, and usher in the Second Coming. They divide themselves into Kings and Priests, a small sample of whom are: Kings – The Kochs, Rupert Murdoch, Sheldon Adelson, et al. Priests – Norquist, Palin, Santorum, Bachmann and above all, for now, Ted Cruz and his deranged father Rafael.
Wow Marty, very few people know anything about the Dominionists whose goal is Christian domination of all world governments – their fundamentalist brand of Christianity of course. You’ve also named a few of the money people behind this group which is very secretive and very well organized. Much of the revisionist history in circulation today, such as, “This nation was founded as a Christian nation!”, comes from these very wealthy and dangerous nut jobs. How did you discover them?
The exploits of these people should be front page news daily. It’s at least a triumvirate; including the Tea Party and the rump of the KKK. They are a clear and present danger.
http://jonathanturley.org/2013/10/12/ted-cruz-dominionism-and-jesus/
Excellent article. I’ve read a number of Hedges’ books and he’s quite well researched. Here’s from your link:
“Dominionists have to operate, for now, in what they see as the contaminated environment of the secular, liberal state. They work with the rest of us only because they must. Given enough power — and they are working hard to get it — any such cooperation will vanish. They are no different from the vanguard described by Lenin or the Islamic terrorists who shaved off their beards, adopted Western dress and watched pay-for-view pornography in their hotel rooms the night before hijacking a plane for a suicide attack. The elect alone, like the Grand Inquisitor, are sanctioned to know the truth. And in the pursuit of their truth they have no moral constraints.”
“Chris Hedges connects many more dots in his article and I urge you to read the rest of it here: http://www.opednews.com/articles/The-Radical-Christian-Righ-by-Chris-Hedges-Christian-Right_Government-Bullying_Government-Corruption_Right-Wing-Extremists-131007-879.html
“We have seen some on this blog who either subscribe to Dominionist belief, or who are fellow travelers in the movement to “Christianize” America, by turning it into a theologically driven country. Hedges point that you can’t reason with them resonates with me. Despite any surface pretensions of “Christian Charity” or “Love the sinner, hate the sin” the truth is that in power these true believers would ruthlessly destroy all who didn’t publicly adhere to its beliefs. We see in many the blog posts here what happens when Islamic extremists gain power over Countries whose majority is Muslim. Despite the fact of their seeming acceptance of a pluralistic system, once they attain power, they ruthlessly dispose of any who do not follow their particular form of orthodoxy. The same thing is true of the Dominionist Christian Movement in the United States. They will seem to participate in our Constitutional processes as a tactic to gradually assume power. Once that goal has been achieved then they will not hesitate to enforce their views relentlessly and recklessly.”
Valerie Plame mentioned them on Real Time with Bill Maher. I think she said they’re prevalent in the military, moreso in our private merc army force I’d imagine, but… it was in the midst of Maher’s diatribe on Islam, so you could barely hear her…
Aspiekid,
Having the government spend more than a trillion dollars a year that it does not have is a recipe for disaster. Fitch is now looking to downgrade the US Government. Doesn’t that make you proud of the policies you advocate. Wasteful spending, and we know it exists (we just had a government shutdown where the workers will be paid retroactively for doing nothing) creates no value. We do need a government and it provides many valuable and necessary services, military, foreign policy, USDA and food safety, FAA and much more. But when government provides services that are unnecessary it is an economic drag on the economy. And, when I actually earn a $1, why do people like you put your hand in my pocket to take as much as possible. I earned it, why should the government take it and spend it on things I don’t want.
Both parties are to blame here. Bush and Obama are both economic disasters and the Congress is a nightmare. Does anyone think we are in good hands with Pelosi, Boehner, Reid and McConnel making our policies?
The article in question involved federal taxes on $400,000 earners. At lower income levels social security and medicare taxes (transfer programs) are more significant as a % of income. And, we all pay almost endless taxes. State taxes, sales taxes, real estate transfer taxes, etc. Directly (or indirectly for renters) we pay real estate taxes. Businesses pay real estate taxes that mostly go to schools as well. Do any of us have any idea how much of a gallon of gas is taxes. We just pay it as we have no choice. When you add it all up then you have to see if the value we receive in services is worth it. Clearly, people on the lower economic scale pay a high relative amount of sales and other taxes, because they likely consume a higher % of their income to pay for basic needs.
The issue is not really revenue. Spending needs to decline. Since the sequester, in the absence of any kind of intelligent plan, we have lived just fine without White House tours and the Blue Angels. Both are nice and were cut symbolically, but we had a government shutdown and paid the workers retroactively for doing nothing. I would guess $500 billion could be intelligently cut out of spending that no one would miss. But, given the political climate and the needs of special interest groups, the band just plays on and we continue to kick the can.
We just had a shutdown that cut $28 billion and is estimated to reduce the GDP by 0.6%. Since our annual GDP growth is now less than 2%, how much less growth would a cut of $500 billion reduce the GDP. Are you people factually and mathematically challenged?
GDP accounting treats government spending as production but that is only half the story. Let’s say that the shutdown caused total spending to go down by 0.6% (which is counted in GDP) but it also saved the taxpayers 0.6% of GDP (which is not counted). This leaves the taxpayers with extra money that they can spend later. So a government spending cut doesn’t actually reduce GDP growth, it just appears to because of the way that GDP is measured.
Larry, that’s like saying that production wasn’t lost when you cancelled your cleaning lady because you went on vacation for two weeks. Just because you saved the $160 you would have paid her doesn’t make up for her lost production. When workers are idled for any reason, production is lost and cannot be made up. That’s what GDP measures. Those federal employees and private contractors who were out of work for the past 16 days cost the total economy 0.6% for the year. I suppose they could work an extra day each week for the next 16 weeks to make it up, but I don’t think that’s going to happen.
…and when I went on vacation for two weeks I spent $10,000 that I wouldn’t have spent if I stayed home. The restaurants, the hotels, and the airlines got some of the cleaning lady’s money. That’s doesn’t help her but it does help a lot of waiters, busboys, and other people who didn’t have any claim on the cleaning lady’s money until I decided to go on vacation.
When analyzing an economic situation you have to look at the effects on everybody, not just one person. That’s one of Bastiat’s principles from the 1840s and it still applies.
Not so fast Larry. You went on a luxury cruise to Antarctica on a ship made in China of Liberian registry, with a French Captain and officers, Indonesian cabin boys, an Italian table captain, and waiters from Goa. You even booked through a travel agent in the Bahamas. In other words, you “outsourced” your vacation! (You corporate types are all alike.) Therefore, our GDP is still out $160 and you’ve drained $10K from U.S. circulation.
Seriously, the taxpayers saved nothing during the shutdown. It actually cost us $28 billion more than budgeted AND we lost 16 days of production from more than a half million people. I do get your point about Bastiat’s principle, but I don’t believe it applies here, especially since the federal employees will be paid anyway.
People staying at home and not cruising causes job losses.
http://travel.usatoday.com/cruises/post/2010/10/stx-europe-turku-finland-royal-caribbean-allure-oasis-of-the-seas-/128848/1
Very true JB.
Gas taxes already go to road maintenance and bridges. Property taxes should go to Police and Fire and if you send your kid to private school, you should pay a lower amount. Just wait until gas taxes aren’t enough to pay for the roads due to cars getting better gas mileage and less gas being bought. There will be new taxes to pay for electric/hybrid/natural gas cars.
Unfortunately, gas taxes already fall short of paying for all such repairs since they are flat amounts per gallon and not indexed to inflation. It’s also very unpopular for politicons to raise them and therefore they haven’t been raised in most states for a long time.
If they raised gas taxes 1 cent each year for 5 years, it wouldn’t be that big of an impact, but the taxes are over 10% of the price of gas now as it is.
It doesn’t matter what percentage they are or whether they “feel” like they are too much. What matters is that these fuel taxes are enough to pay for the maintenance of the roads, bridges, and other infrastructure necessary to travel by automobile and transport goods across this country. To subsidize such expenditures with any other tax unrelated to the amount of use and wear each user causes would be less than fair.
Most every that is poor pays taxes taken out of the checks. If they didn’t get tax credits for having kids and other credits, the economy wouldn’t fall into an abyss. They already have taxes taken out so I am fine with someone making $30K pay whatever taxes they pay, but not to get more money back than they paid in. Why even take out the taxes in the first place if they get it all back? And just because a CEO CAN afford more taxes doesn’t mean they need to pay more. It should be based on who uses the most gov’t services. The rich don’t use gov’t services as much as the poor. There are many ways to not be poor, but not many ways to get really, really rich. Most are happy being in the middle class, but not everyone will be rich and not everyone will be really poor. There will always be poor people and at some point the gov’t can’t pay for everything in a poor person’s life. They get food and shelter and if they get free shelter, they should pay for cell phones and cable TV. And if they can’t afford that, then it isn’t the end of the world. There was a time before TV and cell phones and there were still poor people. There have always been the uneducated people in the world for whatever reason. I would bet there are poor people in Sweeden with very nice apartments. How does that help them not be poor? Should they be required to get a better education? There is always a need for laborers in the world.
The idea that the worth of my house should determine how much money a school gets is also arcane. Pay for your kids to attend school. More kids, more money. I have zero kids, why should I pay the same as someone with kids in the system? If I can buy a million dollar house, why should the school system benefit? I would want more money to go to police and firemen.
Good article on stage hands JB. Thanks.
I know you meant to exaggerate about the economy falling into an abyss, but unfortunately, it’s not much of an exaggeration during a fragile recovery. You see, the poor spend almost all their take home income on consumer goods. They neither save nor invest in overseas stocks as do the wealthy. Therefore, almost 100% is plowed back into the economy. It lowers the GDP to a much greater degree if tax credits for this income group are eliminated and they pay more taxes. Drawing more lower income families into the ranks of income tax payers during this recovery period could even cast the economy back into recession according to many economists. Accordingly, they recommend that if raising taxes on the bottom 47% is necessary, then waiting for the recovery to end and sustainable growth to occur is the only way.
I agree that property tax isn’t necessarily the most fair way to finance education. I believe that taxes should be levied commensurate with the benefit they provide. Property taxes should go to infrastructure and the protection of property (as in fire and police). Fuel taxes to the building and maintenance of roads, etc.
Education, whether yours or someone else’s, benefits the country as a whole. That’s why America was able to outproduce all other countries until recently. You see, we were first to grant free universal access for every child. Public education has, “increased the wealth of individuals, communities, the state and the country as a whole, while teaching respect for private property” (Horace Mann). It’s really the foundation of our democracy. Since education has a direct bearing on wealth, then it’s only fair that our incomes be taxed to fund it. That would eliminate 2/3 of my property tax bill. Without universal education, your income and wealth would be nowhere what it is today. Remember, it will be those other people’s kids who will eventually invent the atomic fusion reactor.
Not every kid will be a brain surgeon or atomic physicist. I bet if you did a survey, many came from public schools. They had a desire to learn. You can’t force that into every child. Education through 12th grade is free, yet tons of kids drop out. I want the smart kids to be in school and the ones that don’t want to be there, they can get a job digging ditches instead of being on the streets. Having more money doesn’t mean you start automatically investing. You can be a dirt farmer with $1,000,000, but that doesn’t mean he is a world class investor. Plenty of stories of janitors that make $30K die and leave millions of dollars to charities. They are the .001% of the poor that recognize their place in life and try to do what they can. Having money doesn’t make you smart either. Plenty of idiot athletes that blow all their money, and that money went straight into the economy in cars, jewelry, houses and drugs. There should be a base line for education payments and those with more than 2 kids in the system should pay more. They already get free breakfast and lunch and they still seem to not be able to do any better. There will always be poor people and those that are motivated will get out of poverty. The rest are happy to live off the gov’t and do nothing.
You are right. Not every kid will be intellectually curious and achieve a doctorate. But how do you know that the third kid born to a poor family which can’t afford to pay for his education wouldn’t have been that scientist who makes a tremendous breakthrough that greatly benefits the rest of us?
If the kid is that smart, there are programs and scholarships for him to get a free ride through college. Just putting kids in a good school district doesn’t make them smart. Parents have to be involved. Parents can work two jobs and move to better districts. Again, they have to be motivated and not just sponge off the gov’t their whole lives. Many of us had a moment of manual labor and realized if we didn’t graduate HS that it could be our fate. You don’t need college to be a plumber or AC Technician. But you do need an education if you ever want to run your own business. Plenty of people are happy being the employee and not dealing with the “hassle” of being a small business owner.
To demonstrate his intelligence, this future Edison must be challenged in a good schools grades 1 through 12. Your “more than two and you pay” policy may preclude the kid from going to a good school or even finishing if he’s a burden on his poor parents. Those scholarships only apply to the top students from good schools.
Not true. There are plenty of kids that go to college from school districts all over on merit based grades and financial needs. Hey, I am not talking about each kid being charged the same, but if two kids actually cost $3,ooo a year, the next kid could be another $250. That is one more kid getting a free breakfast and lunch. One more kid in a classroom. Here, the school district had to hire hundreds more teachers because the classrooms were getting overcrowded, so they went from like 35 in a class down to 28. Well, you need to hire more teachers for that. Each extra kid is a burden to society. What if the first kid is a loser and the 3rd kid does well. You can coulda, shoulda, woulda the problems all day long. The poor don’t need to have more than 1 or 2 kids. There should be a disincentive to having kids if you can’t support them.
Think it through JB. That third kid gets punished because his parents decide not to terminate a pregnancy. By charging the parents for his education, the only disincentive is for his parents to educate him. I’d like those who can’t afford kids to not give birth also, but this isn’t the way to do it.
Prior to 2002, only 25% of the population payed zero income taxes. Then President Bush pushed through his famous tax cuts while he increased spending on prescription drug benefits for seniors and two wars. Dick Cheney said, “…deficits don’t matter.” Everyone felt a little richer and the wealthy actually had 10% more take home pay. It worked to win the 2004 election.
With the combination of the tax cuts to lower income Americans, and the recession bringing down their paychecks in real dollar terms, more and more were pushed below the income level required to pay income taxes. It was nothing that these Americans did to themselves or had any control over, and I’m sure they’d like to be in an income bracket enough to actually pay taxes. It was all done to buy an election without thought to the long term consequences.
That being said, OMB has concluded that taxing the bottom 47% to raise revenue at this point in recovery would have a much more negative effect on the economy than taxing the wealthy and may throw the country back into recession. Continuing to point to that demographic at this point is simply a red herring and, again, without fact as to its consequences. The only road open at this stage to raise much needed revenue is to tax the wealthy.
And, by the way, because these 47% don’t pay income tax doesn’t mean they don’t pay taxes. One source says the bottom 20% pay 17% of their total incomes in one form of tax or another, and the top 1% pay 28% on average. That would mean that the $100M/yr, three days a week golfing CEO still has $72 million after taxes, while the $10K odd job laborer pays $1,700 and has $8,300 left to live on. And you think he should pay more income tax?
By the way, the article says “thankfully” the tax increase on earners over $400/450k a year will generate $600 billion in new taxes over the next decade. That is less then the deficit since the law was passed in January. Taxing “rich” people more is clearly not the answer. It does clearly play well with the 50% of the population that pays 2.5% of the taxes though.
According to the IRS, in 2009, here is what you would have to earn to be in different percentiles of income. It also shows what percentage of all income tax this group pays. The data is a little old, but probably hasnt changed much.
Adjusted Gross Income Threshold on Percentiles/
Percentage of Federal Personal Income Tax Paid
Top 1% $343,927 36.73
Top 5% $154,643 58.66
Top 10% $112,124 70.47
Top 25% $66,193 87.30
Top 50% $32,396 97.75
Bottom 50% <$32,396 2.25
So, if you earned $344 k, you made the top 1%. Your group of earners which obviously goes much higher to include A Rod, Warren Buffet and Bill Gates paid collectively 36% of all taxes.
The 4% of people who were in the top 5%, but not the top 1% (so it excludes the megaearners) earned between $154k and 344K. A nice living for sure, but most people wouldn't consider that megabucks. This group of 4% of people paid 22% of the taxes.
The lowest 50% of income earners pay 2.5% of taxes.
What is the arguement here? Why all of the bashing. Many "wealthy" people have started business, worked their way through school and worked hard. Some of them had innovations that changed the world. Some didnt of course. The next group of prosperous people probably didnt have it handed to them, but I think most would agree are paying more for government services we share, military, FDA, etc., and are probably not receiving a lot of services.
Its great how many people make assumptions without facts. Its easier to bash the "rich" while these people benefit from all the taxes this group pays.
During the 99% campaign a couple of years ago, I had a chance to go by the park where the group was camping out. The motliest people I ever saw with no coherent message from any of them. They should have taken a bath instead. But, they did have a catchy slogan.
My dad earns about 500 and sometime 600K but he is a businessman (industrialist) :/ u forgot to mention that
Count the Cars…in a business owner’s parking lot…
Say a business employees 40 people…they should be generating around
$4,000,000 in revenue…and yielding around $320,000 in net profits…
for most small business those profits flow through to their personal tax returns…
add at least $100,000 for the salary of such an individual…
and you have the typical $400,000 taxpayer…
What rate do you think you can tax such a person…before they stop hiring more people…
40 %…45 %….is there no limit…?
at 51 % and the owner of hos own business becomes a “minority” partner in his own business…what is the incentive for more risk?
At what point is the marginal rate…effective slavery…an important question to ask for a Tax and Spend “majority” party!
EFFECTIVELY. Very ironic key word there, since your whole point is undermined, if not refuted, by ignoring that those tax rates are nominal, not effective. Nice. Very Romneyesque, like lowering that nominal rate a tad while axing deductions- raising the effective rate people will actually pay- and denigrating half the country paying no federal income tax when your whole raison d’être is supposedly lowering/avoiding taxes…
We’ve had many ups and downs in the top tax rates over the last 100 years. Over the last 60, maximum marginal income tax rates have varied from 28% to 94% so you need look no further for your answer. You ask, “What rate do you think you can tax such a person…before they stop hiring more people…” History says that if someone does stop hiring people, it goes absolutely unnoticed in the economy. At no time have any economists noticed a decrease in employment due to high marginal taxes on the very wealthy.
MoR,
The effect is on small to medium sized businesses, not so much on the extremely wealthy who saw the tax rates north of 70%
Please note when mention the higher rates, there were many more tax brackets and the value of the dollar at the time.
Actually, economists have a very strong correlation between employment and tax rates. Do some research on the effect of tax increases in 1932 and the disasterous effect that had on the recession at the time. I assure you, economics NOW model the effects of tax increases on the economy, including employment. It’s really disingenious to insinuate otherwise.
‘..It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increased savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich and onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers.
In an interview about the proposed “Buffett Rule”, T.J. Rogers the CEO of Cypress Semiconductor Corporation (CY) inadvertently illustrated the potential perils of overinvestment for an economy. Warren Buffett the CEO of Berkshire Hathaway Inc. (BRK.A) (BRK.B) had proposed the “Buffett Rule” which would impose a minimum tax of 30% on incomes above one million dollars. Rogers explained to Larry Kudlow on CNBC’s Kudlow Report on May 16, 2012, why he opposed the Buffett Rule. Rogers said that he spends less than 1% of his income on his living expenses and invests the other 99% in creating new businesses and increasing the productive capacity of the businesses he already owns. If he had to pay taxes pursuant to the Buffett Rule he would not be able to invest as much. Clearly, someone who invests 99% of their income will see his wealth grow exponentially as long as his investments are at all productive. It would not take too many members of the top 1% investing 99% of their income before they would be unable to deploy their capital productively. This would be a classic example of capital accumulating faster than consumers’ incomes. Consumers would not be able to buy all the goods and services produced by the over investment…”
http://seekingalpha.com/article/1543642
Well, for one thing, I pay more than the Buffet rule would dictate and I earn less than $1M! It’s whole premise is to take from the rich (very few) and give to the poor (very many). But it is true that there is not enough wealth to spread around – because the largest chunk of it is in the top 0.1% of earners. The wealth/earnings curve is exponential to the point that a 1%-er is nothing compare to a 0.1%-er. We are talking about 5000 individuals owning a good chunk of the nations wealth. Trying to even that out by taxation is a joke. The tax rates of the mid 1900’s are not a good example because the tax code was totally different. Deductions were far more prevalent and loose. Basically very few people came close to paying the top tax rate.
When people talk about recent times draining wealth away from the poor due to the tax code – it makes me laugh. How can that possibly happen(or be that simple) if we have a country where half the population pays no income tax? Romney got slaughtered on that one – but there is a point to it. We have done more than change taxes and tax codes. We have added enormous entitlements and programs that have made an enormous part of this country dependent on the wealth of others. One way to look at it – though equally as unfair – is that the entitlement society we have created since the 1960’s has created a bigger problem than we could imagine. And in a way it has. We have now 2, 3 or more generations that lives in a “2nd America”. We don’t allow these people into the mainstream America – we just pay them to stay there and do nothing. This keeps politicians happy more than anyone else.
One final point – there is no mandate that says that wealth is required to create new wealth. That is totally against all principles of our society. Wealth can just exist. Job creators come out of nowhere – not just the wealthy. So we need to leave our preoccupation with the wealthy alone, and figure out how to make the other half of America feel like it has an active role in this country. Right now, a good deal of the lower 50% do not. Talk to them. It can be very eye opening – as they have no idea of the nature of the problem. They have never known anything to be different. These “parallel universes” do not make us any more productive. Our president has done nothing but exploit the disparity of wealth for his own political gain, but the people whom he pretends to care about are just sitting there wondering what is going on. You can play with all the tax codes and rates, and try to legislate our way of a 2nd America, but the fact is that we legislated our way into this mess in the first place. Perhaps we need to stop and honestly think about what the true nature of the problem is and how to solve it. For the last 5 years we have done nothing but react to political rhetoric that leads us nowhere. Yes it provides for colorful pres coverage – but what does it really do?
I still must affirm that the great majority of non-partisan economic analysts of the proposed tax increases on those earning more than $400K state that there will be no measurable adverse affect on the economy or employment. The following conclusion is from a long but well researched and easy to read report from http://www.cbpp.org/cms/index.cfm?fa=view&id=3756
“Conclusion:
“The research in the field does NOT provide strong evidence that modestly raising tax rates at the top of the income scale would have significant growth-reducing effects on labor supply, taxable income, savings and investment, or entrepreneurship. Moreover, as Professor Joel Slemrod has emphasized, the economic impact of tax increases depends in part on how the revenue raised is used.[71] In the current fiscal and political environment, policymakers would likely use revenue raised by increasing marginal tax rates for high-income taxpayers to reduce deficits, which likely would have positive overall effects on long-term economic growth.
“Broadening the tax base by reducing targeted tax preferences that tend to disproportionately benefit high-income taxpayers can improve the efficiency of the tax code. And, because a cleaner tax code offers fewer opportunities to evade taxes, base broadening also can reduce economic waste associated with increases in tax rates. For this reason, base-broadening measures can complement modest rate increases in a way that allows policymakers to raise revenues without impeding economic growth.
“Including such revenue-raising measures in a larger deficit-reduction effort would also facilitate enactment of a large package that also includes sizeable expenditure reductions. It would represent a more balanced approach to deficit reduction than the alternative of shielding higher-income Americans from tax increases and thereby requiring low- and middle-income Americans to shoulder most of the load. Fairness, as well as growth, matters for tax policy.”
That cbpp.org is another left wing organization. What do you think they will say. Find me something from the Cato Institute or Heritage Foundation. Then I might agree with your assertion that the majority of economist think that raising taxes on the rich is a good thing. In my case I will retire.
You can read the March 16, 2001 cbpp.org analysis of the then proposed Bush Tax Cuts and what they would mean for the economy going forward, here: http://www.cbpp.org/cms/index.cfm?fa=view&id=1701
Interestingly, the paper quotes both the Wall Street Journal and Heritage Foundation which, of course, predicted a rosy economic future for all Americans if only we let those “job creators” have more money. But it didn’t turn out that way now, did it? To date since then, the middle class lost 8% of purchasing power while the poor lost even more. The only ones who consistently made out were the top 1% whose incomes and net worths increased fourfold. CBPP was right on with its predictions while Heritage and the rest of those representing the wealthy were wrong. Conservative appear to hold “truth” in high regard. It just the FACTS they don’t seem to care for.
As far as being classified as “left wing” the Center on Budget and Policy Priorities (CBPP) is described as follows:
“Specifically, it designs measures to make key programs for low- and moderate-income populations more accessible to eligible recipients, more effective in helping them meet their basic needs while moving toward self-sufficiency, and simpler for federal and state governments to administer.”
Yes, since Republicans and conservatives show little regard or understanding for the plight of any but the very wealthy, such concerns for the poor and middle class are now reserved for the left of center.
Give us a break – most of them hire at minimum wage. And, we will always need service people such as servers, laborers, housekeepers, etc. I could care less about the people who make a lot of money off the backs of other people who work hard everyday for their employers benefit but are unable to meet their own minimum living expenses; and then complain about their tax bill.
Man-of-Reason, if I had been taxed at the current rate during the last decade I probably would not have tried to expand my business. What is this “let the job creators have more money” crap? It is the job creators money, not the governments. BTW, it takes more than money, it takes skills. Unique skills are best. If business wants average it is cheaper over seas and the business taxes are cheaper.
The CBPP is a left wing marxist organization. They don’t concern themselves about making the people better, they are just taking from someone else and giving to someone who can’t.
The real fix will can only come from improving the people. There are plenty of jobs out there for the qualified
http://www.theatlantic.com/business/archive/2013/08/why-jobs-go-unfilled-even-in-times-of-high-unemployment/278801/
http://www.forbes.com/sites/realspin/2013/05/31/there-are-4-million-u-s-job-openings-why-are-the-positions-unfilled/
http://moneymorning.com/2013/07/29/u-s-unemployment-three-million-jobs-in-america-are-waiting-to-be-filled/#
http://www.cnbc.com/id/44838614
http://www.cbsnews.com/news/many-jobs-going-unfilled-for-over-3-months/
etc. These jobs may not be $400K jobs but it is hard to get too excited about the CBPP concerns when they don’t address this issue. I also don’t get too concerned about the high school drop outs.
There was a story on National Public Radio recently mentioning that the average salary of a stagehand at Carnegie Hall is $400,000.
Well, since there aren’t many stagehands out there and Carnegie Hall is one of the best places in the world, I would assume it is a very skilled person that has the job. No doubt a union job.
http://www.forbes.com/sites/susanadams/2013/10/04/why-should-stage-hands-at-carnegie-hall-make-400000/
Good article JB, Thanks.
Although it begins with the inference that Buffet is hypocritical because the IRS is claiming that one of Birkshere’s companies which caters to the uberrich, should pay more in taxes while Buffet advocates increasing taxes on the same, it ends with this quote: … “the Buffett rule is not about current law.” He continued: “I don’t think it is hypocritical to take full advantage of existing law while, at the same time, urging that the law be changed.”
Exactly.
You asked the wrong question. There is not much professions where everybody earns $400K. There are however plenty of individuals in many professions who earn much more than $400k.
Oh, and the real answer to “who” earns $400,000+ per year isn’t a person. It’s the small and medium-sized businesses who essentially report their profits similar to how an individual reports their income (but are less able to hide it from taxation). These are dentists offices, printing shops, local IT consultants, etc.
In New York, a lot of people make $400,000 as a corporate executive, lawyer, etc. working in middle to upper-middle management. It’s a middle class income and it is barely enough to enable a family of 4 to live in a nice part of Manhattan. When I was in that income bracket, I wasn’t able to afford a 6-room Manhattan coop (one room for each person plus a living room and kitchen), which cost about $2 million. We rented.
In Asheville or Sacramento or Grand Rapids, $400K would make you rich. It’s all a matter of perspective.
Absolutely true. When I lived back east in NYC it wasn’t uncommon at all for people to have six figure income (100k-400k). Those figures were very typical. If you were making 500k a year in NYC, you were in fact well off, but not “rich”. In NYC if you made 750k+ you were considered “rich”. If you were to take those same figures out west to Colorado you would be considered rich as h*** making 500k a year. The cost of living is significantly higher in NYC than in CO, so salaries are adjusted to match. A entry level job in NYC could net you $50-60,000 a year whereas an entry level job in CO typically netted you $30-35,000.
So why struggle in NYC? Seems like a worthless rat race of renters. I know because I’ve been there several times and know lots of people fighting just to make rent. What the hell? What happened to owning.
First, the new 39% bracket only applies to money earned over $400,000. So they’d have to earn $425,000+ for any meaningful impact. And that’s for a single person – most successful rich people are married, and for them the bracket only applies to combined income earned over $450,000. Most of the money earned under the bracket is taxed at an average of 29%.
Second, most anyone earning $400,000+ a year isn’t reporting that full amount as income. It is usually deferred into “Deferred Compensation Plans,” where the employer essentially holds the money in escrow (so it doesn’t show on the executive’s W2 as reportable income). The employer usually pays a ridiculous amount of interest on it (currently around 3-4%… much higher than any savings account or CD), and the executive can slowly pull money out of it (usually after retirement) and pay at a lower tax bracket, or pass it on tax advantaged through a trust after their death.
That’s just one way — another common way is they max out their 401(k) contribution (about $18,000) or make charitable contributions to institutions (essentially a way to buy power and prestige at a 39% discount).
One of the more common ways to earn $400,000+ a year is through capital appreciation (stock ownership). These are typically held for more than one year, so the entire gain is flat taxed at 15% regardless of the gain. This is the same tax bracket Warren Buffet’s secretary pays… you’ve probably heard that argument (although she is actually in the 25% or 28% tax bracket, like most of us).
It isn’t difficult to avoid the 39% tax bracket unless enormous sums of cash are liquidated to live an extravagant life style. One example of this was Facebook founder Mark Zuckerburg taking a multi-million dollar taxable income hit (back in 2012 of course, before the new 39% bracket went into effect). He was willing to give a third of his fortune away (half if you include state income tax) so that he could enjoy it today, rather than deferring it. When you have fortunes that large, sometimes losing half isn’t all that noticeable.
Welcome to the world of the rich.
Stock appreciation is not part of your W2 earnings. The article is about salaries, not capital gains on stocks. Very few people make $400,000 a year in stock income. If so, they are the .0001% not a person making between 400K and 700K, Zukerburg was still in the 39% bracket, he just moved some of the money into 2012. He is still a millionaire, but then, he had the idea that became an IPO. Not many people have done that, so kudos to all he gets. David Choe painted the mural at FB headquarters and was paid in pre-IPO stock. He is now worth millions. Is he any more evil than someone that climbed the corporate ladder? He basically won the lottery.
And anyone making over 100K can max out a 401K and give to charity to stay in a lower income bracket. It isn’t just those making over $400K. I was once making $42K a year and maxing out my 401K at $14K a year.
Stock appreciation does factor into the W-2 earnings of the rich when they exercise stock options, the restrictions on shares lapse, or shares vest.
The key word is “excercise”. Not everyone has unrestricted stock to sell, not everyone sells stock just because they have it. Yes, Bill Gates can sell 100,000 shares a month and get an income, but the stock just sitting there doesn’t impact his income.
Yes they do, it’s called dividends.
To the extent that the article focuses on wages, it’s misleading. Much of the income of the truly wealthy is from investments.
The money these stocks are purchased with is AFTER-tax. So 15% is fair tax to pay on money that has already been taxed. On Warren Buffet, he makes these idiot statements because he wants the general public to think he soooo swell as if he has remorse over his wealth since he pays such a “low” tax rate. In reality Buffet does ALL he can to pay as little tax as he can. In FACT the Federal Government has sued Warren Buffet for taxes he owes as far back as 2002. THAT is reality, regardless of the bullcrap he feeds the public.
Buffett doesn’t tower income taxes to the govt. This whole tax issue he is involved in is about his private jet company and the Federal passenger taxes owed. Private jet passengers shouldn’t be subject to commercial jet taxes is the argument.
http://dealbook.nytimes.com/2012/03/26/netjets-case-warren-buffett-and-taxes/
The after tax money invested is not taxed again. It’s called the “basis”. So tell me again why it’s fair that the “profit” which has never been taxed, should be taxed at half the rate as hard earned wages?
1) Because that 15% tax on investments has given us record investments of capital. Capital is what creates jobs, not the government. 2) Higher tax rates do NOT equate to proportionally higher rates of taxes collected by the treasury. What produces a healthy economy with lower unemployment rates and higher “real” increases in GDP is the amount of economic activity associated with a given money supply within a specific period of time. Higher rates of taxation SLOW down this rate at which the money supply runs about from pocket to pocket, and cash register to cash register. Lower rates of taxation result in an increase of this economic activity, and more actual tax dollars passed thru the Treasury, with lower rates set in place. Besides, there is NOTHING which prevents YOU from investing your money and paying the same 15% rate on investments, nothing but YOU. I grew up POOR, was given nothing, I’ve worked my a$$ off, and have great abundance in my life. Because I chose that for myself. You choose what you wish for in your life. But I can tell you, thinking that taxing the RICH at sky-high rates will do NOTHING to give you a better life. Help other people achieve what they want, bring more than carbon-dioxide to the marketplace, bring some VALUE.. and you will be rewarded. That is what helps other people, that is what really helps society. Everyone bringing their best, makes everything best for everyone.
Here is the Secret to Success: The degree to which you can help other people solve THEIR problems. Because a poor man sees only the $$ he is paid per/hr, where the wealthy man sees only the value he can bring TO the hour. The poor man sees only how hard he works for each dollar, the wealthy man sees only how hard each dollar works for he. The poor man spends nearly all his money on depreciating assets, the wealthy man spends nearly all his money on appreciating assets. The poor man always spends more than he makes, the wealthy man always spends far less than he makes. It has been said long ago that could take EVERYTHING from every person, and in a year the Rich would be rich again and the poor would still be poor. This is why when you see poor people win a Mega-lottery $100Million, $200Million, and in 5 years they are in bankruptcy, are broke, and have nothing. It’s the relationship with a thing that decides the differences with things in every persons life. Some people play small, other people play big. That’s life. But you are ultimately the decider. YOU step it up.
VERY few people are going to forego investment income just because it’s taxed at the same rate as wages. That’s known as cutting off your nose to spite your face. As I recall, the sainted Ronald Reagan allowed capital gains to be taxes at the same rate as wages, and there is no evidence that raising the rate reduced capital investment.
I recommend that you read the Congressional Research Services report titled “Taxes and the Economy: An Analysis of the Top Tax Rates Since 1945.” You might remember it–it’s the report that Republicans in Congress suppressed in the run-up to the 2012 election.
Your stereotypes are as silly as they are false. I’ve been around both rich and poor and can guarantee you that not all rich men would regain their wealth once it was taken from them, and not all poor men would lose the wealth given to them. Not all rich people are bright, nor all poor people stupid. Jefferson, for example, was a genius and a very wealthy man. He died in debt. But that inability to multiply his capital meant nothing when we judge whether Jefferson was a success, and no one would judge him to be anything else. His priorities were just not centered on securing more wealth – he found it boring.
Blaming the poor for their condition is as old as civilization, whether the wealthy claim it’s because they’re stupid, less cultured, or God just doesn’t love them so much as the rich. Keep going Rick and you will soon justify the Divine Right of Kings as the “Secret to Success”.
Well stated. There is talent and greatness within everyone. When those talents are realized, we all benefit.
You have clever little words you throw around thinking you know what all poor or rich think. I doubt you have ever been without money and question that you worked your a$$ off. You are probably rewarded quite nicely, for very little. You are a shining example of what is wrong with our country, you think you actually are better because you have money. I know greed is good and as long as you can hide behind some freaky facade you bought, you are gonna judge others. Get real and go do some service and find some humility. People are mostly good, regardless of their financial statement. Don’t try to be an authority for the rich and we [the poor] don’t need your cheeky little rambling on how inadequate we are. Most of us are self aware!!!!!!!!!!!!
Rain has a point Rick. Exactly what are your creds? How do you know how the poor think? Who sponsored you through college, your parents being poor and all? And how did those poor friends of yours from the same neighborhood make out after having to drop out of college, not because of grades, but because they ran out of money?
Please explain how, if you were a product of poverty, you do not know that income isn’t commensurate with intelligence or risk. How is it that you believe that those who sit on their asses an clip coupons (collect interest, dividends, etc.) are worth more than Americans, like most of us, who work their asses of to support their families?
Rain is making assumptions too. My story is NOT that much different from Rick’s. I was definitely lower middle class growing up and was a poor pathetic college student that barely had enough money throughout college. I graduated with a college debt. 6 years later I had save about $16k. 7 year later I bought 1/3 of the company I work for but now I own 1/2.
Rick is right about a lot of things he said.
Spouting some honorable sounding values means little when it comes to business or personal success, or at least, “success”, as Rick and you, Peter N, define it. It’s more like throwing a dart and the drawing the target around it – Bullseye! I once saw a Mad Magazine cartoon of three guys sitting on a bench. Twice, a big fly slowly flies past each until the third guy snatches the fly and eats it. The third time a fly does that, the second guy snatches the fly and turns to the third guy and says, “Do you want to buy a fly?” That’s business, so don’t give us some altruistic BS.
I have been good friends with several men who were very bright and very successful by your terms, and who ended up much less than successful. My good friend Claude, who passed away a few months ago, was the consummate gentleman. A graduate of Harvard, he and Ted Kennedy formed a water saying business in the back bay of Newport Beach, CA the summer they graduated (more to impress the girls than business). However, Claude went on to become hugely successful and socially significant in So. California – until three kids and a divorce later gave away most of his capital. But he built up again until another three kids and a divorce reduced him to zero. A third marriage to a much younger woman … We’ll you get the picture. He loved and continued to love all his wives and eight children, and never complained about losing his sizable fortune, saying he had a most wonderful life. All he had in the end was Social Security and the love of his children and many good friends.
My good friend Don has a similar story. A PhD and once the director of quality control for Baxter, a big pharmacy company and in the 1%, he decided to open an executive search firm. I helped him move from Newport Beach to Atlanta. He was very successful. His kids went to a very prestigious private school and colleges, and his daughter debuted in Atlanta society. Marital problems, a divorce, embezzlement by his CFO, and a near nervous breakdown later, he was reduced to a struggling two person operation and too old to rebound. He now lives in the basement of his son’s home in Ohio on Social Security alone.
Arthur had been very successful as an executive for three major corporations (IBM, NCR, & ?) before deciding to go out on his own. Over the years, he and his wife build a chain of very high end art and gift shops in New England catering to the very wealthy. Borrowing to expand again in 2001, his empire came undone with 9/11 and the combination of loan rate increases and the drop off in sales of luxury goods. He and Donna are now painting houses and actually doing quite well at 70, but says he’ll now never have the savings to retire even though his health is starting to tank.
Of course, I can also recite the success stories of friends, but the point I’m trying to make is that financial success in business is not just due to brains, hard work, or altruism, but is mostly due to luck. As I’ve gotten older and see those of my generation succeed or fail financially (as in retire with the most toys), I observe the randomness of it. How does one guy who isn’t all that bright and treats his employees terribly succeed, while a bright and good man fail?
I can only conclude that you who claim superiority due to your position in the 1% are simply full of sh*t.
JB says, “It isn’t bad luck your friend in ATL failed, it is bad business practice to have had his CFO steal from him. Your other friend borrowed too much money. How was luck involved with that?”
REPLY
Each of us has limits. My friend in Atlanta reached his with a wife battling mental illness and he took his eye off the ball in business. Worry, sleep deprivation, and all that goes with such problems can effect any of us in similar ways, including you JB. All someone needs is a dishonest SOB to take advantage of the situation, and you’re screwed. Such things are unpredictable in our lives, random, and simply “luck”.
As far as the other friend, had 9/11 not happened, his expansion would have been quite successful. So , prior to that tremendously unusual event, how does a capitalist realize he’s vulnerable to such things or indeed, even imagine such events may happen.
Anyone who believes he’s too smart to be affected to the same degree by such unexpected problems of life is indeed naive. “Shit happens.” Thank God for safety nets like Social Security and Medicare and a pox on the idiots who try to reduce them.
Rick is parroting the lie we’ve been force fed for more than 3 decades. Capital creates jobs just as much as government does. The truth is that demand creates jobs. People spending money on goods and services drives the value on investments.
Demand is what creates jobs, not capital. The ideal labor cost of any business is zero. When demand or anticipated demands exceeds the existing labor capacity, then, and only then, should that business hire additional workers.
Low taxes on investment income encourages speculation and results in bubbles that pop violently. When taxes on investment income are low, money that could have gone into promoting useful economic activity is uses to speculate instead. These low taxes also encourage the “financialization” of our economy, where more and more of our GDP is consists of the finance sector; much of that adds absolutely nothing useful to our society and is just people cleverly manipulating the markets.
Hi Rick, your post is Beautiful and I want to thank you for it. What you say is absolutely true and sound. I’ve been around middle class and poor people for most of my life and I can say it with great certainly that poverty is a state of mind followed by a string a wrong actions and chooices.
Here is why it’s fair to tax capital gains at a lower rate than earned income:
When I sell my labor I’m guaranteed by current law to get paid fully and regularly. If my employer doesn’t pay my wages I can sue and the court will always award me a judgment. Even if he goes bankrupt, my wages have first dibs on whatever assets are left.
On the other hand, if I have saved some of that income and invest it in a capital asset like stock or real estate, I may make a gain when I sell it, if it’s value has increased. Or, I may lose some or all of those savings if I made a poor choice or was unlucky. If I lose my investment, I get NOTHING back. The government and the courts don’t guarantee me any return of my loss, not even if the investment goes into bankruptcy. In case you haven’t noticed, many many people have lost great amounts of “profit” in the real estate and stock markets. That RISK is not present when you sell your labor. That risk of loss is why capital gains are taxed at a lower rate.
“VERY few people are going to forego investment income just because it’s taxed at the same rate as wages. That’s known as cutting off your nose to spite your face.”
You are looking at this as an investor not a business owner.
When the capital gains tax was increased by %5 my company was instantly worth 5% less to me.
It the capital gains tax is raised by 5% that means the government effectively has a claim on another 5% of my business and it has put NO effort into making a profit nor does it take a risk. Screw that. The government owns too much of my business already. The way things are going it is better to suck all the wealth out of a company and leave an empty shell for the IRS.
Then perhaps Pete, if you don’t want to pay the government for their services and infrastructure, you should discontinue using it or benefiting from what the government is doing or has done for you over your lifetime. Don’t call the police when your car’s stolen or the fire department when you experience chest pains. Don’t drive on public roads and don’t ship your goods to market, use the postal service or the internet since all were provided by the government who wants to tax you. Don’t eat food from the grocery stores or restaurants guaranteed safe by government regulations and inspectors – grow your own. Don’t apply for Medicare or Social Security when the time comes since they are partially subsidized by tax dollars (and you despise such “redistributions”). Let your kids walk only on private property to their private school so as not to violate those tax funded sidewalks. And form, arm and transport your own militia when threatened by foreign powers. Don’t rely on the armed forces. Join the Amish!
That’s ridiculous of course. Almost everything we do or own is made more secure by people who came together to do as a community, whether small or huge, what would be extremely costly to provide with private capital. That’s called self determined “government” and we are all part of it. You may not agree with what the majority has decided or supported, but that doesn’t excuse your debt, called taxes, from being paid. If you think so, then you really don’t believe in government and the constitution which is the foundation of that government.
When a laborer pays $25 out of every $100 in income taxes, should he resent the government for reducing the value of his labor by a quarter? Then why do you resent the larger community for deciding that the passive capital appreciation of $100 should be taxed $20? You didn’t even break a sweat for that $80 in your pocket, unlike the laborer.
Finally, as a business owner, you don’t compete against the IRS. You compete against other businesses which produce similar products or services. The IRS can’t put you out of business. Only your competition can do that by being more competitive than you and taking your customers away (market share). It’s called “Capitalism.”
Ironically enough, if you lose money on your investment, not only do you pay no income tax on the sale, you get to offset the loss against other income!
Jim, as to investment losses offsetting ordinary income: No. Passive activity loss rules prevent investors from using losses incurred from investments to offset other income unless the losses are incurred in businesses the investors manage themselves.
It isn’t bad luck your friend in ATL failed, it is bad business practice to have had his CFO steal from him. Your other friend borrowed too much money. How was luck involved with that?
There are many single people who earn over $400k! We are not all married. And, we actually earn well over $400k in our paycheck alone. The stock, 401k, etc is above and beyond. Not sure where you are getting your information. They missed on career that should be on the list: Sales.
I would love to know what product or service you sell. This is a genuine, as I am embarking on a Sales career after college.
That’s a great question. And you didn’t even need to go to college to be able to ask it. The hard part is getting the answer. Maybe sell expensive real estate?
Q – One of the answers is Software (Oracle, SAP, SFDC, etc). Another is Financial Services (more ‘business advising’, but it’s still selling; MS, GS, RBS, etc). Another is Consulting (for an Accenture, Deloitte, etc but avoid the Indian firms for now). Be prepared to work your butt off, forego personal time (weekends included), and have your livelihood put at risk if you miss your numbers. Nothing (usually) comes without risk but that said, Sales is a very rewarding career both financially and personally. Rick has it right – helping others solve their business problems is a blast and you get paid very well for it. Good luck!
Your spewing nonsense if you think most people earning over $400k are using deferred compensation plans. A good deal of the over $400k category include self employed. You can’t defer your own compensation.
401k contributions only are relevant if someone works for a company that has one. Also, not everyone wants to defer their income over $400k these days. Giving money just to get a partial tax break is bad business too.
Capital appreciation is generally the way most large sums are earned. But they start at 20%, add 3.8% for Obamacare tax, and add as much as 12+% in state tax. So you are talking 35% here. Most relevant is that all this triggers the AMT and most of your deductions(even for state and local taxes) go down the toilet.
The people you talk about here are mostly in the $10-$100+M category. Those of us earning less generally take a beating. Politicians like Obama rely on people’s ignorance to make it seem like everyone with a high income gets away with every trick in the book. It’s just not true, and it appears that you are one of the sheep that has bought into that nonsense.
If you are self employed, you can do a SEP_IRA and put away $44,000 a year. That is like 3x the normal person, but as a self employed person you have more risk to go out of business. I mean, if you going to nitpik that an SEP isn’t deferred….
http://www.dekcsb.org/217-financial-issues/article/10728-roth-401k-457-deferred-compensation-and-sep-plans
Nice try. Your ability to put away anything in an IRA depends on how your income comes to you. Salary – yes … anything else …no. And it isn’t about how to shelter your taxes anyway. Putting away 44K a year isn’t going to do much for your income taxes each year if you are earning $600K. Saving it all for retirement like that makes no sense, unless you need to. The market has been so volatile during my lifetime, that if I did that I would likely have lost money on any IRA.
Why don’t you worry about the people who really abuse the law? People earning $400K, $600K, etc. aren’t criminals and they pay (in many cases) far more than most people do – and far more than most people realize. People don’t post their taxes online – if they did, you would be surprised at how so many people pay a bundle, and so many more pay virtually nothing. And the :”nothing” or very low tax category isn’t as poor as you think.
JCal = TRUTH. Thank you!
When you talk about Wall Street you would have to separate those who make obscene amounts of money,how they make it to differentiate “Hedge Fund” partners(if they are included) and the majority of working “stiffs” few of whom come close to that sum!
Hedge Funds generally charge 1.5% to much more in management fees and 20% and up for whatever profit they make! If they make nothing or lose they still get the 1.5% which for those managing a billion or more is serious money!
A billion is considered small as compared to those managing $5 billion and up where at $5 billion the take is$75 million before the 20% of gains they might generate!
These “guys,gals” also get “favored tax treatment so people like Buffet,like Soros,like Roger’s,like Dalio more than a few can and do earn $50 million and up with a select few making multiples of that in a “good” year!
They do have to pay expenses but where else could a person make it to a “net” worth in the billions in two or three decades?
The C.E.O’s of brokerage firms and those who run the “flavor of the month(year) can and do make many many millions as in Trading,the infamous Partnerships,C.M.O’s,the vehicles that made many very rich while the country and investors lost most everything.
So when you talk about salaries and money it is disingenuous to omit how these monies are made from the drones to the game changers,to the Madoff’s the Banks,the Mortgage creator’s and of course those who permeate the government,politics,Union leadership and those who catch a wave,go public and walk away obscenely rich no matter the success or failure of the vehicle that made them rich.
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