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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Steven H:
Re: global warming.
I can’t help but see a levelling in temp recently. Interesting that CH4 levels also levelled then (due to less manure farming). See figure 4 of second link.
CO2 continues to climb. Also not a 0.5 C temp drop when CO2 went up 20/310, about 6.5% from 1945 to 1975. You cannot ignore data just because you don’t like how it fits! The more I look into this, the more I think that methane is the real worry.
http://www.eea.europa.eu/data-and-maps/indicators/atmospheric-greenhouse-gas-concentrations-3/assessment
https://www2.ucar.edu/climate/faq/how-much-has-global-temperature-risen-last-100-years
Speaking of methane, but rather the burning of same. NO ONE wants to increase methane demand more than oil industry. I live in an oil rich state and they would fall all,over themselves to see a doubling of nat gas prices. Usually oil wells produce gas that must be flared if not economical to transport. This wastes money and BTUs.
Some points:
– Average air temperatures have leveled since 2000. That does not mean that global warming has “stopped” or that there is nothing more to worry about. The science of CO2 and greenhouse effects are well-understood. The science of warming from increased CO2 does not change just because it is temporarily less evident.
– Air temperatures are only one indicator of global warming. There are indications that the oceans are now warming.
http://www.realclimate.org/index.php/archives/2013/09/what-ocean-heating-reveals-about-global-warming/
– 60 year ocean temperature cycles have been observed and are used by some skeptics to cast doubt on global warming theories. Instead, I see cause for concern. What happens if you take a cycle that goes up and down over time (like a sinusoid) and tilt it up? It goes up steeply for half a cycle, pauses or goes down slightly for half a cycle, then goes steeply up again. Look at the pattern in your second link, regarding air temperatures:
There is a trough about 1910
1910-1940: steady 30 year increase
1940-1970: 30 year pause
1970-2000: steady 30 year increase
2000-now: Pause
Projection: Pause may last until 2030, at which point accelerating atmospheric warming occurs for another 30 years. It could start up again sooner if we do not slow down our CO2 pumping.
In other words, the long term trend is continuing, but is masked by (a) counterbalancing of long term trend, by temporary short term cycles (a) warming going to oceans instead of air.
– Lastly: You are a doctor, and so you know who to trust and distrust regarding medical issues. Independent researchers will be more trustworthy than those funded heavily by monied interests (such as pharmaceuticals), for example. Same with climatology. NASA and most climate science sources are less funded than efforts from oil and energy industries, big business, and conservative political agencies trying to cast doubt on climate science. My trust is on the true science, not the politically and economically motivated deniers.
At the risk of this thread permanently veering off its original purpose — financial stuff — I need to ask a few questions.
Any thoughts from anyone on the maunder maximae and minimae and their impact, or lack thereof, on climate change? The maximae and minimae last hundreds of years and all I have seen so far is a discussion on what has happened in the last hundred years. I have read through the links and have seen no discussion of these in the lnks, either.
Same question for the medieval warming period, and the little ice age.
I should also add that I am a statistical data guy, with significant background and experience in six sigma and other methods of ANOVA.
Regarding solar forcing and the maunder min/max sunspot cycles:
“… although solar forcing is real, the implications of that are often rather overstated. Since there has been a clear history of people fooling themselves about the importance of solar-climate links, any new studies in the field need to be considered very carefully before conclusions are drawn, especially with respect the warming over recent decades, which despite all of this discussion about solar activity, is almost all related to anthropogenic greenhouse gases.” – See more at: http://www.realclimate.org/index.php/archives/2005/07/the-lure-of-solar-forcing/#sthash.JTD0Lzol.dpuf
The medieval warming period and little ice age are suspected to be primarily European events, and not actual synchronous global events, though some cool periods have been noted in parts of southern hemisphere near the time period of the European little ice age. I think it can at least be said that the dramatic cooling in Europe was not occurring simultaneously worldwide.
“Several causes [for the little ice age] have been proposed: cyclical lows in solar radiation, heightened volcanic activity, changes in the ocean circulation, an inherent variability in global climate, or decreases in the human population.”
http://en.wikipedia.org/wiki/Little_Ice_Age
My previous reply is in moderation purgatory, so I will try to provide the same information without triggering an investigation.
The maunder effects aka impacts of solar variation on temperature and climate are real but often overstated. Look up “realclimate solar forcing” for more info.
The medieval warming period and little ice age were dramatic regional events in Europe with multiple causes, but are not generally thought to be of significant global impact. Particularly, the oft-stated claim that world temperatures during the MWP were warmer than now has been rather thoroughly debunked. Look up “Medieval Warming Period” plus “Realclimate” or “IPCC” to get good answers to your inquiry.
There is very little upside to bonds right now. I do think that it may be time to look at gold. I have been told I am nuts because I have invested my 401k very aggressively. I can afford to take the risk because I don’t really need the money. The other good part is that I can move my investment around without tax consequences. My taxable account is a different story. I let the experts take care of that because they minimize tax consequences. Because of the increase in capital gains taxes I can’t move my investments around as much. I am pointing this out because there are some that think capital gains should be taxed as regular income. If it were then buying and selling stock or mutual funds would become much more expensive. As it is my taxable account does not do much buying or selling because of taxes.
While I get your point about it being a bit more expensive to SELL stock or mutual funds, it really only matters if you have a significant gain without an offsetting loss. It doesn’t matter at all as far as buying, no tax is paid for buying. What good is keeping an investment if you feel it is fully valued? You could lose more by sitting on it as it is as likely to go down in value as up.
As far as taxing as regular income, I don’t see that happening unless corporate taxes are eliminated or dropped considerably. This should increase the value of some companies (at least those who currently pay taxes as many don’t). This scenario should benefit the economy as internationals repatriate earnings and invest locally, creating real jobs, while increasing tax collections because individuals have less incentive and means to hide earnings.
I would like to see tax rates on investments that actually create jobs, to be kept lower. As it is, investing in stocks doesn’t create much for jobs and in many cases kills jobs because CEOs are more worried about current stock price than employees and future value. I feel this is one of the most major things hurting our economy and increasing the wealth divide.
Agree re: diversification and market timing. I had recommended previously setting a bond / stock / gold balance and rebalance each 3 to 12 months. This FORCES you to sell high and buy low. For example, in crash, you would have shifted a large amount of bond money into stocks. New money would have gone preferentially into stocks. You would have sold gold in it’s bull market as well. Now you would be selling stocks and getting into bonds and gold. I like 120- age in stocks and 5 to 10% gold, rest in bonds, but there are many other formulae. Vanguard has many excellent low expense index funds to work with.
Steven H Peter N
Absolutely. Expenses are everything. Vanguard is amazingly low on costs and iffer a gillion funds. There are several very low commission brokerages as well.
The tax argument is why you want to maximize Roth (taxed now, never again taxed) or 401k (taxed when withdrawn).
Remember, for taxable trades, all the income for corps has already been taxed once. The price you get is pegged to profits that is reduced by said taxes. Dividends have already been directly taxed.
You’re welcome. I’m just not sure I’ve ever met anyone smart, altruistic and honest enough to run all those things well. Only one I know of died almost 2000 years ago.
Check out this thread. These guys aren’t making $400K except for the few that own their own company but they are doing well
http://www.plctalk.net/qanda/showthread.php?t=88222
Steve H
I try to be… With your research and analytical skills, I’m not sure why you’re not running things where you work.
Recently a penny from 1600’s sold for $3 million. Rare and valuable right? Interestingly, the same 1 cent, at 6% interest, is now worth…$ 3 million! Just illustrates the time value of money…save early, save tax free, invest in stocks, with a little counter balancing bonds & gold. You will become richer. John Bogle wrote an amazing book about this. patience nearly always wins…
As far as luck, in my line of work, I know my brain may explode right as I hit submit. That’s why I carry insurance to hedge my bets, health & life. Luck cannot be eliminated as a factor, but controlled.
I truly believe that we should all do well, but I have seen a great deal of laziness, dishonesty, substance abuse in my training and working minimum wage jobs growing up. People’s own decisions matter and at some point they need to be at least partially accountable.
Thanks for the compliment. I’m an engineer and a data analyst at work, and I guess that shows. I’m probably less good at personal money issues than I should be, but am doing OK.
Working at making money always seems like trying to outrun that bear. My ideal community would be where people could focus on creative and engineering tasks, new business opportunities, and ways to improve people’s lives. The competition to make money seems like it consists largely of choosing which of N different banks or investments or utility companies or insurance companies is NOT going to scam and cheat you. Some people advocate for free markets and choice in ALL things. I thought that one of the worst decisions Texas ever made was to provide competition and choice in electric utilities. First, prices went up and not down, and second, it’s just one more stupid thing to waste my time on. I want Utility commissions to keep utility companies from scamming everybody. Why should every single customer have to become an expert in their schemes? Does this make me a socialist? No I don’t think so. I just want to spend my time doing the things I am good at and not have to waste my time playing useless games of competition among every single service that I rely on. So that is why I think it would be great to have single-payer medical, single-provider electric and gas, automatic retirement plans, community funded education through college, and a living minimum wage. I just don’t want to waste my time on useless crap, and I don’t want people to starve because life is difficult.
Thanks for listening to my rant.
I am an engineer too and I own my own industrial controls computer company.
I/we create wealth by increasing productivity.
If you are a good engineer you are better than 95% of the people out there. You should be in the 95% income bracket at least. If you look around there are so many people with so many problems that if you have your act together you should be doing extremely well relative to others around you.
Even though I am an engineer I have had to learn a lot about investing. What I have done personally is get a Fidelity account where they manage the investing for me. They optimize returns taking into account my tax bracket etc.
My company has a 401K. Since I am a trustee on the board I have had to learn a lot about 401Ks. We shopped around a lot before we found a solution that was good for everyone at my company. This took some effort on our part. It sounds to me you want a ready made solution. If you are a real engineer you should be able to do better. Much better just like I have done.
I have disregarded most of the conservative investment advice. I do much better than anybody in our plan because I am willing to take risks. I can afford to take risks because I don’t depend on any one source of income.
You may need to play one investment service off another. You are an engineer. You should know how to optimize outcomes. The single payer system is not optimal for most people and especially for engineers. My suggestion is that you should be willing to research investment and health plans. You should be smarter that 95% of those you are dealing with. You should be able to get a good deal. Don’t expect to be easy. Just remember you are better than 95% of the people out there so you should be able to do much better than most.
Yes life can be difficult but no one is going to starve because of your decisions. Some welfare queens may have to give up their cable TV but that is about it.
My mother raised me right. She said the world does not owe me a living or the world does not revolve around me.
I’m doing OK, in the 90-95 brackets. And your advice is all sound, as far as looking after self-interest, or in the case of the investment committee, looking after the interests of a larger group, which I really like. You created a “ready-made solution” of sorts, in which you and your committee had to learn about 401Ks, but you enabled the rest of your company to focus on their jobs rather than requiring them to study something superfluous to their primary skill and interest. This is a better solution than infinite choice in all life options.
Most of the people in the company are like you and don’t know anything about investing and aren’t going to put the effort into learning so we make it easy for them. We have an outside person come in a explain what is happening 2 times a year but most don’t understand the significance of what is being said. They will do well but they won’t get rich off their investments. Some of the young ones have seen nothing but market turmoil since 2006 so they are afraid to be more aggressive like they should be. I am much older and in theory shouldn’t be taking the chances I do but I have multiple streams of income so I can take chances. However, I too don’t have time to check my investments all the time so I have someone else do it.
I play table tennis with a person that teaches potential stock brokers how to pass their exams. I have learned a lot of how things are done from a stock broker’s point of view but that doesn’t include being good at investing. I don’t trust stock brokers that get a commission.
Investing is a zero sum minus game. You can only get out what others have put in minus the fees. You have to minimize the fees.
Investing is kind of like a game/toy we would play with when I was a kid. It was called time bomb. The top of the toy bomb had a timer that would be activated and the bomb was tossed between kids in a circle until the bomb went off. The person holding the bomb was then out.
Stocks are like this time bomb game. You don’t want to hold them when the market crashes. However, if you sell the stocks you have to pay capital gains on the profits. If you had to pay 35% on the profits you would have little to put back in when the stocks start to steady out and help make the stock market go back up. Sure, the big winner would be the government in the short run. In the long run it would reduce capital for investing. Those that didn’t get out would not see their stocks return to pre-crash levels for a long time. In the long run the government wouldn’t get as much money. This was the argument used to reduce the capital gains in the 1980s. High capital gains taxes makes it less like that money will move to where it will grow the fastest.
Couldn’t disagree with you more Peter N with one major point. This is my life’s work and I certainly would disagree with the view that stocks are like a time bomb game. The best way to be successful in stock investing is to do exactly the opposite of what you are describing. Those who try and ‘time the market’ and get out before the bomb goes off almost always fail eventually. Who thinks they can time the market effectively? There are so many unknowns and unpredictable world events, but what really makes market timing impossible is the fact that public perception of reality is ultimately what makes markets rise and fall.
I believe that the best way to be successful long-term is through a diversified allocation that fits your own risk tolerance and financial plan. The less initiated can certainly get this through any myriad of allocation funds – so it is readily available. The ‘art’ to it for the more sophisticated is putting funds and investment options together that complement each other well. This is to minimize the risk/volatility not to avoid it altogether with “timing”.
Peter — I agree. Although it is not my life’s work, I do hold several financial certifications, one of which is Chartered Financial Consultant (ChFC).
Attempting to time the market is not a good idea. The reality is that no financial advisor or other ‘expert” knows when there are going to be spikes and crashes in the market. If they did, they would be retired and wouldn’t be giving out financial advice anymore. So if the experts can’t tell what the markets are going to do, you can’t either.
When the market crashed in 2008-2009 the Dow lost approximately half its value, going from (roughly) 14,000 to 7000. Rather than hitting the panic button and selling low at 7000, I saw this as a 50% off sale on stocks, and I bought as much equity-based mutual funds (stocks) as I could afford. I took the risk that the markets would eventually recover. Fortunately, they did. The Dow is now sitting at (almost) 17,000, almost 3000 points higher than its 14,000 pre-crash peak. So the mutual fund shares I bougt at 7000 are now worth 17,000/7000, or 242% of what they were worth six years ago. Luck? Meh… a little bit, yeah. But more important, I think, was my willingness to take a risk that the markets would recover, and to risk losing some of my money on that belief.
The objective in investing is to buy low and sell high. Selling after a crash has already occurred would be an example of the opposite, i.e. selling low. And buying only after the market has been soaring for a while is an example of buying high. But that is how a lot of people, acting emotionally, do things. To be successful, you have to act differently.
I’ve always said that there are a couple of things that really play well over time. First is dollar cost averaging your purchases, i.e. space your purchases out, and keep buying even when things turn downwards. Perhaps keep buying ESPECIALLY when the markets go down. i see those as buying opportunities, as long as you hold the investment for a sufficiently long period for it to perform for you.
The second is to diversify. I accomplish diversification primarily through index funds. There are a number of index funds out there which map to the S&P 500, for example, or something similar.
The third is to not panic. Too many people I know personally have “bought high, sold low” in scenarios like the ones I previously mentioned. They looked for individual stocks that were performing well, bought them at or near their peak price, then sold them when they tanked with the restof the market. So not surprisingly, they lost money overall, because they bought high, and then panicked and sold low when things weren’t going well.
And yes, all of this advice needs to be tempered with the idea of risk tolerance. Your ability and willingness to tolerate risk, or not, drives a lot of this advice. If you can’t tolerate risk, then maybe something as middle of the road as an index fund that maps to the S&P 500 still isn’t for you, and you would prefer something that is more safe. That is fine. Just know that there is a risk/return tradeoff. You can’t play it safe and then expect average returns. Likewise, you can’t invest in the riskiest assets and then be suprised that sometimes things go south.
After reading a gazillion wealth books, here is my unqualified take on how to get closer to the “1%”.
Get married once and stay so. Has an amazing effect on long term wealth. Of course, it doesn’t hurt to marry someone who makes more than you…
ALWAYS get a high school degree.
Think hard about going to 2 years comm college or trade school.
Consider a 4 year degree at a state school, hopefully in high demand fields: health, IT seem obvious now.
ALWAYS contribute everything your company will match in 401k.
ALWAYS put all you can in Roth IRA if in 10% or under tax bracket. Otherwise strongly consider it IF not phased out.
Invest some in stocks. Lots of rules, but 5-10% gold, 120-age in stocks, rest in high quality bonds. (or funds for same). Should put 20-30% in foreign investments. Rebalance ( buy and sell to even back out to original levels) each 6 to 12 months. NEVER leave it all in cash. Inflation is eroding and will erode your wealth. A great source is scottburns.com. Not a relative, wrote Dallas Morning News financial column for years.
Consider owning a home. Much less simple than in past. If so own long term. Consider hanging on to old and rent out if buying new.
Borrow as little as you can for depreciating assets (stuff,vacations,cars)…
Credit cards are killers, but emergencies happen….
Carry only what, but all you need, in insurance. Generally, better to get term life (if you have dependents) and high deductible and SAVE the difference.
Eat out less, buy less name brands, $6 coffee?, etc to save a few bucks.
All to say, invest in your self; education,savings,retirement.
Maybe you too can pay exhorbitant taxes some day.
That is all good advice, and it works especially well because it requires a level of self-control that not everyone manages well. But it does not account for the fact that life is about 1/3 hard work, 1/3 help from others, and 1/3 luck. You have described the hard work. Many, many people have put forth the hard work but got a bit less help or had bit less luck than others. We can’t entirely remove the impact of luck, nor should we try. What we can do is build ladders of opportunity so that even those who get tripped up continue to have opportunities to get ahead. The following may not be your sentiment, but what I hear from many members of the GOP is that “you make your own luck” (not true), poor people are all lazy (not true), you shouldn’t ever help anybody because it makes them weak (cold-hearted), “and “I made it so anyone can”. All of these arguments are based on the principle that everyone has equal luck and opportunity and that you don’t have to get rid of the bear of poverty that is chasing the community; you just have to run faster than your neighbor. I don’t want to just run faster than my neighbor. I want to address the root problems. Yes, anybody can do better than the next 10 or next hundred guys if they strive hard enough. But we would all do better if the country is improved and if we dot n’t just focus on our own personal advantages.
I’m not trying to sound preachy. Your comments simply remind me of an offensive sentiment others have expressed, and I do not want to be insulting. I have enjoyed our discussion, and you seem a decent, honest sort of person. I am merely trying to express an alternate perspective.
Now this is good advice. The key is to not spend money on things you really don’t need so there is disposable income to invest.
I haven’t had a credit card since the early 1980s. I don’t even know if I have a credit rating because I never personally buy things on credit.
About the other posts.
About 1/3 luck. It doesn’t work that way. There are plenty of opportunities for luck but they just don’t happen. It may take years to get a break and you must be prepared to take advantage of the opportunities. The better prepared you are the more opportunities or the sooner you can take advantage of the opportunities.
Steven H, as much as I thought I knew in high school or college it is nothing compared to what I know now. The point is that a degree is just a start. It takes constant effort to stay ahead. I don’t see where most people are willing to put this kind of effort into staying current. Because of this there is a huge skills gap that isn’t keeping up with technology changes. There are plenty of opportunities for those that can keep up. If people don’t have the level of self control that I do I don’t see why I should have to pay for their deficiencies.
At the top of this thread there is a picture of a doctor. Would you want a doctor that never learned anything else after he/she got their PhD? Everything is changing and many/most can’t keep up.
As far as shipping jobs over seas. I have been to China and sell automation products to China. There is no magic here or there. They can make things cheaper but most of the technology they use comes from Europe or the US. The key is to be the one selling the technology, not the US worker that must compete with the Chinese worker that now has access to the same technology.
There are too many whiners here.
You sound ambitious, hard-working and successful. It’s all good. But from what I have observed, lucky people seldom recognize the magnitude of their luck: the teacher who gave them the life-changing advice, the friend with connections, the fortuitous opening. Yes you have to be prepared to take advantage of opportunity. But the level of hatred for the poor and derision of the down-trodden that I see in most current political discussion is astounding and depressing to me, and I hope you are not advocating such criticism. So I have to ask you: Have you given as good as you have gotten? If anyone made an effort to help guide you to part of your success, have you made equal or superior effort to guide someone else toward theirs? When you see someone stumble and fall behind, are you inclined to criticize their situation or give them a hand in getting back on their feet? I’d like to think you are the latter example in that last question. But perhaps the whiners here have more reason to whine than you have had. Just something to consider.
Steven H
Again you picked an aberrant year with 2009 full of $800 billion in extra stimulus pushed through early in the year.
First, that $800B (Obama’s stimulus bill) was not all part of the the 2009 spending. Only about $200B was applied that first year. The rest was applied in later years and credited to those later years in spending totals or revenue reductions. I say revenue reductions because about $300B was not spending at all, but were tax cuts. There was only about $500B in spending in the stimulus ands it was spread mostly over 4 years (although some small amounts are still being spent this year).
Yes 2009 was an aberrant year, as was 2010, 2011, and 2012. They all followed the biggest economic crash in about 80 years. This aberration, begun before Obama took charge, produced a big drop in GDP, a big automatic boost in spending from safety nets kicking in, and some additional spending to prop up the economy until we could get jobs on the rise again. This makes it hard to talk about the levels of spending during Obama, because his whole Presidency has occurred in a period of massive economic aberration.
What we can say is that deficits have been reduced since 2009, and spending by all 3 major measurements has gone down over 4 years which happens in the US practically never. Our spending/GDP is still a little high, and our revenue/GDP is still too low, as it has been chronically since Reagan (except for a brief respite under Clinton).
So my point is simply that Obama, despite the popular mythology, has not increased government spending. I guess I don’t see your point.
How about this. We’ll avoid 2009 altogether. Let’s compare real per capita spending across 8 years, from 2005 (before the crash) to 2013 (after the crash.). It went up 12.75% in that 8 year stretch. How does that compare to other 8 year stretches. From 1997 to 2005, real per capita spending went up 20.3%. Most of that (16.3%) increase was in 2001 to 2005. So spending went up more in first 4 years of Bush2 than it did over the COMBINATION of the last 4 years of Bush2 (including the Democratic Congress of 2007-2008) and the first 4 years of Obama. How about under Reagan? RPC Spending went up 18% under his 8 years. 18% vs 20.3% vs 12.75% over three 8 year periods. Spending over last 8 years (excluding the anomaly of the crash) is under control. Not like under Clinton (3.4% over 8 years), but Clinton had the “peace dividend” derived from reducing the cold war military. Relatively speaking, the spending has been kept down. Now let’s do the other half of the equation and raise some revenue. The country has the money. It’s just being wasted as bonuses to the wealthiest of wealthy who neither earned it nor know how to use it well.
Peter N
Passing through cost of benefits to Wal Mart et al is not raising minimum wage for ALL like actually doing so would. It does not increase wages for kids, students, part timers, etc. It would only increase costs for actual heads of households. Targets EXACTLY those who need it most. Besides, why should we taxpayers subsidize these multibillion companies?
As I stated earlier, that would not increase wages for anybody. Nor would it actually provide compensation to the government. It would just motivate Wal-Mart to fire the food stamp people so they would not have to reimburse the government for those costs. Unintended consequences always come into play.
Besides, it’s a lot more efficient to just pay the workers a higher wage than it is to have Wal-Mart pay the government money so that the government then pays the workers in food stamps.
Occam’s Razor. Simplest solution is usually best.
The problem with a lot of the arguments is that GDP is a bad indicator of how well the economy is doing. One can raise the GDP by having a lot of car accidents. I don’t see where wealth is created.
http://zorach.wordpress.com/2010/08/27/why-gdp-gross-domestic-product-is-a-poor-measure-of-wealth-and-prosperity/
Nice article. Thanks!
Steven H
Of course the debt relates only to changes in taxation because spending almost never goes down..
I have several ideas too:
Reduce the abilities to expense salaries over some high amount ?$2million? Having to pay twice on ridiculous salaries would give companies pause.
Make companies repay Fed/state benefits that are paid to their employees who get low wages. This incentivizes increased pay, but would not necessarily affect min wage. Besides it’s not fair for Fed government to subsidize multibillion dollar companies Re: min wage, remember, the cost of living is double in some states compared with others. This is better a state by state decision.
Simplify the tax code and drastically reduce IRS. Eliminate ALL the deductions and loopholes, including for houses, kids, age. Note that the wealthiest ( not highest income) Americans are over 65. But they get $10,000 extra writeoff. If givng age related benefits, I’d lean to younger, < 30 yr olds.
Legalize sports book gambling everywhere and tax it. A $200 billion industry.
Legalize marijuana and tax it. A $250 billion industry.
Quit subsidizing but unshackle the energy industry.
Tax wealth in securities / cash over some amount. Perhaps $10 million. We already tax real property.
Liberalize work visas and collect taxes from migrant workers. Nail cheaters to the wall.
Begin Soc Sec and Medicare means testing.
Disallow any furhter municipal bonds that are Fed tax deductible. Let localities support local projects.
These collect presently uncollected taxes, prevent Congress from crony giveaways, reduce expenses and gives benfits to those who need them.
You have some good ideas.
I agree in principle with the idea “Make companies repay Fed/state benefits that are paid to their employees who get low wages.” I absolutely agree that we are subsidizing Wal-Mart and the like by supporting their workers with federally funded food stamps. Unfortunately, I don’t know how to implement the idea without unintended consequences. Wal-Mart’s response would be to stop hiring anyone who is at poverty level and then only hire retired folks or others who are just looking for a little extra income. The working poor, instead of getting higher wages, just lose their jobs altogether. Minimum wage, for all of its imperfections, is the simpler solution I think. Expensive states could apply their own higher minimum wage at the state level.
In a related issue, the 30 hour loophole for medical benefits should be closed by requiring a proportional health-care benefit paid by the company for hours below 30. Then two 15 hour employees are no longer cheaper than a 30 hour employee. In fact, the full time 40 hour position becomes the most efficient in that plan.
If you made companies pay for the subsidies provided by the government you would raise the cost of hiring these employees. It would be like raising the minimum wage.
The SeaTac airport area has raised the minimum wage to $15. It will be interesting to see the consequences of that move.
If you raise the minimum wage there will be an immediate but short term benefit to those that would get raises. After a while a new equilibrium would be reached and these people would be no better off.
I don’t see how people would be “no better off” after a pay raise. Explain.
Steven H
Almost no way to evaluate debt than as per cemtage of GDP, but that’s an opinion. I found 2010 data most recent year that is complete, from IRS and CBO. 1% income $1.69T, taxes $0.39T, leaving $1.3 T. This is equal to CBO debt if $1.3T. So they would get 0 income. Then, of course there is state taxes. So these folks would be imprisoned soon for not paying state taxes if they did not expatriate first.
I’m still not sure how increasing taxes raises wages. Direct giveaways? Limiting sary deductions? What’s your plan? By the way, buy a share of stock and go to annual meeting and protest salaries if you wish.
I don’t agree with you, but I do appreciate that you have supported arguments, not just making false blanket statements.
Stevendad,
Those numbers for 2010 sound about right, though I don’t have the Saez spreadsheet in front of me to cross-check.
Realize though that Annual Deficits were unusually high in 2009-2012 due to depressed GDP and the extraordinary recession-related expenses; the deficit has gone down in 2013 to about half what it was in 2009 or 2010.
As for taxes and wages: I don’t want to paint tax increases as a panacea that will solve all problems. Economics is never that simple. But there are several mechanisms that make sense as ways that low taxes on wealthy depress wages of the general population , and that high taxes on wealthy then must also help the wages of the general population.
1) Incentive to earn the next dollar: As noticed by many, high taxes are a disincentive. What that means is that people with lower taxes are more motivated to work hard for the next dollar than people with high taxes. If you increase taxes on the very high incomes, they are less motivated to go after that next dollar, leaving it for someone else. In other words, the small businessman trying to become a millionaire may become more motivated to act on an opportunity than a large businessman who is already a multi-millionaire. This is good because it keeps people climbing the ladders of business creation and innovation. When the taxes are too low on the rich, the large businessmen are motivated to crush small business to get that next dollar.
2) Business vs. wage: Before 1980’s, wage salary was taxed higher than business income. This motivated people to leave corporate wage jobs to start their own small business rather than seek the next higher taxed higher paid management position. This difference in tax policy was largely scrapped in the interest of tax simplification (businesses filing under individual tax policy, with new lower rates), but I believe it led to the current era of mergers and mega-corporations and the inability of small business to compete as effectively.
3) Treasury replenishment: Increasing taxes will increase revenue and reduce the debt, plain and simple. It is no accident that Debt/GDP spiraled upward in conjunction with GOP tax cuts. It is no accident that tax increases under Clinton and Obama reduced deficits. When government is more fully funded, then it also reduces the incentive to cut all those programs that help the middle class. Suddenly the government can properly oversee poverty-reduction efforts, education improvement, loan subsidies for college, bridge and road repair; i.e. all of the things that keep the economy moving. It also reduces the need to attack labor policy and unions for government workers, including teachers and police. Stronger unions in any portion of society tend to strengthen wages throughout middle class.
Steven H
You have picked some extremes for examples. Post WWII debt was very high, but there was a war to fight and a world to save. We are now nearly double where we were in the average of years after this was paid down, as a percent of GDP. Again reference CBO 4/14 report. Your pie in the sky debt projections fail to encompass 2nd huge problem, demographics. (Somewhere in my rambling, I brought up #1, globalization.) Soc Sec & Medicare A would have huge surpluses if not stolen by Congress since early 1980’s in unified budget. Those bills are coming due every day as more and more Baby Boomers retire.
2012 showed an aberrant rush of income to the “1%” due to sale of cap gains and distribution of income to avoid potential confiscatory taxes, most of which didn’t happen when all was said and done. Thus this is distorted. Granted, it is still around 18% on the norm.
I agree there were good reasons for WW2 debt. My point is that Debt/GDP can go down while raw debt goes up. This fact is little known among many, so I thought it was worthwhile to note. It is why raw debt is the wrong indicator to focus on. Debt/GDP is a much better stat to follow.
I agree there are economic challenges in the future. We need to get our house in order. Along with the challenges you mention, the extreme income disparity slope is one of the biggest problems to solve. We cannot fully recover economy as long as the middle class income is 25% lower than it should be, given the productivity and GDP gains since 1980.
Steven H
Not sure where you got spending went down in Obamas first four years. As a percentage of GDP, according to CBO. It went from just under 19% to 24%, then 23% for 2 years, then 22%, rhen 21% and has Stayed between 20 & 22% since. Your source is wrong. 2009 showed 5% raw increase and over 25% relative increase in spending. CBO report 4/14.
2009 is a point of contention. No one wants to claim it and for good reason. It is the worst year of the economic crash that began in 2007/2008. But the general rule is that the Fiscal Year is credited to the President under whom it began. The Government FY2009 began in Oct 2008 under Bush. That is just how the government structures its financial years. It was under his watch that the tax policies (hence revenue) for 2009 were set, that the budget was passed, that the inertia of economic conditions for 2009 were put in place. FY 2009 was 1/3 over before Obama even set foot in office.
This is why even the Cato Institute (a GOP/Koch Bros funded think tank) wrote that it is wrong to assign FY 2009 economics to Obama, except perhaps for the $200B or so of Obama stimulus actually spent in that year.
So: In the 4th Obama budget year of 2013, spending was down 10% from 2009, GW Bush’s last budget year, in terms of real per capita spending (adjusted for population and inflation). That number is correct.
And real per capita spending is the proper method to measure spending. Comparison’s to GDP are useful, but introduce another independent variable. GDP was very low in the crash, so even if real per capita spending had stayed constant from 2006 to 2014, spending/GDP would have been high in the crash. So that measure is not a great indicator of spending trends, or at least not during GDP anomalies.
Just to be complete re spending.
FY2009 spending
24.4% GDP
$3.52T in raw dollars
$11,467 in adjusted 2009 dollars per capita
FY2013 spending
20.57% GDP
$3.45T in raw dollars
$10,252 in adjusted 2009 dollars per capita
Change
ratio: -15.6% change in Spending/GDP (partly impacted by GDP increase)
-2.0% change in raw dollars
-10.6% change in adjusted dollars per capita
source usgovernmentspending.com
(not a government site, but has reliable numbers)
Steven H
I will have to check resources on 100% taxing the 1% in the next few days. I have seen / heard 8% of deficit quoted many times.
As far as my wife and I being disincented to work, she is an RN and I a primary care physician. Both fields are in significant shortages. Confiscatory taxes have kept her from working and, if raised, keep me from working as much. I guess these are not important to some people, but good luck finding one when you need one 20 years from now.
This returns to my original opinion. That is making those who work the most and have sacrificed the most by deferring income and investing in themselves pay for those who have done the opposite should be balanced by some measure of self responsibility of all. In a purely altruistic world, socialism works. In the real world, there must be some element of self interest to incentivize people to work. In my field, I can get a man with rectal bleeding worked up in a week, if not a few days. There is a direct monetary incentive as well as just doing the right thing. In the VA, there is no extra incentive to see that extra patient and this work up has been documented to take over a year. This has led to patient deaths. Your utopian world is very much what you find in Europe, whose economies are struggling and yet to recover as much as ours, lame as it is.
Check your sources. I suspect that they are quoting Income of 1%/ National Debt, and it may also be excluding realized capital gains. That ratio may be around 8% but I don’t find it very useful.
I will check my sources regarding capital gains income of 2012 vs other years. I just used 2012 because it was the most recent year with good stats available. But also note that the deficit dropped in 2013 from over $1T to something like $650B (recalling from memory), so the income of the 1% is now actually around 3x the deficit, not 8% of it.
The point is not the precise number but the magnitude. Taxing the rich does make a difference. Especially when you consider that half of the current income of the 1% (and 80% or more of the incomes of the higher echelons of the 0.01% richest) are unearned bonuses far beyond the compensation of similar positions 1 or 2 generations back.
Now, as medical professionals, your family is likely at the lower end of the 1% and many generalizations about that group don’t apply to you. You are probably not making 2x (in real terms) what a similar surgeon 40 years ago made, but you might have a bonus of 10 or 20% and you probably have a lower federal tax burden. Increases on marginal tax rates for incomes of $400K to $1 mill probably impact you, but not more than a few effective percentage points. The real reform needs to be at the levels of income of $1M and higher, where most of the usurpation of the middle class wealth has occurred.
And by the way, I am not a socialist, and I reject the notion that I am. I am just being practical. The economy is unbalanced and the growth in capital has been allocated to the sectors of the economy where it has been least productive, and instead has been extremely damaging, producing economic crisis after crisis over 34 years. We need more millionaires and fewer billionaires. We need true capitalism, and not plutocratic excess. We need an America with a prosperous middle class and not a gilded age ruling class.
steven h – I am with you there. It’s about the effects on the economy. I’m not jealous of those at the top, I’m happy with what I have. But, if the wealthy want to stay that way the middle class cannot be gutted. A defacto ruling class would destroy our economy and country.
Those on the lower end of the 1% are the ones who are hurt by the current tax policies. Those on the higher often end pay less because of how their money is earned. The truly wealthy should not be paying an effective rate less than the employment taxes paid by the poor. Carried interest like Romney’s is not right (it’s earned income!) and while corporations do pay taxes, with loopholes and the like many pay a small effective rate. Then the investors are given a lower rate supposedly to avoid double taxation that many times doesn’t exist.
We need to cut corporate tax rates and raise the rates on the corresponding investment income. This will encourage repatriation and local investment of earnings, provide a temporary tax boost from those earnings in the first couple years, and boost taxes from the increased investment tax rate. I would leave the investment tax rate low for other types of long term investments to continue to encourage investment that really creates jobs, buying stocks does not.
I don’t know that 1% or so of $65 trillion is not a lot of money $650 billion. My point is that a charity director and IRS decide where the money goes, not Congress. Every red cent should go to debt servicing IMO.
Deductions are given on FMV, not basis per Medical Wconomics tax advisor column. Could be wrong…
There are limitations as to how much of your charitable contributions you can deduct, though….relative to your taxable income.
Again unrealized stock gains have not been taxed. The basis is very small for these folks. It was taxed, but often less than 10% of value. And donated stick is never taxed in it’s gains. Again US treasury gets none. I wish I could pick and choose where my taxes went…
And your point is? Should donated stock be taxed? Should assets that appreciate tremendously be taxed at higher rates? Should unrealized gains be taxed?
The irony is – even if you doubled all of these tax rates, we wouldn’t come close to closing the budget deficit.
Peter
Lots of straw men in this thread. Lets use “prolonged contraction of economic activity.” I think we were two quarters short if depression of the top of my head, but busy making Obama money for taxes and can’t look up. Off the point argument…
Not in 2007. The downturn was actually in 2008 and we could have possibly sunk into depression during that era…. very true. But we didn’t. Just think if someone is going to post an article with a bunch of big words trying to sound like some sort of authority on the economy that they would not miss this fact. Saying that we were in a depression in a year with 6%+ growth and all four quarters being positive is embarassing. It’s like saying that Ulysses S. Grant freed the slaves.
JB
Wrong again. Did you ever taking reading comprehension. I clearly said they had tens of billions that was never taxed, not they didn’t pay taxes. This is true between unrealized gains and donated appreciated stock. The Feds only got a tiny amount if taxes (in the very low basis) if any. Those are the rules. I just personally, IMO, do not think that is fair. The former are facts, the latter my opinion.
JB. Again I never said they paid no taxes, just that the ratio of taxes to wealth was very small compared with most if those who pay taxes. Refute.
You just can’t string together a coherent thought. Your argument is all over the place. Either they have paid taxes or they haven’t. Your original statement was they have never paid taxes and you just left it at that with no other explanation. Then you went on to clarify. Again, NEVER is not a good word to use. Again, EVERYONE doesn’t pay taxes on stock growth, not just Gates and Buffet. There is no reason to single them out. Just say IRS says there is no taxes on unrealized gain. It applies to everyone.
JB Gates and Buffett are examples. There are thousands like them. I do not have time nor space to list each one. So you understand the concept of an example?
JB
Adding exclamation points and insulting still does not make you right. They have paid zero tax in their reaalized gains and the treasury collects minimal to no tax when stock is donated to their foundation. Ask an accountant, then figure out how you want your crow cooked.
Steve H.
Re: taxing the rich. Taxing the top 1% at 100% would reduce about 10% (most recent figures I saw was about 8%) of the Federal deficit. You must go lower. Controlling spending is only option. By the way, I agree the government will raise taxes to more confiscatory levels, so I am paying off everything ASAP so I can live on lower income. It is a disincentive to work. My wife already doesn’t work because she would bring home only half her earnings with all income and employment taxes. I just don’t agree we should give more than 50% of our labors to government. It is the Blob from the movies. Its appetite and consumption just lead to more appetite and consumption.
Personally, I will have plenty of money and am just old enough to get full Soc Sec and Medicare. The crushing debt will hit after my death and my children will be advantaged (already no student loans) if not set. Most of those under 50 are screwed.
My point is about fairness and human behavior. Again, I do not think people should get free things and not contribute if able to do so. These are my philosophy and not facts. I grew up under the poverty line and feel there’s nothing like a horrible job to incentivize one to invest in themselves and their future. My first job was cleaning vomit and urine up off bathroom floors.
Stevendad,
The numbers you mention (Income of 1% compared to annual deficit) are the right ones to discuss in my opinion. But I think the numbers are off. Here is what I have found:
According to spreadsheets from economist and researcher Emmanuel Saez, Total US earned income for all incomes (based on annual gross reported income plus realized capital gains) for 2012 was $9.04 T. Of that, 50.4% of total went to upper 10% and 22.5% of total went to upper 1% for an income in that elite group of $2.03T. The annual federal deficit in 2012 was $1.09T. (usgovernmentspending.com) Presumably the 1% were already taxed at about 30% effective rate for all federal taxes (taxpolicycenter.org for 2010, latest year listed), leaving $1.42T. If we took the entire deficit out of their income as well, that leaves only 0.33T or $330B. Pretty harsh I suppose. That only leaves the entire group of 1.6 million families in the upper 1% with about … $206K per family in annual post tax income. They may think this poverty, but amazingly, many people would be envious to live on such a sum. I would be.
I’m not saying this is exactly what we should do. I’m just saying there is a lot more money available than the rich like to own up to. The story on conservative websites and the “eat the rich” video claim that you could take all of the money of the rich and it would make no difference so why tax the rich? They muddle the arguments by talking about wealth instead of income, or by comparing annual tax revenue from the rich to the entire National Debt, or to the entire national budget, instead of to annual deficit.
In fact the sources you referenced very probably were saying the incomes of the rich are small compared to the entire National Debt. Well yes, but that is comparing chickpeas and watermelons. The Debt was accumulated over decades. It could never be retired in a year or even 20.
As for controlling spending: US spending in real per capita dollars went DOWN by 10.6% over the first 4 budget years of Obama. Spending was out of control under Bush but it is back in control. We need more revenue.
Last point of interest: Everybody sweats the $17T in debt, It’s amazing to me that most people today may not even recognize that New Mexico is a United State, but they can quote our total debt. And the presumption is that we have to pay that down, right? The debt has to come down to zero. That’s just a given … or is it?
The Debt/GDP ratio was 119% in 1946 and went to 31% by 1981. So how much did raw debt decrease in those 35 years? None. It actually went up from $271B to $995B, a 3.6x increase. How is that possible? Population and GDP growth, and Inflation. So, we may never pay down a dollar of our current $17T. In 30 years, that may even double or triple and we may still be OK, if we can keep GDP growing. It’s the Debt/GDP that matters, and that is too high. Spending has shrunk but the gov’t is still starved for revenue which has been at historic lows (as pct GDP) from all the GOP tax cuts.
It’s late but one more thing …
I’m sorry you feel burdened by taxes but am happy you are well enough off. However, I would like to explore your comment that high taxes are a disincentive to work. I agree with you. Would you be surprised that I consider that a good thing, at least under certain conditions? At low marginal tax rates, the very wealthy are motivated to make ever more money, no matter how much they already make. Not only is this a drain on the economy, it is a bad incentive. Stories abound of young Wall Streeters or bankers striving for ever higher bonuses in the millions or tens of millions and taking insane risks or devising immoral or illegal schemes to achieve those monetary gains. Even in the milder environment of Corporations or small business, CEOs and management teams reward themselves richly because they can, at the expense of worker salaries that lag behind inflation. How do high marginal rates help? Exactly as you describe. They discourage the wealthy who already have plenty from going after that extra dollar for themselves. Instead they may invest it back in their business, or put it into R&D or higher wages for workers. They may retire earlier, leaving a position for the next ambitious executive climbing the ladder. Some think that discouraging the rich from making more money is bad. I don’t. Because, all too often that extra income beyond the first few million is made at the expense of the overall economy, and not for its benefit.
Steve H.
We have the second highest tax in the world for corporations, albeit with credits it becomes more complex. The effective tax rate has varied in a band and is on low end now, but still in band for the past several decades. Listen to yourself though. Is the problem that we are undertaxed? No, no one will invest due to government uncertainty…regulation, Obamacare, cap and trade, etc. also the Fed govt is competing for lending by borrowing so much. Why would a bank give a small business a loan when it can loan to US govt at decent rates (remember they borrow at zero) and be gurantedd repayment? Other than straight out Robin Hood action, taxes don’t equalize income. Also look at family spending that includes govt assistance. This has increased and is near an all time high. Difficult numbers to find, though, because it does not fit the we are poor narrative…
The world temp has been level the past 12 years. Look it up. Also look up greenhouse gases. Water is far and away the strongest . Methane is many times more potent and is dropping due to less dung fertilization. CO2 production is lower in US than 25 years ago. Taxing OUR industry makes much less sense than taxing goods from other countries that have much more carbon output than us, ie a tariff proportional to production. Nearly all green energies (except hydroelectric in the right areas) cost 3 times to produce and take years to recapture the carbon in their production. Natural gas is vastly more green than coal and much more than gasoline/diesel. If the government incentivized vehicles for it, we could drop motor fuel use by 50% or more. Also switch heating oil to NG. This would also eliminate ANY oil imports and much further reduce carbon output.
This is not the best forum for climate change discussion, but I did not want to leave your points unanswered”
– “The world temp has been level the past 12 years.”
Not statistically meaningful. This argument has even been rejected by Dr. Pat Michaels, one of the most prominent US climate skeptics. In a YouTube video, he urges the audience at a skeptic conference not to use the argument that global warming has stopped, because it is so easy to disprove that it undermines their credibility. Over the last ten years, global temperatures have warmed more slowly than the long-term trend. But this does not mean that global warming has slowed down or even stopped. It is entirely consistent with our understanding of natural fluctuations of the climate within a trend of continued long-term warming.
– “Also look up greenhouse gases. Water is far and away the strongest .”
Yes, but while added CO2 and Methane stay in the atmosphere for decades and are the primary cause of changes in greenhouse warming, water vapor primarily provides a secondary feedback effect. Andrew Dessler and colleagues from Texas A&M University in College Station confirmed that the heat-amplifying effect of water vapor is potent enough to double the climate warming caused by increased levels of carbon dioxide in the atmosphere.
– “Taxing OUR industry makes much less sense than taxing goods from other countries that have much more carbon output than us, ie a tariff proportional to production.”
I’ll agree that tariffs on goods from polluting countries makes sense. I do think that we need to continue reducing our own carbon emissions however, including restrictions on dirty coal.
– “If the government incentivized vehicles for [natural gas], we could drop motor fuel use by 50% or more.”
I like that idea too. GOP and oil industry would fight it.
I also think we need to be careful about the fracking that gives us this cheap NG. It’s wonderful that we have this energy source, but the earthquakes, and corruption of water supplies are extremely worrisome. This industry is vastly under-regulated at the moment, IMHO.
Peter N
Right. Unless you donate the shares. Then you get a nice write off and the charitable trust/institution sells tax free. Thus the treasury LOSES money net net (by giving you a deduction equal to fair market value of stock) and shares are NEVER taxed. Like I said in first place. Looked it up. I don’t have a copy of Gates’ tax returns, but a substantial portion of his donations were stock, not cash per wikipedia. Same for Buffett. Again, generous but they then get to control where it is spent. Much goes out of US. Meanwhile the debt climbs…
Facts: The deduction is not equal to fair market value at that income level. And if it is done in a trust it can be as little as 10-20% of market value.
Yes JB, never been taxed. He has 400 million shares he has not sold of 1.2 billion at it’s peak. None of that has EVER been taxed. Much if the remainder was moved to a chritable trust and again, never taxed. Granted, he is a generous man, but, unlike myself, he chooses where his money goes. And again, his tax/net worth rate is very small. Know your facts before you before you insult people. He is NEVER forced to sell anything by the way and pays nothing on capital gains ( then the lower rate when he does) until he does. Nothing you say is worth the 1’s and 0’s that died for your drivel.
That’s right. Paper gains are not taxed. That is what you are talking about. Yes, I watch my accounts go up and there is a lot of paper wealth that isn’t taxed…yet.
However, when I sell the tax man will demand 20% of any gains.
You can argue over the tax code and capital gains rates, but Gates and Buffet paid taxes. Your assertion is BS and anything you say is irrelevant. Nothing Gates and Buffet do is illegal. It is in the tax code. You or I can do the same thing if we have stock to donate. you didn’t start your argument with “stock gains are not taxed”. which is true of everyone. You didn’t say, “gee, it isn’t “fair” that Gates and Buffet can live off their stocks”. You said they have billions never been taxed. Never is a word that doesn’t work in this context. They have been taxed. over and over. Even if they paid more in taxes it wouldn’t make a difference in the deficit. so take your defeatist attitude about 2 people out of six billion that have built companies that deserve everything they have and can hire (job creation) a ton of lawyers that keep them from paying more taxes than they need to. Any of us wouldn’t want to pay more taxes than we need to. Stop looking at the .0000001% of the people that are rich. Yes, it is 99% in stock. So what. They built the companies. Feel free to build the next great tech company and you get to keep all the profits. Invent the next Facebook instead of being pissed off at what others do. invent the next snuggie or windshield heat deflector. or any of a thousand things that make people money. Michael Dell started in his dorm room, HP was started in a garage. The lady that invented Spanx started in her living room. Start coming up with arguments that are at least plausible. Not this shit about “they never pay taxes”.
dailycaller.com/2013/05/28/bill-gates-glad-to-pay-taxes/
http://www.forbes.com/sites/realspin/2013/10/23/warren-buffetts-actual-tax-rate-is-31-while-his-office-workers-pay-21/
YES! Agree JB….. Love how a guy is vilified for giving several billions of dollars to AIDS research. Jerk. He should give it to our Federal government instead. Are you serious?
Billionaire philanthropists like Gates and Buffett are hardly the problem in our society – and hardly the reason why the bottom 20% is struggling. Nor are they the solution.
Lance
Also the bottom brackets were increased, but the standard deduction was as well and nearly all low earmers therefore paid less. It’s not all simple percentages.
Lance
I stand corrected. However, they (investmanet taxes) were then left the same and income taxes raised later, I believe under elder Bush.
This is all smoke screen. Your real point is the middle class is paying the burden and that is not true. Again, top 10% pay 70% and top 25% pay 89%. your other point is tax cuts lead to recession / depression. Again not true, it’s about 50/50. You are giving an excellent straw man argument, however.
Stevendad,
You are correct that tax burden has dropped on middle class for Federal Income Tax by about 5 or 6% in rate drop (depending on quintile). I’m not so sure about the sum of local and state taxes and Soc Sec tax however. Those may have gone up. Regardless, the real burden on middle class is the loss of wages and reward that has lagged far behind GDP growth. The 25% loss in wages over 30 years is a bigger burden than the small benefit from effective tax rate drops of only 5 or 6%. Meanwhile the wealthiest 1% effective tax rates dropped from about 35% in 1979 to 29% in 2010, despite the increase in share of all wages from about 10% to over 20%.
Not to mention the government is underfunded and we have to pay the piper eventually. That money has to come from the rich because they are the only ones who have the means to pay.
All of this discussion about income tax misses the biggest point. The best way to keep people from gaining wealth is to tax income. We should consider taxing wealth. How about 2% for more than $100 mill and 4% for more than $1 bill? This would tax Obama cronies Warren Buffett and Bill Gates who have tens of billions that has NEVER been taxed. Now they have trusts that permanently bypass taxes. Their taxes as a percentage of wealth are miniscule compared to most working slobs. Fair is fair.
Never been taxed? Take the tin foil off your hat. They pay taxes everytime they sell stock shares, which Gates does on a monthly basis. Give me a break. Anything you say from now on will be completely ignored.
This is collosally stupid. Buffett/Gates paid taxes when they earned the money. In fact, they paid it TWICE – both on the corporate level and on the individual level. Then, they pay taxes on anything their money earns. And as JB mentioned on any transactions.
IMPORTANT: Since most on here do not work in the finance world, let me be clear about something…. there are NO magic trusts that “permanently bypass taxes”. The only real way to do this is by giving your money away – via charitable trusts for example. I know it is convenient to think that the wealthy sock their money away in a magic box (offshore accounts, trusts, shelters, etc.) and don’t pay taxes but this just does not exist unless you relinquish control of the money.
Steven H, Actaually,the percent of total taxes by the 1% is fairly steady over the years. Those under 75% have dropped hugely. Read Amer Tax Foundation website on this. The lowest 50% have had their taxes reduced to less than zero ( if you include earned income credit). This is where tax most affected debt. Of course, spending is far and away the biggest issue.
Payroll taxes are supposed to be repaid when you are older. They are not supposed to be spent. A huge chunk of $17 trill debt is owed to Soc Sec trust fund. Raided by Dem Congress in Carter years. Called the unified budget. These payments are supplemented by half by evil corps, by the way.
I do not love corporations and agree the execs make too much. Buy a share, go to the annual meeting and voice that. Go to your pension manager and complain about it. I believe the US government should be reimbursed, dollar for dollar, by the Walmarts and McDonalds of the world for ALL benefits paid to their employees and their families. This would not only be fair, but encourage a fair wage. Now I sound like a Progressive.
My backgound is engineering. My beliefs are wrapped up in fairness, opportunity and efficiency. I fundamentally believe that all should contribute if they can. We all hear “pay your fair share”. How about “contribute your fair share?”
I looked at tables from tax policy center and the effective TOTAL tax rates on 1% went from 35.1% in 1979 to 29.4% in 2010. This is a pretty substantial drop considering their shares of all income doubled in the same time period. This includes corporate tax rates in the formula (not sure how they calculate) and more of the drop comes from the effective drop in corporate tax rate on 1% than from individual tax rate. Interesting stat since we are always hearing how US Corporate taxes are too high.
The top 3% now pay half of the taxes while the rest of the 97% pay the other half of federal taxes. In 1969 The top 3% paid 75% of the taxes while the rest of the 97% paid the 25% of federal taxes. Since the bottom 50% pay very little there has been a tremendous shift in the tax burden from the top 3% to those between the 50% and 97% percentiles even as the share of income and wealth held by the to 3% has increased.
Corporate taxes go into the income by percentiles data, by attributing all of the taxes and income of corporations to the owners of the shares in those corporations. This is correct since the incidence of corporate income taxes falls entirely on the owners of the shares.
“..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 increases in 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 on 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
We all hear “pay your fair share”. How about “contribute your fair share?”
Love this. “Ask not what your country can do for you……”
Society is really full of whiners and the sensationalist media is certainly responsible. Everyone is a victim somehow. It is destroying our country from the inside – even though some on here seem to think if we increase the top tax rates all will be solved… 🙂
Steven H. About the debt… It went down during the Clinton years after the Repubs put a political gun to his head and he cut giveaways. Regardless, economy boomed after Reagan cuts and wealth redistributed to MC. BTW, I thought Bill was best prez in my 50 + years (don’t remember JFK).
So, if you believe changing the rules on the rich will help, remember two things. They do not have to stay here, taking their capital with them. AND they can afford to pay off Congress and pay lawyers and accountants to minimize their bills.
No one has mentioned real issue: globalization. You no longer just have to compete with the guy down the street, but one in China / India / etc. however, note that jobs are coming back due to superior US infrastructure, cheaper labor and cheap energy (NG is 1/3 the cost of most of the world). and now the rest of the world is becoming our customers more than ever. And companies can go anywhere with their money or headquarters.
Obama and Dems have tried to PREVENT growth with regulation blocking energy production, forcing companies to offshore money ($2 trillion) or leave for greener pastures. If they gave an amnesty for offshore money ( already taxed where it was earned) this would flood our economy with money. Expand energy production by getting out of the way. Then we could see China like growth of 6%. Profits pour into companies ( remember the government gets 20%) and they expand. This raises job demand and then workers become more scarce and can get raises.
Good points.
A few comments:
– Repubs in Congress did keep Clinton spending in check, but Clinton also insisted on higher tax rates – a move that GOP claimed would hurt the economy. It didn’t. The controlled spending PLUS tax increases gave us a 9 point drop in Debt/GDP, the first since Carter.
– Rich folks are always threatening to take their capital away. We ought to raise taxes on wealthy world wide in 1st world nations. We also need to just raise taxes on wealthy PERSONS but keep taxes lower on Business income that stays in a corporation and is not pulled into individual compensation. In other words, motivate reinvestment.
– Energy investment: We need the right energy investment. Carbon pollution and climate change are not myths. We need to keep planning for the future and reduce oil and coal dependency.
– As I understand it, Bush2 offered amnesty for offshore money but it did not work. Money still did not come back. There is already enough money for investment in the country, but it is being hoarded by rich. What we need is incentive for businesses to actually invest in jobs here. Restoring wages of middle class would help to rebuild consumer economy and create markets for new business. We also need more of the ambitious millionaires and fewer of the hoarding billionaires. Centralized wealth and income destroys the economy in about a dozen different ways.
– Globalization is a challenge. As you note, some of the outsourced business is coming back, but we may need some minor tariffs or restrictions on imported goods and exported labor to protect our economy. We have been bleeding jobs to the rest of the world, ultimately helping a few investors and corporations and China but hurting US and other national economies.
– I also liked Bill. I wonder if Hillary can be as strong and smart.
Very few that make $1 mill can avoid the AMT and almost all deductions are eliminated. Only about 1/3 of “1%” pay regular tax system and the rest got NO benefit from Bush tax cuts. This is not a problem of undertaxation.
If you owned a business, would you punish the most and reward the least productive? This perverse incentivization is counterproductive. Making the tax system more progressive would only increase this further.
The IRS should just scrap the tax code and make everyone pay AMT. We have hit it on and off over the last 3-4 years.
Rich get richer when economy dips.
That’s what happens in a recession / depression.
There is no change in how much investable stuff there is (gold, property,etc).
Cash is sucked out of the general economy.
Those who have money buy assets at fire sale prices.
Values start to normalize.
Wealth concentrates to those who already had wealth.
No cheating, no stealing, no deceit involved.
Solution? Don’t spend every dollar. Save some. Do you real need $6 coffee? Buy in the next dip. There will always be one.
I know a family of teachers that are worth > $2 million with this method. They never made >$100 k together in a year.
Wrong about the Reagan tax cuts. That is where the change in cap gains and dividends started.
What does 1913 have to do with anything? The present codependent state was not even imagined then.
Your facts are wrong and you can’t support your BELIEFS with FACTS. Please quit posting your garbage as facts until you can support SOMETHING. Please remember all corporate profits are DOUBLE taxed. At corporate level at about 20% (very complex to give exact number) (BTW 2 nd highest in world) and again as distributions, dividends and capital gains. Not a convenient point for a tax whiner to bring up.
Sometimes all you have to do is read Wikipedia to see the truth about your lie about “the Reagan tax cuts. That is where the change in cap gains and dividends started.” That is where the preferential treatment of capital gains and dividends ENDED
From Wikipedia, the free encyclopedia
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President Ronald Reagan signs the Tax Reform Act of 1986 on the South Lawn.
The U.S. Congress passed the Tax Reform Act of 1986 (TRA) (Pub.L. 99–514, 100 Stat. 2085, enacted October 22, 1986) to simplify the income tax code, broaden the tax base and eliminate many tax shelters and other preferences. Referred to as the second of the two “Reagan tax cuts” (the Kemp-Roth Tax Cut of 1981 being the first), the bill was also officially sponsored by Democrats, Richard Gephardt of Missouri in the House of Representatives and Bill Bradley of New Jersey in the Senate.
The Tax Reform Act of 1986 was given impetus by a detailed tax-simplification proposal from President Reagan’s Treasury Department, and was designed to be tax-revenue neutral because Reagan stated that he would veto any bill that was not. Revenue neutrality was targeted by decreasing individual income tax rates, eliminating $30 billion annually in loopholes, while increasing corporate taxes, capital gains taxes, and miscellaneous excises.[1] The act raised overall revenue by $54.9 billion in the first fiscal year after enactment [2] As of 2014, the Tax Reform Act of 1986 was the most recent major simplification of the tax code, drastically reducing the number of deductions and the number of tax brackets (for the individual income tax) to three.[3]
The top tax rate for individuals was lowered from 50% to 28% while the bottom rate was raised from 11% to 15%.[4] Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[5] This would be the only time in the history of the U.S. income tax (which dates back to the passage of the Revenue Act of 1862) that the top rate was reduced and the bottom rate increased concomitantly. In addition, capital gains faced the same tax rate as ordinary income.
Re: tax cut / depression & recession relationship. Largest CUT EVER under Reagan followed by largest expansion since 50’s, which also followed post war tax cuts. You can’t pick and choose data like that.
People should get back employment taxes in Soc sec and Medicare back IF Congress doesn’t steal it. Not fault of wealthy.
IRS facts on income tax: top 0.1% pay 17% of total
Top 1% pay 37%
Top 5% pay 59%
Top 10% pay 70%
None of these are middle class people, so saying the tax burden is on middle class is also completely false.
I am not sure it was ever thought by founders of this country believed one should get money and stuff for having a heartbeat. The fed gov was for standards, defense interstate adjudication.
Personally, I believe handouts past a year encourage people to stay with what is clearly a losing plan.
The Reagan tax cuts actually taxed capital gains and dividends at the same rate as wages, something that would called communism or worse today. Reagan also maintained estate taxes.
The original income tax in 1913 was 7%of income in excess of $500,000 so only the top .0001% paid any income tax.
Stevendad,
Stimulus boosts an economy, no doubt about that. But if Reagan’s tax cuts had been coupled with corresponding government spending cuts, the Reagan recovery would never have taken off. Reagan tripled the National Debt, and was the first post WW2 president to raise Debt/GDP, which went up 20 percentage points under his watch. The Reagan recovery was put on the National Credit Card and we are still paying it off. Bush1 added another 12 points, and Bush2 another 29 points.
Note also that while Reagan’s income tax cuts gave most benefits to wealthy, his big tax increases (on social security) strained the middle class.
Lastly, the facts on who pays what percent of taxes is interesting but is completely the wrong statistic. Of course, if you have all of the income, you pay all of the taxes. The upper 1% have doubled their share of all income since 1980, from about 11% to about 22% of all income, but their effective tax rate has actually decreased over those 34 years.
One last point, posted earlier but I will repeat it here, since you are interested in statistics that correspond to recessions. The upper 1% of earners received over 22% of income in only 3 periods in last 100 years: 1929, 2000, and 2008, all followed by economic crashes. The longest stable economic period in last 100 years was dominated by policies in 1945 to 1980 (strong unions, high marginal tax rates on wealthy, strong bank regulations) in which the upper 1% received only about 9 to 11% of all income.
Today? The economic crash indicator is at 20% and rising. Time for some high marginal tax rates, strong unions, and strong bank regulations. It’s the only way out of danger.
This is interesting Steven. Can you post links to these facts? I would completely disagree that 1945-1980 was the most stable economic time. The 70’s were torturous and have NEVER in all my studies seen them included in “stable economic times” examples. In fact, the biggest period of expansion in recent history was – like it or not – during the 80’s and 90’s with the technological revolution. Unfortunately, this revolution did just what we feared it might do – it has slowly eroded the unskilled labor workforce.
Would also be curious what “economic crash indicator” you are looking at as well. The economy is actually quite stable at the moment and has been improving every year.
OK, mid to latter 70’s were not so hot. 1973-1975 recession was first one since 1938 that technically lasted more than a year or went over 8% unemployment. But 1945 to 1973 is a time period where income distributions stayed level with lower 90% receiving about 2/3 and upper 1% getting 9 to 12% of all income.
Look up “Saez income distribution excel spreadsheet” to get charts and data on income distribution.
My “economic crash indicator” is just the share of income going to upper 1%. It should be around 11% to match the stable period from 1945 to 1973. The economy always crashes when it stays above 21% or so.
And yes there was growth in the 80’s because we had massive stimulus via increased national deficits and giveaways to the rich. The 90’s had some spending restraint from GOP, reasonable tax increases from Clinton, and also a tech bubble and a peace dividend which resulted in less defense spending. We can’t reproduce most of those conditions (except restoring tax rates to a higher sustainable level, which should be done immediately).
I know quite a few people that make in the 400k range and have met quite a few people who make a lot more than that. Most of the people in the 400k range are surgeons, with a lawyer thrown in for good measure. The people who crush the 400k range? Farmers.
A few rambling points.
It may be too late for some of you but the key to getting ahead is disposable income. Saving or investing even a little bit in your early 20s provides more options that allow one to get ahead even more. Saving a small fraction on interest paid or getting a small fraction on savings will make a big difference over time. I know having just a little money when I was young allowed me to hold out for more when getting raises. This little more allowed me to save enough to by 1/3 of a computer company. I didn’t plan much of what happened. I was simply able to take risks and take advantage of opportunities that came a long.
Few people simply make $400K without make a huge investment in themselves first.
About investing.
if you have a 401K or mutual fund then you are probably invested in much the same things as the rich people just to a smaller degree. One thing that rich people can do is negotiate better rates for their investments. Most mutual funds have rip off fees that skim off average joe’s retirement plan. I know because I am one of the trustees of a retire plan and last year we managed to reduce the fees for the 401K to 0.5% from 0.99%. That is a big difference when you are talking about a lot of money and over time it is a huge drain on a 401K. What is sad is that many don’t know what their fees are. Some are as high as 2 or 3% per year. Also, buying mutual funds that have 4 to 6% front end or back end fees is worse.
Another thing I did is ask the employees if they had small retirement accounts from previous companies. My goal was to combine them so we can negotiate better rates. In our case the rates went down about 0.5% but some of the other merge 401k has rip off rates and basically only matched inflation over the last 10 years. That is 10 years wasted.
What disturbs me about this thread is the misconceptions that many of the liberals here have. If a lot these people were put together they would be a dangerous irrational mob.
What disturbs me is that the conservatives on this thread are just as misinformed as the liberals and are still blaming the current situation on the current president. O’bama did NOT cause the housing meltdown or the banking collapse. Those lie squarely on George Bush’s shoulders and it has been the ineptitude of congress that has perpetuated the problems. If you start talking about the Affordable Health Care Act, That my friends, was caused by big business, and the health care and insurance industries. Big business abandoning the workers benefits instead of trying to reform the insurance industry and the HMO’s which have decimated the health care industry. The government is just attempting to level the playing field. If it doesn’t work, it will be replaced with something that does. For all the rhetoric from the conservative side they have not come up with an alternate fix for any of the current problems facing this country. They just want to bash the President.
” O’bama did NOT cause the housing meltdown or the banking collapse.”
Neither did Bush, that problem was long in the making. It was the program to make banks give loans to unqualified people that really caused the problem. Then you can blame Bush for his lack of oversight and Obama for spending a fortune bailing out the people he should have let go broke. Essentially Obama bought votes with tax payers dollars.
” If you start talking about the Affordable Health Care Act, That my friends, was caused by big business, and the health care and insurance industries.”
No this was definitely an Obama and democratic congress affair. It wouldn’t have passed if it were for congress and it got no republican votes.
“The government is just attempting to level the playing field.”
At whose expense and empowering whom?
It still isn’t clear that more people are insured now than before. The incompetent government is not capable of reporting the awful truth. They keep on saying we don’t have those numbers yet.
“For all the rhetoric from the conservative side they have not come up with an alternate fix for any of the current problems facing this country”
There is no fix. Medical care is a sink hole. People get sick and die and there is nothing you can do about it. There are people that abuse themselves with drugs, food, and too little exercise and I don’t feel sorry for them at all.
Certainly I will bash Obama. I didn’t vote for either Bush either. The second Bush was a real disaster too with his wars and lack of seeing the end game but that is not what this is about.
There are whiners that are complaining they don’t make enough money and their jobs are being shipped overseas. The problem is that they don’t have skills that some one or even themselves can exploit to make a profit. It is that simple.
I agree that the decline of our economic system was long in the making.
However, I have problem with your assertion that “It was the program to MAKE banks give loans to unqualified people that really caused the problem. ” There was no program that FORCED banks to make loans they did not want to make. Banks were ALLOWED to do things they never should have done, and they became highly motivated to scam their borrowers at every turn. They SOLD these loans aggressively. The government program was reasonably well-run and few of the loans associated directly with CRA became a problem. It was bank deregulation in general which was heavily responsible.
Re ACA:
You: “It still isn’t clear that more people are insured now than before. The incompetent government is not capable of reporting the awful truth. They keep on saying we don’t have those numbers yet.”
According to Gallup (since you don’t like government reporting) the number of uninsured have declined from about 17.1% one year ago (which is also about the average from 2009-2013) to 13.4% now. In other words 20% of the people who were uninsured 1 year ago are now insured. The numbers are there if you look for them.
Re: Jobs
You: “There are whiners that are complaining they don’t make enough money and their jobs are being shipped overseas. The problem is that they don’t have skills that some one or even themselves can exploit to make a profit. It is that simple.”
Economics are rarely simple. And yes, matching skills of graduates to jobs available is always an issue. But there is little evidence that this perpetual problem is the major cause of our current unemployment. There are, however, trends that are easy to see if you look at the larger economy. Globalization and jobs exported to lower wage workers in foreign countries is undeniably one of the issues that (a) reduces the number of jobs here and (b) reduces wages for the jobs remaining. Supply and demand requires such an impact. The interesting point is that the overall real GDP of US, while sluggish, is still growing. Yet almost all of the benefits of that GDP growth are going to a very small percentage of the population (mostly to the 1% or even 0.1% highest paid). This is a problem. Not because of arguments of fairness, but because of something much more practical: sustainability and growth. Our economy cannot grow if the working and middle classes continue to have a decline in disposable income. We are a consumer driven economy, but the consumers are now cutting corners at every turn. Wal-Mart is the biggest employer, and while their prices stay low, their wages are even lower, and their workers need government subsidies just to feed their own families. This is not the direction our economy needs to go.
If the country is making more money but most people are not benefitting from the growth, we have an income distribution problem. Not RE-distribution. Just basic distribution. If real GDP goes up 3%, the whole country would benefit if ALL wages went up about 3%. Currently, the managers wages go up 8% and the workers about 0.2%. This is worse than unfair. It is unstable.
Peter N – Well said. VERY well said. Hope some of the folks that are struggling or blaming conservatives, Obama, or the rich read your post two or three times. And your reply to JC as well.
It isn’t surprising that most people don’t understand the government and how our economy works. And why should they? Does the average person understand how a hotel is run? Or a hospital? Or what is involved in managing a restaurant? Or in building a space station? The economy and the government’s role in it is very complex – and unlike the other things I listed, the public is being “informed” largely by a sensationalist media on BOTH sides. This is also fueled by politicians whose main motivation is their own personal re-election or image. Why should we expect anyone to understand the complexities of this?
I’m not even saying I do … but studying the economy and its interworkings and history has been my life’s work -and I am also neither liberal or conservative, Democratic or Republican – and I don’t listen to talk radio or watch TV news.
The most ridiculous thing we can do as a people is blame the President for something like the housing decline – or the internet bubble bursting – or the savings and loan crisis. Economic cycles happen just like weather, time and the circle of life. It’s how we HANDLE them that is the key. And the short-term “let’s fix it now” focus is the enemy of our long-term well being as people and as a nation.
You make reasonable points. However, the unseen fallacy in your arguments is that you assume the economic opportunities available today are just the same as when you started out (20, 30, or 40 years ago?). They are not the same. Real wages have been suppressed for 30 years. College is more expensive. There are fewer jobs available for the population, even for skilled jobs that were in demand just a decade ago. If you were to put most of today’s unemployed into the economic world of 1950-1980, they would be employed, successful, and climbing the economic ladder. Conversely, if you or I were starting out today, our successful careers might have been much less so.
Discussions about investing and saving are very well and good to know, but are completely meaningless if you are trying to pay off the $80K college bill to acquire technical skills that still don’t quite snag the expected high paying job.
I disagree that people back in the 70’s or 80’s climbed the economic ladder better/faster/longer than those of today. There are more opportunities for people to find better jobs by moving companies. That is the best way to improve your situation. Leave the company if you are unhappy and can find a better opportunity somewhere else. Not everyone is cut out for management. That is the ceiling many people face. Not everyone wants to be in management. Many , like my Dad, are happy doing their job without dealing with underlings. He is making the most money he ever has and is still voluntarily working at 74 making 120K range. I don’t ever think you will see chemical/mechanical/civil engineers making 400K, but in the high 100’s is very possible. You would need to own the company to get more, but again, not everyone is cut out for that.
This is a difficult area to quantify, especially if you focus on opportunities for motivated individuals in the professional realm. These people are not doing too badly but they are firmly in the upper 20% of earners.
But consider the macroeconomics. From 1945 to 1980, the income curve was stable at what I call an index of 1/3: meaning 1/3 of all income went to the upper 10%, 1/3 of that to the upper 1%, and 1/3 of that to the upper 0.1%, for income shares of about 33%, 11%, and 3.7%, respectively. So lower 90% of Americans got about 67% of all income. In 2008, upper 1% received almost 25% of all income, which is an index of 1/2: 50% of all income to the upper 10%, 25% to upper 1%, and 12.5% to upper 0.1% (a 3.3x increase!). The distribution is still very near that today.
Sorry for all the math.
This means that the lower 90% of Americans, rather than receiving 66% of all income, receive only 50%. Ratio 50/66= 75%; i.e a 25% pay cut from what they might have made if incomes had kept pace with GDP.
I have difficulty believing that this disparity is because 90% of Americans are 25% lazier or less skilled than they used to be or that the upper 0.1% are 3.3 times harder working than they used to be. There must be other causes.
There are many reasons for different economies in different times. Times change. The uncomfortable point is that economic policy and business policy and tax policy must change to keep the nation stable. If that means that the wealthiest 0.1%, who are making 3.3x what they used to make in a more stable economy (when they were still very rich!), need to give up 70% of their income to taxes, then so be it. They will still be rich. What a Christmas it will be when 90% of Americans can get there well earned 25% pay raise. And we can start paying down the national Debt/GDP ratio again (as we did before Reagan’s tax cuts.) And the country as a whole will be in a lot better state.
Exactly, trickle down doesn’t work. So many at the top don’t understand that in order for them to have customers, employers need to pay wages that keep up with growth. If one employer cuts wages (or doesn’t grow them), it has little effect, but when most employers do it “because they have to” to stay in business (or grow their own income), it hurts the overall economy. This can cause wages to continue to spiral down as more customers are not able to buy.
Money more easily trickles up than down. The higher ups will always get theirs. They just need to understand that letting those below them have a little bit more of the pie doesn’t mean they have to take a pay cut, the economic growth provided by increased spending of the masses can create increased wages for all. An increasing economy and wages also allows for job creation and fewer people on public assistance, this increases tax collections by broadening the base and decreasing the expenditures to pay for it.
Most people are not inherently lazy or stupid, they just have little bargaining power when there are not enough jobs to go around. Not everyone can be at the top, it is naturally limiting. What good is an education when there is no job waiting for you when you finish? This is a real situation many current graduates face, and it’s not just liberal arts majors who face this.
Except for the surgeons and the president, the other folks you mentioned likely get the bulk of their compensation as stocks and such, on which they pay an even lower rate of tax. Unlike what we’re taught, and what most of us believe in, actually working for your living is not so profitable…
But how do you acquire “stocks and such” if you don’t work for a living? Read the “Richest Man in Babylon” or “The Millionaire Next Door” Excellent books that will show you how to be like “them” if you are willing to make the sacrifice …..
Again, very few people outside of the C-Suite get compensation in the form of stocks as part of their pay package. They might get bonuses or stock as a match in the 401K. You can acquire stocks by opening a brokerage account and start buying. Most should just buy mutual funds instead of trying to pick the right stock.
That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers.
According to the Bureau of Labor Statistics, last year 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.
My investing doesn’t affect your income one iota. Nobody forces you to have the job you have. the world isn’t in a conspiracy to keep you poor. whose fault is it two of you combined only make $33,000? the reason companies go overseas is the unions and the regulations and the tax code force them overseas. Why pay a union guy $45 an hour when you can get it done for $6 an hour? What lack of skills do you not have that are keeping you from getting a job? Welders can’t be outsourced, plubmers can’t be outsourced. Auto mechanics can’t be outsourced. Teachers can, but very few people are learning online from someone overseas.
It is exactly people like you that keep me from getting a job! You buy up all the small businesses for the RMR and corporatize middle management, leaving the skilled labor to hang in the wind with nowhere to go.
Why do you say JB is keeping you from getting a job? What other warts do you have that is keeping you from getting a job? Can you consistently pass drug and or criminal back-ground checks? Do you have visible tattoos and piercings? What is the highest level of education you have achieved?
I live in the rust-belt region and while heavy industry has all but disappeared over the past 30 years, new advanced manufacturing jobs are available by the hundreds or thousands (depending on the exact city) and yet they go unfilled because people can’t pass drug tests or credit checks or criminal checks or their education level is GED after having dropped out of school in the 10th grade. I am not a saying our public education system is world-class, but it is what it is and graduating on time after grade 12 still goes a long way in life.
Anyway, when I was young, with shoulder length hair and leather jacket, no one wanted me either and that was with a four year degree and no criminal or drug background. I hated having to clean up my appearance, but I realized it had to be done if I wanted to be taken seriously and make something of my life and not be stuck in some dead-end service industry job for the rest of my life.
I am simply a victim of bad timing. In the early 00’s I had a good job but was at the top of my salary range and the next step was management. Then I had 2 heart attacks a year apart. After being on short term disability, I was ready to return to work, but, the owner decided to sell the company and there was no place in the new company for additional management and so I was let go. I decided that I needed a better understanding of business and took the time to earn 2 degrees in 2 years. Just as I was graduating with my bachelor degree in Business Management, the economy collapsed and there have been no available entry level management positions for someone with no management experience. So I have been trying to gain a foothold in any business but, when you’re almost 60 no wants to hire me because of what they would think I would want as pay. I am overqualified for most technical positions and under qualified for management. During the economic slowdown, All the big companies in the industry swallowed the small and middle sized companies that couldn’t survive the economy and downsized and merged the management end, and with a glut of talent available I’m at the bottom of the list for both tech and management positions. To top it off there is not an available position within 50 miles of where I live. Add a debt load of close to 50K from school which is now closing in on default and with only 1 income there is no money to even start my own business. It’s all a matter of bad timing. But as an eternal optimist I keep plugging along.
I am truly sorry to hear of your trouble JC. You are clearly not the kind of guy I characterized in my initial response to your comments. I am 50 and in a management position for a non-profit. Non-profits are risky to begin with and I realize that at some point my age and salary will conspire against me. But even with that I don’t think the “rich” owe me anything. That said, I am a fiscal conservative and I tend to think that CEO pay in the private sector is far beyond the value the actual people in those jobs bring to those jobs, but they are not particular evil or even greedy. They take the money their board of directors is willing to pay them to keep the company running and profitable. Either way, I wish you well.
This is a great dialogue Bill and JC – This is really the kind of discussion that should be happening….. Nobody wants JC to struggle and I don’t JC wants someone making big dollars to just give him some of theirs. That said, I can also understand how being in JC’s situation it would be human nature to find someone to “blame”.
Life is in some ways like a poker game – you can play the game right but just get dealt bad cards. The key is in my opinion to book some of your winnings when things are going well. This is hard to do – we all want to enjoy the spoils of our labor or good fortune. But we still have to sacrifice even when we are “winning”. This is SO hard for people to do and realize.
I still think that the bigger problem we have in recent years is the evolution from our low paying unskilled labor jobs being manufacturing based being replaced by technology. Other than the service industry or jobs serving the wealthier community, there hasn’t really been anything to replace the widespread manufacturing jobs in America. And yes, some of that has to do with unions, outsourcing, etc. But very, very little of it has to do with our tax rates.
Foe all practical purposes it is entirely due to tax policy. How could you not get a vast increase in inequality when you make the tax rate on the types of incomes that the wealthy receive such as dividends, capital gains and corporate profits much less than the tax rates on wages and make 99.9% of all estates exempt from the inheritance tax?
“..Equally unhelpful in terms of addressing the income and wealth inequality which results in the overinvestment cycle that caused the depression are those who emphasize various non-tax factors. Issues such as minimum wage laws, globalization, free trade, unionization, problems with our education system and infrastructure can increase the income and wealth inequality. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. It is the compounding year after year of the effect of the shift away from taxes on capital income such as dividends over time as the rich get proverbially richer which is the prime generator of inequality…”
http://seekingalpha.com/article/1543642
Lance, you lose all credibility with this statement
“. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class.”
Lance is just trying to drive viewers to his article which he has quoted several times. Quoting yourself in two different places doesn’t make your points any more valid.
There is just no evidence to say that our tax policy is solely responsible for income inequality. Anyone who understands economics knows that it is never ONE factor that makes the results. Furthermore, our income and wealth inequality has been greater in the past (see: Rockefeller, Carnegie, etc.) when our tax rates were much, much higher.
Income inequality is due to people not having the skills or education to get proper jobs. Are you really going to pay a HS dropout the same as someone with a college degree? yes, both could be working at Subway, but there are more job opportunities for the person with the college degree. Are there people out there without a college degree making money? yes, but that is work skill, not education. Plumbers will make more than the office manager. A HS dropout could be dockworker in Long Beach making $100,000 a year. The tax policy has nothing to do with it. It is your ability to work at a job that has skills needed.
Was there a big change in the distribution of education and skills that caused the enourmous increase in inquality from 1926 to 1930, or might have been that tax cuts that shifted to tax burden from the rich to the middle class. How about from 2000 to 2008 big change in the distribution of education and skills also?
“..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 increases in 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 on 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
The fact that you think there was a depression in 2007 kind of undermines any point you are making. A simple understanding of economics would be useful here….
“The world is not a conspiracy to keep you poor.”
True enough. However, it could be said, and likely proved, that unfettered or under-regulated capitalism naturally tends toward centralization of power and wealth, which tends to make the poor poorer and the wealthy wealthier, up until an instability point is reached wherein the system crashes. Consider: the average worker, if unaided by unions, governments, or other collective bargaining entities has very little say-so in pay or hours. It is certainly in the best short-term interests of corporations to pay employees as little as possible and work them as hard as possible. This is how income inequality naturally evolves.
How do you find such instability points? One way is to look at the income distribution curve. It tends to approximate a mathematical curve wherein 1/10 of the “earners” earn X% of all income, a tenth of that sub-group earn about X% of the sub-groups’ income etc. The point is you can look at the percentage of income of the 1% highest paid and it indicates the shape of the overall income curve. Over the last 100 years, the income of the upper 1% has exceeded 22% of all income for only 3 periods: just before 1930, just before 2001, and just before 2009. You may recognize those time periods as rather significant economic crashes. For reference, this indicator was around 11% from 1945 to 1980, a very stable and prosperous period. Today, this economy crash indicator is around 20% and on the rise again. Watch out.
Looking at the economy this way, there is about 10% of the economy that was redistributed from the lower 90% or so of earners up to the upper 1% since 1980. So while the world does not conspire to make men poor, the tax and business policies of the last 30 years have certainly conspired to shift our economy to a very unstable point, where the poor do happen to be poorer and the richest are quite a bit richer.
Peter…
Actually if you go to the tax tables, and plug in $555,000 of taxable income, your tax rate would overall at 30.01%. But where maybe the confusion is is that I am using the taxable income portion and not total income number.
If he had a taxable income of $1M before deductions, then had $120,000 in deductions, or a taxable income of $880,000 that’s where he would pay overall 30% of his 1,000,000. My point is I’m not using gross income, I’m using taxable income. I’m like the person that takes deductions for charities because they can handle using those funds to help others better than the government. It has nothing to do with greed, or being cold hearted. It has everything to do with government being wasteful.
How does “wasteful” have anything to do with the rest of what you said? How do you know what’s wasteful in government or how that compares to private enterprise?
He’s just saying what I’ve been saying all along. The problem isn’t on the revenue side of the balance sheet- it is on the spending side.
Actually it’s even simpler than that. Your effective tax rate is this formula….
Taxes Paid / Total Income
Let’s assume a married couple with $550k in income – all from earnings. Just using the 2014 tax table, they would pay $164,553 in Federal taxes. That is a 30% effective rate. But of course this doesn’t take into account any deductions or credits some will say. But your deductions and credits are severely limited under the new tax law at that level. Of course, if this couple were to max out their 401ks – they could put a max of $46k if they both work and are both over 50 – they could bring their taxable income down to $500k. They would still be paying around 28%.
The way that the ‘rich’ get the effective tax rate much lower is with tax-free income like municipal bonds. If I have $550k in wages and another $450k in tax-free interest, my “effective tax rate” drops to 16%. (Taxes paid / $1m in income) This is how they went after Romney in the last election on his ‘effective tax rate’. The other way is deferred comp plans which allow high earners to defer a great deal of their income, but also handcuff them to their companies.
The reality is that the majority of us who are earning very high wages are indeed paying 30-35% in Federal taxes and 5-7% in state taxes. But some think we should pay more…..
Ok, you need to have a crapload of money in muni bonds to get 450K a year in income. And if you do, so freaking what!!! Those are the rules. Poor people can invest in 98% of what rich people invest in. A poor person can buy index funds or any low expense mutual fund. Yes, a rich person has more money, but a 50% return is a 50% return.
Gov’t wasting money is equal to wasting what I pay in taxes. If they cut fraud and waste, maybe our tax dollars get used more effectively. And AGAIN, the 35%-39.4 rates are only one what you make over the 450K limit so if you make 350K, you aren’t in the top tax bracket, but you are taxed 39.4% over the 450K so if you make 500K, only 50K is in the 39.4% bracket. 401K maxed out of 23.5K is 5% of a 450K salary. So that and if you have a ton of mortgage interest and charity, you can lower your Gross Income. AGAIN, nothing illegal or sinister or greedy about that.
and I would rather live in a state with no state income tax and pay more in property taxes since I am more willing to control the house I own vs wanting to control my income.
That is why I live in Washington instead of Oregon. We moved the company too because of taxes. There is nothing greedy about voting with your feet.
When we spend money on things we want we are also voting. When we are forced to pay money on taxes we are not .
BTW, I don’t think our property taxes are that bad relative to Oregon.
For those of you that don’t know, Oregon has a relatively high income tax but no sales tax. Washington State has a sales tax but no income tax.
Well said… totally agree. And you’re right about the muni bond income – but that was what Romney has and why he is in such a low bracket. And I totally agree with another point – I love this myth that is out there that the rich have access to more investment options than other people. That hasn’t been true at all for about 40 years. Just something else for people to complain about that isn’t even true.
Are you living in an alternate reality? The poor don’t invest because they have nothing to invest! Every penny earned goes to basic living expenses. Milk is now $4.00 a gallon, gas, $3.75 gal, coffee, $10.00 a lb, etc… The minimum wage hasn’t risen from $7.25 hr for nearly 10 years. Most “poor” people, because of their meager income and the taxes they pay, get them maybe to the next weeks check and no more. It used to be that these people put their meager savings in the bank. But now with minimum required deposits and literally no interest and large fees have stopped that. Now they are forced by the banks to go to places like Walmart to cash their paychecks at an outrageous cost per week. You have absolutely no clue as to what being poor really means.
Nobody has to buy coffee. It isn’t a basic necessity. “every penny”? maybe for the basic minimum wage person, but anyone making $30,000 can afford to put away $100 a month into savings. They just choose not to. I see plenty of people with rims on wheels, expensive purses etc instead of saving money. If you make $500K a year and spend $550K, you are just as poor. You have a better shot at changing your habits, but saving habits can happen at almost any wage bracket. There are plenty of stories of the janitors leaving millions to a school, the little old lady that dies with hundreds of thousands of dollars. It is all about choices people make.
First off, the bottom 50% of the country is paid minimum wage or less. That’s why they’re the bottom 50%! Minimum wage earns a person $15,080.00 yr. before taxes. Where do you think they have any extra income to spend. My wife and I had together $33,000 in gross wages taking the standard deduction our taxable income was $12,106 and we paid $1,213 in federal tax or 10% and you have the audacity to tell me that we can if we want, save a 100 dollars a month. The only way we could get an extra $100 is to steal it. We probably paid as much for heat as you did this winter around $500 mo. We don’t have cable, only internet as to be able to find work, otherwise we wouldn’t even have that. $30,000 is below poverty level now didn’t you know that. You think that because you have money to burn, that everyone else does or, is sponging off of you. While you’d rather invest your money in money and not in people, you are, actually creating the problem of higher taxes for yourself by not allowing the lower wage earners enough for more than basics so they are forced to buy cheaper goods from offshore further damaging the economy. Continue to put your profits into investments to make money rather than putting into more production and you are weakening this country, and in short order.
You’ve really missed the point on the tax breaks for the super wealthy Peter. Romney wasn’t in a low tax bracket because he invested in muni’s at all. The majority of his income in 2011 came from his investments: capital gains ($6.8 million), taxable interest ($3 million) and dividends ($3.7 million). He gave a million dollars to the LDS church and another 3 million in money and other valuables to charities. Mini’s were never mentioned, but capital gains and dividends receive favorable tax treatment of maximum 15% and they are easy to structure instead of receiving the same amount in “wages” or “deferred compensation” which would be taxed at the normal rate that you and I pay.
Not mentioned or considered are the millions from the interest and appreciation he received in his 401k’s which is not taxable until withdrawn. I’m sure it will never be since he certainly doesn’t need it and at some time in the distant future, there may be a loophole to retrieve it tax free also. Now, tell me again why you’re content to let the super wealthy pay less so that you and I must pay more?
A) That is blatently false. Only about 2 million make minimum wage. 50%? are you kidding? Most states have a higher pay rate than minimum wage. Show me your research that backs up your lie.
In November 2012 the U.S. Census Bureau said more than 16% of the population lived in poverty, including almost 20% of American children,[7] up from 14.3% (approximately 43.6 million) CBS. November 15, 2012
the poverty level for 2014 was set at $23,850 (total yearly income) for a family of four
MOR – I was just mentioning one aspect as to how the super-rich can be in lower effective tax brackets.
– Capital gains are certainly taxed at a lower rate (although that just went up too on the wealthy). This is now close to 30% – 20% Federal, 5% state + the 3.8% ACA tax. Not 15%.
-Taxable interest is taxed as ordinary income just as wages would be – so you are wrong about that one.
– Some “qualified” dividends are taxed as capital gains (as above) but a great deal of them are taxed as ordinary income as well.
– Charitable giving is certainly a deduction but not something I view as a bad thing.
– 401ks are certainly the best way to reduce overall taxable income but maxed at $17,500 (or $23k if over 50). Doubt that helped Romney a whole lot – and in fact this is something available to practically everyone – even those making minimum wages if they choose to participate.
– Deferred comp is an option that many higher earners have as well. But many times this is to help the most talented workers stay with the company. These are funds that often you leave behind if you change jobs. I personally would rather see the CEOS and bigwigs paid more in deferred comp than salaries….helps them make long-term decisions rather than just for short-term bonuses and profits.
– I have a huge problem with someone whining about the fact that someone’s retirement savings are not taxed in a 401k or IRA. Every working American has the ability to invest in these, but many choose not to – as it would reduce their paycheck for current consumption. I run a 401k plan for a construction company with about 80 employees. Outside of the 5 “managers”, only about 10 others even participate. All of those 10 have over $100k in their accounts and several of them are now close to $400k-$500k. All make very meager wages.
I also agree with the ridiculous post that 50% of our population is on minimum wage. People should really travel the world – or even our country – to see what reality really looks like. There are many, many small banks that will take on even the smallest accounts. My 14 year old daughter has a savings account with $60 in it and has no fees whatsoever.
Unbelievable the amount of victimization and whining that keeps popping up on here. Particularly from the group that doesn’t pay anything CLOSE to 30% of everything they earn to the IRS.
Not everyone has a 401K plan at work, but in reality, a small change in the tax code would allow everyone to have one. Just have a line that shows how much you contributed and deduct it from your AGI. why burden the company with the 401K plan. If you have to borrow money, you get a high penalty. Nothing to pay back. It is your money and if you really, really need it, fine, take it. But know the consequences. the super rich can’t participate in a 401k due to making too much money. They are high earners and skew the numbers. It depends on how many other employees are in the 401K plan. again, 23K pre-tax isn’t a big deal if you make over $1,000,000 a year. The super rich don’t get rich off of 401Ks or investing in muni bonds.
True, JB – but I’m well into the 1% and I have a large amount in my 401k and deferred comp plans. The reason why is that I have been maxing it out from day 1, even when I was making $20k/year in the mid 90’s. And I had it in stock funds , rather than in money market where 50% of all 401k assets lie. I now have about $1m less than 20 years later.
Like your idea of taking the burden from the companies.
A few interesting facts –
-Upwards of 85% of all companies offer retirement plans of some sort. Some studies even show results in the 90’s.
-National participation rate in 401ks is around 70%
-Only about 50% contribute up to the amount that the company matches. How stupid is this!
-ONLY 10% of all participants maximize their contributions to the fullest.
I have been with a few companies that offered a 401K and those in the office contributed, but those out in the field (oil service workers, auto mechanics) didn’t participate. One of the reason was they just didn’t think they would be with the company long enough to care. IMO, it is hard for a couple making less than $150K a year to both max out the 401K. That is 34K a year into retirement which is about 33% savings. Most people are barely saving 10%. Younger people should have mandatory savings into a 401K and maybe it wouldn’t be a bad idea to give bonuses for those under a certain income to have bonus savings put into the IRAs they are contributing to.
I am in financial sales and have made upwards of $1M a year sometimes. I pay my taxes and do not mind helping others. My effective tax rate is the high 20’s after deductions. I can still live very nicely on what I clear. I’ve been on welfare and know what’s it like. There may be those who milk the system, but most would love to work and have a good paying job. And don’t forget, many of those at the top of the earnings scale milk the system, and are on some form of corporate welfare. It’s not just those at the bottom. And when those at the top do it, it’s much worse than when those who scrape by do it. Being on welfare isn’t milking the system, as so many think. Those who complain act as if it’s something great for those on it. If they think that, they should try it.
I’m calling you out on that crock of crap. For starters, if your income was $1,000,000 like you claim it was, and that you only had a marginal tax rate of upper 20’s after deductions, you are full of BS. For starters, I’m going to give you the advantage of having a tax rate for couples filing jointly. For you to pay less than 30% marginal rate! your taxable in one would have to be $554,000 or under. That’s the tipping point. That would mean you have $446,000 in deductions. Although it’s possible, it’s highly unlikely, so therefore the BS flag is thrown. In addition, after the $450,000, you had to have paid the 3.8% Obama Care tax. That’s above and beyond.
So Steve, did you miscalculate, or are you trying to look like a superhero to the poor, or are you simply full of it?
39.4% rate doesn’t start until 400K or whatever the number is now. It isn’t 39.4 on the whole $1,000,000.
David – He is probably close to being right….. but likely not for this year. Like JB said the top rates only kick in on the amount OVER the threshhold….that’s what marginal tax rates are. I would still think he would be around 30%+, but he could very well be putting a lot of money in deferred comp plans or have significant charitable deductions.
I am curious what he means about corporate welfare. I’d like to get on that…. 🙂
The other gentleman named Steve did not SAY he had a MARGINAL percent tax rate of upper 20’s, he said EFFECTIVE tax rate.
With today’s marginal tax rates and no deductions, the first 450K is taxed about $126K, for an EFFECTIVE rate of 28% (using married filing jointly).
With no deductions, the next $550K is at 40%, but the EFFECTIVE rate becomes 34.6% on the full million. With only $150K of deductions, the taxes are only on $850K of the million, and the effective rate drops to 28.6% … the upper 20’s Steve claimed. Your BS meter went off a little early …
It sounds as if you have an excellent perspective of reality.
Looking at the type of responses your post elicited, it appears that you have a really good handle on what is reasonable and fair. In my life and professional career I have noticed that there seems to be two different types of people. One that firmly believes that the pie is constantly growing and there is enough for all if unreasonable expectations are held in check. The other believes that the pie has only one size and for one to take more, someone has to lose. Thank you for sharing your story and reinforcing the notion that there are people out there who think more from a big picture than some.
Normal Joe, if I understand your “two types”, they seem to relate back to the concept of the zero sum game. The first person recognizes that a growing pie can benefit all, the so called “rising tide that lifts all boats”. The second type assumes a zero sum game, where the pie does not grow, so any larger slice to one person indicates a smaller slice to someone else.
But you left out the 3rd condition. This is where the pie is growing, but not fast enough to appease the greediest eaters. That is the state we have been in for 34 years. Almost all of the growth in “pie” has gone to the upper 1% while wages have stagnated or even shrunk for most Americans in the same time period.
It is not a zero sum game. The pie is growing. But all Americans baked the pie, and it is time for everyone to receive their just desserts; no more and no less.
This article does not mention sales people. In the mid 300’s Im still aiming at the 450 mark, but have friends and know others that are there & beyond.
If we want to find who out who are the people that are earning 400kwe must first get rid of the verbage salary. Salary is often tied to employee and very few employees make 400k+. Those people that are earning more than that are earning wages. They do not trade their time for money like an employee would. They have multiple sources of income and a very different paradigm when it comes to earning money. The education system keeps people in a box when it comes to earning money. Most people think making that type of income is very difficult to achieve which is completely false. They have just been conditioned to think that way. There’s extremely wealthy people out there that are not “smart” as determined by a school. Some can’t even read. Yet there’s people that have the finest education’s that are in a financial crisis. Why is that? It comes down to a few fundamental beliefs about money and action taken following a set of beliefs.
There are plenty of jobs that pay $400K in just salary. Every Big 4 accounting partner that has been a partner more than 5 years makes over $400K and they don’t have any stock options. Most high level lawyers make $400K. Starting salary at the big firms are $150K a year.
There is salary and total compensation. Again, plenty of people make a $400K salary. Many get stock options and profit sharing.
The rich certainly don’t use food stamps, housing or any other types of welfare, but there is no reason to tax the rich more. The go’vt should just learn to make better choices in allocation of money and if they want another $1B tank or plane,the money should come from somewhere else. Personally, I think our defense is over bloated and we have enough planes, tanks and subs to keep the invading hoards out of our country. We don’t have to be the world police at this point.
The only realistic solution is the oft used term “all of the above.” As far as the very fortunate few, this country is built on the concept that the fortunate few have a social obligation to “take care” of those less fortunate. When some of those fortunate few are either unable or unwilling to fulfill their social obligation, what is the solution for the greater good? I don’t like taxing anyone for more than what is reasonable. The sticking point is that there are many unreasonable people who just single finger salute those who they disagree with. A progressive tax structure is the institutionalization of the social obligation that we all are obligated as a member of society. We are a society of whiners, some do it vociferously, some with their pocketbooks. The end game is the same, what about me?
There you go. Succinct and true. Call it the bottom line; the extent to which the focus always gets shifted from this is the extent of delusion. I think I said something to that effect months ago here. People would rather forever argue their ideologies or a tax rate change of a few percent, than face the all-time champion welfare queens, exponentially so: our trillion $/yr military industry (which reported it “lost” $2.3 trillion on 9/10/01) and the source of [the skimming of] all the money in all the pockets of everyone here… all the money in the world… The banks. An industry given trillion $ bailouts (before the $200 billion S&L bailouts where even paid off, and while being caught laundering – but of course not punished for – another $200 billion for drug cartels etc) while collecting record profits in the midst of the global meltdown and depression it caused.
“The issue which has swept down the centuries and will have to be fought sooner or later is the people vs the banks”
“The issue which has swept down the centuries and will have to be fought sooner or later is the people vs the banks” -Lord Acton
The rich use more government services than the poor. The billion dollar tank is paid to whom? The billion dollar plane is paid to whom? And who is it that reaps the rewards for these billion dollar government contracts? On who’s backs are these military weapons are built? And who does the fighting? And who reaps the pain and suffering associated with these weapons? And who keeps the rich, rich and the poor, poor?
Open your eyes to the rest of the world! Look the Ukraine. The people that need the assistance cannot defend themselves and the Oligarchs are at the door..again!!
But you are right that We the People of these United States of America are in effect (supposedly) 50 like minded autonomous sovereign states, should not have to be the world police, but as Americans we have a duty to uphold the choice of freedom and democracy for all of the worlds population that want it, as it is the primary tenet of our vision of humanity as a culture.
“The rich use more government services than the poor. ”
Justify that statement.
A company that benefits from a company contract also benefits many 401K people that have a share of that company.
Keep trying
Agree – would love to know how the rich use more government services than the poor.
The wealthy company uses more of everything. More road use, more tax incentives, lower government loan rates, more access to government services, lower tax rates, more influence peddling, It is the entire reason for current economic situation. The rich have influence over the government and take every single advantage to increase their profits.
Here is a real world example. I submitted a bid for a government contract I diligently researched the the specifications did my homework, surveyed the job sites in in the bid, prepared a price based on my long experience and at a labor rate below standard industry rate and filed a bid in the sum approaching $200,000.00. When the submitted bids became public, the winning bid was from the largest local company in the industry for $40,000.00. One fifth of my bid. All the other bids were over my bid so my numbers were in line with industry standards. Why do you think That that wealthy successful business would cut their rate on a 2 year contract to well below the industry rate? One, because they could write off the loss associated with the bid. Two, to gain favor and influence with the local government, and to put sales pressure to replace older systems in place with lucrative new contracts at their real rates. The wealthier you are, the more advantages you get. Instead of getting a foot into the industry, some rich bastard needing tax a write-off puts up a huge barrier to everyone else trying to make a living.
If a company uses the road more, they pay more in gas taxes than someone that doesn’t. Not every company has lobbyists and not all lobbyists are bad. Just because you are trying to get gov’t funds doesn’t mean every company does. How do you USE more tax incentives. If they are there, why not use them? How do the rich keep someone from getting a job? Stop generalizing everything. You think the whole world is against you.
Oh I thought you were referring to the wealthy taxpayer vs the lower income taxpayer (or non-payer as the case may be). Not corporate america vs. the individual.
” Most taxes on the state and local level are “regressive”,”
That is a liberal term used to make people think it is OK to rob the rich to give to the poor. The rich don’t use state services. Why should they pay more than their fair share? One man, one vote one unit of tax. Why should a successful person be a slave to the government and all the losers more than any body else?
Public servant, I think your idea would be very good for the country. It would motivate people to work. I do think the rate would need to be greater than 10%. I wouldn’t need to pay an accountant. Even at twice that rate my taxes would go down.
I am 60. I can retire at any time I want if the gov de-motivates me enough. Then I will just be consuming. Take that everyone.
you guys are missing the problem. Most people that make $400 are professionals that put a lot of time and effort into what they do. To penalize and hold a gun to the heads of those that can and subsidize the losers is outrageous. If you want to start over again we need to make it clear that you MUST graduate from high school to get any government benefits. Parent shouldn’t get social security if the raise a bunch of criminals or free loaders.
However, since I am more libertarian, would simply cut the social programs and reduce the taxes that way.
“Regressive” is NOT a partisan liberal term at all. The dictionary defines it as: “2. (of tax) taking a proportionally greater amount from those on lower incomes.” “Progressive” means the opposite when referring to taxes.
The wealthy use government services to a much greater extent than the poor. The opportunity succeed is provided by the government. The roads over which commerce travels are provided by the government. The military necessary to assure trade routes and markets are open and accessible is provided by the government. The rules formulated to assure fair competition for products and services are provided by the government. The educated work force needed by the wealthy to produce their goods and services is provided courtesy of the government. And on and on.
If any American believes his success is due solely to his own hard work, he’s delusional. We, the people, formed a GOVERNMENT, defined by a constitution, in an attempt to give every American the opportunity to succeed by providing services to all. Those services are disproportionately used, not by the poor, but by the most successful. That’s how they became successful in the first place, and they owe that to ALL of the rest of us.
Roads are paid for by gas taxes. If you drive more, you pay more since you are putting more gas into your tank. Just wait until the go’vt taxes electric cars since they aren’t contributing to the road/bridge tax.
Government tax is government tax, it matters not the source! The government is we the people, whether Federal, State, County, or local!
I was gonna say the (interstate) roads (system) are maintained – but not originally paid for – with gas tax, but my friend Google says you’re right. A one cent increase built our system! Of course a penny was worth more back then, and another perspective is that it equaled a 50% tax increase – which, these days would get Obama labled a Socialist, if not a Communist – but the fact remains that a penny built our system, which is now crumbling*…
Apropo my friend tells me this is a current event:
http://politicalticker.blogs.cnn.com/2014/05/14/obama-to-gop-tear-down-this-bridge-and-pay-for-a-new-one/
*…as China is connected by high-speed rail (Something Clinton promised in 1992, which inspired me and almost would’ve gotten him my vote over Perot… if I was old enough to vote). And this is also in the news today!:
http://www.independent.co.uk/life-style/gadgets-and-tech/news/beijing-to-the-us-by-train-china-outlines-plans-to-connect-world-by-high-speed-rail-network-9342749.html
China can funnel money into HSR all they want. It will never work in this country until we have about 400 Million more people living on top of each other and you want to commute 200 miles. To build HSR anywhere outside the east coast is a waste of money.
Succinctly put, Hear, Hear!
I think many wealthy Americans do believe that their success was due to their hard work, talent, or even good fortune – but none of it would be there without the hard work and energy they put into their careers. To say the government is at all responsible is ridiculous. We ALL have the same government “giving every American the opportunity to succeed by providing services to all” as you state. So that is a constant. What separates us it hard work, talent, and good fortune.
Earlier someone listed the three ways someone could become “rich”, which I liked – earning it, inheriting it, cheating people. One thing I’d add to this….
Why do people cheapen those that inherit money? I certainly don’t want my children treated that way if I leave them millions. Once I have reached a certain lifestyle for myself and have much more extra money left over, what should I be doing with it? I pay a hefty 6-figure sum in taxes every year, donate a great deal of time and money to the community, and don’t see any need in wasting money on stupid extravagances. So instead, I put it away to be able to change the lives of not only my wife and I (and parents who I also support) but also my children and future grandchildren. But somehow there are haters with this philosophy. I can’t imagine that they want me to blow it on stupid things….do they want me to give it all to those in need?
The level of judgement against the wealthy in this entire thread is really appalling – and there are many educated posters throughout this entire thread. The wealthy are not to blame for the problems of the masses. They are not all (or even a majority) money-grubbing selfish leeches who abuse the system.
MOR – you and I have agreed and disagreed over the past few months on many things, but the last paragraph about the successful “owing something to the rest of us” is proposterous and completely cheapens your usually insightful point of view. No random individual that you haven’t even met OWES you a thing.
The poor use the same roads and bridges as the rich. There aren’t secret roads only the rich use. Everyone who uses the roads pay for them. If you live on a farm and never leave it, you don’t pay for roads and bridges. There are many things I would like to see as usage fees. If you don’t use it, you shouldn’t have to pay for it.
Perhaps my words sounded like I was saying that only the rich owe anything to the rest of us, but that isn’t what I meant. We all owe something to the communities which gave their time treasures and talents for us to succeed in life. Of all the American stories I know, Abraham Lincoln came closest to being a self made man. In comparison, all of us here were born with silver spoons, Harvard-like educations, and now work bankers hours. So don’t tell me you succeeded without anyone else’s help. Yet Lincoln recognized that he was given opportunities by his country and believed in giving back. (He also instituted the first income tax on the wealthy.) America is our ultimate community and WE are it’s government.
America isn’t some faceless building, bureaucracy, or boundry map. It’s us, me and you. When I said, “…owing something to the rest of us” therefore, I meant that anyone who grows up in this country and “succeeds” (not just becomes wealthy), does so through the sacrifices of others who’ve come before, and owes a debt to those who are not only here now, but those who will come after. In other words, “…to America”
(Gotta go now. Maybe I’ll finish the thoughts later.)
Of course I had help. And I do “pay it back” every day…. by paying between 40-50% of my earnings back in the form of taxes, by giving to local charities, by volunteering in the community, by mentoring youth, by employing people both in my business and in my home. I personally feel as though I am doing my part to “pay it back” – but certainly don’t do so out of some sort of “obligation”. Nor do I feel as though it is in any way right for someone else to judge me. I can keep it all for myself if I feel like it and have no qualms with others that do so.
While I don’t typically agree with everything MOR posts, I think his last post is one that I can fully support. We do all owe a debt a gratitude to those who came before us and sacrificed to make our country what it is. However, where I get off the debt of gratitude train is where the gratitude focus subtly shifts from our ancestors to our contemporaries, and where that the gratitude must always play itself out in wealth transfer payments. Somehow simple mental and verbal gratitude is not enough. Money must be involved. And I once again note that those wanting to take other people’s money are never described as “greedy”, but those from whom they want to take money are invariably described this way. I’ll let Peter’s penultimate post in this thread represent the rest of my feelings on that subject. I thought it was terrific.
I understand progressive taxation, and to a lesser extent than currently exists in our tax system, I agree with some of it. I would quickly add, however, that progressive taxation punishes success, and so I think we need to be careful about that. We need to strike a balance.
Personal financial success is the engine that drives not only the economy, but the government (through taxes) as well. If taxes go “too high”, whatever that level is, incentives for achievement diminish accordingly. One of my central objections to progressive taxation is that there never seems to be an end to it. Enough is never enough. In the 70s we had the highest tax bracket at 70%, and the highest marginal rate at 90%. Our corporate tax rate is currently among the world’s highest.
At its worst, progressive taxation boils down to making a case for taking money out of your neighbor’s wallet, and feeling good about yourself for doing so. Rarely have I ever seen this viewpoint balanced out with calls for financial accountability on the part of government officials for how that money is spent, or overspent. We have almost $18 trillion in national debt. And it is the same in many states, notably Illinois and California, two highly progressive, blue states. I think New York might be the same, but am not sure.
At any rate, finally, in my view, the differentiators in the income equation are ability, hard work, providing goods or services that are in demand, and educating yourself. “Inheritance”, “luck” and “cheating other people” don’t make the list. However, a belief in these three are some of the main drivers of the progressive taxation viewpoint.
I am happy that our County will be debt free in about 4 years and we will implement a pay as you go system. Our “CFO” does not want anything to do with owing DC anything. There will always be disasters where a town needs some money from DC, but better not to owe them anything. States and cities send money to DC and they send it back, minus the 10% handling fee. How about we just net out costs and stop sending money to DC if they just turn around and send money back. States should be less dependent on the Feds.
Ken — Your argument; “If taxes go “too high”, whatever that level is, incentives for achievement diminish accordingly”. I disagree entirely. For half of the last century the capital gains tax hovered around 70% and every time the tax rate dropped, the economy turned sluggish or declined as in the Stock Market Crash and The Depression, and again in the Eighties. When the tax rate is too low, (as it is now) there is no incentive to put people to work because the wealthy put their money in stocks which can grow exponentially without the American workforce being involved which in turn drains the economy, increases the national debt, and drops the standard of living of everyone except the wealthy that continue to make money with money instead of making money from production. Return to a 70% cap gains tax before it’s too late to recover. Put the money into the workforce and the economy will once again blossom, the debt will go down, and as wealth becomes more distributed, taxes will be offset without draining the much larger middle class and helps pull up the lower classes with the incentive to earn a decent living wage. If working makes more money than government handouts more people will be working than taking handouts.
Creating an incentive for the majority of the lower and middle class (the bottom 50%) to work is tantamount to a huge tax break (even with 70% cap. gains) for everyone, and enables the lower 50% to begin to pay their share in taxes which improves everyone’s lives in our country!
Let me say that it is not the top 50% that is the problem, it actually is the top .1% that everyone is really bitching about. Most of the 1% are in the same boat as the bottom 50% too much of the wages are being used by the government that has by way of necessity shifted the burden to itself by the self serving .1%rs. who would take all of the money for themselves if given the chance. My family made about 60K a year in the 90’s and were getting by in a reasonable manner and now are making half that amount and are losing ground daily, weekly, and monthly. Wages actually regressing rather than progressing. For a job in the 90’s that earned 25$ hr now is being paid 15$hr now which equates to a 75% decrease in pay adjusting for inflation and you wonder why people are upset when governments and large corporations throw around millions, billions, and trillions all the while crying poor mouth.
I also don’t agree that higher taxes dis-incentivize the wealthy. But to say they are ‘too low’ or ‘too high’ is subjective. I will also say one more time – we already have progressive taxation. We aren’t debating whether we should have that in this thread….. we are just talking about whether it is ‘enough’. My argument is that for the majority they are always going to feel like it is never enough.
Great point JC (one that I have made a million times) about the differentiation between the 0.1% and the 1%. But I would take it a step further. Why is it that Apple, for instance, feels the need to sit on tens of billions of dollars in cash. They could reinvest this capital into the company – which in turn creates jobs – but instead they hold it. Why do you think that is?
I personally think it has more to do with the ineptitude and uncertainty surrounding our government and its policies – which in turn create more instability in the financial markets – than anything else. Apple isn’t investing this cash in the stock market, nor does keeping this money in cash help them tax-wise. What is the reason here? This is a MUCH bigger factor in helping the bottom 10% than whether an individual making $700k pays more in taxes or not.
I don’t agree that a 70% capital gains rate is the answer either. This WOULD disincentivize investment. Why take the risk of buying a mutual fund if all of your gains are going to the government?
I’m not very smart when it comes to financial problems so my question is why is a 10% across the board tax with no reductions or loopholes a bad thing for our country? In reference to Federal Taxes. Would this not provide an adequate amount for the government to operate on? Wouldn’t it also be fair to all who earn an income? If not the amount I questioned what across the board amount would do all of these things?
We spend about 22% of GDP on the federal government and have revenues of only about 17%. To close that gap, we must either increase revenue (taxes), or decrease spending – or both. Most taxes on the state and local level are “regressive”, meaning that the poor pay a greater percentage of their incomes than the wealthy, with the middle class in between.
For example, in the state of Washington, the lowest 20% of earners pay 17.8% of their incomes on average in state and local taxes, while the top 1% pays 2.7%. The only way that is evened out somewhat is through progressive or graduated income taxes where the wealthier the family is, the greater their tax as a percentage of income. The flat income tax that you suggest would do nothing to equalize the tax burden and the poorest among us would pay the most. If you believe that’s fair, then advocate for the flat tax. Most don’t.
Of course, many wealthy people would like that just fine and indeed, they’ve spent lots of money on ad campaigns, lobbyists, and legislators to convince the American public and politicians that they are the “job creators” and therefore, shouldn’t be taxed. It works. In the last forty years, income disparity has increased dramatically as Americans have been convinced to advocate against their own best interests and in favor of the wealthy.
Taxing the rich doesn’t solve a single poor person’s issue. THEY need to learn that an education is what moves people up the income food ladder. Not gov’t subsidies. I can give someone free rent, a free car and free food and if they don’t want to learn anything new, there is nothing you can do for them. Stop wasting my money until the gov’t comes up with a real solution without throwing money at it.
Then, tax the rich so that we can make a good education through college affordable to all. Tax the rich so that all of our young can have reasonable health needs met in order to compete in school. Tax the rich to fight crime in low income neighborhoods so that the young are assured of survival and don’t become hopeless. Tax the rich to give all the opportunity to succeed by merit rather than inheritance.
College being affordable has nothing to do with the actual government. Colleges can make tuition whatever they want. The reason tuition goes up is because they know kids will borrow the money. Once kids stop going to private universities and do 2 years locally and then transfer in to a state school, tuition rates will drop. There is ZERO reason for tuition to go up each year except these schools snowblind the kids into thinking the high ranking faculty would actually teach these kids.
Affordable education should be and has been a governmental concern. Who do you think started the local two year institutions? Private universities are perpetuating the growing chasm between the well to do and 75% of society effectively shutting the door on the American dream. They do this because of the ability of the top 10% to pay the ever increasing tuition costs. They are targeting the cream of society with their product. Your assertion that tuition rates will drop is pure fantasy. They will adjust their staff to handle the smaller student population that can afford the cost.
This dialogue is exactly why our country is in the shape it is. There isn’t a meeting on neutral ground regarding most issues.
The fact remains there are many people that have worked hard, been good to employees and customers, and sold their company and did make lots of money. There are some that have probably cheated the public as many make reference to, but i do believe they are in the minority. And then there are those that have inherited a good sum, and for the most part, don’t handle wealth real well. In order, I think those that have wealth got it in order by:
1.) Worked hard and earned it
2.) Inherited it
3.) Cheated the public
Then there are those people that struggle daily. Many are people that want to do better, but just can’t quite seem to pull themselves out. I feel sorry for see people, but continue to urge them to keep trying. The kids in this group are in a tough situation as well, and we all know it’s not right to let kids suffer.
Then there are those people that are lazy, and absolutely don’t want to work, or won’t work, because they can make more off of welfare than they can working. Although, in my opinion only, I don’t think God would want us to let them suffer either, but it is hard to say to them…”here’s some money” when they don’t want to work in the first place. I used to believe this was the majority, but I no longer feel that way. I think most people want to make a better life for themselves.
So now comes the age old question of HOW. How do you fix it! or what is the solution? Everyone keeps saying paying a few more pennies like the tax increase is nominal. It’s not nominal, it’s actually quite large. Not only odd top rates go up 4.6%, there’s the Obama tax of 3.8%. That makes it 8.4%. That’s substantial when you consider what was paid, but maybe in reality, if it’s intended to fix a problem, then it’s doable as long as it isn’t forever.
Here are a couple of thoughts regarding solutions where we all have to work together. First, any small businessman/woman that hires people that have been unemployed to build their company may qualify for lower tax rates on incremental income. That’s one possible solution. Another possible solution is for business to hire those that are on unemployment on temporary status as the help is needed, and the business person pays a difference in wages to the unemployment division of the government. An example would be if not working benefits equal $8/hour, and I’m a businessman that needs part time help (might lead to full time), I would pay unemployment the higher wage, and then the worker could have the option to extend his benefits by that amount, or he could “cash” in for the extra money and go off of welfare.
In the end, the goal is to make America fully employed, and all people have a chance at the American Dream. Many people need help, I get it, and many people just want to abuse the system. Let’s set policies where it makes it almost impossible to abuse. And let’s in return, penalize and punish those that have ascertained their wealth by illegal methods. This way, both ends of the scale are being addressed.
Lastly, let’s get the people out of power by mandatory laws that can’t balance the budget. Period. If they can’t work together, then they are OUT. Period.
I’m sure I’ll get blasted but what the heck. Blast away
You have stated the “defense of the business owner” in a reasonable way, but let me offer the defense of the American worker. People who are poor and/or struggling got that way in this order:
1) Worked hard but were underpaid for their labors
2) Inherited their poverty by their life situation
3) Are lazy
The facts are that that the profits (increase in GDP) in the US are fairly consistent but the distribution of those profits has changed dramatically. Most Americans work hard and play fair. Yet the natural progression of power and wealth are toward the already powerful and wealthy. So while a business owner may have worked hard for his money, how is he/she supposed to understand that he is being rewarded 20 to 50% more (in real adjusted terms) than someone a generation or two ago would have made for same skill and effort? And how is it justified that 90% of American workers are making 25% less than they would have if the pay for their position had increased at the same rate as GDP?
The upper 1% used to make about 10% of all income. In 2012, they received about 24%. The lower 90% of earners used to get 2/3 of all income. Now they get about half. This equates to a 30% drop in income from what they “should” be making to what they are making. No wonder the economy is struggling. The disposable income of America has been pushed into the coffers of the wealthy by over-rewarding the rich.
The slow and steady redistribution of the wealth and income from poor to rich is not primarily because rich people cheat the rules. It is because the rules themselves have been changed in a way that inherently cheats most Americans and puts them at a disadvantage to the rich and powerful.
Every year, government spends all that was budgeted so that it can appear to need more the next year. That’s why the IRS last year went on a weekend that resembled the Roman circus. No expense was too outlandish. This year it’s office furniture. All the fancy buildings, furniture, programs and anything-at-all expenses, like Obamacare with all its exchanges that have “eaten out our substance” to quote The Declaration of Independence–and is destroying the delivery of healthcare in America, while pretending to “fix” the system–it’s slavery. amd it’s being done to our children. Slavery is first of all a lack of education and propaganda to make everyone believe the wrong thing, then it’s economic where the value in people’s lives is stripped away, and then it’s a system of law that binds the individual to the system that enslaves him.
Stalin said, “Corrupt the young, distract them with sex, remove God from them…” and here we are….We haven’t guarded our gate. We haven’t thought about the consequences of the decisions we make. We haven’t paid attention to the very important question, “In whom do we place our trust?”
Well Rebecca, you obviously cannot trust the people who gave you that quote from Stalin. It’s 100% FALSE: http://www.snopes.com/history/document/communistrules.asp
How are we to believe anything else you so carelessly pass down to us from these people?
Once again I am intrigued by the amazing number of “dumb” smart people. Please be aware that 100% of all of our faithful 1040 tax payments go directly to pay the interest on the “unconstitutional” national debt. In other words the tax payment is received to pay the interest that is due to the federal reserve in exchange for the ink and paper of the Federal Reserve notes that they print out of thin air. We pay one trillion dollars per year to the private bank for them to print currency and flood our markets and destroy our economy. Forget anything else, your taxes that you pay are one half of the story for the hidden tax of “inflation” is taking its toll on you and your desire for a modicum of wealth. The central bank has to be put out of business and the 16th amendment repealed. Read about the federal reserve system and you will start to understand what is causing our downward spiral for the majority of Americans. God has blessed us with the luck of being born as Americans; read and understand for yourself.
The opportunity for most is to got drowning in debt to attempt to get a dregree or to go work in a subsidized labor job. Even those making over $13bucks a hour may be elligble for government handouts so they can ‘afford to work” IF minimum wages were kept on par with inflation since 1964 as promised by LBJ the minimum wage would be over $25 per hour, go to a pawn shop and by 5 old ‘junk’ franklin quarters from the 1950s. The peons asking for 10 to 12 blips a hour are setting their sights way too low. When negotiating go higher than what you will settle for like $30 bucks a hour and settle for $25 with a provision to keep up with inflation. The other opportunity is to introduce a $20 “dollar” silver dollar and a $1000 dollar gold piece and go back to real money and get rid of all this fake leveraged mathematical casino economy with questionable reserves. The national debt shall be questioned it is UN-avoidable to thinking people.
If salaries kept up with inflation, prices would be higher making up for labor costs. At some point, it costs X to make a widget and X+L when you raise labor costs. The reality is life is divided up into work buckets. Unskilled Labor, skilled labor and whatever you want in between…why would an unskilled worker make more than a skilled worker? Anyone can dig a ditch, not everyone can perform brain surgery. How does creating a $20 coin solve anything?
The fact that the nations’ wealth has shifted from many to a few blows the doors off your argument. Instead of raising all salaries, certain people have raised their own instead. There is more than one place that “labor” costs are factored into the equation. You are talking about what is called “direct labor,” that which is directly related to producing a product. “Indirect labor” represents all other labor costs that get lumped into the category of indirect costs such as administration, advertising, etc. The allocation of costs is much more complex than you seem to promote on your argument.
Keep in mind that this typically includes household income. So if you are married and each person is making 200K a year or more, you will fall in this category. And you don’t have to be in one of these categories.
Also, this year there were many other changes other than a marginal rate difference that significantly impacted taxes – even for people making less than $400K per year (elimination of exemptions and cap on deductions, and phaseout of other deductions such as loss on rental income). This makes it almost a disincentive to have two people work when the government (even on a marginal basis) is taking so much of our hard earned money.
Or like us, My wife makes 3.5x what I make. We pay more in taxes, and that money doesn’t make it into the economy. We paid $600 in obamacare investment tax. That was $600 that could have gone to a restaurant, a bartender or a plane ticket. Now it is gone forever.
You make a lot of money and you complain about paying $600 in taxes that could have to a plane ticket, but it is gone forever. Selfish bastard. It went to allow others to get health care. When you are blessed, work hard and even have some luck, giving some back isn’t going to kill you. Greed is a terrible thing
Why does JB owe others health care?
Health care is not a right when it comes at another’s expense.
Health care isn’t mentioned in the US Constitution.
Sounds to me like you are on welfare and your wife is the government. Maybe she should kick your sorry ass out of the big bed.
Should I be paying for the poor’s retirement plans and their car payments as well? Health insurance shouldn’t be a social problem spread out among everyone. How do I control obese people staying out of McDonalds? how do I stop welfare money buying soda and ice cream? You want free food? You get a bag of bread, cheese, beans and rice. You want more, get off your butt and go work for better food. That extra $600 could have gone to many other small businesses in my area. $20 to the beer bar, $10 to the frozen yogurt store, $50 to the restaurant, etc….now that $600 gets wasted by going to DC and $6 of that will probably make it into the “health care” system. Yeah, that same system that is screwing the Veterans of this country. It doesn’t matter IF I can afford it, the point is, I SHOULDN”T be part of the solution.
JB, do you know the rationale behind insurance? The idea is to take some from everyone to pay the one who suffers the loss. There is no implied or otherwise inference to recoup all that is paid in. If there is, it is fantasy or delusional. Let’s take health insurance. Sixty years ago when a child or adult got sick they went to the family doctor, or the doctor came to them, diagnosed the problem, wrote a prescription for medicine or sent the patient to the hospital for enhanced care. Tort claims were minimal, doctor’s fees were low, medicine was reasonable, and people took out catastrophic care health insurance. This model worked for another 15 years. Then hoards of people educated themselves as lawyers, tort claims started to take a big bite out of the doctor’s net worth, so they had to invest in malpractice insurance which drove doctor fees up. The pharmacologic companies started to experiment with new drugs investing millions in basic research so much that to bring a drug to market required ever higher pricing to make a profit. Then we entered into the realm of needing medical insurance just to cover the normal course of events maladies and medical treatments. All this put pressure on the insurance companies because now the rate at which claims were being paid was outstripping the big pot of money that they collected from the people who were healthy and did not need the money. But now everyone was needing a piece of the pot and to keep rates low the insurance companies got creative inventing insurance policies that rarely paid or barely paid any claims. So, in effect the insurance companies were now collecting funds from people who needed the insurance, but were sold policies that did not provide the level of coverage they needed. This latest development is what the Affordable Care Act did to reboot the coverage/claim gap to something more beneficial for all. And that is the basic premise behind insurance, collecting premiums from all with the design of collecting enough to cover all of the claims that are presented for payment. You have always been paying for somebody’s poor health habits. It’s just that a very sick element in our society has planted in people’s heads that you don’t have to do that. The Great Generation that has just passed were galvanized by the Great Depression and a world war. They had a motto. All gave some, some gave all.
Steve, do you have any fucking idea how much we give to charity? Charities where I KNOW what the money is going to? How about your local church do something about the poor in your area. I am busy funding scholarships to college kids that give a shit. Not like your kids.
There isn’t socialized car insurance, or life insurance or homeowners insurance. Why should health insurance be any different. Rich or poor, if you are fat and out of shape, you pay more. The perfect incentive to lose weight if you can’t afford your insurance. Get pricing on the walls so everyone knows what they are paying. The poor need catastrophic insurance and when doctors put up affordable visits for physicals, you might change the system. Cancer diagnosis can make even the rich lose all their money. High deductibles and ERs with the balls to turn away people that OBVIOUSLY do not need the ER are the ways to bring down the costs.
No one, if you’re fortunate enough to work your way up a company and reach executive, bringing home 400k, Obama will take half of it. The starting salary for the highest tax bracket is ridiculous. Someone explain how taxing mid size company executives double the percentage Billionaires are taxed is fair. RAISE THE HIGHEST TAX BRACKET.
Sorry, needed a place to vent.
-tax season
My wife makes about 275K and she paid 91k in FIT. Our effective rate for our taxes was about 24%. Remember, the 39.5% doesn’t kick in until you hit that higher rate. I did get to pay an extra 3.8% for the ACA so anyone on this list that has it, your welcome. 🙂
I worked in consulting for a while, I made almost 400k every year as a pretty senior guy, but not a partner, plenty of people make this kind of money
One more thing, I did work 60 hours plus travel a lot and was never “off”, I could get a call any time and have to drop what I was doing and deal with the question at hand. You know what, I don’t even know what $400k does for you, a decent house a BMW and a European vacation, could probably do the same thing if you lived in Boise for 185k a year
We see such success stories happening everyday as the economy gathers strength. Most Americans don’t realize how far it’s recovered or that residential real estate prices and construction has bounced back to pre-recession levels in most areas of the country. As American companies innovate and adjust to changing markets, there are winners and losers.
I recently read about the tremendous concern car manufacturers have for the changing cultures with the U.S. as many people are forgoing the purchase of a car, and use companies like the Ride Sharing company (Lyft) illustrated in Forbes. It means that one company goes from 2 to 240 employees, but that auto manufacturers reduce workers by even a greater amount. Are the innovators in this case, “job creators” or “job destroyers”? Yes, in the short run, it increases unemployment, but overall in the long term, we are all better off (that is if the wealthy share the productivity increase with the rest of us).
Taxi drivers have the most to lose in Lyft and uber. Most people won’t carpool now so Lyft won’t affect those drivers to work. Many people are keeping cars longer. My wife’s car is 13 years old and our friend kept her car 22 years and just got a new one last year. I intend to keep my car as long as possible. If everyone started to eat at home, restaurants lose employees but grocery stores make money. People ride bikes more, the bike stores make money. There will always be a dynamic that companies have to deal with. Vegas was hit hard in 2007-2008 when the credit crisis brought the country to a halt. Why does the wealthy have to “share”? They have put up money and capital to create jobs for Lyft. They aren’t going to pay someone $100 an hour when a taxi is cheaper to take. Costs are part of the salary. The idea is to make it cheaper to catch rides with Lyft in areas taxis don’t operate, but you can only pay people X dollars. If the CEO has stock and the company goes public and revenues grow, it doesn’t always translates into more money for the driver. It is all dependent on people using the service and thinking they are getting the service at a decent price. If I can take a taxi to the airport for $50, why would I pay someone from Lyft $75 unless there was a service provided the taxi driver didn’t have that is worth an extra $25…
Does this count as a company going from 2 employee to 240 count as trickle down? You can’t outsource this kind of job.
http://www.forbes.com/sites/jeffbercovici/2014/04/02/lyft-raises-250-million-series-d-to-fight-the-car-wars/
http://finance.yahoo.com/news/5-millionaire-myths-201534838.html
The web site you reference is a sales pitch for this woman to make everyone a millionaire by following her advice. She ONLY interviewed self made people because she’s selling those who were not born to wealth, the formula for becoming millionaires (hard work, etc. etc.). But if you listen to her spiel, she talks about working 60 hours a week and being overweight before getting smart. Now that she works 20 hours a week, she’s the successful primary bread winner AND has time for her two children. Although she may have some good points to help anyone (although I’m speculating here) her conclusions about millionaires she’s interviewed are NOT scientific, but instead, meant to sell a product.
Look at the wealth distribution in this country, on a scale it looks like 1 or 2% have 90% of the money. The middle class is disappearing in the US we are becoming like Mexico the haves and the have nots. Among the have nots are the working stiffs supporting everyone, corps. and the welfare recipients. The med/insurance and the higher ed industries constantly rip people off and our government does nothing to protect consumers. I feel like the gov looks out for the poor and their corp. bosses who put them there. Forbes had it right, 10% tax on everybody except the genuine poor.
Always left out of the Bush tax cuts is 1%ers (barely) like me that received ZERO benefit from them as we pay the alternative minimum tax. It was changed ZERO for high earners and is consistently higher than standard rates. It taxes dollar one at 26 or 28%. There is no gradual increase to a marginal tax rate. I have looked hard for the data and best I can tell, about 2/3rds of top 2% got ZERO tax benefit from Bush tax cuts. I could not find top 1% data. So, at least for me and, best I can find data on, a MAJORITY of top earners, shut the heck up about how we benefitted!
By the way, name me ANY other endeavor that punishes the most successful and rewards the least. Sure, a few cheat the system, but the vast majority had more talent, work harder, deferred years of earnings while in school and invested in education. I am a physician and work with such people every day. They average 50 to 70 hours aweek and had 11 to 15 (!) years of post high school training. They are ofen available 168 hours a week ( that’s all of them) and lose time with families, lose sleep and have little leisure time. I don’t think we would have a slow gowing economy if everyone did that. They DID build it!!!
Agree. I’m in the “wealthy” categorization and am still waiting for my tax breaks. The irony is I noticed it a lot more when I was in more “middle class” range.
Here’s another tax break Peter. Perhaps your not wealthy enough to take advantage of it, but the money saved by the wealthy who do, must be made up in taxes by you. And it accounts for more than your share of food supplements for the poor.
http://www.businessweek.com/articles/2014-01-09/south-dakota-dynasty-trusts-tax-haven-for-rich-families#comment-1319732538
I make 45k a year and enjoy a good life. I have a college degree and have worked for a good company for years. If I wanted to study something else at 18yrs old to become richer at 50, I could have. I could’ve went into law or medical at 30 if I had wanted to. The rich pay more because they make more. I don’t want their taxes in my pocket but I admire the richer (I feel rich) for building roads, schools and things all of us need. The rich doesn’t need to pay for everyones own mistakes and I shouldn’t pay more for a hamburger because you didn’t finish high school. I look up to people who say I’m gonna make it and do. Really everyone should get what they put in with a little help when they may need it. Thank job creators. One day I may need the help of richer peoples taxes I hope I have done my part to have earned it.
People will innovate regardless of tax rates and income tax has nothing to do with Facebook going public. However tax rates, being historically low, create a meteoric rise in personal wealth that once was somewhat checked by taxes.
No, not every rich person has a lobbyist, but most lobbyists work for wealthy individuals, corporations, or organizations controlled by the wealthy. Money gives a very few people greater influence over elections and legislation than the vast majority of Americans.
really? the janitors want a union and hire a lobbyist. They aren’t all rich. Now janitors are part of a union. why would a lobbyist work for a bunch of minimum wage workers? Farm workers have a lobbyist. They aren’t rich either. the lobbyists come from what ever side whats the gov’t kickback to their benefit. if the poor people can’t get organized, whose fault is that?
I didn’t say “all”, I said “most”. If unions had so much influence, you wouldn’t see the tremendous reduction in union ranks, wages, and influence. Unions, however, at least represent many. Most all others represent the few, the wealthy and many times, the greedy (those who have much more than they can reasonably spend in their lifetimes, and still want even more).
Here’s another question for everyone…. What effect, if any, do you think the Information Age has had on the disparity between rich and poor? Is it merely a coincidence that the Information Age happens to coincide with the increasing disparity of wealth we’ve seen over the last thrity years? We can all name a lot of Info-based CEOs who are among the wealthiest people on earth — Zuckerberg, the late Steve Jobs, Gates, among them. There have been many others who have become very wealthy, and their names are not easily recognizedby most of us, such as the people who got in on the ground floor at Microsoft and retired in their 30s.
This may well be the result of too much money looking for investments and the unintended result is the elevation of these people to the top 10 and 1 % instead of the other way around. The overwhelming correlation and probable cause of this economy is the imposition of Reagan’s Supply Side Economics that deserves to be put in the dustbin of history right alongside his Star wars defense system fantasy.
I think it has a ton to do with it. First of all, like you mentioned, we created a whole slew of uber-wealthy people from the info-tech world in the last 20 years. In a way, it parallels “the men who built America” like Carnegie and Rockefeller in that people like Gates, Zuckerberg, Jobs, Ellison, Allen, etc. have “built the new backbone of America”.
The second reason as I have stated on here before is that unlike the Rockefeller days, this amazing growth period in our economy has not created eons and eons of unskilled labor jobs. Sure, there are tons of jobs in this industry, but they do require a certain degree of expertise, education and ability. The manual labor jobs of the Rockefeller days like making steel or laying down railroad ties just don’t exist as much in the information age as they did then.
So don’t you think this contributes to wealth inequality significantly? Creation of millionaires and billionaires who build the infrastructure, but without creating opportunity for thousands of lower and middle class laborers.
Frankly, I think this has much more to do with the inequality than anything else discussed in here – including Democrats or Republicans, tax laws, lobbyists, or whatever….
….but I’m sure many will continue to try and blame it on Obama. Or Reagan. Or greedy CEOs. Or something “unfair” that they can vilify. That certainly is more fun. 🙂
Oh… and add to this the jobs that technology advancement has taken AWAY. There is more of a divide than ever between skilled labor and unskilled labor.
Many people never saw their stock options make any money. Tons of people in Silicon Valley were paper millionaires. Then the tech bubble blew up and they were back to normal.
Gates and Ellison created a product. Facebook won’t last forever. But Zuckerburg cashed in at the right time and has 500M people using the product. Why does every industry have to help the unskilled and poor? Many industries are software and other soft industries. BTW, there is a ton of manufacturing going on in Texas related to the oil industry and there are about to be 2,000 jobs for blue collar working in East Houston building some new refineries. Those on welfare and are unskilled working in fast food restaurants won’t be able to take advantage of these jobs. Unions are encouraging members to leave other states and come to Texas for these jobs.
JB – It doesn’t have to help them. It is what it is. And yes it’s not like there aren’t any unskilled labor jobs available – there are just fewer of them. The boom in the information tech world has largely been at the top and the bottom hasn’t come with them. And sure, even at the top there were winners and losers (like you mentioned those that didn’t cash in at right time).
Like Rockefeller, today’s tech wonderkids and their wealth are a product, not only of higher technical skills, but also of historically low tax rates, especially on dividends and capital gains. This allows the gain in wealth to be even more meteoric. I believe there are a number of reasons for the accelerating of wealth disparities, with lowered taxes and supply-side economics being only a couple, although significant.
The weakening of labor laws and unions over the past 35 years means cheaper labor and greater profit. Also, the fact that technology has outpaced worker education and training has created an unemployment gap that drives down all other wages also. In this cycle, the wealthy tech guys we all admire have actually decreased employment overall. Yes, their companies are growing, but at the expense of many other companies’ employees. So many jobs have been replaced by computers and robots that where it once took many workers to produce a product or service, it now takes a fraction of that. Most importantly, the far greater ability of the wealthy now to influence legislation favorable to their companies and subsequent bottom lines is extremely significant.
Although it will take some time for workers’ skills to rise to meet today’s technology, other measures can, and indeed should be implemented. By far, the most important of these is to eliminate the ability of one class of a few individuals, the top of the top 1%, to influence legislation so disproportionally. What laws (or lack thereof) may be of further economic benefit to the wealthy and their corporations may greatly conflict with the well-being of the rest of Americans. Once that votes and voices are equalized, I have every confidence that our political system can remedy most all else through civil discourse as once envisioned.
How do low tax rates spur innovation? What does income tax have to do with Facebook going public? If you are the main person, you allocate yourself enough stock to make you rich. Now, are interest rates at historic lows a possible reason? If you can borrow money at dirt cheap rates, maybe that spurs people to start a business. Businesses were started in the 70’s, 80, 90’s at all levels of tax rates. Not every rich person has a lobbyist.
“Like Rockefeller, today’s tech wonderkids and their wealth are a product, not only of higher technical skills, but also of historically low tax rates, especially on dividends and capital gains.”
More distortions of the truth. THERE ARE NO CAPITAL GAINS UNTIL YOU SELL!!! Also, US business tax rates are some of the highest in the world.
” Also, the fact that technology has outpaced worker education and training has created an unemployment gap”
This is true.
“that drives down all other wages also.”
This is not. There are hi tech jobs that aren’t being filled even though they pay well. The sad truth is that many can’t be trained to fill these jobs.
Labor unions have lost power because mediocre and unskilled can be hired over seas for less money.
“of these is to eliminate the ability of one class of a few individuals, the top of the top 1%, to influence legislation so disproportionally.”
The last president I voted for was Reagan. My state has 2 democratic senators. My representative is relatively junior but she is a republican but more of a middle of the road kind.
Maybe the top 0.01% has influence but that isn’t one 1% of the 1%.
PeterN, When computing net worth, assets are balance against liabilities, including tax liabilities. Therefore, all capital over and above the basis is balanced against either taxes on wages, interest or dividends to be eventually paid, or capital gains. Of course, the wealthy have a choice and can structure their future after taxes and will do so to realize the greatest return which presently is capital gains. Therefore, where I compute my IRA as worth it’s face value minus my projected taxes on ordinary income when withdrawn, they must likewise compute their net worth as stock value minus projected capital gains taxes.
Corporate tax RATES may be higher on paper, but the amount collected now is about a quarter of what they once were prior to the 80’s. The effective rates are much lower due to the favorable legislation for special interests I spoke of earlier.
Unions have lost to globalization where, for instance, Bangladesh can hire close to slave labor to work in dangerous factories which would never be allowed in this country, and then sell those products in this country. But they’ve also lost to the money in politics which have created zones of lower pay and benefits called “Right to Work States” that effectively shut out the labor movement’s ability to organize. America no longer values labor as we move from industrial to service. Wisconsin’s recent history attests to that.
Regardless of how many of the top 1% disproportionately influence elections and legislation, it’s wrong. In a democracy, each person expects to have one vote and to have one voice with which to engage in civil discourse, just as we are doing here. When someone wealthy uses his money to crank up the volume of his noise so that no one can hear you or me, democracy breaks down. It creates a plutocracy.
Sorry, if a company invests $1,000,000 to automate something and 10 people lose a job and the one guy running the machine is paid well, that is life. Production goes up, mistakes go down. Machines don’t fall asleep, get drunk, or die. Life in the big city. Some machines increase production like the Cotton Gin or the Combine for farmers. If a farmer doesn’t need 100 workers in the field picking lettuce and a machine can do it rain or shine and not need a green card, go for it. These guys can go start their own local farms.
When was the last time a building was built in China and shipped over here? The pros and cons about unions vs illegal workers is valid, but if I can build a building for 1/3 the labor cost and not get thrown in jail for hiring the questionable workers, why hire union workers? That is a gov’t issue they won’t address because they will have to deport all those people, but I guarantee you can train a hood rat to learn to haul stuff around a construction site and learn to build stuff. They just don’t WANT to. There is a reason hard labor is done by a certain worker. They are working in a better place than where they came from. Every country has unskilled workers doing the crap work, and at some point I want a skilled plumber and electrician, but at some point, the labor cost is worth the risk.
I certainly agree that innovation and automation work to eventually improve our lives. That’s why worker productivity has almost doubled since 1970. The problem has been that all but 5% of the profits from that productivity increase has gone into the pockets of the upper one or two percent of Americans who have increased their net worth fourfold on average in comparison.
I recently read an article in which the author posited the following:
When efforts to limit collective bargaining succeed, more and more money accumulates at the upper end as workers are paid less while CEO’s and stock holders acquire more and more capital. As the top income earners accumulate wealth, they must find more investments in which to park it. However, putting more into American companies that provide services or products for the American market simply creates overproduction since the consumer hasn’t the extra income with which to buy more products. Therefore, we have seen a tremendous reinvestment in companies which export raw materials, and foreign companies doing business in emerging markets. The net effect is that much of the profit from increased American productivity is leaving our borders and creating jobs in third world countries.
Had the middle class shared in the productivity increases to the same extent as the wealthy, they would have increased their spending proportionally and American companies would have increased their production and profits proportionally also.
MOR – your last post has the feel of someone trying to make the problem fit a political agenda rather than thinking this through. The whole perceived wealth inequality situation is not necessarily the problem of legislators or politics. It is entirely possible that the problem is simply one of a changing era in the economy, isn’t it?
The surprising thing to the average American is that the government actually has very little impact on all things economic. (The Federal Reserve is another story) Some of these changes proposed in past posts like raising taxes on the wealthy, eliminating loopholes, etc. may make us feel better politically, but they all have such a minimal impact to the overall economic progress of a nation …. thankfully.
Although I agree that the president’s and congress’ ability to influence or improve the economy over the short term is very limited and much overblown, I must disagree that governments can’t impact wealth disparities within their respective borders, especially over the long run.
Simply look at Europe where wealth disparities were once much much greater and now are much less than in America. Where the top one percent own 40% of all capital in the U.S., the U.K’s top 1% own only 15%. Consequently, while the median U.S. family has a net worth of $38,786, the median British family has $115,242 (source: Global Wealth Data Book). The difference is directly associated with the tax structure and subsequent services provided.
Here in the U.S., some of our most wealthy citizens have used some of that wealth to influence legislation disproportionately to gain more wealth at the expense of the middle class. In Europe, Japan, Australia, etc., the impact of such money to influence elections and subsequently legislation, is greatly limited in comparison. However, this has been a problem with republican forms of government since ancient Greece and was so noted by their philosophers even then.
In the U.S., although it’s mainly the extremely wealthy who benefit the most, all of the top 1% have benefited also from such efforts over the last 35 years. The impact has not been “minimal” one the middle class at all, and many economists believe the disparity to be a drag on the overall economy.
Those countries didn’t experience the information age boom to the extent our country did in the last 20 years either…. You can’t simply isolate the variable that you want, that’s my main point. A number of factors go into the difference between wealth disparity of nations – including the size and demographics of the population, their economic situation and the government/taxation/politics.
I don’t know that anyone is for the current campaign finance situation. The fact that Obama and Romney raised $2 BILLION between them is just ridiculous. And to what end? So we can pick from one slightly different shade of the same color?
All I’m saying is that our tax system isn’t the main reason – or even a top reason – for the wealth disparity. And that’s even if we can agree that the wealth disparity in our nation is a problem in the first place.
OH and by the way – I thought we were talking about income disparity. Noticed just now that you were now talking about wealth disparity, which has a great deal to do with 5 years of stock market gains. The 1% were far less likely to yank the money out at the bottom of the market in 2008, which is where the masses got hurt terribly.
Actually Peter, you used the term “wealth inequity” a while back, but regardless, I am talking about it, especially about how it’s affected by all income streams. My children will neither surpass me in either income or net worth, nor will many from middle income families be better of than their parents. That’s a shame since Americans have always expected the next generation to do better. Yet that was orchestrated deliberately and you can read about it from an economist/professor here: http://nebraskansforpeace.org/growing-income-inequality
Why won’t your children have the opportunity to exceed your wealth and income? Mine certainly will – at least on the wealth side because of the opportunities I am giving them and frankly the money they will probably inherit. Curious why you think your kids don’t have a chance to surpass you.
I think we hit on the biggest different between us. I don’t think there was some grand orchestrated plan to get the 1% richer. I believe in economic cycles, even on the extremes.
Just in from Youtube: https://www.youtube.com/embed/svGDZOW-brA?rel=0
Just a point of information on some of the rhetoric in that video. The president is not responsible for initiating budgets. The president sends his recommendations on to Congress where the House of Representatives has the responsibility of initiating the legislation that starts the legal adoption process. After the House approves a budget, it is sent to the Senate for their recommendations. The Senate then passes their version of the budget. This is now where the process has become dysfunctional, both budget bills are supposed to go to Congressional conference committees where they work out the differences between the two bills. The result is supposed to be a bill that both houses can vote and approve. Afterwards, the President has the opportunity to take line item vetoes which congress can then pass with 2/3 majority making it veto proof. The president is then responsible for administering the approved budget. If Congress passes a budget that spends more than what is reasonably expected to be received in revenues, the budget is then in a deficit and requires any actions necessary to fund that budget completely.
Wrong. Then what is this exactly? http://www.whitehouse.gov/omb/budget
The President’s proposal with supporting documentation for the Congress to use in the preparation of the Congressional Budget Resolution.
http://uspolitics.about.com/od/thefederalbudget/a/budget_process.htm
First off, I never said that the 1% earned 70% I said they had 70% of the money, they have it all tied up making more and more money and not trickling it down.
I heard on TV this morning the same old rhetoric straight from Gov. Rubios mouth that 10.00 or even 15.00 an hour minimum wage won’t help. He said that by cutting taxes on on companies that invest is the only way to fix things.
I’m tired of this same old bullshit. The more invested the richer the rich get. If trickle down policy worked, there would be plenty for everyone to go around. In the years since Regan (or whoever) cut the Capital gains tax to 14% just proves it all the trickle down went into only the riches bank accounts it hasn’t spurred any benefit to the middle and lower classes. Which is why left is mad in the first place. We have over compensated by raising taxes on earned income which has destroyed the middle class.
The problems we face are are our own fault. Only by voting will we get things fixed. And only by acting as one nation and not 2 separate factions at war with each other will we start to repair the damage done.
Ask 1 question to anyone seeking election. Are you in favor of election reform. If they answer ANYTHING OTHER THAN YES. Tell them to take a hike. The only way to get the right people into office and throw out the trash is to vote it.
JC – Yes, yes, yes! Trickle-down does not work! If you want a sure way to get people to invest, give them customers! The current tax rates are not even close to usurious or to the point of discouraging investment. If you earn your income (or the bulk of it) by investing, then you should be paying a rate equal to the rest of us.
Large companies started as small companies. How can you say trickle down doesn’t work? Money reinvested into a company helps it grow. Most of the uber rich are paid low but make up the rest of the compensation in stock options. Right or wrong, it helps them keep the company growing so their stock price rises. are you happier with a CEO making $150K but has 15,000,000 shares of stock? Buffet could work for free and sell 1 share a month and be just fine.
That’s right JB. Trickle down does work very well… for the 1%. If “the proof of the pudding is in the tasting” then let’s see what it tastes like to the 99%. The efficiency of the American worker has increased 95% over the last 35 years. He produces almost twice what he once did. Yet, over the same period, his income in real dollar terms has increased only 8% (decreasing 8% in the last 10 years). The rest went into the pockets of the 1%. The 1% now have 4 times what they once did on average and crow about how lucky the rest of us are for having jobs that they provide. That’s trickle down economics (aka Reaganomics, aka Voodoo economics).
The bullshit we all hear about “a rising tide floats all boats”, is just that, and it offends Americans’ sense of justice.
Yet we have the richest 99% in the entire world.
No we don’t Peter. There are a number of countries where the divide between the 1% and the 99% are nowhere near as great as the U.S. and yet have a higher per capita income.
The divide might be greater here, but the poor still live better than in those countries you refer to. Would love to see this list… the US was 7th in the world in per capita income (2012) behind Qatar, Luxembourg, Singapore, Norway, Brunei and Hong Kong. Two of these countries, Brunei and Luxembourg have less than 500,000 people. The biggest is Hong Kong with 7 million people. The US has 400 million people.
And the GINI coefficient which measures income inequality is about the same as in Singapore and Qatar, lower than it is in Hong Kong. Only Norway has a higher per capita income with less income inequality.
Sorry but you are wrong on this one.
Then I stand corrected until I can find differently. Well done.
Okay Peter, Let me quote from the Global Wealth Data Book.
The median net worth in the United States is $38,786 which ranks it 26th in the world. The median is of course, the person exactly in the middle with an equal number of people on either side. That’s the true standard of middle class “wealth” accumulation, and we’ve been falling compared to other nations for three or four decades.
1. Australia $195K
2. Luxembourg $154K
3. Japan $141K
4. Italy $124K
5. Belgium $120K
6. Great Briton $115K
7. Iceland $96K
8. Singapore $96K
9. Switzerland $87K
10. Austria $82K
11. Canada $82K
12. France $81K
13. Norway $79K
14. Finland $73K
15. New Zealand $63K
16. Netherlands $62K
17. Ireland $61K
18. Qatar $57K
19. Spain $53K
20. UAE $48K
21. Taiwan $45K
22. Germany $42K
23. Sweden $41K
24. Cyprus $41K
25. Kuwait $40K
26. United States $39K
MOR – well done as well. Haha….
I think the point in your last post that bears notice is that we have been falling. That’s what the concern is. Not that we are becoming some third-world nation or that our poor live in substandard conditions relative to the rest of the world. Even so, 26th in the world in median net worth is pretty darn good.
Interesting Japan is 2nd. Due to their massive economic fallout decades ago, their public – even the poor – have been saving money like crazy. And 30-40 years later, they have the 2nd highest median net worth. Go figure! Saving instead of consuming actually helps people on an individual level. Not exactly the American way.
I do still maintain that there are more than enough stats I could roll out – even beyond the anecdotal evidence – that our poor and middle class have it really, really good in America relative to the rest of the world. Of course, that is no excuse for apathy.
JB – I fail to see your point. Why wouldn’t companies continue to pay executives in stock options instead of salary? How is that even part of trickle-down?
Trickle-down says that keeping more money in the hands of the wealthy with get them to invest and create jobs. But, without people with the ability to buy, there are no companies growing. Customers are the basis of our economy and any successful business. Why would you invest to build a million more fidgets if there are only 100 customers with the ability to pay? Why wouldn’t you invest to build a million more if you have 2 million customers that have the ability to buy?
In order to grow the economy, we need to keep money in the hands of customers. They will buy, businesses will invest in workers and equipment to meet demand, and the cycle will continue and multiply the money in the system raising the wealth of all. Put into the hands of the wealthy only, they will invest where they see the most benefit for themselves. If they don’t see customers locally, they can decide to sit on the money (as many companies are doing now) or invest in places outside the US, neither of which helps us grow our economy or reduce our unemployment. Trickle-down raises the boats of the wealthy, but trickle-up raises everyone’s. Proven throughout history, the wealthy will always “get theirs”.
It doesn’t matter how much you pay someone if they aren’t buying the product a company is producing. Not every person buys every item in the economy. Rolls Royce pays their workers well, but have a limited supply and demand for the cars. Apple has to produce millions of phones and it is their choice to use Chinese labor at 1/3 price and at some point if a better phone comes along, Apple won’t be making those phones. Look at Blackberry. Those phones will be gone soon. Again, if you think a CEO is going to take less money in order to pay labor more, you are barking up the wrong tree. They get paid based on many things. Just because Apple has 200B in cash doesn’t mean they have to double labor wages that will skew the rest of the market. You salary is based on your skills and worth to the company. A great salesman should make more money than a poor salesman. CEOs get fired when the companies don’t perform, and like Pro Sports teams, they think paying more gets better talent, but it doesn’t. But it isn’t up to you and me what they are paid. They still pay more in Federal Taxes, Sales Taxes and Property Taxes than the 75% of the rest of people. They have 2nd homes, go on more vacations and probably have large staffs of people running the house. That is direct trickle down economics. If I fire my maid, I have made a direct impact on her life. But guess what, she isn’t worth paying $500 to clean my house. She is willing to do the work I am paying her.
JB – That is all nice and dandy, but I don’t know why you keep thinking that people are insisting the CEOs should take a pay cut and give it to their employees.
My point is no matter what your business, big or small, high priced and fancy or cheap and simple, you need customers that have the ability to pay for it. These customers drive the economy and profits to all companies big and small. Sure, you may trickle-down a few dollars here and there, but you are also more likely to put money aside into savings account or invest outside the US. The multitudes have the buying power to change the overall economy, not the wealthy.
A persons is also not just a commodity. Just because there are people willing to take a job, any job, even if it doesn’t pay a livable wage, doesn’t mean they are worthless and deserving of only that. People that want to treat others like that, as a commodity, are truly sickening.
The left complains the CEO makes 400x more than the lowest paid worker. Those are the people complaining about CEO pay.
You misunderstand JB. The “left” along with many on the right are pointing to CEO pay as an example of how the top has increased its wealth during a time of great productivity increase, while the middle and bottom barely have any increase at all or have even regressed. They are saying that something is wrong with this picture. They are very concerned about growing inequity, not “complaining” about CEOs.
JB – And therein lies your misunderstanding. It’s really, truly, not the Left vs the Right. There are many in either group that will go along with or against you.
If you want to keep going down that line of thought, there is no hope a any real discussion with a positive outcome as you have already decided what is what.
Personally, I feel this bitter partisanship is the biggest reason we are where we are as a country. The only way out is to start working together towards a common good.
Big companies also hire smaller companies to do things efficiently that the big companies can not.
Great back and forth between you guys (JTM and JB). Think I agree with both of you. But the point JB made is right. There are plenty of people complaining about CEO pay. Or saying the CEO has a duty to raise the wages of his/her employees. Or saying they should pay 70% in income tax. There is plenty of that going around.
Only JB may be stretching the facts a little. The fact is that currently CEO pay is 380 times the income of the median worker, not the lowest paid. Subtle difference to some, not so much to others. It’s an observation, not an epithet. We can not afford to be afraid of the truth.
A hundred years ago Keynes predicted the “end of economics” based on what he saw as the pace of technological change and productivity, he thought that by now most people (probably referring only to what we now call the developed countries like the USA and UK) would be able to live very comfortably only working about 15 hours per week. What Keynes did not foresee was that the rich would use their political power and media ownership to shift the burden of taxes away from the rich and onto the middle class. Thus, robbing the middle class of their purchasing power and vastly reducing the efficiency of the economy with periodic overinvestment cycles.
How is the burden of taxes on the middle class? This makes no sense. Even when you wrap in the payroll tax, etc. the middle tax pays a lower percentage of their wages in tax than the 1%. This isn’t even debatable. They also pay a small percentage of the overall tax burden, which is largely carried by the 1%. This is rhetoric….
The problem with the middle class in my mind is two things:
1) The lack of unskilled labor jobs as our economy changes from an industrial, manufacturing age to an information technology age.
2) The fear of corporations to free up their capital to expand or hire people, largely due to the uncertainty about our overall economy and nonsense coming from Washington (tax hikes, ACA, etc.) that creates so much uncertainty for a business going forward.
Derek Jeter pays more in Taxes than 100 people in the middle class. Can he find deductions by having a large house and donating some money? Yes, but he will still pay more in taxes than the middle class. He is taxed at 39.4% + the 3.8% tax on investments and passive income. He pays more in property taxes and sales taxes. Now, if he lived like a middle class person he could live in a $300K house and shop at Costco and not go out to dinner at the high end restaurants, but that is the choices of having the disposable income. Jeter is arguably one of the best short stops in the game. The Yankees think he is worth $20M and the guy coming up in the minors hopes to have those talents. Are athletes overpaid? One the most part, probably yes. Russel Wilson is “only” making $500K, but his career is much shorter than most and he will get his payday soon.
Both Rich and Poor have declared bankruptcy. Making $1,000,000 and spending $1,100,00 might make you an idiot, but most of those expenses are controllable. I agree, the person making $30K spends more money on the necessities, but no amount of food stamps or section 8 housing will do anything unless they decide to figure out how to get a better education by increasing their skills. Not everyone is cut out to own a business, not everyone is cut out to manage. Plenty of people are happy being a worker bee and letting the boss have all the stress.
We all pay for athletes making more in ticket prices and beer prices and cable prices. If you don’t watch sports, you aren’t helping pay for them. if you don’t rent a car, you aren’t helping pay for the stadiums.
FYI, on a different topic of industry, there are now more than 2,500 breweries in America now. They are all providing jobs. Someone had to risk money to start the brewery. The bigger the brewery gets the more people is needed. At some point cash is needed to be reinvested and held for expansion or getting through the bad times. Microsoft, Google and Apple are the far, far outliers of companies with hoards of cash. Just go out and support your local brewery and not the dreck that Budweiser and Miller Lite puts out. We are all better than that.
Let’s break this down in real facts instead of throwing generalities in the air as if they are facts. First, there are 114,800,000 households in the United States as of the 2010 Census. The top 1% is only 1,148,000 households. This correlates with the tax information link provided by Ken that noted 1,350,335 tax returns. Most information is provided in what is called quintiles, or 1/5 slices of the total households. The total net worth of all Americans is $54 Trillion. The top 1% hold 40% of that total. In 1976 the 1% took home 9% of the nation’s income. By 2012 that same group took home 24%. The top 1% own 50% of the country’s stocks, bonds, and mutual funds. The bottom 50% only own .5%. The average American worker must work a whole month to make as much as the dreaded CEO does in one hour. The claims that the middle class is shouldering the burden of this wealth inequality is not based on how much they make, but more on how many of them are making it. The bottom 15% are in the poverty range without savings or assets to rely on. The middle class, the middle 40%, 45,920,000 strong, are struggling away without anything to show for it. If you make more than $100,000 you are in the top 20%, not the middle class.
http://en.wikipedia.org/wiki/File:Distribution_of_Annual_Household_Income_in_the_United_States_2012.png
The source of this inequity is founded directly in the failure of management to share reasonably with the working class the efficiencies that many worked long and hard to enable their companies to excel, and the offloading of the tax burden on the top 1% driving us deeper into debt.
http://stateofworkingamerica.org/charts/productivity-and-real-median-family-income-growth-1947-2009/
Not everyone in the middle class are struggling. Plenty of people in the middle class pay off houses and save for retirement. Most people are in the middle class. there will always be a middle class. Even if the median income goes up, the gov’t will still just move the line higher.
“2) The fear of corporations to free up their capital to expand or hire people, largely due to the uncertainty about our overall economy and nonsense coming from Washington (tax hikes, ACA, etc.) that creates so much uncertainty for a business going forward.”
The uncertainty to expand isn’t so much because of “… nonsense coming from Washington…” but rather because the economy, which is 70% driven by the consumers, isn’t strong enough to support more production or increases in services. The consumers do not have the resources to spend more. The “nonsense” argument is political noise and is just that, nonsense.
JB, I must respectfully disagree. If the “middle class” is not struggling we would not be in this extended recession (seeing as some people are unable to classify our economic doldrums as a depression). Since 1970 there have been four recessions, but since 1980 each subsequent recession has taken a larger toll on the aggregate demand of the middle class that is historically the engine that fuels the recovery.
This continuing decrease in aggregate demand is the product of the middle class’s erosion of disposable income. Without realizing the gains in productivity and the cost of basic necessities, housing, food, and healthcare continues to rise, less is available to fund leisure activities. This is what depresses the economy resulting in the eventual extensions of the life of the recessions. This is arguably the direct result of the wealth redistribution of the past 40 years.
I will agree that the uncertainty from Washington because of our dysfunctional government (all parties included) just kicking the can down the road and pretending that doing nothing is leadership introduces uncertainty not only at home, but worldwide. But it is not tax hikes or getting people covered by health insurance that is doing it. That is delusional hogwash used by incompetent politicians putting lipstick on a pig.
http://www.economist.com/blogs/dailychart/2011/07/american-recessions-and-recoveries
http://www.frbatlanta.org/cenfis/pubscf/nftv_1110.cfm
There is some truth in what you are saying, MOR – but also truth in what I am saying as well. In spite of what you are saying about consumers not having the resources, consumer spending rises each year. In fact, it has risen every single year in most of our lifetimes except for the 08-09 slowdown. We are actually now at record highs for consumer spending.
That consumers don’t have the resources to spend more is nonsense. For decades, there has been very little that can stop the American consumer from spending.
Wages are taxed at much higher rates than dividends, capital gains and especially inheritances. The middle class derives most of their income from wages while the rich derives most of their income from dividends, capital gains and especially inheritances.
The capital gains tax was never as low as 14%. You are repeating liberal propaganda spread by Democrats against Romney. Romney paid less because he had deductions for donating to charity. Romney gave away many times more than Obama did but some Romney is the ogre?
peter – Romney is also required to tithe (10%) to his church, which makes up the bulk of this charitable giving. So, I wouldn’t put so much importance behind his charitable giving. Besides, is he really giving 10% of his earnings? He, and others like him, can manipulate (within reason) their income from year to year to show what they want by choosing which investments to sell and when.
Who should be more commended, those who give what is required by their church and can easily afford it, or those who see someone n need and do whatever they can do even if it means they suffer a bit themselves?
While I agree many wealthy are very generous, it is easy when you have the money and just need to write a check and you get a nice payback at tax time.
Ouch. You are gonna get some pushback from this. I am actually fairly anti-religion as many who have seen my posts know. But nonetheless, who are you to judge the merits of what charitable giving Romney does. While I don’t agree with a lot of Romney’s politics, I think you’d find a hard time finding someone who knows him who doesn’t say he is a very kind and generous man.
You don’t have to suffer yourself to be kind and generous to another. It’s insulting to cheapen someone’s good deeds and charity by saying “it’s easy for them”. You know what’s even easier? Sitting on my butt and keeping my money in my bank account.
It always riles me on here how making complete fun of the wealthy is totally socially permissible, but when people do the same to the poor it is just “mean”. I know you don’t intend it to – but it just comes off as petty envy.
peter – The thing is, your post seemed to extol Romney’s virtue because of his charitable giving. When, in fact, it’s not that charitable when it mostly goes to and is required by his religious sect. If he were to give beyond the required 10% and include other charities, I would consider that charity, but not a mandatory tithe.
Wasn’t my post. (Another Peter) I still don’t agree with you at all – didn’t think he was extolling Romney’s virtue at all – but maybe I read it differently than you.
I will say that there is nothing mandatory about being Mormon. He can choose to not be a Mormon. But don’t get me wrong… I don’t think anyone should get a tax deduction for giving to ANY religious organization. And I think Christianity is just as kooky as Scientology, Mormonism or Muslim.
peter – Apologies for confusing you with the other.
The part where I infer him extolling Romney is “Romney gave away many times more than Obama did but some Romney is the ogre?”.
And, I agree, tax deductions for religious groups should be reconsidered. But, as far as choosing not to be a Mormon, sure he could, but that makes it a bit oversimplified.
As an aside, I would like to see how he accounts to his sect for tithing only on his reported income. His real income is much greater, it just hasn’t been realized for tax purposes yet.
Well, presumably the money he gives to the Mormon church goes to the greater good – helping people in need both here and around the world. Whether that is actually true or not is an argument for another forum.
Presumptions aside, it is a requirement for him in hopes of entering the kingdom of God, not something necessarily virtuous or altruistic. So I don’t see how it can be viewed as somehow setting apart or making him any better than others such as the Obama’s, which the original post by ‘Peter N’ seemed to be pointing to.
You are correct that the Maximum capital gains tax was never as low as 14%; it was actually 15%, from 2003 to 2012. Under Reagan it was 20%, then raised to 28% in the latter few years of his terms. In the 1970’s it was 39.9% until 1979.
The 15% upper rate was an anomaly that should not be repeated.
BTW Romney got much of his low overall tax rate based on his income being treated as “Carried Interest”, which was taxed like long term capital gains at 15%. That was more of a contributor to his effective rate of 14% than was his donations to charity.
I am a chiropractor in nyc and for the past 20 years, I have made over 400K. My best year was 1.2M. I pay taxes, I create jobs and I get hurting people well. Someone please tell me why I am the enemy of the current administration.
Who said that the administration said that you are the “enemy”? Rush Limbaugh? Fox News? This administration never said such a thing. The far right talking heads say those things to make you feel unjustly victimized and piss you off. Anger gets people to the polls to vote for their candidates. Don’t let them manipulate Alan.
alan – aspiekid is quite right! Except he only leans on the Right, when many on the left are just as much at fault. It’s these fools on the “news” channels(from BOTH sides) that say the classes are at war with each other. They benefit by getting you riled up and looking to fight the other side. It makes you lose your senses.
The reality is, BOTH parties go us into this mess, we are all in this together. It is going to take compromise and working together to get us out of our mess. The rich don’t all despise the poor, nor the poor the rich. There are rich people through luck and genetics as much as there are poor for the same. There are also hard workers at all levels of income. We all share more than we don’t. We all need to start working together and expecting the same from our leadership.
For one thing, we need to start voting for the best candidate, and stop voting partyline. Anyone who says their party has all the answers and can do no wrong while the other party is full of fools, is totally delusional!
Uh…. http://youtu.be/JMSkXM9PIHc
There is no shortage of divisive rhetoric from this president “attacking” the wealthy saying they aren’t paying their fair share.
How can anyone affect anything worthwhile when so many focus on what they perceive as divisive? This is a throwaway epithet that fails to engender any confidence and is used ad nauseum. From time to time the concept of a “Flat Tax” filters it’s way to the top of the debate, but is quickly relegated to the nether-land of ignored concepts. Why is this?
Maybe because of it’s true egalitarian consequences whereby anyone making $20,000 or $20,000,000 will pay the same percentage. There is always push back by the high earners. Please explain why this is considered justified other than one group thinking they are more important than others? It can be argued that any tax philosophy to be successful must be viewed as unjust by all parties. No one should be happy.
I would be happy with a flat tax. I wouldn’t need to pay someone to do my taxes for me. The 20% rate would be OK to since the rate I pay is much more even though I have a lot of deductions.
Those that don’t pay taxes do not have any stake in the economy or the country. They are leaches and should not be allowed to vote. This may seem harsh but they don’t feel consequences of their decisions. A flat tax would solve this problem.
You still haven’t grasped the concept that even the poor pay taxes, especially on the state and local level that are very regressive. All a flat tax would do is to eliminate any progressive push back on the other taxes and cause us all to pay a greater percentage in taxes as our income decrease. Great for the rich. Not so for the poor and middle class.
That is true…the poor do still pay payroll taxes. Most don’t pay income taxes and a majority don’t pay property taxes either. But they do pay payroll taxes.
I’ll say it once again though to those of you fighting for “progressive taxation” …. THIS is what we HAVE! I pay an effective tax rate now of about 35% while 15 years ago when I was making barely enough to survive (and tax rates were higher then even), I remember an effective tax rate of 4%. That is the definition of progressive. We HAVE THAT already.
theoretically, you get back what you put into SS if you live long enough. Some people get more than they put in. That is why we aren’t arguing about SS except for the limit to where it goes away. Everyone gets capped at X amount of SS. So yes, when you go over 120K SS stops, but you don’t more than the maximum allowed.
peter – And …. your point? There is no shortage of divisive rhetoric from those on the Right either! BOTH sides point their finger at the other for trying to divide us up, while doing the same exact thing!
You assume because I show the President of the United States using divisive language that I’m on the right??? Well, you’d be wrong.
I just posted that clip as a response to Aspiekid’s assertion that “this administration” never engaged in any rhetoric that would be divisive or to make the wealthy the “enemy”. Took me about 2.5 seconds on YouTube to find a clip of Obama doing that very thing.
Peter, Why does the president’s belief that the wealthy should pay a larger share of income taxes mean that he’s making you the enemy or that his language is necessarily divisive? Warren Buffet believes the same thing as do many wealthy individuals. You see they once paid a great deal more.
The issue is divided along the lines of those who think it’s fair and those who don’t, regardless of wealth. Buffet, who’s a great deal better off than anyone here, obviously doesn’t feel he’s being made the enemy, but instead, agrees that the present system is unfair. Most people who are wealthy had nothing to do with the present system and no one’s coming for the 1% with pitch forks and torches. Chill.
Buffett doesn’t think the tax laws are unfair to the 1% though. He thinks they are unfair to the .01%, which is a different debate. Buffett has never been a proponent of raising income taxes on the people making $350k. Plus, when Buffett talks about income inequality, he isn’t talking in dramatic rhetoric and using words like fair. He is approaching it with a reasonable, thought out mindset which I appreciate quite a bit.
The big difference between the two is Buffett is just calling it like he sees it. Obama is trying to win favor, votes, popularity, etc. Hence the rhetoric.
I agree that the tax burden of the .01% should be greater than the 1%. You pay 35% while they pay 14%. That is NOT just or fair by any standard held by a vast majority of Americans.
Or just cap the amount of money a candidate can spend. All extra money goes to pay off the National Debt. Then you have an even playing field.
In response to:
“JB March 10, 2014 at 12:42 pm
I am going to go out on a limb and say most rich are WAY too lazy to do all that work just to give some money.”
Methinks that throws the justification for them to be entitled to earn more money out the window.
Nothing will change much to the benefit of all Americans until we eliminate the influence of money on elections and legislation. Unless we limit political contributions (including lobbying), and work to provide equal public discourse over public airwaves and internet, we will be fruitlessly arguing these same issues and Americans will be just as polarized, talking past one another 50 years hence. Money and the political demigods it buys divide us too greatly and weakens our country.
The poor have lobbyists. Why do you think they want the Minimum Wage raised?
I didn’t say to do away with lobbyists, but to limit the money individuals can contribute to them. Since more than half of all our legislators now are hired by or form such firms once out of office, and are paid in the millions for their connections, there is little chance they will vote to restrict such money. Therefore, the first thing to do is to forbid anyone holding elective office from taking such a job.
There is a limit in place already. You need to get rid of the Super PACs that basically have no limits.
The wealthy can circumvent those limits now any time they want using corporations, shell companies, trusts, foundations, and Super Pacs. There are no limits on lobbyists and the influence they peddle. All politicians should be required to publicly list the minutes spent talking to anyone about any issue before, or which may come before, the respective legislative body.
So long as there are no limits, just in Russia like with Vladimir Putin, all media and information will be overwhelmingly controlled by wealthy political activists (the top of the 1%). That’s not a democracy where each person deserves a equal vote and equal voice.
I am going to go out on a limb and say most rich are WAY too lazy to do all that work just to give some money.
The rich are hardly lazy when it comes to investing a few hundred million in politics which may pay off hundreds of billions through favorable legislation. Adelson, Soros, and the Kochs are prime examples.
Here’s another line of thought to ponder, although I picture it being somewhat like throwing raw meat to a pack of wild dogs……
If the tax code is so unconscionably preferential towards the 1%, then who is it who caused the tax code to be this way? Wasn’t it government itself which created this — and in particular politicians with questionable ethics who allowed themselves to be bought by corporations, or by members of the 1% ? And if that’s the case, why then do we think that government policiticians will be honorable enough to correct the situation? They’re the ones who crafted the tax laws in the first place.
And before we start with the “it’s all the fault of small government Republicans” blame game, let’s remember that during 2009 and 2010 Democrats had majorities in the House and the Senate, plus they occupied the White House. They could have overhauled the tax code pretty easily, relatively speaking.
OK. Let the games begin……
During those two years, the political capital was spent on the Affordable Care Act instead. There was no way the Democrats could tackle a return to pre-Reagan tax rates even if they really wanted to. Perhaps with more time… but that’s just speculation.
I couldn’t reply to your comment regarding taxes, so I’ll take that opportunity here. Ken wrote previously:
“For clarity, as of 2010 the top 1% did not earn “70% of the wealth”. They earned 18.9% of the wealth, while paying 37.4% of the federal income tax burden.”
Unfortunately, these numbers represent AGI as reported in tax filings. This is not an accurate representation of true income because it is the product of extensive adjustments to Gross Income. Just an FYI.
Normal Joe — I think my comment was a much fairer representation of reality than JC’s previous comment to the efffect that 1% pay 40% of the taxes because they earn 70% of the wealth. My point of course was that the 1% do not earn 70% of the wealth. As represented by AGI, they earn 18.9% of the wealth, upon which they then pay 37.4% of the tax burden. If you have charts to make a fairer representation than AGI, I’d be interested.
Everyone it seems, is talking about all the problems and how it hurts them, but no one is talking about any solutions. Here is my list. it is not comprehensive, but it’s a start.
Step 1. Freeze all new legislation for a period of two years. In that two year span audit all currently enacted legislation and repair what is broken.
2. Enact a 50% Capital Gains tax.
3. Eliminate all income tax below 1 million dollars.
4. Eliminate Welfare for any healthy adult person.
5. Any healthy adult person wishing government assistance must enlist in a direct government job. Job will be randomly assigned, based on application exams from: the military, homeland security, department of transportation, federal infrastructure, and federal administration. All government jobs are temporary in order to learn skills. No federal job shall be held by any person for longer than 5 years.
6. The minimum wage shall set to GDP.
Good start JC. Here’s my initial thoughts to help get the ball rolling.
1) Eliminate the limit on earnings subject to FICA taxes.
2) Enact campaign finance reform that will overturn Citizens United and remove “dark money” from the equation and restore limits on personal contributions. Ideally, all campaign finance should be controlled by a central public fund eliminating personal contributions entirely.
3) Require that all lobbying activity must be transparent and every legislator at the state and federal levels must report on all meetings with lobbyists and the purpose of the meeting.
4) Implement an apolitical national voting commission to oversee redistricting and responsible for all federal elections. Standardize the voting process across state lines to eliminate waste and inefficiencies with all the different methods in use today including advanced voting timelines.
5) Create a public/private funding mechanism to fund infrastructure improvements and put people to work:
Upgrade the electric power grid in the entire country;
Implement an aggressive bridge maintenance/replacement program;
Implement an aggressive road maintenance program;
Identify areas where transportation infrastructure will face higher levels of use and put into rolling 10 year plans to anticipate changes with improvements;
6) Enact a 33% Capital Gains Tax.
7) Eliminate the Estate Tax.
8) Raise the Minimum Wage to $15 and then tie it to GDP.
9) Enact legislation linking student loans to the Fed Funds rate (this area needs extensive changes with regards to limits of liability and transference).
10) Create a Corporate Executive Tax based on the ratio to the median corporate employee wages. Let’s say for argument, an executive’s total compensation (current and deferred) exceeds, for this example, 200 times. The corporation will pay a penalty based on the difference between the 200 and the actual.
11) Link corporate tax rates to a median of a set of other industrialized countries, leveling the playing field across the world for US Corporations.
So if I pay FICA making $1M a year, do I get to get paid back what I put in? SS is already capped at X dollars per year no matter how much you made. So if you made $1M and only put in up to $110K, you don’t get more SS. Also, if it was uncapped, it will only be a drip into the whole system. Again, it won’t boost the amounts a poorer person would get.
Why should someone’s pay be doubled when they have minimum skills? All that will do is raise the pay scales for everyone else. Would you want to be a manager and have the MW person making the same or a little less than the manager, who has more responsibility?
I’ll know that you are serious about managers making more than employees when you advocate raising the wage of the fire chief in your community. He works 24/7, is highly skilled over and above the other firefighters and officers, yet doesn’t make anywhere near what his subordinates do when counting their overtime.
They don’t hire Fire Chiefs with zero experience in the field. They work their way up the chain like those in the military. I guess you want some private leading troops into battle. They have proven to have the experience for the job. Go find any organization where the workers make more than management. Management has more responsibility than the workers. Not everyone is cut out for management.
Read my message again JB. Fire Chiefs make less that their subordinates even though highly skilled and working more hours.
I based that number on the simple fact that at the current minimum wage a worker would have to work two full time jobs just to elevate themselves above the poverty level. There is sufficient evidence now to show it does not have a direct affect on the cost of goods and the practice of large corporations such as Walmart, McDonalds, etc. subsidizing their products with food stamps and welfare would be eliminated putting downward pressure on the need for these support mechanisms.
Ok, it may not hurt the .01% of corporations, but it will hurt the other 99% that might be barely breaking even. If you are going down this path, then say it only applies to a company with over 500,000 employees, or some large number like the tax code, that only hurts the bigger companies.
What kind of effect would it have on small businesses, which employ 52% of the people in the country? http://economics.about.com/od/smallbigbusiness/a/us_business.htm
Whoever said that a manager has more responsibility than any other worker. Managers are just taught a different skill set which is no better or worse than anyone else’s. In my lifetime, I have found more bad managers than good. In my industry, if I make a mistake it is my license that is on the line, even if it is the managers fault. The manager cares nothing about that, only that he gets his work done in time to go home. I once had a manager who had a policy of not allowing the technicians to have any stock in their service vehicles! We would have to tell the customer that “there is a problem {but cannot replace that .30 fuse} and we will have to return to make repairs. By the way your fire alarm system is down and I have to return to the shop to get that part and it will cost you an additional 2 hours travel and labor on top of the 2 hours travel and labor that has already accrued.” That job only lasted 5 weeks before I couldn’t stand the frustration of not being able to do my job and amount of gouging the customer was getting. I quit. I could not afford for something to go wrong and effect my license or my ability to maintain it. P.S. he was fired shortly after I left due to customer complaints. Now corporate raiders have rushed in to takeover all the independent installers and dealers for their ROR but don’t have clue 1 about how it affects real people. I now have to pay for my own certifications and licenses, i.e. professional tax, and certifications to the tune upwards of 6000.00 a year, which is the reason I can’t get a job. Not because I do not qualify, but only that I’m not licensed prior to getting the job. But with no job there is no money to get the license, Catch22? By the way the industry has now created another revenue stream of charging the people they actually depend on to sell and service their products to pay them to learn to install their own product only to be judged certified! But everyone uses essentially the same technology as dictated by standards but purposely complicated so to require certification.
Here’s the difference, with your 400K you have a nice, well constructed home with climate control and is cozy, whereas I must survive in a tin house with 2 inches of insulation and either pay 550 a month for propane to keep it heated or 800 a month in electricity. There is no other choice, except to freeze that is. With your 400K a year, I’ll bet you grumbled when the price of fuel rose by .60 cents a gallon in the last 90 days. To pay the 1300.00 bill for the last 90 days of heat I had to sell my car.
Why is it that the 1% pay 40% of the taxes? Simple! Because the 1% has 70% of the money! Our costs are the same. Gas costs the same, milk costs the same, the basic essentials of living costs has and keeps rising. The minimum wage has not risen in 10 years.
If the only choices are a minimum wage job @ 7.25 hr for 30 hours a week, all that’s available, because no one wants to pay full time benefits, or, being subsidized by the government, which equals the same or better in some cases! What would do? No, you do not have the choice to say, start your own business, because you can’t afford the entry fees. Every penny of my income is spoken for for basic living expenses. There is no money to better myself. There is no escape. And it’s getting no better.
But I’m just ranting!
For clarity, as of 2010 the top 1% did not earn “70% of the wealth”. They earned 18.9% of the wealth, while paying 37.4% of the federal income tax burden.
http://taxfoundation.org/blog/tax-rate-paid-top-1-double-national-average
How does raising everybody’s taxes help you? The government doesn’t tax you and give it to me or you or the widow down the street…those dollars are destroyed. Instead of raising the SS cap, eliminate the payroll tax completely so lower income earners have more.
The government doesn’t need the income and everybody who understands monetary sovereignty understands this.
Increasing the minimum wage would in many cases just transfer money from those who eat at McDonalds to those who work at McDonalds and similar establishments. At worst it is a distraction from the main cause of both inequality and the low level of economic growth which is the vast shift in tax burden away from to rich and onto everyone else.
How could you not get a vast increase in inequality when you make the tax rate on the types of incomes that the wealthy receive such as dividends, capital gains and corporate profits much less than the tax rates on wages and make 99.9% of all estates exempt from the inheritance tax?
“..Equally unhelpful in terms of addressing the income and wealth inequality which results in the overinvestment cycle that caused the depression are various non-tax factors. Issues such a minimum wage laws, unwed mothers, globalization, free trade, unionization, immigration, problems with our education system and infrastructure can increase the income and wealth inequality. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. It is the compounding effect of shift away from taxes on capital income such as dividends each year as the rich get proverbially richer which is the prime generator of inequality…”
http://seekingalpha.com/article/1543642
If you raise the cap on FICA taxes, do you still cap the benefit?
It would be ANOTHER 6.2% tax on the rich by taxing the SS without the person getting the benefit. That would be another 52K in SS taxes and the gov’t will never allow that person to get the full benefits. They are already talking about means testing so if you have $5M in savings, the gov’t will say you don’t qualify for SS benefits. Another way to steal money from the rich. They put the money in, they deserve the money coming back. Again, this only applies to .1% of the population.
Raising the cap on FICA would help the deficit problem since social security combines a very regressive tax with a very progessive benefit schedule. Social security replaces 55% of the wages of those in the lowest income bracket but only 15% of wages in the highest bracket. If the limit on FICA was removed it would make sense to establish a new 5% replacement bracket so that that those with wages above the maximum threshold now would still continue to get more as they earn more but only on the basis of replacing 5% of their wages above the threshold.
And thanks, Lance…. we have now all seen your article. 🙂
Still Lance – another way to tax the rich more heavily. That’s where the “savings” would come from.
FICA (called Payroll Tax) is contributions to Social Security. There are many misguided people who clamor for its eradication, but that is another shell game playing with pension benefits. All the dire claims about Social Security are the result of the Post WWII baby boom reaching retirement age. This bubble will last, at most, 20 years. The fact remains that putting people back to work, and the growth of the population base will also contribute to its solvency. Some people just don’t want to admit that circumstances have a lot to do with who succeeds and who doesn’t. Why must there be a political and financial Untermenschen?
One of the reasons we have an too many dollars chasing too few investment opportunities is the lack of consumer demand. That relates directly to the suppressed earning of too many of the working class. Ken raises the fact that small businesses employ 52% of the people in the country. The next question must be how many of them are minimum wage jobs? The effect could well be overstated at first blush. Henry Ford paid his factory workers a premium wage and was roundly criticized by his peers. Ford was the visionary and laughed all the way to the bank as he empowered a whole new level of consumer building the new middle class. A middle class that not only became good customers, but salesmen as well.
When focusing on deriving “savings” out of any plan being discussed, please remember that any tax policy that reduces outstanding debt is saving future tax dollars that would have to be addressed eventually. Interest rates are low now, but historically, this is a temporary situation. And, like subsequent to WWII, people collectively understood that sacrifices by all were going to be necessary to dig the country out of it’s mountain of debt, which ironically, exceeded our latest peak when factored as a percentage of GDP.
“However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. ”
This is non-sense and more liberal lies. So many don’t even pay taxes. Now most will have subsidized Obama care. That there are many posts on this thread that show that the top 1% pay much more than their fair share of taxes.
“Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?”
? Thomas Sowell
When the Federal income tax was enacted one hundred years ago (primarily by the social conservatives of their day who knew that prohibition could only be enacted if a way was found to replace the 40% of Federal revenue that was raised by excise taxes on alcohol) the original tax was 7% on incomes above $500,000. Since $5 a day was a very good wage then, the top .001% paid 100% of the income tax.
peter n – Do you filter out the conservative lies also? There are plenty of them too, like saying so many don’t pay any taxes. There may be a good portion who don’t pay federal income taxes, but they still pay plenty of other taxes.
While the 1% may pay a larger portion of taxes collected, they also have the bulk of earnings and an even greater share of overall wealth, both have continued to grow while the rest of us stagnate.
Wow – I would love to eliminate all income tax below $1 million. That would seriously eat into the budget though. Of course, if welfare was gone there would be an offset there.
My additions to this:
1. Eliminate tax exempt status for religious organizations.
2. Increase the allowable charitable deductions.
3. Legalize marijuana at the Federal level and tax it. Follow the Colorado model using a percentage of the proceeds to fund awareness and treatment.
4. Eliminate the estate tax.
5. Legalize online gambling and tax it severely. Again, use portion of proceeds to handle education and treatment.
6. Have the government control our prison system rather than it being privatized. Establish treatment centers in lieu of prison for drug users. Release all drug possession offenders from prison.
7. Make a balanced budget a requirement. (or at least close to it)
Most importantly, something has to be done with our election system. Campaign finance reform is at the top of the list. I also would do away with the two party system completely. It is just too hard for a dissenting voice to be heard. Both parties subscribe to the same big-government spending nonsense, international meddling policies and general BS that is driving most of us crazy on here. They tell slightly tilted versions of the same story. People laugh when they hear about elections in the Middle Eastern nations or North Korea where there is only one name on the ballot. Well, we have the same thing here! Only difference is there are two names on the ballot. Almost impossible to get the third name in the game – especially since Perot crashed the party and they changed all the rules for entry. If we want anything to change, it has to start here before we even tackle the stuff on any of our lists.
Since you have opened the Pandora’s Box of Marijuana, why stop there. The war on drugs is an utter failure and responsible for creating violent criminals the same way the Eighteenth Amendment devastated this country. More than half of all incarcerations are the result of non-violent drug charges egregiously targeting minorities creating generations of second class citizens. It has been estimated that the country has, in effect, wasted a Trillion dollars since it’s inception in 1971 in lost potential revenue as well as law enforcement, judicial processing, and prison costs. This should be a no-brainer, but will face extraordinary resistance from the legions of jobs it has created at taxpayer expense.
I agree that all investment income should be taxed as ordinary income. But, long term capital gains is a troubling obstacle. If this is done, I am not convinced that the estate tax yields the critical mass of revenue, but I am open to the presentation of more information to evaluate my perspective.
Gambling is definitely another potential revenue producer.
I have reservations about a balanced budget requirement. That could tie the government’s hands when faced with extraordinary circumstances. I do recognize that we need a mechanism that prevents politicians from “giving away the farm” the minute surpluses show up in the revenue stream.
Pot doesn’t make people as violent or as crazy as other hard drugs. Booze has killed more than pot ever has and it is taxed and regulated. Let’s start with pot and if people want to have a movement for cocaine and heroine, let the studies show it is OK. I am fine with pot and booze being legal.
When comparing the ill effects of any drug and drug policy, we must evaluate all negative aspects of each side. All of the violent criminal activity in Central and South America is directly related to the USA requiring USA Drug Laws as a precondition for financial aid. Our failed war is killing thousands outside the US borders, and should be addressed.
Agree with both of you. Let’s just start the ball rolling with open minds. Anything has to be better than leading the world in imprisonment, fueling the violence and drug cartels in Mexico, and all the money wasted on the “war”.
Plus a lot of this talk is about the “wealthy paying their fair share”. How about the people in the drug world pay their fair share too?
One of the reasons given for ending prohibition was that it would reduce the gang violence like the St. Valentines massacre where members of the Capone Beer cartel killed 7 members of the Malone beer cartel. However, didn’t I just here of a assacre where members of the Budweiser Cartel killed members of the Coors Beer cartel? See legalization doesn’t reduce gang violence.
Bottom line is if you make more you have to pay more but the tax bracket should be the same as any one else if not more.
If the top 3% are so less in number where is all this noise coming from ? Well money is making all that noise and it is quite a bit of it.
Last two decades have not seen rise in wages for middle class people in terms of inflation as we know it.
So if nothing is done money is not going to flow automatically that is what it proves. Trickle down does not work as ‘The Super rich’ wants anyone to believe.
They are the bosses of the economy and the country and makes the rest 97% or more of the population as if we have live on their handouts.
US economy has disproportionately helped the super rich and the only reason for that is political process favors buying political interests.
If the law makers are really working for the super rich then what can be expected.
So basically politicians more from Rep. side try to white wash the red states. I would call them ‘dumb’ population under issues which are not of any consequences to the pockets of their ‘masters’ (super rich). Such issues would be religion, anti-immigration, anti-gay and so forth.
Democrats do not engage in above but they tend to support unions which are also sold in a way not to make a dent in the super riches’ pockets either.
So the end game is lost for most of Americans. If we did not have the arms and strategic alliances (thus far) and the dollar to protect we would be a mediocre economy and struggling population ready for mass movements any time. Slowly but steadily country is marching there.
The problem would be ultimately for the Super Rich though ! There are no safe havens out there.
They can ship jobs to China or other low wage countries not themselves or their families. (at least not for couple of decades).
So while tax collection is low, more pressure to cut the budgets. What do we have to see, less police (more crime/disturbances), bad schools-factory for useless generation not capable of fetching even those jobs that are available.
Thus feeding millions to this sacrificial fire of Greed of few who call them under threat !
What is under threat is the nation whose political machinery is decaying because of being soaked in money and we all know where it is coming – the poor ‘Super Rich’ class of the American society.
Two items representing the biggest mis-information distributed re: this topic:
A) People with income over $400k represent a homogenous group – while this is also simplistic it should be noted that there are really 2 main groups in this category 1 – those who are in working and earning salaries over $400k (usually in 2 earner families) – these individuals are being horribly disincentivised from continuing what is generally the most in-demand and greatest benefit to society work that they are engaged in. They pay upwards of 35% on their taxes (as high as 42% with the new medicare taxes). The current system only encourages the second earner in these families to simply stop working (which often leads to unemployment for anybody they have hired to assist with what is usually a professional career). 2 – those who derive nearly all of their income from previously procured investments and don’t actually work for their income (frequently the uber-rich, but plenty in just the “rich” category) – these individuals contribute less to society and pay significantly less in taxes since all of their income is from capital gains.
B) Wealth discrepancy in the United States is worse than at any time in history – This represents one of the most ridiculous assertions ever. If you measure wealth solely in terms of currency on hand, maybe that is true. The term “wealth” has been defined variously, however, and a common interpretation would be all of an individual’s assets, including physical, emotional, & tangible. The notion that an individual can have immediate access to shelter with running water, working electricity, sufficient calories for health (not to mention an overabundance facilitating gross obesity), time for leisure, and affordable devices that bring all the libraries in the world along with endless entertainment directly to your fingertips and yet still be “poor” is laughable – not just to the 2.5 billion people on the planet 50 years ago, but to the over 2 billion people living in rural China, North Korea, Mongolia, many parts of Africa, etc.. The poor in the United States happen to live in the same country as individuals who have amassed great fortunes, but that doesn’t even come close to making them truly “poor” on either a global or historical scale.
AWESOME post! Well said….. Couldn’t agree with you more – particularly with B). To me if you add the distinction between the .01% and the 1%, you covered the major bits of misinformation and BS rhetoric revolving around this topic.
While it is understandable why you would want to compare the poor in the USA to, let’s say, Somalia, it sounds more like searching for empirical data to support you preconceived beliefs. When you abandon comparing apples to apples, almost anything can be rationalized in one way or another. One philosophical premise in this thread is not only the distribution of wealth, but it’s well documented unintended consequences. Redefining the definition of “wealth discrepancy” only serves to obfuscate an obviously clear warning sign. Is there a causal relationship? It’s hard to say unequivocally. But, there is a documented tendency. It is also a considerable exercise in self control to ignore all the conflicting noise that has been carefully crafted to do just that.
OK – then compare our poor to France. Or Italy. Or India, China, Portugal, Thailand….. Our poor (the bottom 10%) live better than about 2/3 of the world.
I think the poor in France live a great deal better that our poor in the U.S. Their healthcare is rated best in the world, and no one goes hungry that I’ve ever heard.
Wealth discrepancy won’t go away. There are always those that can do better than others. Modern society and technology has made it so that small differences in ability get greatly magnified. There isn’t much you can do about that unless you want to kill the goose that lays the golden eggs.
Meanwhile, I just got back from a trade show. I was told by several people they were having a hard time filling technical/engineering and sales positions and this has hurt their ability to do new projects. There are plenty of jobs out there for qualified people. The key is being qualified. These jobs are not 400K/yr jobs but they are a good start.
Mean while, Obama should be impeached for fraud. Our company can not keep its health care plan. We had to switch. Now healthcare premiums are itemized person by person and kid by kid so there is no more insuring a family. One must insure each kid. This will raise our rates. On top of that there is one employee who’s wife has cancer. The new plan will not cover a drug she needs. We/the company are paying for that. 🙁
If those that selling shares in a movie can be arrested and charged with fraud for not telling the truth then why can’t Obama for telling the most expensive lie ever?
Yes, there will always be rich and poor, but the disparity has never been so wide in the U.S. in our lifetimes. And income and capital disparity certainly isn’t so wide in Europe and Japan. The goose laying the golden eggs is the middle class American citizen. That’s who purchases products and services that the owners of businesses and corporations provide. 70% of the U.S. economy and a great percentage of other nations economic growth is dependent upon our middle class. When the boss reduces the employee’s share of what he produces because he feels entitled to more (he is, after all, the “job producer” he reasons), fewer of the boss’s products are sold, overproduction results, and growth stops (causing depression per Lance). Regardless of the semantics, the goose dies.
Higher marginal tax rates have historically made little or no impact on incentives to create new products and improve technology. And, high tax rates have never caused a recession. Conversely, lowering tax rates as Bush did, didn’t stimulate the economy enough the justify the damage created by increasing the national debt or reducing services for the middle class, plus it ended in recession just as Some economists predicted. Trickle down has proven to be great for lining the pockets of the 1% at the expense of the middle class and even more so, the poorest Americans.
The trouble with your assertion is tha Americans do not compare themselves with Mongolians or Africans. When we speak of the “happiness index”, societies whose members are most satisfied with their place and role in their respective communities, we find that these members compare themselves only with others of the same society. The Danes are number one, while Cubans are close behind – two very different societies and under two very different governments. They have one thing in common however. Both are egalitarian. The gap between rich and poor in these nations are much less that here and therefore, no one considers himself quite so poor as do the lower wage workers in Silicon Valley for example.
The middle class today live better than the monarchs of old, but that doesn’t make them any happier, nor should it. In the face of so much wealth increasing the bottom line of the 1%, they’d like themselves and their children to share in the American dream also. The following link was this mornings news and gives great perspective on this I believe:
http://apnews.excite.com/article/20140306/DACC8A881.html
The perception of being left out or hind has tremendous potential to do great harm, divide the country, and create civil unrest.
Aspiekid – The poor in France are worse off than the poor in the US. If you have been there you will probably agree, if not my experience is that they certainly aren’t any better off.
Man of Reason – Your assertion that baseline level of poverty is not as important as Range of Wealth is not a comprehensive assessment in my opinion. There are important aspects of poverty that are more likely to lead to civil unrest and crime than others. A society where large numbers of individuals don’t have access to basic items such as food and shelter is more likely to lead to violent crime and social upheaval. A higher baseline society where there is a wide range of wealth will no-doubt lead to grumbling among the lowest tiers of wealth. Grumbling is not violent upheaval. Couch potatoes with access to food, shelter, and a television will always ask for more handouts, but are unlikely to pick up the pitchfork and skewer the business owner selling them cigarettes and soda.
A progressive tax rate makes some sense within limited parameters. IMHO once you start taxing above 30% on wages I think you are limiting your economy not improving it. The biggest mistakes in our current system is that we tax WAGE earners (particularly married two income families) at a top rate in excess of 50% for the second earner (assuming the first earner makes 450k, the second earner’s marginal rate would start at 39.6% + 2.9% medicare + 6% SS + X% state income tax) – why are we disincentivizing that second earner? Taken in a vacuum it is easy to say that this “high income” family has more than enough and should give more back to the government because they don’t need it. That’s a very short sighted view. Ultimately, we want that second earner out there adding to our nations GDP, but when that family (of 2 professionals) looks at hiring a nanny to care for their children (30+k?) and then considers more than half of everything they make will go to the government they drop out of the work force entirely. I know at least five two doctor families in a town of 115,000 who have made this decision (and I’m sure not all of them are at the 39.6% tax rate, but even at 35% the second earner is looking at 45% tax on all their income) . The result is the loss of hundreds of thousands of dollars (probably over a million dollars) our society has put into training the highly educated second earner and ZERO benefit to society. Makes no sense at all.
Meanwhile, truly rich families who derive all their income from investments are taxed at 25 % on their capital gains are also discouraged from actually working for all of the same reasons above. It would make more sense to have a progressive tax rate on investment income over a million dollars and to decrease the rate on wages. After all wages imply that something is being produced and added to our nations’ economy while investment income is merely the result of the production of these wage earners.
just mho
You may be right about France, although I’ve heard but not verified that their poor are better off. But consider Europe as a whole, or even two countries, Germany and Sweden. These two countries have embodied the right to an adequate level of living in statute. The U.S. does not.
Sweden:
Sweden uses the reference budget to determine the social welfare allowance. Reference budgets are expenditure patterns for different types of households. To ensure transparency and legitimacy, the reference budget is an objective tool used to calculate welfare allowances every three years. The reference budget is more than a minimum budget and includes more than basic needs such as leisure activities.
The reference budget calculates the daily expenses of a family, which include, food, clothing and footwear, hygiene, recreation/leisure, consumables, newspaper, radio, TV and telephone. The welfare allowance is then used to top up the disposable income of families to the amount indicated by the reference budget.
Germany:
A test case brought before the Federal Constitutional court in Germany in 2010 established a constitutional right to a subsistence minimum for an existence in human dignity. The Hartz IV decision stresses that there is a unified and all?encompassing fundamental guarantee that covers “both the physical existence of the individual, that is food, clothing, household goods, housing, heating, hygiene and health . . . and ensuring the possibility to maintain inter?human relationships and a minimum of participation in social, cultural and political life, given that humans as persons of necessity exist in social relationships.”
The legislature fixes the actual level of benefits using a transparent and appropriate procedure on the basis of plausible methods of calculation according to people’s actual need. We do nothing of the sort here in the United States. Need isn’t taken into account. Only politics of how much we are politically willing to pay. It’s only a “gut feeling” emotional decision with 50% believing it borders on too much and the other half believing it too little, but without commonly accepted objective data, also know as “facts” to help us decide.
I’m sure that if we study it objectively, the poor of many first world countries would fare better than our poor citizens. Unfortunately, we rank first in few areas any more, military spending and incarceration rates being the exceptions.
Hard to compare two of the most racially homogenous countries in the world that severely restrict immigration (illegal or legal) with a country that can’t control its borders and has a reputation for being a land of opportunity thereby attracting individuals from around the world who necessarily start out poor before making an effort at success. Many European countries require a certain amount of wealth before they will even let you emigrate there. Additionally, its much easier for most people to stomach a government revenue draining welfare system when any individual benefitting from it is likely at most 2-3 generations removed from your own family tree.
You must also consider that Sweden’s population is smaller than New York State and Germany’s is roughly equal to western US. We currently have more unemployed than the population of Sweden.
My point was simply that the poor in many first world nations do live better than ours. If anyone thinks being on SNAP, Medicaid, or other forms of assistance make the lives of the poor more than anything but desperate, you really need to take a much closer look. Ask a social worker or other who work closely with such families.
I have learned a lot from this thread. My fellow Americans and not fellow Americans. They want what is mine. I have NO allegiance to those that want what is mine.
To paraphrase Thomas Sowell, WHAT IS YOUR FAIR SHAR OF OTHER PEOPLE’S MONEY.
It isn’t the progressive tax laws I object to. It is when they raise the rates to pay for some losers.
The hardest part to swallow is that when I file my taxes for 2013 I will see that I paid almost $300k in Federal taxes. And yet someone will tell me that I’m not paying my fair share. My mother, father, brother (and his wife), and my mother-in-law combined will pay about 1/10 of what I pay in taxes. But somehow I’m a selfish rich guy who shouldn’t be reluctant to paying a “fairer share”.
My wife paid over $90K in FIT on her W2 and I don’t even make what she pays in taxes. We are on the cusp of breaking $400K as a couple, but we pay PLENTY in taxes to the govt. Can we afford to pay $2,000 more? Sure, but WHERE DOES IT STOP?? People that make $400K a year usually live in a neighborhood that is relative to their income, but we bought a house well below our means. so every tax dollar the go’vt takes is one less dollar the ‘rich’ have to spend on dinners out, vacation, or any other disposable income item. We save 45% of our income so we keep the money out of economy for when we are retired, which will be sooner than later.
I think this is why you rarely hear proponents of the progressive tax system talk in terms of actual dollar amounts paid in taxes. It’s nearly always in terms of percentages. I think when actual dollar amounts are shown it sheds an entirely different perspective on the subject, as far as who is contributing what.
Personally, I also have a bit of a tough time with the word “progressive” as it is used in the taxation context. The word has a common meaning which is much different, and much more positive, than the taxation meaning of the word. In the common, layman’s usage of the word, “progressive”connotes something positive, moving forward, getting better. In the taxation meaning of the word, “progressive” means graduated, in the sense that the more money you makes, the greater percentage of your income is taken from you.
I think this is double entendre meaning of hte word “progressive” is exactly why proponents of graduated taxation coined the term. It connoted something positive, when in fact the question of whetehr it is positive or negative is debatable. I think a more accurate, less manipulative word is “graduated”. Or, if you wanted to create an emotional equaivalent to “progressive” but on the other end of the spectrum, we could use the word “punitive”.
“Progressive” simply means that those who have more income pay progressively higher tax rates. The term has been around long before the income tax was codified in the constitution and was never meant as a psychological lever for propaganda such as, “Death Taxes” or “Redistribution of Wealth” are used today.
People are going to say that you are selfish, not because you are in the 1%, but because you advocate letting you mom, dad, brother, and mother-in-law pay a greater percentage of the tax burden. You see Peter, for them to pay the same or greater percentage than you would cause them a great deal more pain. These are the people who made it possible for you to earn so much. (Well, maybe not your mother-in-law, although I wouldn’t say that to your wife.)
I don’t think they should pay more in taxes. Never said that. As it stands now, several of the people I mentioned pay NOTHING in income tax. My mother-in-law has millions of dollars and pays very little in tax, since most is in tax-free bonds or low-interest bearing accounts and all the taxable income she has is social security.
I don’t think they should pay the same percentage as me. I’m not the one complaining about the current tax system, even though I pay considerably more than everyone in my family (both on an absolute and percentage basis).
But I will say this – if any of them start telling me I am not paying my fair share, I have every right to be taken a bit aback by this, don’t I?
Okay Peter, But if they don’t pay more in taxes, and you don’t pay more either, then much must be cut from existing programs, many of which benefit them. What would you cut to not only put the budget in the black (abt $500 billion next year) and also pay off the national debt of 17 trillion in a reasonable amount of time? Which of your proposed cuts wouldn’t lower your extended family’s standard of living?
Whether they pay more in taxes, or have government programs which benefit them cut, it’s all the same in the end. That’s a simple reality.
Exactly!!!! MUCH must be cut. And there is no part of the budget that would be spared. There is certainly plenty to cut in the intelligence, military and defense budgets for instance. And yes – it would hurt us all somewhat temporarily but we would save our nation from financial ruin. The poor would benefit the most in the long run, as our country’s financial stability is the reason why they live at a higher means than almost any other nation’s poor.
I would also raise revenues by legalizing and taxing drugs and online gambling (and save money by eliminating the “war on drugs”) and by eliminating tax exemptions for religious organizations.
The point is this ….raising my 37% that I paid in taxes in 2013 to 40% isn’t going to solve anything….we will still have a giant deficit and have this same conversation 5 years from now – that I should pay more. We HAVE to cut spending. It is just so convenient for you to think I should pay more, but the numbers show that it doesn’t solve the problem.
It’s very hard to believe, but our problems with our economy began when a well liked actor, presidential candidate, and eventual POTUS told a simple story over, and over, and over again. A story that appealed to the most base of human instinct and reoriented a large segment of the population from the big bad corporations, to big bad government. A recent conversation hosted by Bill Moyers with Ian Haney Lopez explains it’s genesis, and how it set the people against each other at their own expense.
Ian Haney Lopez: “So, we know Ronald Reagan used talking about welfare queens, but he also had this other stump speech that he would give. He would speak to his audiences and he would say, “I understand how frustrating it is for you when you’re standing in line at a grocery store waiting to buy hamburger and there’s some young fellow ahead of you buying a T-bone steak with food stamps.
Now, the first time he told that tale, it wasn’t some fellow, he said, “some young buck,” and the young buck was a rationally coded term that stood for a strong African American man and so that term… that moved from being a dog whistle to an outright racial provocation. Reagan backed off and he started talking about some young fellow buying a T-bone steak with food stamps.
Thank about the characters in this story. The first character is the person buying a T-bone steak with food stamps and that’s conjuring the image of the lazy minority who’s strong, who could work, but doesn’t want to work and prefers to be on welfare. But the other image is the you in that story, who Reagan’s talking to and the you, ostensibly, the voter, the hardworking taxpayer, the law-abiding American, that voter, that hard-working American implicitly has as racial identity and that’s white.
So, there you can see this racial narrative; you, Reagan, is saying to white audiences, “You’re being taken advantage of. There’s a third character here; government. It’s government, ostensibly, that’s taking advantage of whites, that is taking their money through taxes, and then giving it to these undeserving minorities. So what did Reagan suggest? He suggested tax cuts. You shouldn’t have to pay taxes to a government that’s just taking your money and giving it to minorities and, indeed, what did he do? He enacted tax cuts. In the first year of his tax cuts, a $164 billion went to American corporations.
Over the 1980s the Reagan tax cuts transferred a trillion dollars to America’s top 1%. Yes, voters got the tax cuts they thought were aimed at cutting off undeserving minorities, but, in fact, it was the politicians that were showering money on the very richest Americans. We have to understand the way in which something has fundamentally changed in American politics.
We used to understand that the biggest threat in a political life was the power of concentrated money. The power of big money and of corporations to hijack the marketplace and hijack government. But now Republicans for 50 years have been telling voters the biggest threat in your life is that minority is going to hijack government. The government has been taken over now serves them. So when white voters vote against government, they think they’re voting against minorities, but, in fact, they’re to give over control of government back to the very rich, back to the big corporation.”
Right on the money!(sic)
Whoa, I’d forgotten about Reagan’s stump speeches. You’re very right and put the chain together nicely. Well done. Thanks.
One thing I’ve noticed throughout this long but very civil discussion is that many here with differing opinions have good reasoning abilities and many of the same values. What separates them is there perceptions of the government, the poor, and the influence of money from corporations and wealthy individuals on our political process. Also known as “facts”.
What’s lacking is an understanding of the narrative you just expressed about how we got here, and facts as to whether “that young buck buying steak with food stamps” actually exists in quantities that should cause real concern. I’m old, have waited in many grocery lines, yet have never encountered any such event. But had I, I’d want to know exactly how prevalent it is and what it means to me. Does such waste cost me $5, $50, or $500? And how much will it cost me to correct it? Like someone said before, a store doesn’t pay $5,000 for a detective to stop $50 in shop lifting from happening.
Your post is a good beginning however. Good job.
I have never seen anybody buy a steak with food stamps. However, I have seen people a few times buy staples with one purchase and use the money they didn’t have to pay for food to buy beer or cigarets in a separate purchase. Money is fungible. For all practical purposes these people are buying the cigarets and beer with food stamps.
As for the waste, there shouldn’t be any. The whole idea of giving people money and expecting them to use it as you intend is crazy.
You’re absolutely correct PeterN, those who smoke and drink are going to scrape together enough money to continue those habits regardless of benefits received. It would be silly to expect anything else, nor do we tell SNAP recipients that they can’t do so. The food mostly goes to their families. Right or wrong, it doesn’t matter.
I especially like your last sentence. People are not going to make the same decisions about how they spend their money that you or I would. But we must give them the freedom of choice regardless, even the ability to make what we may consider very stupid decisions.
That is a good point MOR. Always at the heart of these debates is the frequency of extreme stories from either side. The guy buying steak or seafood with food stamps, not working and living on assistance is similar to the “rich” paying 10% in income taxes and using offshore accounts and loopholes. Very few of us actually know either of these people personally….and while they do exist the extent of which is certainly in question.
Most people on the “poles” of this debate are the rich paying 30% or more in income taxes frustrated with the waste and the rhetoric that says they should pay more in taxes … And the lower income earners who have trouble making ends meet.
These guys should be going to jail. Accountants don’t search for fraud unless they have a reason to. It isn’t hard to cook books, but most won’t try.
http://www.chicagotribune.com/news/sns-rt-us-dewey-execs-criminal-20140305,0,3189470.story
I found this interesting to note as far as who the top donors are who are trying to influence legislation. Thirteen of the top twenty are Democratic leaning, four are on the fence (contributing more or less equally to both parties), and three are Republican-leaning. https://www.opensecrets.org/orgs/list.php
Ken, good summary of the past 25 years. However, the site is quite upfront in acknowledging that there have been significant changes lately subsequent to Citizens United.
“For example, this list does not include casino magnate Sheldon Adelson. He and his wife Miriam donated nearly $93 million in 2012 alone to conservative super PACs — enough to put him at No. 2 on this list. Similarly, the list excludes former New York City mayor Michael Bloomberg, who has donated more than $19 million in the past two years, largely to groups that support gun control. Neither Adelson nor Bloomberg — or the organizations they report as their employers — qualifies as a “heavy hitter” under our current definition. It’s also important to note that we aren’t including donations to politically active dark money groups, like Americans for Prosperity, a group linked to the Koch brothers, or the liberal group Patriot Majority — because these groups hide their donors; see a list of top donors that we’ve been able to identify to such groups. We are working to revise this list to take into account the new realities of campaign finance created by the Citizens United decision, but as it currently stands, there are significant omissions.”
I found the charts relating to the Lobbying Spending Database very intriguing and would love to know what issues these funds were targeting by donor. For all the data it would be very helpful to categorize by political objective other than which party was impacted.
Unfortunately many who get that much , earn lots via the investments the money makes and this is hidden in corp accounts, trust, overseas to protect from taxes.. , some with businesses who do earn that sometimes can not reveal much of it..
And its great that there are people who do well, problem is that there not enough good, engaging work for the new young (especially) educated folks.. There’s about 1 good job for every 10 people who are good for it..– we need to reinvest the big profits and big wealth to reward/spread and JOB share..maybe job choice/assign.. so more people who want to do stuff like be a finance analyst or sit behind a desk and apply some interesting skills get a chance..
I am a professional financial planner who makes well above the cut-off of this article – and I wish someone would tell me where all these hidden corporate accounts, trusts and overseas accounts are so that I can quit paying the 40% in taxes I have been paying.
Not sure why nobody believes me here, but this stuff is simply not available to 99% of the 1%. I work with over 500 households where the majority of them make over $250k – and my JOB is to help them however I can. Other than maximizing their company retirement plans (limited to $23k/year) and purchasing tax-free bonds, there isn’t much else we can do to reduce their income tax burden.
If there was a place for the 99% to complain it should be the fact that about 90% of my clients are Federal employees or Federal government contractors. The complaint should be that the government is PAYING this much money out and making millionaires of their employees.
Amen. How come nobody complains about the Hollywood 1% making $20M a movie? A CEO earns his money WAY more than an Actor.
“nobody complains about the Hollywood 1% making $20M a movie” because actors and athletes are one of the very few rich who actually to pay a higher percent of their income in taxes than middle class taxpayers as much of their income in in the form of wages like the middle class. The wealthiest 1% pay an average effective tax rate of 17% of their income as compared to 16% of all middle class taxpayers. Since there are many in the wealthiest 1% pay that pay an average effective tax rate above 17% such as actors and athletes, that means there are many like Warren Buffet who pay much less than average effective tax rate of 17% of their income.
We are not complaing about the rich havinf lots of money, the complaint is that they used their political power and ownership of the media to have the types of income get be taxed at much less than the taxes on wages.
How could you not get a vast increase in inequality when you make the tax rate on the types of incomes that the wealthy receive such as dividends, capital gains and corporate profits much less than the tax rates on wages and make 99.9% of all estates exempt from the inheritance tax?
“..The enormous shift in tax policy favoring the rich has been a world-wide phenomenon going on for many years. After the Socialist party candidate François Hollande won the presidential election, France enacted tax laws that gave France the most progressive tax system among the 20 largest industrial nations. However, world-wide the tax systems have become so much less progressive in the past decades, that if the tax code that France has today were applied to France in 1969, France would have had the most regressive tax system among the 20 countries in 1969.
A major component of the shift of the tax burden from the rich onto the middle class involves the corporate income tax, whose incidence falls entirely on the owners of corporations. Corporate income taxes were 4% of GDP in 1969 and are now less than 1%…”
http://seekingalpha.com/article/1543642
Which federal employees make more than $250K?
Lance said – “The wealthiest 1% pay an average effective tax rate of 17% of their income as compared to 16% of all middle class taxpayers.” This is absolutely, 100% NOT true. Please back this up with evidence.
MOR – Was talking about households really…. many make more than $100k and max out at $170k – so if both spouses work there they go over the $250k easily. However, this doesn’t include folks that are paid locality pay – particularly overseas. The overseas folks can make twice that with all expenses paid.
The data on effective Federal taxes by percentiles is available at:
http://www.cbo.gov/publication/44604
Lance – the page you linked shows that the top 1% pays a much higher rate than the middle class.
This historian disagrees:
“What Causes Nations to fail: Concentrated wealth arguably caused the collapse of Ancient Egypt’s New Kingdom, Rome, Pre-Islamic Mecca (Islam is, in part, a reaction to concentrated wealth), Byzantium (the 50 years prior to Manzikurt), Medieval Japan, Hapsburg Spain, Bourbon Russia, Coolidge/Hoover America (triggering the Great Depression, Hitler’s rise, WWII, and the holocaust), Bush II America (triggering the Great Recession). The general pattern: Wealth/power concentrates, the wealthy/powerful use their interest to avoid paying taxes, civil institutions fail.”
– Tim from Mesa, NY Times Comments, 2012
Bush didn’t cause the recession. Banks and home buyers did. The rest of the stuff is 100 to 5,000 years ago. You really think the Roman Empire economy is the same as the USA today?
I think that Lance had a point when he said that when the Banks loaned all they could to those who were stable enough to pay such loans back and they still had so much cash on hand, they began loaning money to those who they knew couldn’t pay back the loan. They then packaged the risky loans in bundles and sold them to the unsuspecting suckers who were stuck with the losses. But the problem was created by an oversupply of money caused by reducing the taxes on the wealthy and sold to Americans as necessary to stimulate economic growth. Does that sound familiar?
I don’t think the banks knowing loan money to people that can’t pay back the loan, but I do know for a fact that Washington Mutual loaned money and assumed the house value would keep going up so that if they had to foreclose, the house would be worth more. Guess who lost on that bet. It didn’t matter if a house is upside down as long as the payments are being made. The other issue with the MBSs is that they were/are valued mark to market so when the home values fell, so did the value of the portfolios. Again, if you are making your payment, who cares what the value it. The other issue is that the sub-prime loans got mixed into prime loans so that the prime loans were taking bigger hits than they needed to. If the subprime loans had been kept better records, maybe less people would have bought those portfolios causing the banks to pull back on the subprime loans. Again, 5 states caused the majority of the housing failure. California, Nevada, Arizona, Florida and one other. Texas fared well during the crisis mainly due to our regulations that you couldn’t take out a 125% cash out refi on our houses. using your house like an ATM certainly didn’t help the housing situation when people became $300K underwater. Being $50K underwater is more palpable, but once they spent that money on renovations or vacations or cars, they were never going to recover. So, in essance, the homeowner got greedy and wanted to cash out the equity and hope the value kept going up. Guess who lost…
The check on the homeowner is the bank. When I first purchased a house, I had to put 20% down, show that my annual income was at least one third the purchase price plus any other loans I had out, show that I’d been employed by the same company for at least three years, have good credit history and had paid off any loans on time, and that my monthly payments on all loans was no greater than a quarter of my monthly income. Those rules had been standard for many years and were the common wisdom among bankers. You see JB, at that time, the loans were kept by the local banks and S&Ls and default would have been bad for business.
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But regulations we loosened greatly between 1981 and 2008 and eventually, loans could be packaged and sold by the banks, thereby realizing an immediate profit out of which the bankers received bonuses. There was no longer an incentive to assure that loan would be paid back since any default was someone else’s problem. Therefore, bankers got greedy and knowingly sold not only residential, but also commercial real estate to buyers who would not have qualified under previous in house rules or government regulations. They got paid their bonuses, while the suckers who bought the loans got shafted.
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Sure, you can blame some $13,000 per year strawberry picker for buying the bullshit from the banker who sold him a $750K home, that prices always rise and therefore, he’ll make lots of money when they sell, but is that really honest. It’s the banker who’s responsible for the sale to a qualified party, and in most all instances, the bankers knew the score.
According to Lance, this temptation was a result of too much wealth looking for investment and they simply ran out of qualified buyers. Too much product and not enough buyers, the cause of the Great Depression, also applies to the cause of this one.
Just because the bank says you can borrow $750K doesn’t mean you should. We were approved for a $500K home loan and we bought a house for $225K. Well below what we qualified for.
Agree with you on this one MOR. Everyone shares the blame in their stupidity in the banking crisis, but ultimately if the government is going to serve any purpose it would be to help stabilize the economy the best they can. By knowingly loosening the underwriting regulations and requirements they were helping fuel a housing bubble that was bound to explode.
You’ve got a good grasp of the problem Peter. I’m disappointed that many of the measures we know would prevent this from happening in the future, haven’t been enacted by this congress. For instance, we still have “too big to fail” financial institutions.
The first thing we could do to help this whole problem is quit trying to extend ourselves all over the world in everyone’s business (Syria, Ukraine, etc.). THAT is what led to the fall of most of the major empires, not concentration of wealth.
“An imbalance between rich and poor is the oldest and most fatal ailments of all republics.”
– Plutarch, Greek historian, c.100 A.D.
Show me a successful Socialist Country.
How about Norway with per capita income much greater than the U.S., and the inequality between rich and poor much less. Although marginal tax rates are much higher, unemployment is very low and their economy is booming.
Norway has a population of 5,000,000 people with the Gov’t owning the oil company. So all the profits go straight to the gov’t coffers. We have 300,000,000 million people, 50 states and a greater diversity of a population. They still have a 3% unemployment. So unemployment isn’t THAT much lower. Taxes are still much higher just for a free education? I don’t see millions of people trying to get into Norway just to live in that “Utopia”. That isn’t a ton of people to be able to educate. There are 4.1 Million people just in our county here.
Then combine them with Sweden, Finland, Denmark, and Germany, all socialist to a much greater degree than the U.S. Anything less than 3% would be very unhealthy for an economy, but is extremely low at only 40% of what we experience anyway. Go tell the Norwegians, Danes or Swedes that they pay too much in taxes for the “free” education and they’ll look at you as if you are nuts. They realize that the point isn’t how much something costs, but the value they receive for what they pay is much more important to them. That’s why you don’t see people from these countries lining up to immigrate to the U.S. any longer.
http://www.futurescopes.com/wealthy-dating/7732/10-richest-men-norway
And yet, Norway has billionaires and nobody seems to hate them. Probably because they pay 70% in taxes.
Of course not JB. You keep repeating the false mantra that the 99% HATE millionaires and billionaires. That’s simply not true. However, people realize is that we have a tremendous national debt which needs to be paid down, and we have very monied people and their corporations who’ve had the benefit of great tax cuts and now, rather than restore rates which benefited everyone in the past, many are using their wealth to elect politicians favorable to legislation which will make them even wealthier and more powerful. They want even lower taxes for themselves and to cut the services and safety nets that the middle class and poor count on. When Romney, Buffet, Gates and so many other uberrich pay so much less than so many who’s income are a slight fraction of theirs, people get angry, not at the rich, but at the injustice.
If Norway can create billionaires and a vibrant economy, even with a 70% marginal tax rate, then the U.S. can also and has so proven in the past. But Norway limits the influence of money in politics to a much greater extent than the U.S. which now, because of Citizens United, has no limits.
If you read Lances article you’ll understand that perhaps the reason our economy lacks Norway’s vibrancy is because taxes on the wealthy are so low.
I’m sorry, but the 99% get a lot more votes than the 1%. Additionally, I have said on here a million times – and I’ll say it again – there is a HUGE difference between the 1% and the 0.01%. The 0.01% are your billionaires like Buffet, Gates, etc. The 1% includes people living in expensive cities like Washington, New York or SoCal who are making $350k and not living extravagant lifestyles.
It is also a myth that the entire 1% wants lower taxes. I make in the high six figures and I don’t have a problem with higher taxes at all if I felt like it would help the economy. And you know, what – when I have these conversations with my peers, most agree. What frustrates the people in my situation is the SPENDING side. If we felt like our higher taxes would “trickle down” to help the less fortunate or reduce the deficit, then we (at least I) would be supportive of it. Instead we all know it will go to waste, or to build our 15th aircraft carrier, or for a bloated mess of a universal health care plan, or to the failed war on drugs, or to meddle in other people’s problems like Ukraine, or to give money to other countries’ natural disaster programs, or mainly….. to fund some sort of program that serves the career of the politician rather than righting the fiscal ship before it crashes into an iceberg.
The votes that the 99% get only occur on two year cycles excluding local government entities, not on budgets, spending, or who runs what at the federal level. As far as who is actually in the “middle class,” this explanation is pretty much on point, and disturbing. http://youtu.be/QPKKQnijnsM
Good video Joe. Very graphic and easy to understand. Here’s a followup:
http://www.youtube.com/watch?v=fbj8hTsPEzc
And here’s a link to a brief article that perhaps will add some perspective and balance to this issue of income inequality.
http://www.forbes.com/sites/timworstall/2013/06/01/astonishing-numbers-americas-poor-still-live-better-than-most-of-the-rest-of-humanity/
I have been saying we have the richest poor people in the world. Most have indoor plumbing, a big screen TV, a cell phone, a car and electricity. Try living in India in a cardboard box or in the slums of Brazil. My wife has seen the real poverty in India. Poverty and Poor aren’t the same thing.
Is this supposed to make us feel better because the 15% of Americans who are technically are at or below the “poverty level” in the US are not as bad as some of the most putrid and unhealthy areas of the world? In ancient Rome, the slaves lived better than some of their free countrymen, but that was because of Roman engineering and the knowledge of sanitation and the need for clean water. Those states that have the highest levels of poverty as well as the highest per capita use of food stamps and other social safety nets are, ironically, “Red” states and have the lowest average life expectancy in the country. If one chooses to repeatedly demonize the working poor as throw-away people, one must also expect to be the object of much derision for their callous and disrespectful behavior. Even business in America knows better and compares themselves to their “peer groups” and not the most under-performing competitors.
Franklin and Madison both warned us of what the over accumulation of great wealth by individuals would do to our democracy. Were they sick with jealousy also Joe? You’ve been drinking the Koolaid on Bullshit Mountain way too long. You need to hike down for provisions of reality.
Mancrunch, Lance, MOR, and Aspiekid, your consistent, cogent, and objective observations are exactly what is missing from our political dialogue. It has nothing to do with good or bad, only strategies and outcomes. Sometimes it appears that both ends of the spectrum are well practiced whiners. It seems that our real peccadillo is finding the way to break the over-investment chain and move the capital back into the “real” economy so the system can function more beneficially for all. It’s going to be very difficult to do when, just as it did in ancient Rome leading to their demise, it’s too easy to purchase legislation favorable to the ones with the money (which is how the rich oppress the poor).
Franklin and Madison warned us….. but not of the situation we are in now – we aren’t even CLOSE to what they were concerned with. What they were referring to did exist in the early 20th century, when at one point, one man (John D. Rockefeller) was worth about 10-15% of the nation’s GDP. Individuals owned the railroads and could simply hold the people hostage for food, fuel, supplies, etc. For instance, a man like Henry Flagler was GIVEN miles and miles of Florida coastline just to build a railroad.
The internet is the 21st century’s “railroad”, and many have gotten rich from it. Yet, their individual net worth is not a threat to GDP, doesn’t move elections by themselves and is not sucking the money out of the middle and lower classes’ pockets.
I think the big difference is that back in the railroad days you could just work hard and get a piece of the pie. In the internet/technology age it really separates the “intellectually skilled” from hard labor jobs, of which there are much fewer.
Welcome back Peter.
Franklin and Madison lived in the 18th and early 19th centuries and were products of The Age of Reason where scientific thought was greatly valued and used not only in science, but also applied to philosophy, religion, and politics. They were scholars of the ancient Greek and Roman classics and well versed in history and the rise and fall of various empires. The consequence of their thinking was the United States of America, although amended along the way by other great thinkers such as Lincoln, TR, and FDR, all of whom valued scientific thought and reason.
The concentration of wealth in too few hands also buys more political influence, which concentrates that wealth even further. Big money and contributors buy the elections of politicians who will legislate favorably to their patron’s financial benefit, rather than to the benefit of all. That was as true during Plutarch’s time as it is now, and the founders were well aware of Plutarch’s philosophies as well as many other Greeks and Romans who said similar things.
It’s not so much how wealthy someone is, but rather how much money he’s willing to use to corrupt the democratic system. Although Rockefeller was tremendously wealthy, others today use much more money contributing to campaigns, super-pacs, and hiring lobbyists than Rockefeller. But regardless of the “situation” or century, the same principle holds true that money in politics corrupts and will destroy democracy if allowed to accumulate in too few hands.
The only point I’d add here is that the Rockefeller types didn’t have to use Super PACs to influence anything. They controlled everything through business and true monopolies. The government came to THEM for help rather than the other way around. Again, not saying we want this either – but alot of the talk about “concentration of wealth” in 2014 makes me laugh when I think about the way things were in those days.
amazing how things don’t change much. Carnegie cashed out and became one of the biggest philanthropists. there were still poor people and rich people 100 years ago. Roosevelt broke up the Monopolies, but certain people still managed to get rich. They still had all the risk.
“Thankfully, even though individuals in this bracket are few and far between,…”
WTH!! Can someone tell me WHY we should be thankful people who earn this sort of money are “few and far between”?
Jealousy is a sickness and this statement reeks of the green monster. The attitude of “If I can’t have it then no one else should have it” is really REALLY disgusting and the position of a first class loser.
Why do we tolerate billionaires? Why do we let people inherit hundreds of millions of dollars? They are a greater threat to democracy than plastic surgeons could ever be. The estate tax should be 100% on inheritances above the $10 million mark. Know anybody in that group? Neither do 99.9 % of the American people. We have got to fight aristocracy.
LOL, you are one sick and JEALOUS dude. Get a grip, loser and stop whining over what others have.
I hope you meant to use a sarcasm font. I guess you would rather just restrict what someone can make in their life. I would peg you as a $40K a year type person. Sorry, anything you do to make your company better doesn’t matter. Your skills are worth X forever. We should embrace billionaires and anyone that takes a risk in order to improve some method. Do you really hate the person that invented the car? Do you hate the person that improved the car? How about airplanes? Do you hate the Wright Brothers for showing us how to fly? I mean, they didn’t become billionaires, but Mr. Boeing probably did. Why the hate? Embrace the rich and hope they share their wealth. If they don’t, you weren’t going to get any of it anyway. BTW, the next time you walk into a Library, you can thank that Evil Billionaire Mr. Andrew Carnegie.
Tax rates for everybody should be 2x CPI growth. FEDERAL taxes are dollars destroyed to mitigate monetary inflation. It’s all accounting.
The US Government, a monetary sovereign, has no need for revenue. The politicians and bankers who benefit from a guaranteed interest stream will tell you otherwise.
“..Most investors now believe three things about the Federal Reserve, money and interest rates. They think that the Federal Reserve is artificially depressing rates below what would be a “normal” level. They believe that in the process of doing so the FED has enormously increased the supply of money and they believe that the USA is on a fiat money system.
All three of those beliefs are incorrect. One benchmark rate that he Federal Reserve has absolute control of is the rate paid on reserves deposited at the FED. That rate is now 25 basis points, after being zero since the inception of the FED in 1913 until recently. If the FED had left that rate at zero, t-bill rates would now be even lower than they are now. The shortest t-bills rates would now probably be negative.
Paying interest on reserves combined with the subsidy to the banks of providing free unlimited deposit insurance on non-interest bearing demand deposits is keeping t-bill rates positive. Absent those policies the rate on t-bills would be actually negative. The Chinese and others all over the world are willing to pay anything for the safety of depositing funds in the USA. Already, Bank of New York Mellon Corp. has imposed a 0.13% charge on large deposits.
An investor who believes that interest rates are headed up may respond that the rate paid on reserves is a special case, but that the vast increase in the money supply resulting from the quantitative easing must result in higher rates when the Federal Reserve reverses its course. The problem with that view is that the true effective money supply is still far below its 2007 level.
Money is what can be used to buy things. Historically money has first been specie (gold and silver coins), then fiat money which is paper currency and checking accounts (M1) and more recently credit money. The credit money supply is what in aggregate can be bought on credit. Two hundred years ago your ability to take your friends out to dinner depended on whether or not you had enough coins (specie) in your pocket. One hundred years ago it depended on the quantity of currency in your pocket and possibly the balance in your checking account if the restaurant would take checks.
Today it is mostly your credit card that allows you to spend. We no longer have a fiat money system. Today we have a credit money system. Just because there is still some fiat money does not negate the fact that we are on a credit money system. When we were on a basically fiat money system there was still a small amount of specie in circulation. Even today a five cent piece contains about 5 cents worth of metal, but no one would claim we are still on a specie money system.
Fiat money is easy to measure; M1 was $1.376 trillion in 2007 and was $2.535 trillion in May 2013. The effective money supply is the sum of fiat money and credit money. Credit money cannot be precisely measured. However, When the person in California whose occupation was strawberry picker and who had made $14,000 in his best year was able to get a mortgage of $740,000 with no money down and private equity could buy a company like Clear Channel in a $20 billion leveraged buyout, also with essentially no money down, the credit money supply was clearly much higher than today. A reasonable ballpark estimate of the credit money supply is that it was $70 trillion in 2007 compared to $50 trillion today.
The effective money supply is the sum of the traditional fiat money aggregates plus the credit money supply. Thus, despite the claims of Ron Paul and Rick Perry to the contrary, the effective or true money supply has fallen drastically over the last few years..”.
http://seekingalpha.com/article/1514632
My credit card doesn’ ALLOW me to spend, my income does. I could do just fine not using a credit card. Credit cards are the reason people have done into debt. People somehow managed to spend less back in the 60’s and 70’s without plastic.
Bill Maher weighs in on exactly what we’ve been discussing here about the persecuted 1% (actually the uberrich .01%) Very entertaining and expresses the issue quite well. Watch to the end and have fun.
http://www.youtube.com/watch?v=pcKMd49wDRk
How on earth did this turn into a philosophical debate about wealth? We are in Capitalist America. Get over it already! The opportunity is there for YOU if YOU WORK HARD FOR IT!
Most C-suite executives in the Fortune 500 are earning over $400K – not just the CEO.
Most of the seasoned Wall Street professionals are also earning over $400K.
The leaders of the CWA, Teamsters and some of the other larger unions are earning over $400K.
Sources: Google or any other browser…
Here is my post resubmitted with correction:
Anti-rich rhetoric only half-describes the problem/answer
scenario. I am against the ACTIONS of a rich person who
uses their wealth to oppress people. I am all FOR the
actions of rich people who use their wealth in constructive
ways. It’s all a matter of the condition of the heart.
Mankind is not naturally kind to others. It’s only through
a transformed heart, that a person becomes burdened to
intervene in the world out of a heart of sacrificial love.
I watched my father and mother help to build up a Congolese
community through their love of the people God loves in
the area of Africa they went to serve as medical missionaries.
I have also observed people with power in that same area
who spent their lives and power destroying people around
them. My father’s Congolese sister (orphaned while my
grandparents were missionaries) was attacked by her
biological uncle and the missionaries saved her life and flew
her to safety. Her uncle used his power to gratify his own
selfish pleasure with no concern about her. The tribal
governmental structure would have totally backed his
actions, it was people who had been taught to love others
by the author of love, who stepped forward to save her.
The same applies on a large scale with the individual actions
of people who use their power, wealth and influence to either
work evil or good.
Where would new wings in hospitals be without the wealthy?
They might have to be coerced to do the action, by having
a plaque in their honor posted on the wall of the hospital, but
the fact is that the hospital wouldn’t exist without the wealthy.
Some wealthy people share their wealth because they want to
help the community. We must look at individual actions.
We all recognize the good some do with their charity. Giving is what your Jesus taught his followers to do. However, because some very wealthy people donate hospital wings with their names on the outside in large letters, doesn’t mean they shouldn’t have the heaviest tax burden also (or that they’re believers). Your Jesus cited the widow who donated the mite (a meager pittance) as giving the greatest amount because that was all she had, but today, very few would consider engraving her name on a plaque. You seem to have lost that value, as many here declare that the widow’s contribution is so much less that the $300K the millionaire pays in taxes.
There is no “class warfare”, at least originating from the poor or middle class. That’s SOP for those who want to screw over others, deflecting their actions by first accusing their victims of the same offense they are perpetrating before they can be accused. It masks their actions by creating public confusion as to who is the victim and who is the perpetrator. But I was always taught to “follow the money”.
Even though the wealthy (although certainly not all) and their surrogates now claim to be the victims of class warfare, is that really true? Were it true, then the lower and middle classes would have to be substantially better off now and have made greater gains over the past few decades than the top 1%. But the FACT is that, while the American worker is 95% more efficient than he was in 1980, his pay has increased only 8%, with the very poor being even worse off. The difference went into the pockets of the 1%, those who claim to be “victims”. Therefore, if there has been class warfare. it’s been perpetrated by the 1% on the middle class and poor.
The wealthy not only had the power, wealth and influence to gain at the expense of all others, but they’ve been given even more by the Supreme Court and can now make unlimited contributions anonymously to political causes and candidates in order to legislate greater advantages of power, wealth and influence at the expense of everyone else.
Your Jesus dined with the poor, the sinners, and the disabled; those who would be today’s welfare recipients, and he was opposed by the establishment, especially the well-to-do and well connected of the age who finally crucified him. His ministry was to those who you now vilify and he opposed those who you now hold as heroic. Unfortunately, your vision of “individual actions”, with which you judge others, is greatly clouded by propaganda purchased by wealthy donors and PR firms, none of which represents those to whom your Jesus ministered. Jesus doesn’t want us to be “successful”, he wants us to be useful to others according to the talents we’ve been given.
(Note: Moneyning, Please retain for Rebecca’s benefit. It’s really not off the subject even though it’s addressing her belief system.)
I am all for the ACTIONS of a rich person who
uses their wealth to oppress people…. how does a rich person oppress someone?
Example: Scrooge and Bob Cratchit.
Scrooge was just a miser.
I thought he was a rich miser. No?
Rich is relative. He had money from being a money lender and I would think being a miser he wouldn’t have had the largest house in town, but since he loaned money, he was better off than his customers. Cratchit could have found work somewhere else. He wasn’t a slave. He could have went somewhere else. Working for the County, I see some people that think job security is more important that maximizing their skills and salary. Many could have gone and worked in the private sector, maybe making more money ,but they are tied to the idea their pension will be a miracle be all end all when they retire. If you could have found a job making $10K more per year, that is more than the pension would be paying. Maybe Cratchit just put up with Scrooge, but it sounds like he could have worked at the bank.
As I recall, Tiny Tim had a pre-existing condition so Bob Cratchit was tied to Scrooges medical insurance plan, meager as it was. Scrooge knew that and took advantage, not giving poor Bob a raise in more than a decade. Now,. with ObamaCare, Bob will be free to explore his talents as CFO with another employer, or have leverage to ask Scrooge for a generous raise. Bless you one and all!
It has been posted on here multiple times.
If the top 3% of the tax payers pay 50% of the taxes, that is a progressive tax system. I think it is actually unclear why it’s “fair” to have a progressive tax system, but that is what I was taught as an econ major. Others, like Ronald Reagan clearly advocated that people make the best choices of what to spend not the government. It is clearly not the answer to tax the rich more to solve our spending and economic problems. That much is clear.
Recently a study came out that the top 86 people in the world control more wealth than the bottom 50% of the world. It certainly was an eye grabber and many prominent people believed that something is wrong with that picture. But is it?
Most of these super wealthy have done transformational things in this world. Does anyone think that Bill Gates didnt add $100 billion in efficiency to the world. Warren Buffett employs millions of people at his companies. And, in the end, they will give most of their money to charity or it will go to the government in inheritance taxes. And the Gates Foundation is focusing on the poorest people in Africa and working to eliminate malaria. So what is the rub here? There are more recent billionaires like Zuckerman. Has Facebook changed the world as much as Microsoft, probably not. In the end Zuckerman will probably give most of his wealth away too, and he will pay billions in taxes. It is too soon to tell as Facebook only recently went public and most of his enormous net worth is tied up in Facebook stock. He probably wants to and needs to keep his investment in the company.
I’m sorry, but I just don’t buy the anti-rich let’s tax sentiment.
This might be a technically, but Buffet owns stakes in other companies. He has no hiring/firing capability. He doesn’t control the companies. BH is basically an S&P index fund. Facebook has made social networking a big thing. Will it be around forever? Probably not, but neither were horse and buggies. VCRs were big once and so were 8 Track tapes. Nothing lasts forever. Bill Gates had a bigger impact than Warren Buffett.
Bill Gates was a very smart guy but was originally a greedy predator who happened to be in the right place at the right time. He found out that IBM was looking for an operating system for its new personal computer to compete with Apple. He also happened to know some genius who invented an operating system, but didn’t know anyone was looking for one. So, instead of cluing the guy in, Bill bought the OS for $50,000, called it PC DOS and sold it to IBM for hundreds of millions. As luck would have it, IBM never required exclusive use in the sale, so our friend Bill changed his copy’s name to MS DOS and collected billions from the sale of clones.
As he built MicroSoft, his advantage in capital meant he cold take software developed elsewhere away from those companies by hook or crook. He was great at figuring out ways to steal other peoples’ ideas and marketing efforts. Netscape was a great example. He was not a nice guy, and all of this development would have happened anyway regardless of Bill Gates.
When court battles started going bad and he was exposed for the turd he was, he hired a PR firm who told him that he needed to get into charity. He’s there in a big way now and has revived his image big time thanks also to his wife. I do believe he’s change in real ways also.Like many great fortunes however, it started with very unseemly behavior and a whole lot of luck.
Having the richest 3% pay 75% of Federal taxes and the bottom 97% pay only 25% during the 1950s, 60s and 70s allowed the economy to hum along nicely without any severe recessions or depressions. When the rich used their political power to shift the tax burden to the middle class, they robbed the middle class of much of their purchasing power and caused the severe recession that began in 2007. It is not a matter of fairness but rather efficiency to have a progressive income tax and tax all income rather the mostly just wages. BTW this is a world-wide phenomenon.
“…The enormous shift in tax policy favoring the rich has been a world-wide phenomena going on for many years. After the Socialist party candidate François Hollande won the presidential election, France enacted tax laws that gave France the most progressive tax system among the 20 largest industrial nations. However, the tax systems have become so much less progressive in the past decades, that if the tax code that France has today were applied to France in 1969, France would have had the most regressive tax system among the 20 countries in 1969.
A major component of the shift of the tax burden from the rich onto the middle class involves the corporate income tax , whose incidence falls entirely on the owners of corporations. These were 4% of GDP in 1969 and are now less than 1%. ..”
http://seekingalpha.com/article/1543642
“If the top 3% of the tax payers pay 50% of the taxes, that is a progressive tax system.”
Not if the top 3% have 75% of the income. Do the math.
Who cares who has the income. It’s about paying taxes. Poor people have the same access to a basic education as the rest of us. Dell and Gates never finished college. You don’t need college to come up with an idea the rest of the world is willing to pay for. The rich will always be rich and will be able to spend less in order to pay the increase in taxes. Why should the rich pay 75% of the taxes? When is it too much? The rich use the least in gov’t services the poor use.
Jefferson thought the rich should pay ALL of the taxes (then called tariffs). Even Adam Smith, who wrote the book on Capitalism, believed in progressive taxation with the rich paying a greater proportion of their incomes than the middle class. It’s simply the way Americans have overwhelmingly believed fair.
“The rich alone use imported articles, and on these alone the whole taxes of the General Government are levied… Our revenues liberated by the discharge of the public debt, and its surplus applied to canals, roads, schools, etc., the farmer will see his government supported, his children educated, and the face of his country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.” –Thomas Jefferson to Thaddeus Kosciusko, 1811.
Wrong. Top 1@ pay 33% of all taxes and the top 5% pay pay 75% of all taxes. Yet all the WHINING comes from the jealous losers who think it all should be handed to them.
You missed the point entirely. Lance didn’t say what percentage the top 1% now pay. He’s simply making the point that having a progressive tax system where the top marginal rate for the wealthy is much higher than today, doesn’t depress the economy. As verification, he points to the economies of the 50s, 60s and 70s.
Since you don’t have the capacity to understand why most Americans have advocated a progressive tax system throughout history, you attribute their motives to being “jealous losers”. Then you also must lump into that category the author of our Constitution, Madison; author of the Declaration of Independence, Jefferson; author of the first publication on capitalism, Adam Smith; along with most other great Americans including Lincoln and Teddy Roosevelt. That’s right Joe. They all believed the wealthy should progressively pay a greater portion of their incomes in taxes.
By making the tax rates on the income that the rich receive such as dividends, carried interest, capital gains and inheritances much lower than the tax rate on wages by the use of their political power and ownership of the media, the rich have gravely weakened the free-market capitalism that provides the prosperity, since the concentration of wealth vastly exaggerates the business cycle
“..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
So, am I to understand that I can be attacked
by man of reason for using words he objects to
in a public venue, but then I cannot reply to
his attack? I cannot refute the obvious bias
about ideas that he states over and over
and which are untrue? Your censorship of
ideas that are relevant to who earns more
than a certain amount, should apply to his
attacks on me, not just to me. Please get him
to stop attacking my analysis of this whole
discussion if you are going to censor me.
You are not playing fair with the censorship.
But that is my whole point. The ideology of
communism has always hated Christ Jesus
and the liberty of those who benefit from the
labor of their own hands, and those who
choose to labor with them. While mouthing
“fairness” as the goal, there is no tolerance
for any other viewpoint.
Where is my answer to man of reason? I know it
was read because he asked about Jessica. Not
allowing my answers to post is censorship. I have
posted other answers to man of reason which
have not posted either. Definitions I have
provided to the words objected to, are relevant
to the discussion on this thread. You claim to
value fairness, but if you remove valid communications
that add to the discussion after man of reason
attacks me, then you are not fair in your censorship.
I’m sorry your post was deleted because my response to it would certainly make more sense were it still there. But I do understand that Moneyning is allowing only those posts which address the issue of who are the people who will be affected by the tax increase on incomes over $400,000 and why that increase is either justified or not. It’s actually been a great discussion because it hasn’t been allowed to go off on silly tangents. For example, I did read about Rebecca and the heartbreak her parents feel about losing custody to the hospital, but that has nothing to do with tax increases and the economy, nor about partisan propaganda distorting facts which affects the way we support such measures.
I’m sure that if you address the subject, your posts will remain.
I think MOR meant Jessica, not Rebecca.
Awhile back, I mentioned that in the state of Washington, where there is no state income tax, the bottom fifth of income earners pay on average 17.8% of their meager incomes to state and local taxes. The top 1% pays less than 3%. That’s called “regressive taxation”, and was neither envisioned by the founding fathers, nor believed fair by the vast majority of Americans. But money buys influence, and all governments drift in the direction of giving advantage to those who are most influential, the most wealthy. That requires periodic adjustments and the establishment of the progressive income tax was one such adjustment. Without the income tax, (or with a “flat tax”) the overall tax burden would fall most heavily on the poor and middle class while the wealthy would accumulate a greater and greater portion of capital and influence, much like a game of Monopoly where the winner ends up with everything while everyone else loses everything. Is that really what you want?
Do some politicians pander to their constituents by bringing home the largess from Washington D.C. to spread among the home folks? You bet. Most all do to some extent. That’s not corrupt unless it rises to the level of “tyranny of the majority”, and then we have checks and balances through the court system to protect against that. What is corrupt is the injection of unlimited amounts of money into our political system, especially when done without revealing the source. Free speech? Hardly! Such money merely drowns out the voices and influence of the average citizen, making him irrelevant in “self government”, also known as democracy. It kills democracy.
Money buys propaganda. And we know that Madison Avenue can sell just about anything with money. They play upon our emotions rather than our God given ability to reason in order to sell products or candidates. They convince many to side against their own best interests by using fear and hate rather than reasoned civil discourse in an effort to decide our course of action. They use words like Socialism, Communism, Ponzi schemes, Marxism, Godless, death tax, redistribution of wealth, and on and on. These words are meant to evoke fear and anger and when you’re angry, your ability to reason diminishes and your frontal lobe shrivels to the point where you will gladly screw over yourself and those you love, blinded by your emotions. That’s exactly what they are counting on. You see Rebecca, they are the one percent, and the only way they can advance their continued accumulation of wealth at your expense is to convince you that to do otherwise is immoral, a sin. Obviously, it works.
Texas, Florida, Nevada and Wyoming dont’ have a state income tax as well. While our property taxes are higher, I am OK with that because you CHOOSE what type of dwelling to live in. I want my income as high as possible without it being taxed by a state.
Of course you have to live somewhere and even if you rent, the property taxes must get paid. That represents a regressive tax. This can be made worse by property owners who do little to minimize property taxes since any increase is just passed on the the renters (up to the point of inability to pay, at which point the state will come in and help the owner evict the renter for non-payment.)
Property taxes and sales tax are regressive taxes, period. That might not have been the original intention of such taxes, but is, in effect, exactly how they are best described.
That’s why they call it “tax” Proto. If you gave it voluntarily, it would be called “Charity”. Oh, and that small group of people you talk about includes every citizen so governed. That’s why they call it “self rule” aka “democracy”.
Can anyone answer this question? What gives this small group of individuals i.e the state the right to involuntarily take money and resources that they didn’t earn through voluntary interactions upon threats of imprisonment?
Without a progressive graduated income tax, capitalism would fail as depressions would get increasingly worse.
“..Depressions occur after investment bubbles burst. In free-market capitalism, capital generates income for the owners of the capital which in turn is used to create additional capital. This is very good. Sometimes, it can be actually too good. As capital continues to accumulate, its owners find it more and more difficult to deploy it efficiently. The business sector generally must interact with the household sector by selling goods and services or lending to them. When capital accumulates too rapidly, the productive capacity of the business sector can outpace the ability of the household sector to absorb the increasing production.
The capitalists, or if you prefer, job creators use their increasing wealth and income to reinvest, thus increasing the productive capacity of the business they own. They also lend their accumulated wealth to other businesses as well as other entities after they have exhausted opportunities within the business they own. As they seek to deploy ever more capital, excess factories, housing and shopping centers are built and more and more dubious loans are made. This is overinvestment. As one banker described the events leading up to 2008 – First the banks lent all they could to those who could pay them back and then they started to lend to those could not pay them back. As cash poured into banks in ever increasing amounts, caution was thrown to the wind. For a while consumers can use credit to buy more goods and services than their incomes can sustain. Ultimately, the overinvestment results in a financial crisis that causes unemployment, reductions in factory utilization and bankruptcies all of which reduce the value of investments.
If the economy was suffering from accumulated chronic underinvestment, shifting income from the non-rich to the rich would make sense. Underinvestment would mean there was a shortage of shopping centers, hotels, housing and factories were operating at 100% of capacity but still not able to produce as many cars and other goods as people needed. It might not seem fair, but the quickest way to build up capital is to take income away from the middle class who have a high propensity to consume and give to the rich who have a propensity to save (and invest). Except for periods in the 1950s and 1960s and possibly the 1990s when tax rates on the rich just happened to be high enough to prevent overinvestment, the economy has generally suffered from periodic overinvestment cycles.
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
I disagree that abundance produces depressions.
There’s no way to prove this thesis. It’s purely
conjecture that sounds like it was dreamed up
by a marxist professor at some college I am
paying for with my taxes, but who has never
had a real life job. I have seen much evidence over
my lifetime, though, that governments cause
misery in countries. The latest example is the
dictator thrown out by Ukraine, who had
accumulated to himself all sorts of decadent
luxury his people could not dream of. Govt
is the only entity that can extract from everybody
forcibly, and which, in America has been used
to drive many people out of business. Govt
policy in OR has just closed another lumber
mill with a loss of 85 jobs at the lumber mill
and then all the jobs that supported the mill.
We are not being allowed to use our resources.
Whole sectors of industry have been closed,
Businesses from other countries have gotten
tax breaks for a period, then move away when
the introduction period is over. Our own people
are not given tax breaks–except Nike, which
said it was going to move away–so the governor
called a special session and they granted a
waiver to the tax. In doing this, the Democrats
have retained a very large business and their
favorite leftist businessman, but driven
many, many smaller businesses out of business
with their policies–especially targeting conservatives.
There is increasingly a bubble forming, but I
really doubt that it is for the reason stated above,
which is not able to be proven.
I do know that before we went down this road
of mammoth govt expansion America had a
large and growing middle class, lots of business
activity, and we were making the rest of the world
rich along with us. Now we are getting ready to
collapse the world with our banana-republic
printing of money and other manipulations
by the govt and the people they are in collusion
with.
You can produce 25M Iphones, If only 1M people buy them, you haven’t really created anything. Having the capacity to ramp up production based on demand without having to get loans or bank approval is a good reason to keep liquid capital on hand.
I just had to interject here once again….. There is actually an economic definition of “depression” – and the 2008-2009 downturn (not sure why you quote 2007) did NOT qualify under any of the metrics that one would use. To compare it to 1929 is just silly. There are really very few parallels between the two – both statistically and anecdotally – and the regulatory mechanisms to protect the people dwarf those in 1929. In fact, most of them were created after the Great Depression.
Throwing the word “depression” around is fun for politics and stirs up emotion – but it just isn’t accurate.
(Just for a point of reference….I do work in this field. Not blindly quoting Wikipedia or third party political slanted articles.)
Thank you for the sane comment. I hate the over hyperbole of depressions and people acting like our economy will turn into Argentina or Zimbabwe.
proto – Our government was not formed on the idea of no taxation, it was founded on the idea of no taxation without representation. How do you expect our country to continue to exist without taxation of some sort? That would mean not just loss of social safetynets, but also loss of military.
When I was at Wharton, I interned at the Dept of Labor in DC. One day early on I went wandering about and happened upon a small office with a supervisor and a half dozen subordinates. I was taken aback when I learned their sole purpose was to ensure that the minimum wage was still paid out in the event of a national emergency (e.g. nuclear war, Cat 5 hurricane, plague of locusts, etc.). Multiply this inane enterprise by 1,000,000 or so and you get an idea of the waste of tax dollars in DC as well as places like Sacramento and Albany.
Of course, any time you mention budget cuts, the Left tries to sell a narrative of starving children and elderly, rather than some slacker bureaucrat having to go work in the private sector and actually work like the rest of us…
tralfaz – You point to the left, but the right only tries to cut safety nets while increasing spending on defense. That’s just insane! We spend as much on defense as the rest of the world combined. That’s not maintainable and it shouldn’t be needed. It’s almost as if they are building up to contain people within our boarders after the eventual uprising caused by a greedy few at the top.
I make over $400K. I pay lots of taxes and don’t feel rich. Except that I’ve had the same job for 25+ yrs and only have to work 32 wks a year for it.
Am I a bad person?
The only people who claim that you are a “victim” Charlie, are those who want to cut government services and safety nets with the intent of cutting taxes for the poor ol’ wealthy “victims” (aka, themselves). It’s a ploy, along with their claim of “class warfare” to enlist your support by putting you on the defensive. No one believes you’re a bad person for being in the 1% and lawfully avoiding taxes. The only argument here is whether the progressive (or regressive) tax codes are fair to all.
Again…. We have progressive taxes already. What I think you mean is that “The only argument here is whether the current progressive tax system is fair enough to all”. Correct?
I’m still not sure why more people don’t realize that the problem lies in the spending portion of our budget. Just take a peek at Obama’s proposed budget he just released last week. Just swiping the public credit card over and over and over and over…..
Peter – That’s the nail on the head right there. The money has been spent, the government needs to somehow get the money to pay for it.
We can’t “starve the beast”, trickle-down theory doesn’t work, the deficit is too high to grow out of it, inflating our way out would be very painful, and we can’t spend our way out of it either!
BOTH parties have put us where we are. They all have their special interests they want to protect, so they give a little to another’s pet project to get some for theirs and in the end everyone is getting something and our debt grows.
No one has the fortitude to do what is needed, cut defense, cut entitlements, cut special tax breaks, etc.
We need to take a true, stark look at where the money is going and how we can cut back while doing the least amount of harm to the country, while also considering raising taxes on some/most to cover our expenses. We need to leave no stone unturned, a little here and a little there will make all the difference in the world without harming any one group too much.
AMEN JTM. Everybody wants to be a popular politician. The minute we propose cutting the military, the opposing politician sees an opportunity and starts telling us how we won’t be safe anymore (see: McCain). The minute we want to cut education funding, the opposition sees an opportunity and says that we don’t care about our schools (see: Obama). The point is that EVERYTHING needs to be cut.
Funny thing is I work in the DC area and most Federal employees would even agree with this – to their own deteriment.
Let’s make this simple, Charlie: if you believe a poor person should lose an unemployment benefit or other safety net rather than see yourself pay a few cents of every taxable dollar over $400k in higher taxes, then YES, I consider you a bad person. If not, then no, you’re fine.
Where do you draw the line? So today its a “few more cents” by your accounting. Every few years, the govt comes looking for “a few more cents” from Charlie. But not $1 more from JZ
Charlie cant pay for everyone to stay unemployed forever. I have dozens of friends in NYC metro unemployed for *years* and I can tell you that for most of the long termers the blame is LARGELY theirs at this point.
There will never be enough Charlies to allow fast food workers to live in downtown Seattle or allow a single mother of 5 to stay home full time.
Meanhwile, multimillionaire moguls and billionaires hire fewer and fewer people, work the Charlies harder and harder and have had tax *reductions* factoring inflation in since their income is all unearned cal gains and deferred/reinvested
marc — I find it very interesting that the people who pay the least in federal taxes both in percentage terms, and in terms of actual dollars contributed, are the ones who complain the loudest about how unfair the system is. These are also the same people who benefit the most when you look at what they receive in federal government benefits, versus what they have contributed to the system.
You would think that the people who are paying the most and benefiting the least, i.e. the high earners, who would be the ones to complain. But it’s exactly the opposite. It’s people who pay the least and who benefit the most who are complaining the loudest.
I just find that very interesting.
My issue is the total waste and fraud that goes on in the gov’t. If the gov’t was more efficient I wouldn’t have as much of an issue. Hundreds of billions of dollars are wasted each year. Many Federal Programs could be done on a more local level. We don’t need a Federal Education program. Let the states deal with it.
JB – Those points are valid, but they mostly focus on issues that effect the lower classes. What about the total waste and fraud that happens through loopholes, fraud, and government giveaways to the wealthy and corporations who have the ability to pay for “creative” accounts and lobbyists?
So companies that are paying accountants and lobbyists are job creators. What happens when all taxes are fair? Those jobs go away. If you have a company and you can hire someone and pay them $100,000 to save you a potential $1,000,000, wouldn’t you do that? There aren’t illegal loopholes. If the IRS wants to fix the loopholes, then they can. Yes, they write the code to appease tons of different industries. Hate the IRS, not the companies that go by the code and use it to their advantage.
JB – You mentioned fraud in your first post. What about the those corporations and wealthy that defraud the government? One large fraudster makes up for many of the socalled welfare queens. People at all levels of wealth go to extreme means to keep money in their hands.
As for the IRS, I would like the tax code junked and the money wasted on finding/exploiting loopholes could be better spent making better products or given to shareholders.
how many wealthy go out and actually defraud the gov’t? Plenty of middle class defraud the gov’t as well. Plenty of small business owners declare expenses fraudulently. Name some companies instead of painting them all with some broad brush. CEOs are held responsible for fraudulent books. That is why they have outside auditors. You think every company and rich guy is screwing the gov’t. That is your issue, not mine.
JB – I couldn’t agree more, there are plenty of people cheating the government, regardless of wealth. I’m no more painting with a broad stroke than you are. Which goes back to my original point that it’s not just the poor or lower middle class defrauding the government and causing problems.
I don’t think every wealthy person or corporation is cheating the government, but there are plenty who do, just like the not so wealthy. But, when the wealthy do defraud, they do it for much larger amounts. The biggest bankruptcies in history are companies that defrauded the government and all of us.
Bankruptcy and Fraud are two different things.
JB – Agreed, very much that bankruptcy and fraud are different things. If you re-read, I never said fraud = bankruptcy. HUGE fraud led to largest bankruptcies in history. That doesn’t even cover the Ponzi-schemers such Madoff that blatantly took from anyone who would give them money (from many levels of wealth and charities), all while being “watched” by the investment banks that profited from them.
JTM is pointing to fraud that, when discovered, leads to the bankruptcy of large institutions. So, yes, bankruptcy and fraud are different, but these can be connected in terms of causation. And yes, large companies do far more damage than the “welfare queens.”
Specific examples of companies that JB requested range from procurement fraud by defense/military contractors to big pharma to Medicare/Medicaid billing fraud — all referred to as false claims usually for services not rendered to the government. In 2012 alone, the Dept of Justice recovered nearly $5 billion in fraudulently claimed billings. In recent years, major settlements and fines against large companies committing fraud against the government have been
Johnson & Johnson, $1.273 billion
United Technologies Corp. (UTC), $664 million
GlaxoSmithKline, $750 million
Allergan, $600 million
AstraZeneca, $520 million
Novartis Pharmaceuticals, $422.5 million
… the list goes on …
I don’t think any of us on here are “pro-fraud”, whether it be taking advantage of entitlement programs or abuse of “loopholes” by the wealthy.
Unless you are willing to start with the defense budget, this position is meaningless.
There you go. Succinct and true. Call it the bottom line; the extent to which the focus always gets shifted from this is the extent of delusion. I think I said something to that effect months ago here. People would rather forever argue their ideologies or a tax rate change of a few percent, than face the all-time champion welfare queens, exponentially so: our trillion $/yr military industry (which reported it “lost” $2.3 trillion on 9/10/01) and the source of [the skimming of] all the money in all the pockets of everyone here… all the money in the world… The banks. An industry given trillion $ bailouts (before the $200 billion S&L bailouts where even paid off, and while being caught laundering – but of course not punished for – another $200 billion for drug cartels etc) while collecting record profits in the midst of the global meltdown and depression it caused.
“The issue which has swept down the centuries and will have to be fought sooner or later is the people vs the banks”
Bottom line; the extent to which the focus always gets shifted from this is the extent of delusion. People would rather forever argue their ideologies or a tax rate change of a few percent, than face the all-time champion welfare queens, exponentially so: our trillion $/yr military industry (which reported it “lost” $2.3 trillion on 9/10/01) and the source of [the skimming of] all the money in all the pockets of everyone here… all the money in the world… The banks. An industry given trillion $ bailouts (before the $200 billion S&L bailouts where even paid off, and while being caught laundering – but of course not punished for – another $200 billion for drug cartels etc) while collecting record profits in the midst of the global meltdown and depression it caused.
“The issue which has swept down the centuries and will have to be fought sooner or later is the people vs the banks”
Very astute observation! I was trying to put my finger on
just that thought, and you nailed it. Why is it that those
who are the target of class-envy don’t seem to grasp
that it is envy and greed that drives this whole discussion
and just continue to discuss the details of tax law
as though it was some academic study?
I complain a lot. By most measures, I am one who earns a lot (wife and I earn $200k/year ) and we pay a lot in taxes (a bit over $50k plus state taxes and local taxes my employers share of FICA so closer to $78k). But wealthy, by no means. I believe higher earners should pay higher tax rates, not just higher taxes.
I do not understand why anyone who earns more and has the benefit of living in the USA where he is safe, lives in a very nice place, especially when compared to over 90% of the worlds population and is surrounded by a populace that is educated, civil and tolerant, should complain at paying higher taxes.
On the flip side, why should some one who is struggling to pay for food, shelter, etc. pay much at all?
I am a pretty smart guy with a Ph.D. who works hard for my success, but I have many relatives who work no less hard than I do, but simply do not have the talents I do and cannot command anything close to the same salary. I am lucky, I benefit from a well-developed economy that values my contributions (if I were say, a ditch-digger with no other talent, I would not be the best ditch-digger, nor one who made a lot of money compared to other ditch-diggers, I would still work hard, but I would have a lot less money). I do not think you can blame that much of the wealth disparity on “work ethic”, despite what is said by politicians in an effort to justify the present tax system.
Everyone fortunate enough to live in the USA is lucky, none more so than those who make much more money than average. They should pay taxes at a higher real rate for the privilege of getting to enjoy that good fortune. Anyone earning double should pay more than double in taxes (ie a higher rate, which is not now the case in fact.) I say this despite being in the not-so-sweet spot of paying payroll taxes on nearly all my income and being in the salary range too low to be rich and too high to be poor so wife and I pay at higher rate than either really rich or poor.
So by that argument, you should not complain if we raise your taxes- say..by another 20%? 30%? 50%? After all, you have the privilege of living in the USA! And by golly, it’s this government that you owe everything to! Not YOUR hard work. Not your sacrifices. It’s the government! The government did all of this for you!
Your argument reeks.
Yes. Your government is the reason you dont need to bribe a mobster to not do harm to your business. Your government is the reason you dont need to grease a bunch of corrupt government employees to not forge fictious charges against you or your business. Your government does a lot to manage the economy, police your customers, prevent corruption, and a variety of other crimes as well as set and moderate many of the terms of our free market system.
Think its all about your hard work, great! Go make $400K in lawless or corrupt places like Pakistan, Russia or heck, stay close to home and try it in Mexico. I hear the taxes are much lower. Good luck! Dont get shot.
This perfectly illustrates the differences between the two major political parties. Without knowing either Dennis or Jack, it’s perfectly clear which one is the Democrat and which one is the Republican. One thinks about the larger community and is humble about his accomplishments and acknowledges that his success is partially due to good luck, while the other is totally selfish and demonstrates an arrogance that his success, gosh darn it, is entirely of his own doing.
Great comment Dennis and completely agree. I am in roughly the same demographic as you.
I do think, though, that I couldn’t afford to pay much *more* than I currently do (nearly 50% of my income) without cutting back. Thats a delicate game for the fed because if we (our demographic) cut back the consumer spending falls.
My issue is that in reality, the $100-$500k earners, seen as “rich” by anyone making $1 less, carry a massive tax burden.
Once you are into the 7 figure wage bracket your income is largely unearned and taxed at the still ridiculously low cap gains rate.
I always say that a big cultural problem in the US is that people hate the neighbor with the new BMW who may simply be a better saver, or be over leveraged, or work a but harder, or be a bit smarter, or yes, a bit more lucky, but *certainly* pays *more* tax while sending his kids to the same school. Meanhwile they look with awe at the guy in the chauffeur driven Bentley heading for the private jet who *almost certainly* pays *proportionately less* tax.
Passing increases on the unprotected “5%” is effortless. Passing cap gains increases that impact our bosses (the 1% owner/executives) is nearly impossible.
I agree that we are beyond fortunate to be here in the US and possessed of the luck and talent to do fairly well and we are also able to work hard, adapt and sacrifice to drive a career. The super wealthy, the TRULY wealthy are that much MORE fortunate though, yet are never expected to pay.
How much should a rich person pay? It is great to talk percentages, but a person who earns $1 mln is probably paying $350k in taxes. A person who earns $10 mln (and there aren’t many people who earn either amount) probably pays $3-4 mln. They get the same government services as everyone else yet in the eyes of people who pay lower taxes they never pay enough.
If someone makes $300,000/year in investments they do pay lower tax. But, when they earned the money in the first place, they likely paid 30-40% tax on what they earned. Then they did the prudent thing and invested and get taxed again. But apparently what they pay isn’t enough for some people.
In the end, most wealthy people pay enormous taxes on their income and investments and their heirs pay large inheritance taxes. These same wealthy people generally give large portions of their wealth to charity. Look at Bill Gates and Warren Buffett. In the end most of the wealth they create goes to others including you and me. What is the beef here?
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.
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 increases in 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 on 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
Excellent article. I learned much. Your definition of depression makes very good sense and puts this one in much better perspective. Thanks Professor.
This article completely fails to account for the increases in tax receipts that resulted from the Reagan tax cuts and the Bush tax cuts. It also fails to account for the Obama tax raises that have resulted in a stagnant economy and record numbers out of the job force. It also fails to account for the Obama policy of sky rocketing debt caused by unshackled, skyrocketing government give-away programs. It also fails to mention that the housing market bubble caused the 2007 depression, and the housing market bubble primarily arose because of Barney Frank and his Democrat cronies creating an artificial housing market for high risk home buyers via Fannie, Freddie, greedy Wall Street bankers, and duped Wall Street investors. The article also completely fails to take into account that the foundation of this country was ‘equal opportunity’ not ‘equal income.’ The only people that talk in favor of ‘equal income’ are socialists, and history demonstrates the economic and social failures of socialism. Not only does socialism fail to account for the prime economic motivator of risk/reward, socialism does not have enough information to make an efficient market. Clearly a more progressively confiscatory tax scheme seeks redistribution of wealth and diverting more power from the individual to the government, i.e. socialism. Thus, the author of the article is promoting more socialism by attrition, which, of course, will only deliver more misery.
It was an article about who makes 400K, not about taxes.
That’s because it’s an objective viewpoint from an economist, not some politically motivated bullshit created for campaign talking points. I have never heard of any nonpartisan reputable economist blame Barney Frank or Barack Obama for this depression, and the article doesn’t advocate any political ideologies such as equal opportunities, which are quite separate from the economic math. Stop regurgitating the talking points you hear from politicians and their surrogates Kent, and start using your noodle to reason.
Oh, and tax receipts never got back to the pre bush tax cut levels due to an improved economy. As a matter of fact, we ended up in depression.
We did not end up in a depression. It was a recession….stop exaggerating.
You didn’t read Lance’s article, did you JB? It’s well worth the read
http://seekingalpha.com/article/1543642
JB….both bear markets in the 2000’s were under George W’s watch. Yet you find a way to blame Obama and the Democrats. 2008 was the worst bear market since 1929…which was a depression.
“..Many who have been vociferous in criticizing income and wealth inequality such as Paul Krugman and Joseph Stiglitz have not pointed to the increase income inequality as the cause of the depression. Those on the left who might be the natural proponents of a more progressive tax system have not connected the dots. They have a different theory as to the cause of the depression. They are adherents to the regulatory fallacy, the belief that the depression was caused by insufficient regulation.
To determine if someone is an adherent of the regulatory fallacy ask this question: Do you believe that given the degree that the tax burden was shifted from the rich to the middle class, was there any type of regulatory policy which would have prevented the financial crisis? If they answer yes, they are adherents to the regulatory fallacy
In Paul Krugman’s 2012 book “End this Depression Now!” he comes heartbreakingly close to connecting the dots between the reduction in the progressivity of the tax system and the cycle of overinvestment that caused the depression. He states that the book is much less concerned with the cause of the depression than what should be done to end it. His prescription is fiscal stimulus focused on the spending side that has even less of a chance of being enacted than the tax cuts suggested above.
Those on the right have their own version of the regulatory fallacy. They blame the government sponsored enterprises Federal National Mortgage Association Fannie Mae (FNMA) and Federal Home Loan Mortgage Corp. (FMCC) and the Community Reinvestment Act. According to their theory, regulation such as the Community Reinvestment Act resulted in a vast increase in subprime mortgage lending that caused the financial crisis. Possibly the non-bank private entities that originated and securitized the most of the subprime loans mistakenly thought the Community Reinvestment Act applied to them.
A slight variation on the regulatory fallacy is the financial innovation fallacy. As with the regulatory fallacy, both left and right versions, there is a miniscule grain of truth to it. Financial innovations such as credit default swaps and regulatory changes like repeal of the Glass-Steagall Act slightly affected the exact timing of the onset of the depression. However, once the tax burden was shifted from the rich to the middle class it was just a matter of time before middle-class consumers became unable to absorb the increased production and service the debt that accompanied the overinvestment. Different regulatory policies might have shifted the bubble more towards commercial real estate rather than residential real estate or visa versa but the outcome would have been similar.
Blaming regulatory policies and financial innovation for the depression is like blaming the armaments manufactures and soldiers for World War II. In order for the war to occur there had to some weapons made and some soldiers to fight. If those particular armaments manufactures and soldiers were not available, others would have taken their place.
Equally unhelpful in terms of addressing the income and wealth inequality which results in the overinvestment cycle that caused the depression are those who emphasize various non-tax factors. Issues such a globalization, free trade, unionization, minimum wage laws, problems with our education system and infrastructure can increase the income and wealth inequality. However, these are extremely minor when compared to the shift of the tax burden from the rich to the middle class. It is the compounding year after year of the effect of the shift away from taxes on capital income such as dividends over time as the rich get proverbially richer which is the prime generator of inequality…”
http://seekingalpha.com/article/1543642
Just because someone calls it a depression doesn’t make it one. We were not in a depression. It was a bad recession, but it could have been prevented if people hadn’t been so greedy in buying houses and banks giving loans to every breathing person.
An old economics joke is “A recession is when you are out of work. A depression is when I am out of work.” However, the differences between a recession and a depression are not simply how many people are unemployed. It is important for investors to recognize and understand the significance of the differences between recessions and depressions
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.
If we are in a recession, economic activity will fully resume just from the monetary and fiscal stimulus that has already occurred. Ultimately interest rates will rise. However, if we are in a depression, even one with safety-net benefits that mitigate the hardships, interest rates will remain relatively low for decades as was the case in Japan and the USA of the 1930s, where only World War II ended the depression. ..”
http://seekingalpha.com/article/1543642
There is a good discussion on this article. Love to hear more on this of taxation. Taxation plays a critical role on how investments are made. Earned income should be taxed at a lower rate than investments. Check out http://www.outofozeconomics.weebly.com
That little one sided rant didn’t mention that the housing bubble burst at the end of 2006 and the depression was in 2008, after the still hot economy was faced with gasoline prices at nearly $5.00 a gallon, leaving few industries with a viable business plan.
Oops, wanted to post my reply after Kent’s post.
Excellent response. I learnt a lot from it. It also fits other hyper-inflationary periods when the influential rich and the churches sat on enormous wealth that the state was too afraid to tax, forcing the government to print money to keep the country moving. Today, it is joined by corporations and major nonprofit institutions that cry poverty and keep piling up a dead bank balances that fails to build anything, circulate or create opportunities. A flat tax on all returns, whether earned or invested with no deductions may be a way to go. If not, a progressive tax rate that also locks a floor is a good alternative. No one is asking for the actual principal, only the earnings.
Guess nobody wanted to answer Marc’s question…. 🙂
Those who are able to pay more, should pay more. They are the ones who benefit most from our system of government.
Why should the wealthy pay a MUCH lower percentage than many in the middle class? Many wealthy pay an effective rate not much higher than the employment tax rate the rest of us pay (with income taxes on top of that!).
Why should those that benefit greatly by having a healthy, able to spend on things other than necessities, middle class, not want the middle class to be as financially able as possible? Over time, a healthy middle class can create many more jobs than a handful of wealthy people or large businesses getting a tax break.
The rich already pay more. How much more is open to debate. Everyone complains about the rich person influence in DC, yet it’s not like the rich are getting the benefit of food stamps, section 8 housing or earned income credit. the wealthy pay more than the middle class. Why do think there is a top tax bracket of 39%? The middle class aren’t paying 39%.
jb – Add in the employment taxes of just over 15% and the middle class can easily pay 43%! After ~$128k/year those taxes are cut drastically.
You don’t think the wealthy benefit from aid programs? They benefit greatly. What about the many large apartment complexes that cater to them? What about all the businesses, big and small, that they make purchases from? What about the businesses that don’t pay livable wages? They benefit from the aid programs making up the difference for their workers.
Point being, things are not as black and white as you are trying to make them out to be. You know the talking points but no substance.
Ok, but you just can’t take a person making 30K and magically have them make 80K no matter how much the CEO makes. It just doesn’t work like that. If you want teachers to make $200K a year, your taxes will go up and the education your kids get won’t change one bit. Large apt. complexes get money from the Federal gov’t. Your tax dollars. If it is so easy to make millions from owning a large apt complex, plenty of people would be in real estate management. It isn’t that easy and there aren’t thousand of complexes like this. the rents aren’t high, but expenses to maintain might be. Your wage is determined by your skills. WalMart cashiers will never be paid $40K a year. Neither will Taco Bell workers. There will always be low paid jobs. The 1% aren’t stopping the 99% from getting an education and learning a new skill. God knows there are hundreds of gov’t programs that ever get used to improve your skills. Bill Gates isn’t obligate to pay his AP clerk $1,000,000 a year just because he has millions.
JB – You are going to unfair extremes. I don’t believe it’s easy to make millions from a large apt complex and didn’t say that, but those landlords do benefit from these programs (as do smaller landlords such as myself).
I don’t believe everyone should have income greater than their abilities. But I do believe having people able to by your products is a necessity for all to thrive. Employers have the upperhand currently in wages, but that doesn’t mean they should pay as little as possible. Also, education only goes so far, there are only so many good paying jobs and more qualified workers would reduce those wages. The low wage jobs are things that need to be done, why shouldn’t they pay a reasonable wage? And, if the employers prefer we subsidize their workers through government programs, why shouldn’t they pay taxes towards those subsidies?
We may not like it, but we are all slotted into a salary based on the capital markets. If you are one of the 1% of anything , you get paid the most. Actors, Athletes, Doctors, Lawyers, CEO, Salemen. If you want affordable housing, then that complex gets money from the gov’t. Not every complex is low income. These same people are most likely getting food stamps. Again, not everyone does. If you think your salary is too low, go find a job that pays more. That is the American way. Be the best taxi driver and out hustle everyone else. Build a clientele that can depend on you. If you are a janitor, your slot in life is pretty limited until you have the ability to start your own firm or have the ability to lead the other workers as management. Small business owners have zero obligation to spend X% of profits on salaries. Large corporations set budgets and they have little reason to overpay the accounting clerk for basically data entry. Computer programmers have more skills than the admin assistant answering the phone. The exec admin makes more because that person has more responsibility. The more responsibility the job has, the more you make. That is the system weather you like it or not. Jobs that are based on the taxpayer, ie Police, teachers etc, can’t be paid more without increasing taxes. Paying someone more doesn’t automatically attract better performers, but those that are in the profession should be able to be able to get bonuses based on certain metrics. It isn’t easy to measure all metrics, but I think most of us know a good teacher from a great teacher. Exxon made $40B dollars in profit, but it was only 11% of revenue. It wasn’t obscene, but if they had revenues of $100B and expenses of 60B, are they smart for being able to get the most out of who they employ? The engineers aren’t making minimum wage. you can’t just pay the unskilled $60K a year for a job anyone can do. It just doesn’t work that way. Even at $10 an hour, prices will rise and these people will be in the same boat. Salaries in other jobs will rise a bit as well. How would you like to be paid the same as a Taco Bell worker when you are working in an office with a basic college degree?
How many people in the middle class actually pay 43%? What proportion of the population paid a single cent in federal income tax in 2013?
@DE – 43% – 15% = 38% tax rate. And, everyone pays taxes one way or another. Let’s see (Not an all inclusive list):
Federal Gasoline Tax (the government, state and federal combined make more off a gallon of gas than the gas station owner;
State Income Taxes;
State Property Taxes;
State Personal Property Taxes;
State Sales Tax; and
All fees and processing charges by federal, state, county, and municipal government agencies. You will find that in many cases these fees have increased faster than the Federal Income Tax because politicians have weaseled these charges semantically while claiming to not increase taxes.
This is a TOTAL MYTH – the rich do pay significantly more on a percentage basis than those in the middle class. It isn’t even close. What you are responding to is the outlying billionaire who has all of their assets in tax-free accounts and shelters and uses charitable deductions to decrease their tax burden even further. This is NOT the norm. Most of us making in the high six-figures pay close to 40% in income taxes. When I was in the middle class income range, my effective tax rate was often in the single digits or low teens.
PETER – It’s obviously NOT a total myth, you admit as much yourself that there are at least outlyer cases. I may not have qualified my statement properly, as I didn’t mean all wealthy pay a low tax rate, but a significant number do. Romney’s taxes alone show it’s not just those with hidden offshore accounts that can pull this off. Tax rates on investments are much lower than what the incremental rate is for many in the middle class.
We can all agree that 1% of people are rich and some of them are dishonest and might be hiding money from the IRS. It isn’t the majority of the rich people so stop painting everyone with the same brush. There are a few Ponzi schemers, there are a few CEOs that bankrupted a company. It isn’t the majority, it is a very small percentage that makes people think they are all like that. Public companies have a very difficult time hiding money or doing things illegally. Have companies committed fraud? Sure, but not many. Enron is the last major company and that has been over 10 years now. Private companies have more flexibility, but they won’t last long under intense scrutiny of a forensic audit.
JB – It’s also a very small percentage of the lower classes that do the same. There are people at all levels that good and work hard and plenty at each level that lie, cheat, scheme and steal. I have nothing against the wealthy and know that most of them worked hard to get there. What many people don’t get, is that many of the poor also work very hard and for one reason or another stay poor. Yes, it may be bad choices, but there are many other factors.
We are all in this together. It’s not R vs D, conservative vs liberal, rich vs poor, …
Your post assumes that wealthy people come by their money through hard work and merit. That’s true sometimes, but definitely not all the time. Moreover, your notion that the wealthy pay “large inheritance taxes” is demonstrably false.
This issue cannot be viewed in a vacuum. It isn’t about just making rich people pay more. The question is whether it is more equitable to ask a millionaire to pay a few cents more on every dollar of income over $400k or to instead cut unemployment benefits or other assistance to the neediest. Some people think that putting the “burden” on those who have benefitted the most and who can most easily afford it makes more sense, while others call those people Socialists and instead believe that poor people are that way by choice.
I made $1,000,000 last year and I payed $500,000 in taxes.
Mr Jim, I can understand no one is crazy about taxes. Actually the person making 300 k is paying a smaller percent. I believe the 15% self employment tax “caps out” at 125k or so unless they changed the rate. If you can take part of your income as a
“distribution” that could help. The people in the “get screwed” bracket are essentially subsidizing the billion dollar corporations who are technically in high tax brackets, but end up paying an effective rate of 10% or less in many cases, after all the loopholes, credits and other gimmicks are calculated. Hard to believe how well our country got along with a 90% tax rate for so many years.
The problem with the 90% rate was the fact that almost no one paid it. People think there are loopholes now. Back then the loopholes allowed high income earners to pay less than they do now in many cases.
I could be wrong (this crap changes all the time) but I believe the employer portion (half of the 15%) is uncapped.
“..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
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 IRS for this wonderful pyramid scheme of a tax system!
jim – Your numbers are a bit off. You don’t pay 43% in taxes, that was your marginal rate for a small portion of your income. Since you hit the limit for payroll taxes, you are no longer paying the full extra 15%. Also, there are deductions that “adjusted” your income and the first parts of your income were taxed at lower rates.
Using your numbers and assuming the worst tax case of single with the standard deduction gives $24400 income tax + $16500 payroll taxes, giving a 32.7% overall tax rate. Most likely, you have deductions to bring your rate even lower, but there are still a small portion of the payroll taxes that you’re still paying.
All things considered, though, I agree that investment income should be taxed at a higher rate after a certain level of income.
It is. It is called the investment tax (part of the “affordable care act”). It is part of the privileges accrued by being in the hated successful class. These privileges must be recaptured by the drones, led by their enlightened representatives. (My Grandpappy said Democrats love to feed at the trough) Successful people obviously have stolen success from the disenfranchised illegal immigrants and the socialist drones. The achievers cheated by working their asses off.
Wake up, idiots!!!
That’s a pretty big broad brush you’re using there. I guess all the successful farmers getting their federal subsidies, the too big to fail banks getting bailout funds, and the corporate giveaways (public trough) all go to successful, hard working people too? While is is very true that many achievers work very hard, there are almost as many unethical business people who are scamming all taxpayers or just plain stealing from their companies. When we all learn to stop blaming every ghost behind a tree and start to work together with equal respect, then maybe we could start to rebuild our country and economy.
Bush I, “Read my lips. No new Taxes”.
A republican, non?
There is no real difference substantially in the two primary partys. There is only one party: The Incumbency Party.
All the rest of the BS is an illusion.
Randy – Unfortunately, the Republicans love to feed at the trough also! The parties just have different ways of feeding “their” people. There are leeches in both parties. Also, there are about 47% who vote for each party, not just for the Dems, leaving elections up to how well a party gets their voters to the polls and the handful that are willing to vote both ways.
If you want to leave it at Republicans are the party of business people and Dems the party of low wage/ no wage (which is far from true), you have to also admit that one millionaire tax cheat can steal more than dozens of welfare queens.
Truth is, BOTH parties are full of me first fools and representatives who will not work together. Both parties truly want what is best, but have different ideas of what that is. We need to stop looking at this as us vs them, it’s US for US! We need to start working together to get our representatives working together. We need to start voting for the best results, not some silly party ideology.
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