Income and wealth inequality

I suspect that those incomes go a lot farther in Minnesota than they do in NJ.

Tom_Reingold said:

@terp, nearly all new income is going to the top 0.1% in the last few decades. It is at everyone else's expense, demonstrably.

The macro economy is not a zero sum game, but a household's income is. When you say it's not a zero sum game, are you implying that everyone else's wealth becomes a benefit to everyone else? That's what the Republicans want us to believe, but again, demonstrably, it's untrue.

Demonstrate it then.  Let's take Elon Musk.  Elon has gotten much wealthier over the last 10 years.  How has this come at the expense of others?   I look forward to your answer.

When I say the economy is not a "zero sum game" it means that if someone gets wealthier, it does not require that others get poorer at the rate.  Wealth is created in the economy through innovation, capital investment, etc.  Those who get wealthier in the private sector(not the public sector or through cronyism) on balance improve the lives of others.  If this were not true, then people would not pay them for their goods/services.   The only way to create wealth in the private sphere is to provide value to others. 

Tom_Reingold said:

We have history. History has shown (me, anyway) that taxing high wealth is good for the economy. And yet, the wealthy get to stay wealthy. Wow, imagine that.

This is factually incorrect.  

Tom_Reingold said:

Meanwhile, Wisconsin and Kansas have followed the Republican shtick, and it has not worked out so well. States are good research labs except that the people are the lab rats.

Not to belittle Minnesota's 99% driven economic miracle created by taxing the rich and massive hikes to minimum wage, but these policies are LITTLE.

Prior to August 2014] Minnesota law set the minimum wage at $5.25 for companies with annual revenues up to $625,000 and $6.15 for companies that have revenues of $625,000 or more. The new law will change the threshold for small and large businesses to those making more or less than $500,000 in annual revenues. For those above that line, the wage will go from $6.15 per hour to $8. The small employer wage will go from $5.25 per hour to $6.50.

Considering that the federal minimum wage (which covers almost all hourly workers) is already at $7.25 per hour, a $0.75 increase in Minnesota’s minimum wage, applicable only to workers earning less than $8 an hour at businesses grossing more than $500,000 a year, isn’t exactly a radical move, nor would its effects be visible in raw employment data. Moreover, the minimum wage increase only went into effect in the summer of 2014, almost four years after Minnesota's job market began to recover.

Remember, we've discussed this before, correlation does not equal causation.  Although, a hike in the minimum wage will have an adverse affect on employment, it does not mean that unemployment will increase. There are other factors in the economy that affect employment.  

And Dayton’s tax hike, which increased the top marginal tax rate by 2 percent? That didn’t occur until 2013, and it only increased state revenues by .1 billion (or 0.35% of Minnesota GDP).
In fact, all of the policies Gibson praises were implemented well after Minnesota started experiencing its impressive job growth, and they weren’t especially ambitious in the first place.

As for the supposed benefits of higher taxes, Gibson states that “even though Minnesota's top income tax rate is the 4th-highest in the country, it has the 5th-lowest unemployment rate in the country at 3.6 percent.” But this is the definition of a cherry-picked statistic. If you want to establish a correlation between top marginal tax rates and unemployment, you really have to use more than one data point and control for more than zero variables. (Speaking of cherry-picked statistics, among Midwestern states ranked by job creation from March 2013–2014, Minnesota ranked dead last).

In addition, an international study found that in industrialized countries, such as the United States, higher top marginal tax rates are associated with higher rates of unemployment. This suggests that higher top marginal tax rates may lead to less job creation than would otherwise occur.

Ah, but perhaps we shouldn't let reality get in the way of a good Internet meme. 

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html

RobB said:

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html

Ha. Well perhaps Musk is a bad example.  One of the problems is that given the prevalent cronyism with our leviathan government there aren't too many great examples of people that get that rich without some cronyism.   I always used the Steve Jobs example, but he's apparently dead.  It probably works more or less for Mark Zuckerberg...but I really am not inclined to check.  

The wealthy "get to stay wealthy". It's going to be allowed by the self appointed arbiters! Shouldn't they be grateful! 

It's remarkably illiberal to dictate that your neighbors and fellow citizens should be limited in their ability to possess or earn wealth. 

I get the discussion of what the proper level of taxation would be that maximizes economic benefits while providing for funding of the government. 

This discussion, however, is not that- this discussion is about people believing that there is a "proper" amount for other people to have or earn, based not on economics but on their feelings about how much they think other people should be allowed to have. 

This discussion is about putting behind those feelings the force of law, allowing agents of government to seize property from those who have been judged to "have enough". Seize it, right out of the old bank account. 

It's wholly, wholly illiberal. It is, however, 100% leftist. 

Here's the bad news- no matter how much we use the force of law to take away from those we believe have "too much", they will always have more than you. They'll always have more. They'll always be more talented, harder working, bolder, cleverer. (ETA- and more than me as well).

There is only one way to stop them. That way, too, has been used quite a lot in the last 130 years.

RobB said:

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies.

http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html

Good

Jackson_Fusion said:

The wealthy "get to stay wealthy". It's going to be allowed by the self appointed arbiters! Shouldn't they be grateful! 




It's remarkably illiberal to dictate that your neighbors and fellow citizens should be limited in their ability to possess or earn wealth. 

I get the discussion of what the proper level of taxation would be that maximizes economic benefits while providing for funding of the government. 

This discussion, however, is not that- this discussion is about people believing that there is a "proper" amount for other people to have or earn, based not on economics but on their feelings about how much they think other people should be allowed to have. 

This discussion is about putting behind those feelings the force of law, allowing agents of government to seize property from those who have been judged to "have enough". Seize it, right out of the old bank account. 

It's wholly, wholly illiberal. It is, however, 100% leftist. 




Here's the bad news- no matter how much we use the force of law to take away from those we believe have "too much", they will always have more than you. They'll always have more. They'll always be more talented, harder working, bolder, cleverer. (ETA- and more than me as well).

There is only one way to stop them. That way, too, has been used quite a lot in the last 130 years.

ya missed the boat here

and look, can we spare the high dudgeon over the idea of society or government limiting a person's wealth, as if it's an outrageous concept?

We do it all the time. That's the effect of any tax, obviously. We, as society, have clearly stated "You can't keep all of your money. You must give some back."  It's fundamental.

The only question is how much to tax.

drummerboy said:

and look, can we spare the high dudgeon over the idea of society or government limiting a person's wealth, as if it's an outrageous concept?




We do it all the time. That's the effect of any tax, obviously. We, as society, have clearly stated "You can't keep all of your money. You must give some back."  It's fundamental.

The only question is how much to tax.

That is rational. 

But 90% marginal tax rates are ridiculous.   When exceptionally high marginal tax rates did exist, we had many more deductions and loopholes. 

It is worth noting that tax policy can be used to do more than redistribute wealth.  It can drive behaviors.  

As an example, if tax reductions incite investment or motivate innovation (e.g., Elon Musk with SpaceX, Tesla) that isn't necessarily a bad thing.  

What I don't understand is why we are so focused on the numerator.  Our lowest paid people barely survive.  I'd be more supportive in pushing living wages in more types of jobs that hover near minimum wage.  We might get a little inflation, but that also helps narrow the gaps.  A higher marginal tax could help offset that, but it doesn't need to be 90%.  

Oh, and if we raised taxes on gas 25-30 years ago we would have avoided foreign oil dependence and the being tied up in the Middle East altogether, possibly saving us trillions in war related costs and debt.  

We were due for one of these threads where some people talk about $2 million annual comp like its modest and others talk about $200k per year like you are the Monopoly guy and can buy a yacht.  

We have been through these discussions before.  Can we at least agree that:

- $200k is vastly different in NJ than the Dakotas

- No one should expend too much sympathy for people who earn over $2 mil per year

- We will never agree what is "rich" or "wealthy".  Most see it as someone who has more than you.  

- please know the difference between earnings (how much you make) and wealth (how much tyou have)

- Also, it may be helpful to think in terms of gross and net income.  As an example, our nanny earns about $35k per year from us. Our wife decided to work full time    also.  So it takes about $55k of gross pay just to break even on the nanny.   So our gross income looks high but is somewhat deceiving.  

Giggity?

Woot said:

Our wife

Nannies are way too bourgeoisie. To be fair to the proletariat, only state run créches should be allowed.

drummerboy said:

and look, can we spare the high dudgeon over the idea of society or government limiting a person's wealth, as if it's an outrageous concept?




We do it all the time. That's the effect of any tax, obviously. We, as society, have clearly stated "You can't keep all of your money. You must give some back."  It's fundamental.

The only question is how much to tax.

But income taxes don't limit a persons wealth.   Let's look at Woot's post below.  Specifically the part that I bolded. 

Woot said:

We were due for one of these threads where some people talk about $2 million annual comp like its modest and others talk about $200k per year like you are the Monopoly guy and can buy a yacht.  

We have been through these discussions before.  Can we at least agree that:

- $200k is vastly different in NJ than the Dakotas

- No one should expend too much sympathy for people who earn over $2 mil per year

- We will never agree what is "rich" or "wealthy".  Most see it as someone who has more than you.  

- please know the difference between earnings (how much you make) and wealth (how much tyou have)

- Also, it may be helpful to think in terms of gross and net income.  As an example, our nanny earns about $35k per year from us. Our wife decided to work full time    also.  So it takes about $55k of gross pay just to break even on the nanny.   So our gross income looks high but is somewhat deceiving.  

These discussions aren't about taxing wealth.  They are about taxing income.  These taxes rarely fall on the wealthy.  They fall on the wage earner and small businesses.   The wealthy will find ways to not pay taxes. Heck, they may even set up a charitable trust to avoid the hand of the IRS.  It has been known to occur.

This burden goes to the wage earner.  And specifically, to Woot's point, it will fall mostly to the urban wage earners.   The guy making $200K in the NY Metro area is doing pretty well, but is probably not living a lifestyle most would associate with.  

And what of the guy making $2 Million a year.  I don't necessarily have sympathy for that person. However, I also do not feel any entitlement to their $$.   The fact that they earn $2 Million per year has little to do with me. 

And the point about "As a society we have decided.." is pablum.  I think you mean the government decided.  And what of it?  What does the government do with this $$?   We've been fighting an ideological war on Poverty for what 50 years?  We have perpetual war.  We have a Department of Education that has overseen Public Education to the point where it is failing(Student proficiency in Math/English around 30%).  We have a crumbling infrastructure.  They spy on us.  They take our property through civil forfeiture.  They imprison us at unprecedented numbers.  

If society has decided on this arrangement.  Society is *****ing clueless. 

I'm all for soaking the rich.  But income doesn't necessarily make you rich.  assets do.  regardless, if it's income we;re focused on, look at $500K and above individual, not $250K combined.  

Otherwise all we're doing is further eroding the middle class at the upper end.

Hey, we already gobbled up the lower and solid middle classes. Might as well go after those "rich"  households headed by middle school principals.

don;t forget about those  dental hygienists and document reviewers.  evil bastards.  

Robert_Casotto said:

don;t forget about those  dental hygienists and document reviewers.  evil bastards.  

How much do they make?  They're only evil if they make more than me. 

terp said:

Tom_Reingold said:

@terp, nearly all new income is going to the top 0.1% in the last few decades. It is at everyone else's expense, demonstrably.

The macro economy is not a zero sum game, but a household's income is. When you say it's not a zero sum game, are you implying that everyone else's wealth becomes a benefit to everyone else? That's what the Republicans want us to believe, but again, demonstrably, it's untrue.

Demonstrate it then.  Let's take Elon Musk.  Elon has gotten much wealthier over the last 10 years.  How has this come at the expense of others?   I look forward to your answer.

Is there an optimal percentage of income for the top earners? Or, is there a limit beyond which society and democracy can no longer function? 

On the graph here, can the red trendline go as far as 100% and that is acceptable? 

For that matter, it could go above 100%, a situation where whatever accumulated wealth the lower percentiles have is slowly turned into debt.

There must be a point at which this trend either stops by itself, is stopped by legislation, or by something worse.

Any trend will eventually stop on its own. No need for the statists.

But distribution is irrelevant. All that is at all relevant is absolute amounts of lower income groups in terms of purchasing power.

That's why I speculated about the red line going over 100%, a point at which the purchasing power of the lower groups will go below zero. 

Certainly that trend will stop, but how? And what would the country look like? 

tom said:

terp said:

Tom_Reingold said:

@terp, nearly all new income is going to the top 0.1% in the last few decades. It is at everyone else's expense, demonstrably.

The macro economy is not a zero sum game, but a household's income is. When you say it's not a zero sum game, are you implying that everyone else's wealth becomes a benefit to everyone else? That's what the Republicans want us to believe, but again, demonstrably, it's untrue.

Demonstrate it then.  Let's take Elon Musk.  Elon has gotten much wealthier over the last 10 years.  How has this come at the expense of others?   I look forward to your answer.

Is there an optimal percentage of income for the top earners? Or, is there a limit beyond which society and democracy can no longer function? 

On the graph here, can the red trendline go as far as 100% and that is acceptable? 


For that matter, it could go above 100%, a situation where whatever accumulated wealth the lower percentiles have is slowly turned into debt.


There must be a point at which this trend either stops by itself, is stopped by legislation, or by something worse.

I'm not sure if there is an ideal.  The top is getting ahead because they own the assets.  Our economy is being engineered through reflationary monetary policies.  Guess what tends to increase during times like this?   

The problem is that the tactics we are using to "fix the economy" depend on debt spending for assets and consumption.   As stated above, this benefits the top.  The working class benefits when we increase productivity as it enables the working class to earn more $$.   These policies do nothing to address this.  This coupled with the more competitive labor markets(which is now in some ways global) has resulted in a stagnant working class.   

The trend will likely stop when we have a financial crash and the asset values come crashing with it.  Of course, we will then have bail outs, more extreme fiscal and monetary policy...rinse & repeat.

If you don't accept taxes as a reality of society, then I don't know how to argue anything with you.

Do you mean income taxes specifically?   And people call me an ideologue.  Sheesh!

No, not specifically income taxes, but we need some forms of taxation. When the US was formed, taxes were collected primarily as import tariffs. Needs and circumstances change. I think small amounts of property and sales taxes make sense, and I'd like to see most tax revenues collected be based on income. But that's just my view. There is room for other views, for sure.

Every super-wealthy person in the country agrees with you Tom, so there's actually a fair chance of making that happen.

RobB said:

Every super-wealthy person in the country agrees with you Tom, so there's actually a fair chance of making that happen.

Really? I'm under the opposite impression. If we shifted taxation to be more income based, I expect the super wealthy would pay more, so why would they favor that?

Tom_Reingold said:

RobB said:

Every super-wealthy person in the country agrees with you Tom, so there's actually a fair chance of making that happen.

Really? I'm under the opposite impression. If we shifted taxation to be more income based, I expect the super wealthy would pay more, so why would they favor that?

Many super wealthy ARE socially conscious and have expressed support for higher tax rates.  But not "every" super-wealthy person I'm sure.  

The super wealthy are already super wealthy. Any "income" they receive is nominal. I earn a higher salary than Bezos, Zuckerberg, and Ellison. Combined.

Jackson_Fusion said:

They'll always be more talented, harder working, bolder, cleverer. (ETA- and more than me as well).

I don't think you believe that.  Clearly they will always exhibit more of some trait than you and I, but for sure those traits are not all positive.   If people did believe it, there would be a lot less finger pointing. 

Robert_Casotto said:

I'm all for soaking the rich.  But income doesn't necessarily make you rich.  assets do.  regardless, if it's income we;re focused on, look at $500K and above individual, not $250K combined.  

Otherwise all we're doing is further eroding the middle class at the upper end.

So if I make $2M and piss it all away leaving me with no assets I should be taxed differently than my partner who makes the same and saves his money?