Author Topic: Tour of the US Income Distribution - "The L-Curve"  (Read 6656 times)

mr_orange

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Tour of the US Income Distribution - "The L-Curve"
« on: August 18, 2015, 02:47:23 PM »
I found this site many years ago and thought some of the forum may find it interesting to discuss.  The site attempts to show how big a share of the pie the very upper crust of folks makes relative to everyone else. 

http://www.lcurve.org/

Any thoughts or comments?

MDM

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #1 on: August 18, 2015, 03:05:14 PM »
Any thoughts or comments?

A lot of people have a lot more money than we do.

We have enough.

A lot of people have a lot less money than we do.

If more people focused on merely having enough, rather than considering it unfair if others have more, or a sign of superiority if others have less, things would be generally better overall.

Mr. Green

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #2 on: August 18, 2015, 03:17:17 PM »
Generally speaking, billionaires have accomplished something that has changed the world. I'm okay with them being rewarded financially for that.

Hey It's Me

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #3 on: August 18, 2015, 10:01:06 PM »
You can appreciate the absurdity of the income gap and still work towards your goals. The below really stood out:

$1 million is the same proportion of this income [$50B] as $1 to a person earning $50,000 per year.

Insanity.

Abe

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #4 on: August 19, 2015, 11:27:49 AM »
Gates doesn't earn $50b per year. That's his total wealth. The curve is mixing income with wealth. Granted, it would still be a backwards L curve anyway. I think the bigger question is not "why do these few people have so much money and get it from them?", rather how do we help people make enough to live well enough. Education, frugality, and hard work?

Seppia

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #5 on: August 19, 2015, 11:38:15 AM »
I have zero issues with the concept of people making kajillions of dollars, I have more than enough.
I have issues though with people being almost unable to survive.
A just society tries to have everybody be at a sufficient level of income to support a family, and should be ok transferring wealth from those who don't need it.

I personally consider obscene that the richest of all pay on average significantly less taxes than the upper middle class but hey, that's what happens when you have no cap for campaign funding.
When you basically legalize bribes those who can pay the highest ones tend to do very well.

Matt_D

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #6 on: August 19, 2015, 12:15:00 PM »
Generally speaking, billionaires have accomplished something that has changed the world. I'm okay with them being rewarded financially for that.

Source(s) to back this? I'm frankly skeptical that there's a strong correlation.

I can definitely think of a few billionaires who have changed the world (not always for the better, but in this case we'll just go with "changed"), but there are also billionaires who were great at finding a way to make a pile of money, but aren't exactly going to make it into the textbooks for contributions to humanity. I'm also able to think of many more people who have changed the world and never hit millionaire status (never mind billionaire).

ShoulderThingThatGoesUp

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #7 on: August 19, 2015, 12:21:53 PM »
I have zero issues with the concept of people making kajillions of dollars, I have more than enough.
I have issues though with people being almost unable to survive.
A just society tries to have everybody be at a sufficient level of income to support a family, and should be ok transferring wealth from those who don't need it.

I personally consider obscene that the richest of all pay on average significantly less taxes than the upper middle class but hey, that's what happens when you have no cap for campaign funding.
When you basically legalize bribes those who can pay the highest ones tend to do very well.

Source? As a percentage of income? Total dollars? Percentage of net worth?

Also, Citizens United was about whether the government can ban movies about politicians. If you want the answer to be "yes" I am baffled. (I'm guessing that's what you're referring to with "legalized bribes")

forummm

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #8 on: August 19, 2015, 12:26:10 PM »
Generally speaking, billionaires have accomplished something that has changed the world. I'm okay with them being rewarded financially for that.

Source(s) to back this? I'm frankly skeptical that there's a strong correlation.

I can definitely think of a few billionaires who have changed the world (not always for the better, but in this case we'll just go with "changed"), but there are also billionaires who were great at finding a way to make a pile of money, but aren't exactly going to make it into the textbooks for contributions to humanity. I'm also able to think of many more people who have changed the world and never hit millionaire status (never mind billionaire).

Some billionaires got rich by making the rest of us better off. But I don't know what percent that really is.

A lot of billionaires inherited money (say the Waltons who are 5 of the top 11 or so wealthiest). Many of them turned a lot of inherited money into more money (which isn't that hard to do if you just don't spend too much and let time go by). Some billionaires got rich by creating a monopoly for something or getting political favors. Even self-made people like Gates essentially copied a lot of stuff other people had done and was very good at business so that people got locked into their platform instead of someone else's. A lot of billionaires are actively trying to prevent other people's great contributions from catching on. Other billionaires made money by convincing people to buy things they didn't need.

mr_orange

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #9 on: August 19, 2015, 12:49:05 PM »
Source? As a percentage of income? Total dollars? Percentage of net worth?

Also, Citizens United was about whether the government can ban movies about politicians. If you want the answer to be "yes" I am baffled. (I'm guessing that's what you're referring to with "legalized bribes")

Figure 6. here has a nice breakdown:

http://www2.ucsc.edu/whorulesamerica/power/wealth.html

I'm not sure how reliable the data is, but it seems plausible as presented.  Percentage-wise there isn't much difference at the top from the percentages paid by the next tranche.  Citizens For Tax Justice may have distorted the data in some fashion; not sure.  I do know that effective tax rates are generally far different than what marginal tax rates are.  Our taxes have gone down significantly as a percentage of income as we have made more money. 

If people have better data I'd love to see it. 

Avidconsumer

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #10 on: August 19, 2015, 01:09:36 PM »
I found this site many years ago and thought some of the forum may find it interesting to discuss.  The site attempts to show how big a share of the pie the very upper crust of folks makes relative to everyone else. 

http://www.lcurve.org/

Any thoughts or comments?

Your savings are crazy btw... 6 months and you will increase your FI on 9k a month by over 50%? That's over 500k savings/NW increase in 6 months.

Mr. Green

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #11 on: August 19, 2015, 01:23:46 PM »
Generally speaking, billionaires have accomplished something that has changed the world. I'm okay with them being rewarded financially for that.

Source(s) to back this? I'm frankly skeptical that there's a strong correlation.

I can definitely think of a few billionaires who have changed the world (not always for the better, but in this case we'll just go with "changed"), but there are also billionaires who were great at finding a way to make a pile of money, but aren't exactly going to make it into the textbooks for contributions to humanity. I'm also able to think of many more people who have changed the world and never hit millionaire status (never mind billionaire).
I think we're viewing the phrase "change the world" differently. For example, I'm sure Heinz invented numerous new ways to package food that resulted in people being able to more easily access food. For good or bad, that's changing the world.
« Last Edit: August 19, 2015, 02:11:57 PM by Mr. Green »

Seppia

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Tour of the US Income Distribution - "The L-Curve"
« Reply #12 on: August 19, 2015, 01:29:04 PM »
Source? As a percentage of income? Total dollars? Percentage of net worth?

Also, Citizens United was about whether the government can ban movies about politicians. If you want the answer to be "yes" I am baffled. (I'm guessing that's what you're referring to with "legalized bribes")



Math?

Ordinary income has a top taxation rate of 39.6%, while capital gains are taxed at 15%, including for some sort of reason (maybe it has something to to with the uncapped campaign contributions) income for hedge fund managers.

According to warren Buffett in his NYT opinion article "a minimum tax for the wealthy" dated November 25, 2012, more than 25% of the members of the Forbes 400 list paid less than 15% taxes, more than half of them paid less than 20% and "a few of them" (no numbers) actually paid 0.
I tend to imagine his sources are solid.

Of course I speak in percentage, why would you talk absolute values?

Mr_orange: the analysis on the top 1% has a simple issue: the entry level salary for the group is a relatively low $350k per household (according to Wikipedia), so there's a lot of people among the 1 percenters that get most of their income from salaries/ordinary income.
The more you go up (top 0.1%, then top 0.01%) the more the average tax rate goes down because most of their money comes from capital gains.

Edit addendum: I think there's a number of nice slides and graphs on the % taxation of the uber-rich in Stiglitz 's "the price of inequality"
« Last Edit: August 19, 2015, 01:31:34 PM by Seppia »

ShoulderThingThatGoesUp

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #13 on: August 19, 2015, 02:25:55 PM »
Math?

Ordinary income has a top taxation rate of 39.6%, while capital gains are taxed at 15%, including for some sort of reason (maybe it has something to to with the uncapped campaign contributions) income for hedge fund managers.

OK. I certainly don't see a good reason why ordinary and capital gains income should be taxed differently.

That said, I think there's a lot of good that can be done for inequality that would save the government money. Stop throwing so many poor people in jail for stupid reasons and you improve their ability to collect and generate income. After we stop spending money to ruin poor people's lives we can see if more taxes are needed.

Matt_D

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #14 on: August 19, 2015, 03:10:11 PM »
I think we're viewing the phrase "change the world" differently. For example, I'm sure Heinz invented numerous new ways to package food that resulted in people being able to more easily access food. For good or bad, that's changing the world.

Hm, interesting example choice because actually the original Heinz seems like a pretty cool guy, for reasons beyond ketchup! https://en.wikipedia.org/wiki/Henry_J._Heinz

That aside though, what I was getting at is more like what forummm expressed - there's a wide range of reasons billionaires have their money, and not all of them benefit many people or change the world much.



mr_orange

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #15 on: August 19, 2015, 06:25:07 PM »
Your savings are crazy btw... 6 months and you will increase your FI on 9k a month by over 50%? That's over 500k savings/NW increase in 6 months.

Well those are projections ;-)  It doesn't mean they'll happen, but I like to have BHAGs. 

And yeah....the next 6 months are going to be great if the Austin real estate market stays hot.  I have 14 or so properties coming to market between now and the end of the year and another 20 or so shortly thereafter.  FIRE in 2016 probably isn't out of the question, but it will probably be a few years out. 

mr_orange

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #16 on: August 19, 2015, 06:26:50 PM »
Mr_orange: the analysis on the top 1% has a simple issue: the entry level salary for the group is a relatively low $350k per household (according to Wikipedia), so there's a lot of people among the 1 percenters that get most of their income from salaries/ordinary income.
The more you go up (top 0.1%, then top 0.01%) the more the average tax rate goes down because most of their money comes from capital gains.

Edit addendum: I think there's a number of nice slides and graphs on the % taxation of the uber-rich in Stiglitz 's "the price of inequality"

Yup...there is a good article about the major differences within the "top 1%" here:

http://www2.ucsc.edu/whorulesamerica/power/investment_manager.html

The upper half of the top 1% is far different than the lower half. 

Seppia

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Tour of the US Income Distribution - "The L-Curve"
« Reply #17 on: August 19, 2015, 07:06:13 PM »

Yup...there is a good article about the major differences within the "top 1%" here:

http://www2.ucsc.edu/whorulesamerica/power/investment_manager.html

The upper half of the top 1% is far different than the lower half.

What a great article!
I'll do some additional digging, but do you have any info on who is behind this?
I am very pleasantly surprised as it seems to steer clear of what I find to be the equally annoying republican or democrat "standard" points of view on things.

I agree with them that one of the main issues behind the craziness in the financial sector was the elimination of the Glass Stegal act separating the banks in two well defined groups.
Funnily enough, if I remember well, the rule was changed/eliminated under a democrat president (Clinton if my memory doesn't betray me)
« Last Edit: August 19, 2015, 07:08:11 PM by Seppia »

mr_orange

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #18 on: August 19, 2015, 07:14:28 PM »
Nope....the source was intentionally trying to remain anonymous.  It is a nice article though.  It isn't really backed by hard data, but that is really hard to find without some skewing anyway.  Topics like this are generally pretty tied to politics and policy and thus it is hard to find objective data. 

Seppia

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #19 on: August 19, 2015, 07:20:33 PM »
They are but data is data, unless someone blatantly falsifies it.
Then obviously the presentation of the data can be bent in many different ways. For example:
"Ice melt in Greenland and western Antarctica is accelerating at a very worrisome pace and is mostly man made"
And
"The earth has undergone very major climate changes before, much more extreme than the ones we are seeing it now"
Are both true
They present reality in a very different way

gReed Smith

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #20 on: August 20, 2015, 09:02:29 AM »
Why does it matter if a very few are insanely wealthy?  It isn't like Warren Buffet, Bill Gates and the Waltons are occupying all of the hospital beds in America, drinking all of the Yoohoo and driving 14 million cars off of a cliff each year.  It's impossible to actually consumer $50 billion dollars worth of goods and thereby deny the rest of us some share of the Yoohoo.  I have never once seen anyone even attempt to show how the wealthy consume resources that could have been used for the huddled starving masses.  Where is the L curve of consumption of rice and beans?

I will add one caveat.  Apparently Ted Turner's conservation efforts in the Midwest are affecting the price and productive use of agricultural land.  So, if someone could show that that affects the global food supply in a significant manner, I might concede that Ted Turner is using his wealth to starve people.
« Last Edit: August 20, 2015, 09:07:41 AM by gReed Smith »

Abe

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #21 on: August 20, 2015, 10:53:21 AM »
I think people have this naive idea that if, say, the Walton family did have their tens of billions, Wal-mart would have spent that profit on something other than making more Wal-marts (such as paying their employees more). That seems unlikely, especially since publicly traded companies are for-profit, and thus obligated to their shareholders to maximize return on investment. One of the arguments is "we all (the employees) contributed to generating that wealth". That is true, but they entered a contract with the company stipulating how much of it they were entitled to get, which is not billions of dollars.

Unfortunately we are in a situation as a society where a lot of the productive physical labor has been replaced by machines, while most of the productive mental labor remains beyond the average person (as has been the case for millennia). That's why there is an L-curve - only a few people have these skills that are in high demand (mostly financing stuff and making software), and they are not willing to take pay cuts to help out others who don't. Whether they should or not is up for ethical debate.

Another argument is that the wealthy somehow benefit more from everyone else from the stability a functioning government & society provides, and thus should pay a disproportionate amount. That already occurs to some extent with the income tax, and definitely occurs with social security & medicare taxes. I don't think billionaires benefit a million times more than others, and probably benefit less to some extent since they don't use a lot of government services. Also, if the police suddenly disappeared, they would probably be able to bank-roll private armies like feudal lords did for most of human history.

gReed Smith

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #22 on: August 20, 2015, 11:21:34 AM »
I think there is also a misconception that the $18 billion wealth of each Walton is a big pile of cash that could be converted into salaries or medical care or foot long hotdogs.  Fundamentally, that wealth is the sum of the value of their retail locations, inventory and contracts, plus a bit more for intangibles.  You can't tear the buildings down and give each employee a brick as a means of redistributing wealth.

If you want to criticize high salaries or massed wealth, I think you need to identify the hoarded resource that these people have that could actually be converted into whatever resource is lacking in the rest of the population.  I'm not convinced anyone is hoarding resources that aren't being put to productive use in the lives of many people.  If you don't like conservation, then maybe some people are hoarding land for selfish reasons.  But as far as I know, no one has billions of dollars worth of rice in massive warehouses (although I think the government warehouses dairy in order to support prices) or 75 empty personal hospitals.

Mr. Green

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Re: Tour of the US Income Distribution - "The L-Curve"
« Reply #23 on: August 20, 2015, 11:31:21 AM »
But as far as I know, no one has billions of dollars worth of rice in massive warehouses (although I think the government warehouses dairy in order to support prices) or 75 empty personal hospitals.
Some times when I'm hospitalized I like the view from the right side of the building. Some times it's the left. And there's definitely a battle for most comfortable bed going on between room 304 and room 212. These are just a few of the things you get to enjoy when you own your own empty hospital. The hide and seek games are legit, let me tell you! :)